By Steven A. Morelli
Why does California seem to go after annuity agents so aggressively? That’s been a question often asked after two criminal prosecutions in cases that could have been insurance department matters.
The state’s Life & Annuity Consumer Protection Program might be a factor. It is a Department of Insurance initiative that pays county district attorneys to prosecute life insurance and annuity agents. The program appears to be the only one of its kind in the nation, according to the National Association for Fixed Annuities.
Riverside County, which is prosecuting Alan S. Lewis on 29 felonies for annuity sales, applied for and received funding to pursue a case that seems to describe the Lewis case. In fact, Riverside County has been an active participant since the program started paying prosecutors in 2006, collecting $371,000 since then. The fund pays for personnel, such as attorneys and investigators, and expenses for prosecution and informing the public about life insurance and annuity fraud.
It is difficult to identify pending cases in the county’s annual request for funding because the details were blacked out before the state released the documents. But in the Riverside County district attorney’s cover letter to the request, a pending case was described as involving “many victims and a high loss amount.” The letter was dated May 10, 2012. In the next grant application, dated May 10, 2013, the district attorney said, “We request that this amount be carried-over in Fiscal Year 2013-2014, as we anticipate the further investigation and ultimate prosecution of both a new investigation received from the Department of Insurance and a new case currently in the process of being filed, in addition to any new investigations that may be referred to our Program during the next fiscal year.”
On Oct. 24, 2013, the district attorney filed 36 embezzlement, grand theft and burglary felony charges against Lewis, three days before the statute of limitations kicked in. The prosecutor accused Lewis of selling more than one annuity to 12 seniors, incurring $300,000 in surrender charges. He was charged with burglary because he had visited the clients in their homes. He is in jail awaiting trial on June 23.
Also in the 2012 request, Riverside Chief Deputy District Attorney Vicki Hightower wrote: “In addition, through our continued outreach efforts with the Department of Insurance and other agencies, we anticipate additional investigations will be referred to our Program during the next fiscal year.”
In those sessions, which are typically conducted by an assistant district attorney and at least one Department of Insurance investigator, seniors are given pamphlets and shown videos, one video in particular. This was also in the funding request paperwork: “As we do at all outreach sessions with audio/video capability, we were able to show the Annuities - It's Your Choice video provided to us by CDI, and the attendees seemed to learn from and enjoy the video.”
That video, provided by the insurance department, provides many warnings about annuities and features an actor playing a particularly smarmy insurance agent. After the warnings about the complexity of annuities, surrender charges are the first key danger discussed before the reenactment with the actor playing the unscrupulous agent. The “con” starts at a seminar and moves to the apartment of one of the seniors later on.
Those sessions are also subsidized by the program, which is funded by a $1 fee on every insurance sale in California. Half goes to the Department of Insurance for public information, such as videos, and investigations. The other half is given to district attorneys as annual grants that the counties must apply for.