A recent development is a signal NAIC has taken it regulatory reach to a new level.
This is a timeline of the case against Alan S. Lewis, a former California agent who was charged with 29 felonies for annuity sales.
Alan S. Lewis starts working with Family First Insurance Services, based in Woodland Hills with 11 regional offices in California. Family First and the company whose fixed index annuities it sold, AmerUs, are eventually subject to a class action suit over sales practices.
Lewis says the gathering class action suit rattled some clients, so, among options, he suggests clients can buy Allianz MasterDex 10 fixed index annuities. The prosecutor alleges the surrender charge that the clients incurred constituted embezzlement. Although the clients were promised that the bonus from the new annuity would offset the charge, the prosecutor alleges Lewis should have known it was a “phantom bonus.”
Lewis leaves Family First. Lewis says he recognized in hindsight some shortcomings in the MasterDex 10 and returns to some clients and moves them to a third annuity. The prosecutor says this constitutes “twisting.” Allianz is subject to a large class-action lawsuit over the sales practices involving complicated, two-tier annuities, such as the MasterDex 10.
February: Lewis leaves the annuity business, suffers a severe episode of depression and moves to Spring Hill, Tenn. Lewis estimates he sold approximately $30 million in annuities over six years. He had three official complaints, which he said were settled “without wrongdoing on my part.”
Lewis recovers from depression. He begins to receive calls from California Insurance Department Investigator June Arago, who asks about his annuity sales.
October: Lewis suffers severe depression and lives on the streets of Nashville for a year. He and his wife divorce.
October: Lewis begins recovering from depression and moves in with his parents in Houston.
Oct. 24: The Riverside County district attorney alleges Lewis induced 12 seniors into surrendering IRAs or annuities for a “less favorable” annuity. Court documents allege Lewis committed “twisting” and caused seniors to lose more than $300,000 in surrender penalties. He is charged with 36 felony counts of willfully embezzling from an elder for an amount exceeding $950, grand theft in excess of $400 and burglary. The prosecutor argues that the surrender penalties constituted embezzlement and theft, and because Lewis did some of the transactions at the clients’ homes, it was also burglary. An arrest warrant is issued.
February: Lewis has growing success at a sales job outside of insurance, but he has to quit in order to help his older son, who had moved to Houston in December. The 18-year-old admits a prescription drug addiction and spirals into self-destructive behavior that compels Lewis to take his son to Tulsa, where his ex-wife lives.
Late February: Lewis returns to Houston, where he is pulled over for speeding and arrested on the California warrant.
March 10: Lewis is extradited to California. He faces arraignment the next day but when the full scope of the case against him is apparent, the proceeding is postponed until a trial lawyer can be assigned to Lewis.
March 20: Lewis is arraigned and faces 36 felony counts of embezzlement, grand theft and burglary. The maximum sentence is 40 years in prison.
April 3: Preliminary hearing starts. During the several days of testimony and evidence, the proceedings are postponed for a day so that the prosecutor may attend a class on annuities.
April 14: Last day of preliminary hearing. Superior Court Judge Bernard J. Schwartz allows 29 of the felony counts and one misdemeanor to go to trial and dismisses the others for jurisdictional reasons. Lewis is in jail in lieu of $600,000 bail and scheduled to go to trial on June 9 to face 19 felony counts and one misdemeanor of embezzlement, eight felony counts of burglary and two felony counts of grand theft.
June 9: The trial is postponed for June 23 at the request of the prosecutor, Sheronda L. Edwards. The prosecution’s expert witness, Vincent Patrick Gallagher, is in China until June 23, according to a motion. Edwards is still waiting for the alleged victims’ annuity contracts subpeonaed from Allianz Life, Genworth Life, Lincoln National, Fidelity & Guaranty Life, American Equity, American General, North American, Athene and ING. The prosecutor also says she will submit eight audio CDs of interviews of the alleged victims by June 6, according to the motion filed June 5.
June 26: Trial postponed to July 28.
July 10:All charges are dismissed in a court hearing and Lewis is released.