|By David Wren, The Sun News (Myrtle Beach, S.C.)|
|McClatchy-Tribune Information Services|
Today, a bank is threatening to foreclose on the home that's been in Allen's family for three generations. What should have been a comfortable, albeit modest, retirement with her husband, Charles, has instead turned into a gut-churning, constant worry over money.
"We used to be able to pay all our bills and we could go out to eat whenever we wanted," said 80-year-old
The Allens blame
They aren't alone -- nearly two dozen lawsuits have been filed against McDavid by families who say the insurance salesman scammed them by talking them into mortgaging their homes and properties for high-dollar life insurance policies they didn't need and didn't understand. The allegations include fraud, breach of contract and negligent misrepresentation.
"I hope he goes to jail," said
"Anybody that takes advantage of sick people and elderly people, I don't know what's good enough for them,"
Salesman, agencies stand by work
McDavid is not facing any criminal charges and he denies any wrongdoing in his answers to the civil lawsuits. McDavid declined to talk to
The insurance companies that issued the policies --
"We believe these matters are more appropriately addressed in the court system," Kristinik said.
"The policies were issued only after appropriate review, and consistent with applicable law and industry standards," Waetke said. "The owners of the policies in question were provided with disclosures and illustrations that described the type of insurance product they purchased from Aviva."
Connor estimates his clients have paid more than
A new way to profit
McDavid -- a 63-year-old
"I took Rick as a genius,"
It took awhile for that genius to manifest itself in cash.
Financial statements McDavid filed during his 2004 divorce from his fourth wife show he was barely scraping by financially at the time despite an income of
"When we first got together, Rick had nothing," McDowell said during a deposition. "He borrowed
McDowell, who couldn't be reached for comment, was working as an office manager at East Coast Honda in 2004, the same place McDavid's ex-wife worked. McDowell testified that McDavid called her at work one day, wanting advice on how he could get his wife back. McDavid and McDowell had lunch together, and a romance blossomed at the same time McDavid's idea -- what he called his "program" -- began to pay dividends.
By 2007, McDavid had given his new girlfriend a diamond ring during a trip to
"He promised me that he'd show me the world, he'd give me the world," McDowell said. "He even promised he would die for me."
McDowell, in court documents, describes McDavid as being a man driven by money and belongings, especially luxury items.
"Rick loves to spend money," McDowell said during another deposition, also taken in 2009. "He bought 200 guns. He would buy boats. He would buy houses. He would buy river lots. . . . He would buy extravagant gifts for me, and one in particular, he bought me a
McDavid gave his girlfriend cash, remodeled her home, paid for her tummy tuck and installed an in-ground pool because she wanted one, according to McDowell's deposition.
"I'd have to pull him out of stores to keep him from buying stuff for me," McDowell said.
The relationship had its problems. McDowell said in her deposition that McDavid didn't like her children, and was sometimes mean to them. She wanted financial stability, yet McDavid "was always spending money, he would spend money behind my back."
The biggest problem was the
McDavid hadn't paid his taxes since 2002, according to court documents, and McDowell said she refused to marry him until he cleared his tax debt. Neither of those things happened.
McDowell said she also suspected McDavid of being unfaithful.
McDavid had put most of his belongings -- purchased with the proceeds of insurance policy sales -- into McDowell's name to keep the
As their relationship soured, McDavid pressured McDowell into transferring those belongings -- including some that he initially said were gifts to her -- back into his name.
McDowell -- who was living apart from McDavid -- said in a deposition that she believed McDavid wanted his belongings because he was seeing another woman. McDowell had a key to McDavid's house, and in late
"Program" pays off for McDavid
McDavid's income soared during the time he and McDowell were dating -- from about
McDowell, in a deposition, said her bookkeeping showed McDavid was making even more money -- her QuickBooks software accounting program put his income at
The newfound wealth was due to the insurance "program" McDavid invented, according to McDowell.
"He started refinancing people's homes and taking their money and buying insurance and annuities," McDowell said in a deposition. "He takes their money out of their house, their equity. He convinces them to put X amount of dollars in annuity. He convinces them to buy a life insurance policy, saying it is money-making . . . and he shows them how they can take their money interest in their insurance and annuity and pay their house payment so they will be scot-free of a house payment."
McDavid's commission depended on how long he could keep the insurance policies in effect.
The commission on a whole life policy equaled the premium payments for one year. In the Allens' case, for example, McDavid's commission would have equaled
"He would squeeze everything out of you with the equity in your home to make sure he got his commissions paid," Connor said.
McDavid also got a commission from the mortgage broker in each transaction, McDowell said.
McDowell said in a deposition that McDavid's program worked fine for wealthy clients, "because when the economy went down, they had money in their annuity."
"Now, for the older folks that don't have anything but
The program also didn't work if housing values declined, McDowell said, because it required multiple refinancings for continually higher mortgage amounts to keep up with the insurance and house payments.
Clients in the congregation
Court records show that most of McDavid's clients were not wealthy, and many were elderly who relied on
The insurance companies liked McDavid's program so much that Aviva appointed him to the advisory board of the company's
"He told us that his program was so good, that he had been offered
McDavid -- whose business card omits the words "life insurance," instead referring to his services as business development and estate enhancement -- used the same mortgage broker and lawyer for every transaction, court records show. Those individuals are not named as defendants in the lawsuits.
McDowell said in a deposition that McDavid found many of his clients through the church they attended,
"I referred him some friends in my church," McDowell said in a deposition. "I had one friend that done the business that was directly involved in my church and then her sister and then one of her friends."
Some of McDavid's clients said they were convinced the insurance salesman had their best interests at heart.
"He was a well-dressed Christian man," said
"We just more or less felt that he was a good, church-going Christian, and we trusted him," said
Squires did not respond to requests for an interview.
The Allens were living on about
The mortgage closing was a blur -- "He [the lawyer] had a stack of papers and he kept flipping them, saying, 'Sign here . . . sign here',"
Court records show proceeds from the mortgage were used to purchase three whole life insurance policies with death benefits totaling
"I told him [McDavid] I've had a stroke, that I can't get life insurance,"
Things went fine for more than a year, despite McDavid's repeated requests for premium payments. The Allens' bank records show the couple made five payments totaling
When the Allens' bank account ran low, McDavid urged them to refinance their home. In
Connor said the lower interest rate was by design, because an anti-churning law in
"By lowering their monthly payment, it counted as a tangible benefit," Connor said.
There was another reason: McDavid was getting a kickback from the yield spread premium -- the difference in the actual interest rate paid versus the market rate a borrower qualifies for -- on the initial, high-interest mortgage, according to court documents.
All told, the Allens paid
"He wanted some more money and I told my wife we just can't afford to make these payments any more,"
Newfound wealth evaporates
"It wasn't until six months later that we finally got the policy," said
Connor said McDavid typically had the policies mailed to his office instead of his clients' homes. McDavid then held onto the policies until after the cancellation period had expired and his clients could no longer get back their money.
"He put us in such debt that we couldn't dig out,"
"The doorbell rang one morning and they were serving me papers that the house is being foreclosed on,"
"She thought I was going to do something to myself,"
The financial devastation has gone beyond the threat of losing a house.
"There were times when we didn't have adequate food in the house because we were trying to make the [house and insurance] payments,"
"We had to ask my church for help,"
Counting on the courts
Connor has repeatedly asked the
Records show the insurance department conducted two investigations of McDavid -- one in 2011 and the other in 2012 -- in response to complaints filed by Connor's clients. The department dismissed each complaint within about a month after McDavid provided written statements telling the department he had done nothing wrong.
The dismissal notice in the second investigation shows the department was skeptical of the complainants' motives.
"Although this is the second letter with the same complaint from different insureds, it is noted that these complainants are represented [by] the same attorney and have a civil suit pending against the respondent," investigator
Connor is hedging much of his case on a state law that made it illegal, beginning in 2005, for a home lender to finance -- either directly or indirectly -- life insurance premiums. Although insurance premiums weren't paid directly at the mortgage closings, Connor said the policies were written within weeks of the closings, sometimes within days, and his clients would not have been able to afford the premiums except for the proceeds from the mortgages that were arranged by McDavid.
"The law says directly or indirectly -- that's not a mistake, someone wrote that in there for a purpose so you can't get around it," Connor said. "If you are selling life insurance and orchestrating the mortgage, that is an indirect violation of the law."
Connor hopes to cancel the mortgages, recoup the insurance premiums his clients already have paid and get punitive damages against McDavid and the insurance companies.
Connor said he knows some critics will argue that his clients should have been more careful, that they should have read and understood any document before they signed it, but he bristles at the notion of blaming the victims.
"Is that what they'd say if it was their mom or dad?" Connor said. "These are simple, country people who go to church and trust people. Wouldn't everyone like to have a little more money? Sure. That's how McDavid got his foot in the door. But when you get older, your ability to think about these kinds of things diminishes and it becomes more difficult to fight off someone who wants to take advantage of you."
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