Fraudster Defies New Insurance Laws

Within the past five years, California has enacted into law separate bills designed to prevent predatory sales practices, enhance disclosure and ensure that the sale of an annuity is a suitable investment for a client.

But even those laws, designed to tighten the state’s insurance code, weren’t enough to deter 31-year-old Joseph Anthony Mele of Ventura County, Calif. Prosecutors say he fleeced two elderly victims of as much as $2 million.

The laws, two of them passed in 2011 and one in 2014, were co-sponsored by Insurance Commissioner Dave Jones.

AB 689 requires that insurance agents have reasonable grounds to believe the sale of an annuity sale would be suitable for a buyer. AB 2347 amends disclosure requirements and stipulates conditions for refunding clients in the event of cancellation. It also requires the policy to disclose details around the surrender charge.

Mele, 31, ignored his responsibilities and began buying, selling and repurchasing long-term annuities and other types of insurance without the knowledge of the victims, according Santa Barbara County District Attorney Joyce E. Dudley.

Working out of his father’s agency, Mele & Associates Senior Insurance Services, the younger Mele positioned himself as a financial advisor, a rung or two above insurance agent. Then he gained the trust of his two female victims, according to county prosecutors.

The victims were 93 and 74 years old.

In the case of the former victim, Mele advised her to sign eight blank checks so that he “could move quickly on investments,” Dudley said.

Mele was sentenced last week to 10 years in prison after pleading no contest in November to seven felony counts, including financial elder abuse, grand theft, embezzlement and money laundering, according to the district attorney.

Mele’s lawyer, Samuel K. Eaton Jr., declined to comment.

Prosecutors accused Mele of “churning” victims' policies, a practice of rewriting annuities solely for the purpose of generating commissions.

Mele earned hundreds of thousands of dollars in commissions through these deceptive practices and caused the victims to incur over $650,000 in surrender fees, penalties and lost premiums, according to state officials.

Between February 2013 and September 2014, he wrote $800,000 worth of checks and deposited them into his personal bank account instead of investing the funds, Santa Barbara County prosecutors said.

He used the money to pay for entertainment, expensive vacations, gambling and plastic surgery, state prosecutors also said.

Jones, in a news release posted to the department’s website, said Mele perpetrated a “callous scam” targeting vulnerable seniors. Country officials said they had recovered surrender fees, penalties and interest from the insurance carriers.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].