Two Minnesota Advisors Charged In Annuity Scams

By Cyril Tuohy InsuranceNewsNet

Two suburban Minneapolis insurance advisors were charged with multiple counts of theft and fraud in connection with stealing nearly $500,000 from elderly clients in separate incidents over the past three years.

Paul M. Bardine, 54, a former insurance agent from Minnetrista, Minn., was charged with three counts of insurance fraud and three counts of theft. State investigators alleged he stole more than $270,000 from a 79-year-old woman and a couple in their 70s.

In a separate complaint, 45-year-old John Vernon Heath was charged with two counts of theft. State investigators alleged he stole more than $220,000 from an 88-year-old victim suffering from Alzheimer’s disease.

The cases are unrelated and each defendant faces a maximum sentence of 20 years in jail and or a $100,000 fine, according to documents filed by the Hennepin County Attorney’s Office.
A message left with Heath at his office, JVH Wealth Management in Bloomington, Minn., was not returned. Bardine could not be reached.

No attorney is listed for either of the defendants.

“These two financial professionals exploited their positions of trust to lie, cheat and steal from their clients,” Minnesota Commerce Commissioner Mike Rothman said in a news release announcing the charges.

Bardine and Heath have been issued summonses to appear in court April 7, officials of the Hennepin County Attorney’s Office said.

Agent Accused of Ripping Off Elderly

Bardine’s insurance license expired in 2012. He is charged with three counts of theft by swindle and three counts of insurance fraud for stealing from clients between 2013 and 2015, according to court documents.

He is alleged to have convinced the widow of a deceased client, along with other clients, to cash in their annuities to fund an “investment opportunity” in 2013 and 2014, according to a detailed statement by a Minnesota Department of Commerce investigator.

In the case of one of the victims, Bardine convinced her to transfer funds out of her Allianz annuity into an American Equity annuity in the summer of 2013. Then he requested a withdrawal of the funds out of the American Equity annuity later that year so that that proceeds — $85,000 — could be invested through Bardine’s company, the O.B. Investment Group, according to the complaint.

The victim, 52, consented after Bardine promised her a return of 8 percent on her investment and claimed the investment was secured by property Bardine said he owned.

In January 2014, Bardine transferred $5,000 from the O.B. Investment Group’s account to his personal checking account, officials allege.

He withdrew another $32,525 in the form of a cashier’s check from the O.B. Investment Group account payable to My Bridge Loan. He withdrew an additional $8,099 payable to the Renville County Auditor Treasurer to pay for a property tax judgment, officials also said.

Bardine spent the rest on bills, utilities, a health club and retail purchases, Special Agent Joseph K. Boche alleges in the complaint.

A second transaction, this time in April 2014, transferred $15,000 from the American Equity annuity to O.B. Investment Group and into Bardine’s personal bank account.

In the end, the victim, identified in the criminal complaint as “L.G.”, received only $3,000 in January 2015 for the $100,000 transferred to O.B. Investment.

Other victims lost money in similar scams, the complaint alleges. A retired married couple in their late 70s, lost $105,000 and a 79-year-old retiree lost $67,000.

The victims were persuaded to cash in their annuities, deposit the proceeds into an O.B. Investment Group account, only to have the money transferred into Bardine’s personal bank account to pay for personal debts and expenses, according to the complaint.

An April 2015 real estate finance and commerce website matching the address on the criminal complaint lists a notice of mortgage foreclosure sale on a 2,027-square-foot home on which Bardine owned more than $750,000.

“We will prosecute Mr. Bardine and Mr. Heath vigorously, and if we are successful, try to get them prison time,” Hennepin County Attorney Mike Freeman said in a news release.

Advisor Allegedly Preys on Alzheimer’s Patient

Heath, the sole proprietor of JVH Wealth Management, admitted to swindling more than $220,000 from an 88-year-old man who suffers from dementia and lives with his daughter in Robbinsdale, Minn., according to the criminal complaint. The man had been Heath’s client for 20 years, the complaint said.

Heath faces two counts of theft after stealing funds from his client’s Jackson National annuity to pay for shopping sprees, cell phone bills, airport parking and personal credit card reimbursements, officials also said.

Heath holds an insurance and securities broker license in Minnesota, according to the complaint.
JVH Wealth Management offers securities and advisory services through the registered broker/dealer Independent Financial Group, according to JVH’s website.

Independent Financial Group terminated Heath on March 1, after he admitted to “wrongful taking of funds,” in the wake of an investigation by the Minnesota Department of Commerce on Feb. 19, the Financial Regulatory Authority’s BrokerCheck records indicate.

Heath, who joined the industry in 1993, passed FINRA Series 24, 7 and 63 exams, BrokerCheck also shows.

Heath’s LinkedIn page boasts about his selection as one of Minnesota’s “Five Star Wealth Managers,” every year from 2009 to 2015, but state investigators paint a different story.
They detailed a scheme in which Heath abused and preyed upon one of the nation’s most vulnerable investors: an impaired man unable to provide for his own care and meeting the state’s definition of a vulnerable adult.

The fraud allegedly began in 2008 when Heath, then working for Amiot Financial Group, and his client signed off on a Jackson National annuity. The client paid an initial premium of $67,926, and in 2009 and 2014, made additional premium payments.

By the end of 2014, the premium value of the annuity had reached $180,000, according to state officials.

But on Jan. 29, 2015, Jackson National received a request to update the information on the annuity with Heath’s home address. Heath later admitted he initiated this request without his client’s consent or knowledge, the criminal complaint also states.

In September, Heath opened a bank account at Wings Financial in the client’s name and drew down on the Jackson annuity, again without the client’s knowledge. On Oct. 30, the “full contract surrender” value of the annuity — $194,172 — was wired into the Wings account.

By Jan. 20, Heath had spent the funds on credit cards, ATM withdrawals and retail purchases, according to Special Agent Beth Kelly.

When bank officials tried to alert the client, caller ID revealed Heath returned the call. Heath claimed he was the client’s grandson with permission to use the client’s bank card, according to investigators.

When Wings Financial froze the account, Heath claimed he had power of attorney.
The client, however, during a follow-up investigation, denied granting any powers to Heath, saying only that his daughter held his power of attorney, according to the complaint.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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].