An elderly Brewster couple and their four adult children have sued a Connecticut investment adviser for allegedly defrauding them out of millions of dollars by churning annuities.
George Tremblay, 84, and Denise Tremblay, 79, are seeking $28 million in losses and damages from Paulo R. Azevedo of Danbury.
The lawsuit, filed in federal court in White Plains on April 13, also names Allianz Life Insurance Co. of Minneapolis, whose annuities they bought.
The couple says Azevedo met them several times at their home and convinced them to roll over existing annuities or use cash to buy new annuities from 2004 to 2016. "Your money will be safer if you invest it in annuities with me," they claim he said.
He allegedly told them that Allianz annuities had better rates and features than other policies and that the new investments would immediately pay bonuses that would cover surrender charges and fees from the old investments.
But there were no bonuses, the lawsuit states, and the couple incurred significant fees, taxes and lost profits. It also claims that Azevedo was not licensed to sell annuities.
Azevedo allegedly practiced illegal "churning" and "twisting" schemes. In churning, an insurance carrier's own policy is misrepresented to persuade the client to invest in a new policy. In twisting, the deception is made against another's carrier's policy to get the investor to switch.
In both schemes, the transactions are meant to generate commissions for the seller while creating little or no benefit for the client.
A spokesman for Allianz said the insurer declined to comment at this time.
A phone number for Azevedo was not in service.
From 2004 to 2011, the Tremblays bought 15 Allianz annuities, using $1.3 million in cash and rolling over nearly $2 million in existing annuities.
Then they borrowed about $1 million from the new annuities to buy policies for their children.
At each step, the lawsuit states, Azevedo misinformed them about the financial consequences of the transactions and created documents that misrepresented the deals.
A transaction in 2005, for instance, rolled over $290,225 from an existing policy but financed an initial premium of only $273,875, for a loss of $16,350. The cash surrender value of the new policy was $239,641, or $50,584 less than the old policy.
In 2011, the Tremblays used $400,000 in cash to buy an annuity that had a cash surrender value of $350,000. The couple was unlikely to live the 20 years required to realize the full annuity value, the lawsuit states, and they immediately lost $50,000.
Then Azevedo allegedly persuaded them to withdraw money from the new policies to fund annuities for their children, depicting the transactions as a way to transfer wealth without incurring taxes. He created fictitious financial profiles of the children, according to the lawsuit, without their consent or knowledge.
In the last transaction in late 2015, the Tremblays used a 2009 Chase annuity worth $506,473 to fund an Allianz annuity with a $443,165 cash surrender value.
"You are not making any money on this Chase annuity," Azevedo allegedly told Denise Tremblay. "You are not going to lose anything."
Last year, Allianz notified the couple that they owed $358,427 in taxes. The couple claims that Azevedo dodged their calls for three months and then advised them to "surrender some of your policies to pay the taxes."
They allege that Azevedo and Allianz have refused to compensate them.
They calculate losses of $8.3 million for fees, taxes and other expenses and another $10 million in lost market profits. They are also demanding $10 million in punitive damages.