North Carolina Insurance Fraud Investigation Nets $11M In Refunds

March 29--Eighty-one senior citizens across North Carolina who were scammed by two former insurance agents have been refunded more than $11 million as the result of a seven-year investigation by the N.C. Department of Insurance.

The victims scattered across 14 North Carolina counties, including one in Wake, received the money they lost in the scam plus interest. Individual losses had ranged from $65,000 to $275,000.

The Insurance Department is touting the case as one of the largest amounts of money recovered in the department's history. By contrast, N.C. Insurance Commissioner Mike Causey said at a press conference, in all of 2016 the department recovered about $5 million thanks to criminal investigations.

The two insurance agents, Milton Hooks, 72, of Rocky Mount and James Mangum, 69, of Tarboro, have pleaded guilty to six counts each of obtaining property by false pretenses.

As part of a court-approved plea agreement in return for the restitution that Hooks and Mangum agreed to pay their victims, an additional 100 counts of obtaining property by false pretenses were dismissed and the defendants received no jail time. Instead, they were given a suspended sentence that includes probation.

Hooks and Mangum, who were arrested in 2012, were accused of fraudulently persuading clients to shift more than $10 million in assets -- from life insurance policies and 401(k)s -- between 2004 and 2011 into annuities that were unsuitable for their situations, said Shane Guyant, the department's director of criminal investigations. That enabled the defendants to obtain more than $620,000 in commissions from three insurance companies: American Equity, AmerUs and North American.

Those companies agreed to refund the victims' money with interest after the scheme was uncovered.

Guyant said the first victims he interviewed were a retired Washington County couple who had sunk their life savings of about $250,000 into an annuity that Hooks and Mangum sold them.

Guyant said Hooks and Mangum told the couple that their 401(k) "was about to bust, that they were going to lose all their investment if they didn't move their money, kind of intimidated the victim into moving their money."

The prospectus of the annuity that the victims were sold, said Guyant, contained altered and forged material -- including a missing page.

Hooks and Mangum "had hidden the fact that what they had sold these people was a product they should never have been sold," Guyant said. "It pretty much locked their money up for 30 years. Someone who is 70 years of age doesn't need to have their (money) locked up for 30 years."

Following the arrests, investigators also discovered that Hooks and Mangum persuaded another four victims to make a total of $316,000 in investments which the defendants funneled into their own bank accounts. Hooks and Mangum agreed to repay that money as part of their plea agreement.

Officials defended the deal that enabled Hooks and Mangum to walk in exchange for restitution.

"It did bother me that these people were able to get away with this and not do any prison time," Causey said. "But ... if I had to choose between the two, I'd far rather see the senior citizens get their money back."

Sue Gibson, 70, a retired classroom assistant who lives in Charlotte, purchased a $55,000 annuity from Hooks for her brother, for whom she has a power of attorney. She later invested $163,000 of her own money, which she had gained from an inheritance, with Hooks, whom she once considered a friend.

When she learned of the scams, she figured all of that money was lost.

"I'm very grateful to get the money back," she said.

Gibson, who was a victim of the second scheme that figured into Hooks' and Mangum's plea bargain, said she was asked by a prosecutor whether she would rather have her money refunded or see the defendants go to jail.

"Of course, I wanted my money," she said. "This made quite a difference in my life."

Seth Edwards, the district attorney in five eastern North Carolina counties, said of the 77 victims who recovered their losses plus interest: "One thing that is so unique about this type of outcome is that the victims were compensated for their losses in a big way. So often there is not restitution or a very small amount of return on their loss."

Causey, a Republican who was elected in November, used the press conference as an occasion to make a case for significantly adding to the 20 law enforcement officers the department currently employs.

"One of my top priorities as insurance commissioner is to go after insurance fraud," Causey said. According to the department, an estimated 10 cents of every dollar paid in premiums goes toward paying fraudulent claims.

David Ranii: 919-829-4877, @dranii

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