Jessica Tyner  |  March 18, 2014

Category: Legal News

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Life Insurance AnnuityLife insurance and annuity fraud scams can take a wide range of forms, but one recent case is particularly dark.

The Securities and Exchange Commission (SEC) received a complaint that two brokers intentionally defrauded customers by luring people to invest in contracts that are actually taking bets on how long people with terminal illnesses will live. It’s like going to the races, except the races involve humans who have a short amount of time to live. Unlike more common annuity frauds, such as those that offer hidden fees and lock people unknowingly into predatory situations, this one instead banks on the appeal of a gambling rush.

A variable annuity is a retirement savings option that’s very popular with certain investors who have a high net worth. Usually, these contracts offer a mix of mutual fund features along with a death-benefit provision similar to a life insurance policy. However, Investment News says the owner of these annuity policies doesn’t necessarily have to be the same as the “annuitant” — the person whose death would cause the payout of the benefit. To further complicate things, the owner doesn’t even have to have what’s called an “insurance interest” in the annuitant. You can take out an insurance policy on a total stranger, which injects a thrill of the unknown. There are so many annuity frauds happening around the country that an annuity fraud class action lawsuit has formed, but this is perhaps the grimmest scenario yet.

So far there have been no allegations that anybody has tried to accelerate anyone’s death to win a bet. While it’s not illegal to invest in the insurance policy of a stranger, it can lead to a situation like this. However, with life insurance settlements, at least those who are insured have an opportunity to profit when investors buy rights to their policy (or become the owners). That leads to a symbiotic relationship which can be a win-win for everyone involved, or at least as much as possible when considering it’s still about human lives. However, the SEC said the two brokers in this case, Michael Horowitz from Los Angeles and Moshe Marc Cohen from Brooklyn, took it too far. It’s alleged that the two men conspired with three other people who are employed in nursing home and hospice centers to illegally get personal information about 16 terminally ill patients.

They allegedly obtained the information fraudulently so certain people could “buy” the policies. According to the SEC, the men falsified paperwork in an effort to make the policies appear legitimate and, in doing so, convinced “at least” 50 investors that these stranger-owned policies were “loss proof.” Their scheme worked. They drummed up $80 million in capital which led to about $1 million in commission profits. The terminally ill patients received nothing.

A Hard Road Ahead

Horowitz and Cohen have refused to comment but the case is moving forward. However, the SEC has reported that two people involved in the scandal have agreed to $4.5 million in disgorgement earnings and penalties. It’s unclear if that includes Horowitz or Cohen. This particular annuity scandal helps shed light on just how creative some of these schemes can be.

Other examples include brokers who prey on vulnerable populations such as the elderly, bullying them into signing onto unnecessary policies or hiding fees purposefully. There are many ways annuity fraud can happen, and it’s not always clear what’s a gimmick and what’s not. That’s why it’s crucial to work with a reputable financial planner.

Think You’re the Victim of an Annuity Scam?

Do you believe you or a loved one was a victim of such a scam? If so, you might qualify for an annuity fraud legal claim and might deserve compensation. Read more at the Life Insurance Claims Lawsuit & Annuities Fraud Class Action Lawsuit Investigation. Submit your information and a lawyer will be in touch if you have a case for a free annuity fraud claim review.

 

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2 thoughts onAnnuity Fraud Case Comes With a Dark Twist

  1. Josh says:

    You know that’s actually a pretty smart thing. The terminally ill didn’t get anything, but honestly they would of gotten nothing anyway. What would of made this better if the agents would of agreed to give some of the death benefit to the next of kin. If they would of done that then it would of truly been a win win. I am sure that the terminally ill patient would of appreciated that. The only one that gets hurt in this whole thing is the insurance company and if they don’t have checks and balances for these type of situations then it’s their fault not the fault of these agents who have found a creative way to beat the system. Now if they obtained records illegally or if they did things that were unethical then there is a price to pay for that. There are way too many class action lawsuits in this world and everyone is always trying to get free money for nothing. Example. You go to McDonalds and if you spill coffee on yourself well guess what that’s not Mcdonalds fault. You take a drug knowing that it may have side effects and you have a stroke, well guess what that was the risk you agreed to take when you took that drug. We have over 80 million people in this country getting some sort of govt help. In fact now for the first time in history there are more people collecting benefits then there is tax payers to fund it. People need to get up and go to work.

  2. Alyssa says:

    After I read this I felt sick to my stomach. What kind of a person would victimize terminally ill people for personal gain? The icing on the cake is that some of these psychos are targeting people they don’t even know! Regardless, even if they do know the person they’re duping it’s sad since these poor people aren’t as well equipped to fight back because of their illnesses. What a sick world we live in.

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