New York Attorney General Eliot Spitzer says a life settlement provider has been paying brokers to keep prices down.
Spitzer’s office has filed a civil suit in a state court in New York that accuses Coventry First L.L.C., Fort Washington, Pa., of making secret “co-brokering fee” payments to life settlement brokers in exchange for the brokers’ help with suppressing competitive bids from other life settlement companies.
Payment of undisclosed co-brokering fees is wrong, because the brokers are supposed to be representing the interests of the policy owners who are selling the policies, Spitzer says.
“Coventry First is disappointed that the attorney general’s office has chosen to file this complaint,” the Coventry Chief Executive Alan Buerger says in a statement. “The attorney general’s civil complaint relies almost exclusively on a handful of out-of-context e-mails that do not support the allegations. Because the complaint’s rhetoric cannot be backed up with facts, it has no merit and will fail in a court of law.”
Moreover, most of the policy sellers have lawyers, or financial planners, or both, and “Coventry has dealt with them in good faith and with the highest standards,” Buerger says.
Spitzer says he began looking at the life settlement industry in 2005 in response to a tip.
The suit includes allegations of fraud and antitrust violations.
Spitzer is seeking injunctive relief from the court, restitution and damages.
Spitzer says he has copies of electronic mail messages and other evidence showing that life settlement industry executives were aware of illegal conduct.
One example Spitzer cites involved a 79-year-old widower living in Hawaii who was selling a $400,000 policy. Copies of electronic mail show that a senior Coventry executive knew that a broker was “sitting on” a competing offer for the policy, Spitzer says.
Coventry also encourages brokers to take “gross offers,” or offers that “provided a separate financial incentive for brokers to convince their clients to take as little as possible for their insurance policies,” according to officials in Spitzer’s office.
In at least 200 cases, brokers received undisclosed commissions equal to 50% or more of what the seller received, officials say.