My father, who owns his own legal practice, has a bunch of neat mementos he’s gathered over the years. One is a set of my baby shoes when I was only a year old. He used them as a dramatic prop to successfully defend his client, who had been wrongly accused of child abuse. Another is a rubber stamp that simply reads “BULLSHIT,” which in one infamous occasion, he used the stamp to reply, paragraph by paragraph to a spurious legal letter his office received. I am *this* close to ordering one for myself.
A third tchotchke is this weird little statue on his bookcase that is of a cartoonish old-time lawyer with heavily lidded eyes, pince-nez glasses, a barrister’s wig and a law book in the crook of his arm. On the base of the statue, it reads, “SUE THE BASTARDS.”
I often joke with my dad about that statue, because I think it plays to negative stereotypes people have about the legal profession. That goes double for my father, whose practice is mainly handling real estate settlements. Civil tort litigation only makes up a small percentage of what he does. And yet, the statue speaks to this vicarious thrill I think a lot of trial attorneys get when they bring a good case to bear. Whether it’s good because it’s getting justice for somebody who needs it, or whether it’s good because it brings in a nice paycheck, I can’t really discern.
I bring all of this up because of a series of newspaper articles I came across recently. They are from the Observer, a monthly publication from Shepherdstown, West Virginia, covering news in that state’s eastern panhandle–Jefferson County, to be specific. The Observer‘s publisher, Thomas Harding, had seen the photo National Underwriter ran of MassMutual CEO Roger Crandall when we profiled him last year. He had hoped to use the photo for his own publication, but we could not release it to him; we were using it with MassMutual’s permission. Only today did I see why Thomas wanted it: to cap off a three-part article series on a fairly serious case of misconduct going back a few years over the pushing of 412i plans on people who did not qualify for them. The upshot is the clients, taken in by their advisors, walked into what they thought was a on-the-level investment strategy for protecting income from taxation. What they got was millions of dollars in IRS fines (initially, at least, before the IRS wised up, realized there was a serious problem with 412i plans in general, and scaled back the penalties).
Now, I have to say that I think that overall, Harding’s articles were well done. Especially the first, which lays out a pretty compelling story of some folks who came into a lot of money, needed a way to protect it as much as they can, and ran afoul of a guy they trusted but who was wholly unworthy of that trust. What resulted was an all-too-familiar story for this industry: clients left holding the bag and forced to sue to get their money back. The culprit in the story says he did nothing wrong, but it sure doesn’t look that way. At best, he is guilty of gross incompetence. At worst, outright fraud. Frankly, I’m surprised they don’t have criminal charges pending.
But early on, the stories took another all-too-familiar turn for me: the sanctification of the victims and the vilification of the insurance industry. To be sure, the Lloyds, the first folks involved in Jefferson County’s multiple 412i problems, did not deserve to fall down the deep, dark rabbit hole of disastrous financial advice. But the Observer makes them out to be poor farmers who scrimped and saved their way into affluence, when in fact they got their big money the same way every other small farmer seems to make it these days: by selling off cropland to commercial real estate developers. There is nothing wrong with that. (Unless you lament the disappearance of our farmland to make way for more fast food outlets.) But if you’re going to cover these victims, do it properly. Don’t make them into something that they’re not.
But that is really just a nitpick. Take one look at 412i, and it looks like it was a bad fit for the families convinced to use it as a tax shelter. Where I have stronger issues with this story is in its third act, when the focus turns on trying to pin as much blame on MassMutual for all of this. Maybe I’m just reading into things, but it seems that once the lawyers smelled blood on this case – that there were multiple plaintiffs and a veritable gold mine of fees to reap, then the aim went from bleeding white the knuckleheads who pushed the bad strategy to going after the carrier itself. After all, MassMutual is the archetypical “deep pockets,” and when that lawsuit strategy began to unfold, then we see the editorial shift go to MassMutual as the bad guy. Interestingly, in the first two articles in this series – which were published in 2009 and 2010, respectively – MassMutual was always listed as the last defendant. A tack-on, if you will. Come the third article, and suddenly they are out in front. Why is that?
The Observer contends that MassMutual did a poor job of policing its sales force, and that in this case, they knew they had a dodgy operator on their hands and failed to do something about it until it is too late. Sorry, MassMutual, but it looks like they have you there. But, there is a world of difference between a compliance department acting too slowly on something and an intentional effort to drag feet because apart from current lawsuits, the 412i thing was making money. If that’s the case, then MassMutual would be in a lot of trouble. However, the Observer does not make that case convincingly. It doesn’t stop it from suggesting it, though, and gauging by the comments left by Observer readers, it appears that in the eastern panhandle of West Virginia, people have already decided who is ultimately to blame. The multi-billion-dollar insurance company, that’s who.