No other story has captured the attention of the insurance and annuity industry in recent months like the case of Glenn Neasham. The California-based insurance agent was convicted last fall of felony theft for selling an annuity contract to an 83-year-old woman who was later diagnosed with dementia. Not surprisingly, his story has stirred debate over whether his conviction was justified or not.
Neasham (below right) recently emailed LifeHealthPro.com a statement detailing his side of the case. An edited version is printed here. LifeHealthPro, ProducersWeb and National Underwriter Life & Health will continue to follow this story and its possible impact on the industry.
Here, Glenn Neasham shares his story in his own words:
Lou Jochim, a longtime client, contacted me in January of 2008 and said that Fran Schuber, his girlfriend of 15 years, had a CD maturing in early February. Fran and Lou came into my office Feb. 1, 2008 to find out about products similar to Lou’s because he earned 10 percent that year.
Lou had been my client since 1997. On that day I did my due diligence. I gathered Fran’s current financial information, monthly income, home value (which was free and clear), goals, health status (which she herself said was good). I inquired what was important to her as far as financial products, tax deferral, guaranteed monthly income, long-term care, safe returns, risk tolerance, and current financial goals. I asked her, “What would you like to improve about your current financial situation?” As an insurance agent, I am required to make sure any products that I offer are suitable. At no time did Fran appear to be confused.
I also gave Fran a brochure on a product that I felt would serve her needs, which was the MasterDex 10 (MD 10) offered through Allianz. The MD 10 had been the number-one selling fixed indexed annuity in the country for five consecutive years. It had the best crediting strategy of the 350 fixed indexed annuities available in California. It’s a product that allows you to participate in stock market gains with no downside risk. It also offers a fixed account, which currently earns about 3 percent to 3.5 percent. Since 1994, this product has averaged 8 percent in the equity options. It offers plenty of liquidity options as well: 10 percent free withdrawals, policy loan provisions, a 10 percent bonus that is paid up front on any premiums added anytime in the first five years (though the product must be annuitized to realize this bonus, all gains are credited annually to the initial investment plus the bonus), and 20 percent free withdrawals if the client enters a nursing home, which in Fran’s case would have been $44,000 per year for five years. After five years, the full cash accumulation value of the policy can be annuitized (which means turned into a guaranteed monthly income for 10 years or longer). If the policy owner were to die during the payout phase, the remaining payments would go to the beneficiary.
In short, this is a very safe product. Allianz, the parent company, is worth $0.7 trillion in assets and is A+ rated by A.M. Best. Allianz owns Pimco, Oppenheimer, Fireman’s Fund, and about 700 other companies in more than 60 countries. Allianz is the third largest money manager in the world, and the 15th biggest corporation in the world. Allianz of North America, which did the underwriting on this product, had 157 percent solvency, which means for every dollar, it had $1.57 cents in reserve. This product is designed as a legacy product, or a product to provide income you can’t outlive.
A return visit
On February 4, 2008, Lou and Fran came back to my office. At this time I did the presentation, which took about one hour and 30 minutes, including the presentation and completion of the application. During most of this time, my assistant, Deanna Jones, was in my office, as one of my assistants typically is. Deanna Jones testified that Fran appeared “very competent” and was not at all confused during the presentation. When we discussed beneficiaries, Fran wanted to name Lou as the primary (he had been on her CD since 2004). She wasn’t sure who she wanted as contingent beneficiary. They finally agreed on Betty Koenig, Lou’s daughter. Fran was told she could change this at any time. Deanna Jones witnessed this, too. After the presentation, Fran and Lou went to the bank to get the funds made payable to Allianz.
Later that day, Lou called me and said the bank was giving them problems in reference to moving the money. Per Lou’s request, I called the bank manager to speak with her. She told me that she didn’t have a problem with Fran, but was concerned about Lou’s influence. She also said Fran was confused about the investment. However, Fran knew she wanted to withdraw $175,000 made payable to Allianz.
I went over the product on the phone for about five to 10 minutes. The bank manager said she didn’t have a problem with the annuity; her problem was with Lou. (Later, during testimony, she denied that went over the product with her.) The bank at no time said anything that led me to believe Fran was confused about anything other than the benefits of the annuity. They never expressed to me that Fran was incapable of understanding the transaction. When Fran and Lou came back to my office to give me the check, I asked Fran if she understood the annuity and she said yes.
Meeting with Fran’s son
On Feb. 5, 2008, one day after Fran bought the annuity, I called her son, Ted Schuber, and told him about his mom’s purchase. During our phone conversation, Ted said he was concerned about his mom’s overall health, but at no time has he ever told me his mom had Alzheimer’s or dementia. I set up a meeting with him on Feb. 6, 2008 at my office at 3 p.m. The date is in my 2008 planner. (Ted later testified under oath that we met the summer of 2008, which never happened. We only met once, on February 6, 2008.)
During our meeting, Fran’s health never came up. If Ted would have told me his mom had dementia or Alzheimer’s, I would have immediately stopped the transaction from going through. The policy wasn’t even issued yet and the client had a 30-day free look period. I would have called Allianz immediately and asked them and my FMO what to do in this situation. I would also have contacted the client and asked further questions about her health.
I was concerned about Lou only after the bank said they were concerned about Lou. I never understood why Fran’s son wasn’t at least the contingent beneficiary. I tried to set up a meeting with Ted and his mom at an annual client appreciation dinner, but Ted didn’t want to do that. He said he loved his mom, wanted her to do what she wanted and wanted her to be happy.
The investigation begins
On Dec. 5, 2008, 10 months after the transaction, I met with Fran and Lou in my office. Lou had called me to say that an investigator from the Department of Insurance had come to their home on December 3 to ask them some questions. During our meeting, I asked Fran if she understood the investment and went over the letter the courts later referred to as the “CYA letter.”
The “CYA letter” was written because I was concerned about Fran’s choice of beneficiary. I felt Ted should be beneficiary or at least contingent beneficiary. I also felt like I needed to protect myself from having to use my E&O insurance because Ted wasn’t named as beneficiary. After my meeting with Ted in February 2008, I felt more than ever that he should be the beneficiary. I even contacted Fran and asked for a copy of the CD statement to show that Lou was the beneficiary of the CD. He had been since 2004 and I still have the postmarked envelope that shows a date of Feb. 6, 2008.