On Dec. 6, 2010, Lake County (California) District Attorney John Hopkins signed a criminal complaint charging Glenn Neasham with “committed theft and embezzlement – financial abuse – with respect to an elder and dependent (sic) adult.”

On Oct. 23, 2011 Glenn Neasham was found guilty by a 12-person jury of a single count of felony theft, for selling an annuity to an elderly woman.

Editor’s note: The California Attorney General’s office has filed a petition with the state’s Supreme Court to review the reversal of the conviction.

The facts:

  • Allianz followed California Department of Insurance regulations and submitted their annuity product to the state for approval prior to selling, including associated marketing material. The department approved the Allianz annuity product to be sold in their state, including marketing material, which set the age parameters for whom the product was approved to be marketed to.
  • Allianz utilized best practices from the National Association of Insurance Commissioners to develop a state-approved annuity application, including a suitability form to determine the appropriateness of a specific annuity to a proposed annuitant’s specific circumstances.
  • Glenn Neasham met with Fran Schuber on more than one occasion; he completed a carrier-approved fact finder, suitability and other forms and an annuity contract.
  • Glenn Neasham submitted the state approved application along with the required suitability forms, and Fran Schuber’s check, to Allianz, which reviewed the paperwork, determined Fran Schuber’s suitability, in compliance with state law and industry practice, and issued the policy.
  • The MasterDex 10 Glenn Neasham helped Fran Schuber reposition $175,000 in funds she had in a CD account with the Savings Bank of Mendocino had the best crediting strategy of the 350 fixed-indexed annuities approved for sale in California at the time. The product, at the time Fran Schuber purchased this annuity, had averaged 8 percent in the equity options. It offered 10 percent free withdrawals, for ample liquidity, policy loan provisions and a 10 percent bonus paid up front on any premiums added, anytime in the first five policy years (though the product had to be annuitized to realize this bonus, all gains were credited annually to the initial investment plus the bonus). Moreover, this product provided a 20 percent free withdrawal if the client entered a nursing home in this client’s case, $44,000 per year for five years.
  • After five years the full cash accumulation value of the policy could have been annuitized (meaning a guaranteed monthly income for 10 years or longer). And if the client passed away during the payout her beneficiary would have received the remainder of the payments.
  • Fran Schuber had enough liquidity to meet her needs in the form of $100,000 in other accounts along with $17,500 per year for at least five years. Fran Schuber’s $175,000 went directly to Allianz and by the time Glenn Neasham came to trial, Fran Schuber’s policy value had grown to some $220,000. Moreover, Allianz did not use or take any of Fran Schuber’s funds to pay Glenn Neasham’s commission. That was paid directly from Allianz’s general funds, as is industry practice.

So what happened?

It would appear Lake County District Attorney John Hopkins acted on the principle of “Don’t confuse me with the facts; I already have my mind made up.”

How do we know this? Glenn Neasham appealed his conviction and recently the Court of Appeal of the State of California – First Appellate District, Division Three in a decision written by Justice Stuart Pollak found: “Theft is a specific intent crime requiring the intent to steal. By permitting the jury to find defendant guilty if it found that the annuity deprived Schuber of a significant portion of the value or enjoyment of the funds with which she purchased it, regardless of whether the defendant considered the annuity to increase the value of her holdings and had no intention to deprive her of anything, the [trial] court prejudicially erred. Indeed it is doubtful whether one who gives equal value in exchange for property received can ever be found to have intended to steal the property received. Defendant’s conviction must be reversed.”

So how did this happen? The state’s argument was the annuity policy’s potential withdrawal penalty deprived Schuber of the enjoyment of her property. To this the appeals court found:

  • There was no evidence that Schuber intended or needed to withdraw monies form the policy;
  • The penalty did not apply if Schuber became hospitalized or needed to move to a long-term-care facility, and most importantly;
  • There was no evidence that this “standard term” reduced the value of the policy to less than she paid for it

Here are some questions that maybe we should all start asking about this case:

  • Did the Lake County District Attorney not look at Glenn Neasham’s “intent” or did his intent not matter to the Lake County District Attorney? It seems intent mattered to the appeals court.
  • Were the facts the appeals court reviewed available to Lake County District Attorney or was there another perspective the Lake County District Attorney was adhering to?
  • What are your thoughts of the bank employee filing a complaint against Fran Schuber’s companion and Lake County District Attorney going after the insurance agent?
  • Was the CD with Savings Bank of Mendocino a good deal for Fran Schuber? Today, its website shows interest rate between 0.10 percent and 0.60 percent. What do you think it was in 2010 for CDs from 32 days to 60 months, with a 30-day, 90-day, 120-day and 180-day penalty for early withdrawals? The two exceptions for this penalty, as stated on their website, is the death of any account holder and if an account holder is declared legally incompetent by a court or other administrative body of competent jurisdiction.
  • Did the Lake County District Attorney look into the CD requirements as to Fran Schuber being deprived of a significant portion of the value or enjoyment of the funds with which she had in the bank’s CD if she withdrew her funds early and had incurred a penalty fee for early withdrawal?

I can relate to this case. When my stepfather passed away in 2002, my mother received about $100,000 from a life insurance policy. I helped my mother with a MasterDex 10 annuity from Allianz. She took the 10 percent bonus up front, then a year later she annuitized to take a 10-year certain, life-thereafter income. She passed away last June, still receiving her monthly income from Allianz. She said of all her income stocks, bonds, rental income the only three incomes she could count on was her Social Security, her IRA and her Allianz monthly income. She passed away in the ninth year of receiving this income from her MasterDex 10. We have been closing her estate this past year and instead of using her assets to pay her bills and settle her estate guess what the estate had available to pay the ongoing expenses one more year of income from her Allianz MasterDex 10. This was a good deal for my mother, who passed away at age 88 from vascular dementia, and lived with us the last year of her life.

I believe Fran Schuber received value for her money.

I recognize if common sense were common more people would have it. Yet you have to ask why the Lake County District Attorney seemed to be lacking this common sense, at least according to the Court of Appeal of the State of California – First Appellate District, Division Three.

Your thoughts?

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