Who or what are those forces doing harm — either intentionally or unintentionally — to the life and health insurance industry? This year, we polled our readers and reviewed our own coverage to determine the top 10 culprits, which now make up the 2014 Rogue’s Gallery. From fraudsters to political pundits to government organizations, the following are this year’s Rogues.

See also: The Bad Bunch: National Underwriter’s 2014 Rogue’s Gallery

See also: National Underwriter’s 2012 Rogue’s Gallery

See also: National Underwriter’s 2011 Rogue’s Gallery

Janet Yellen Janet Yellen took over from Ben Bernanke as the Federal Reserve chair in February.

She seems like a nice person. She has a bachelor’s degree from Pembroke College and a doctorate in economics from Yale. She has won teaching awards. Forbes has named her the second most powerful woman in the world, behind Angela Merkel, but ahead of Melinda Gates.

But she is also a rogue.

Last year, we named Bernanke because of his role in presiding over a long run of fiendishly low interest rates. The Fed has pushed interest rates close to zero to help shaky banks, the U.S. Treasury, and well-connected hedge funds and publicly traded corporations get “free money.”

All of these co-conspirators are, of course, getting their “free money” by ripping off all of the savers of the world – the people who are counting on getting a modest but respectable level of rent, or interest, from the money they are leaving in the hands of banks, money-market funds, and issuers of high-rated bonds.

That includes ordinary retirees, pension funds, issuers of annuity products that offer any kinds of guarantees, issuers of long-term disability insurance, and issuers of long-term care insurance.

Yellen has continued the practice of helping the free-money gangstas keep the party going for the richest 0.001 percent, while not doing much of anything to get any of the free money flowing to the well-connected to flow to the people who are trying to prepare for the future.

Some have noted that insurers issue bonds as well as investing in bonds, and that some of their operations, and the benefits of some of their customers – including baby boomer savers with adjustable rate mortgages — benefit from low rates. Well, sure.

But the beneficiaries of the low rates are all feasting off of the dashed dreams of people who went without fancy food or fancy trips to try to put money aside for the future. That’s not very nice.

Jacob Lew Why are life insurers being labeled systematically important financial institutions? That’s a question that many in the industry, not least among them senior executives of the targeted insurers, are voicing with growing alarm.

And they’re pointing an accusing finger at the SIFI designator-in-chief: Jacob Lew, head of the Financial Stability Oversight Council (FSOC) and the U.S. Treasury Secretary. He has much to answer for.

That starts with the FSOC’s “preliminary” decision on August 4labeling MetLife a SIFI, a designation that groups the company with other non-bank SIFI designees: AIG, GE Capital and Prudential. MetLife President and CEO Steven Kandarian immediately objected to the ruling, noting the company might seek remedies available under the Dodd-Frank Act to contest the designation.

As well he should. If the designation stands, MetLife would be held to harsher capital, leverage and liquidity requirements by state regulators and the Federal Reserve Board.

This comes at a time when MetLife, like so many other insurers, are facing increasingly burdensome regulatory demands. They’re also being challenged by pressures — rock-bottom interest rates, non-traditional competitors and volatile markets — that are taxing balance sheets as never before.

The SIFI designation might be justified if there were a rational basis for it. But as a letter written by Rep. Scott Garrett (R-NJ) to Secretary Lew stated, the FSOC’s policy seems to be to “designate first and ask questions later.” Supported by 6 other U.S. House members, the letter argued that insurers “didn’t get the public analytical effort that the asset management industry did in the FSOC’s ‘rush’ to designate firms as SIFIs, leading to disparate treatment of insurers.”

Like so many actions by regulators (recall FINRA’s earlier failed attempt to regulate indexed annuities as securities) the FSOC’s ruling on MetLife looks like a naked power grab: bringing the New York-based insurer under its purview because it has the will and ability to do so.

One can only hope that MetLife will ultimately secure redress under Dodd-Frank; or, failing that, convince the FSOC to craft metrics, rules and stress tests less onerous than those governing the colossal-size banks for which they were originally intended. 

CDC

The CDC is widely known as the nation’s keeper of our health and, maybe more importantly, our guardian against infectious and deadly diseases. As a society, we presume the organization is the master of everything science and health related; it stands as our guard against all national health threats. The CDC: an army of lab coat-laden warriors who wouldn’t dare let a harmful, contagious, internationally-spreading disease into our sacred land. 
 
Well, for the most part, maybe.
The CDC has been criticized for many different perceived shortfalls in it’s response to Ebola. The deadly disease was first discovered in 1976 in what is now the Democratic Republic of Congo near the Ebloa River. Fast forward 38 years and the largest Ebola outbreak in history makes news in March as 23 die in what was then called a “mystery” homorrhagic fever. 
 
Doctors, nurses and volunteers working for aid groups in West Africa are reported to have contracted the disease while helping patients in the area. At the time of this writing, 14,413 people have been sickened since March and at least 5,177 have died, the latest of which was Dr. Martin Salia, a U.S. resident who contracted Ebola in Sierra Leone and died from the disease at Nebraska Medical Center. 
 
Though critics agree you can’t stop individuals from traveling to West Africa, someone — or something — should prevent infected ones from returning to the U.S. Many have blasted the CDC for not reacting to the outbreak quick enough, and when they did, many feel the organization was — and still is — not strict enough on quarantine regulations, or lack thereof. 
 
As the House Energy and Commerce Committee recently put it: “The trust and credibility of the administration and government are waning as the American public loses confidence each day with the demonstrated failures of the current strategy.”  

Michael A. Horowitz and Moshe Marc Cohen On March 14, 2014, the Securities and Exchange Commission filed charges against this duo for their part in an $80 million fraudulent variable annuity scheme from 2007 to 2008. According to the SEC, Horowitz, a Morgan Stanley broker  at the time, looked to exploit the death benefit and optional bonus credits of the VAs by identifying terminally ill individuals in Southern California and Chicago.

Horowitz teamed up with Los Angeles-based Rabbi Harold Ten, who would identify individuals who would not object to Michael using their name and Social Security number on an annuity in exchange for compensation.

The SEC’s Enforcement Division alleges that “Horowitz, anticipating that a patient would soon die, sold VA contracts with death benefits and bonus credit features to wealthy investors, designating the terminally ill patients as annuitants and marketing the scheme as a way to win short-term investment gains.”

The primary criteria Horowitz employed in selecting hospice patients to designate as annuitants were “their terminal illness” and “the likelihood that they would die soon.” And when they did in fact die, the investors collected death benefit and bonus credit payouts. According to the SEC, the duo generated more than $1 million in sales commissions alone through deception, falsification and other fraudulent acts.

In July, Horowitz settled with the SEC, agreeing to pay disgorgement of $347,724, plus prejudgment interest of $103,025 and a $400,000 penalty. He is also barred from associating with a broker-dealer or investment advisor or from participating in any penny stock offering. Cohen, a former Woodbury Financial Services broker, was required to forfeit $766,958 plus interest along with civil penalties as deemed necessary by the SEC. The SEC also requested an order barring Cohen from the securities industry for life.

 

The Fraudulent Four In a sickening misuse of government funds, 106 people were charged in January with what New York officials have called the largest fraud ever perpetrated against the Social Security disability system, a scheme stretching back to 1988 in which as many as 1,000 people – many of whom were police officers and firefighters already collecting pensions from the city – were suspected to have bilked the federal government out of an estimated $400 million.

The fraudsters had been coached on how to fail memory tests, feign panic attacks and, if they assisted after the Sept. 11 terrorist attacks, to talk about their fear of airplanes and entering skyscrapers. These people were not smart enough to keep their act going on social media. Prosecutors found Facebook photos of the “disabled” fishing, riding motorcycles, driving jet skis, flying helicopters and playing basketball, even though most reported they were so impacted, they could not leave the house.

Leading this massive scheme was Raymond Lavallee, 83, a Long Island lawyer who started his career as an FBI agent; Thomas Hale, 89, a pension consultant who investigators say filled out applications for the scammers; John Minerva, 61, a former police officer who works for the Detectives’ Endowment Association; and Joseph Esposito, 64, a retired NYPD officer, who coached the applicants to act symptomatic during exams conducted by psychiatrists for the Social Security Administration.

In August, Esposito plead guilty and was ordered to pay $734,000 in restitution. He will likely be sentenced to less than four years in jail. John Minerva pleaded guilty to grand larceny and conspiracy charges for his role in recruiting retired FDNY and NYPD officers. He was ordered to pay $315,000 in restitution and will likely serve less than three years in jail. Raymond Lavallee and Thomas Hale have pleaded not guilty and are awaiting trial.

 

Oregon Gov. John Kitzhaber John Kitzhaber is a former emergency room surgeon and health care administrator who has probably saved many lives over the years.

He has been the governor in Oregon since January 1995.

He has tried to protect his state’s salmon – which are certainly delicious and healthy fish – and he has supported continuing education programs for physicians and the practice of evidence-based medicine. These are all worthy endeavors.

But Kitzhaber is also one of the Democratic governors who supported the Patient Protection and Affordable Care Act (PPACA), got huge sums of money from the U.S. Department of Health and Human Services (HHS), and expressed great love for it – then failed to follow through to make sure its information technology systems would work.

The state’s exchange, Cover Oregon, took a bossy approach to exchange management. It decided to act as an “active purchaser,” meaning that it would dicker with exchange plan issuers over benefits, not simply have the exchange act as a clearinghouse for all plans offered by all qualified, interested issuers.

The exchange made a point of having folk singers croon about the virtues of exchange plan coverage in commercials aired on Oregon television stations.

Corey Pulver, a Eugene, Ore., insurance agent, warned National Underwriter back in September 2013 – correctly — that the Oregon exchange would have trouble even with relatively simple tasks such as associating consumers’ applications with the agents who helped the consumers.

Then, surprise, surprise: Come Oct. 1, the exchange enrollment system worked so poorly that Oregon eventually gave up on taking applications through the Web and shifted to a paper-based process.

So much for PPACA creating a simple, cheap, brick-less, mortar-less Amazon.com for health insurance in Oregon.

Kitzhaber is a rogue partly because he leads a state that was so annoying, arrogant and self-righteous about PPACA, then botched the implementation. He’s also rogue because he and officials like him contributed to a fundamental weakness in the PPACA experiment: If, eventually, the PPACA public system fails, we may never have a definitive answer to whether it failed because the PPACA exchange and regulations were bad or because the implementation was bad. We may still be bickering about that subject through a mind-to-mind virtual reality brain upload version of National Underwriter a century from now. 

Dave Ramsey According to Dave Ramsey, Roth IRAs are superior to traditional IRAs because unlike the latter, retirement funds can be distributed from the former income tax-free. And actively managed mutual funds always outperform passively S&P 500 index funds.

The problem with the statements: In respect to IRAs, the Roth is only superior if one enters retirement with a higher income tax bracket than when employed. As to mutual funds, studies have found that S&P 500 index funds outperform between 80 and 90 percent of their active counterparts — and do so at lower cost.

The fact that Dave Ramsey — author, talk show host and self-described personal finance expert — is wrong about so much of the financial information he conveys to his avid radio listeners evidently hasn’t had a negative impact on his business. His mouthpiece, the “Dave Ramsey Show,” can be heard on (among other media) more than 500 radio stations in the U.S. and Canada. And he enjoys growing royalties from his popular books, including five New York Times best-sellers.

Why are people lapping up the often debatable, or downright wrong, finance info he peddles? His main appeal lay in his signature message: Follow my advice, and I’ll help you get out of debt (a theme that another personal finance guru, Suze Orman, has also run to the bank with). Ramsey’s books and broadcasts also reflect a Christian perspective popular with his numerous religious followers.

It’s unfortunate that someone with so powerful a bullhorn is so little qualified to deliver financial advice to the masses. Though he has degrees in finance and real estate, he never received the intensive education in retirement planning, investments, estate planning and other topics in which most financial service professionals are well versed.

Nicholas Paleveda, one such advisor and a critic of Ramsey’s on Producers Web (a sister online publication of NUL) suggests the talk show host enroll in the certified financial planner or comparable program if his recommendations are to be taken seriously.

Until then, his books and broadcasts should be viewed as no more than financial pornography.

U.S. District Judge Robert Scola: Joel Steinger, 64, masterminded a life-settlement scam that victimized more than 30,000 investors nationwide between 1994 and 2004. His company, Florida-based Mutual Benefits Corporation, bought life insurance policies from people with AIDS and other terminal or chronic illnesses and then sold them to investors.

Problem was, according to federal prosecutors, his life expectancy numbers were fraudulent and thus not enough people died to fulfill the promises made to investors. In order to perpetuate the scam, Steinger used Ponzi techniques to funnel new-investor money to prior investors. In turn, he created one of the largest scams in Florida history.

Steinger’s entire life was filled with lies, fraud and theivery. In an interview with the Broward Palm Beach
Times, his stepson, Michael Rosen, still wonders how he stayed out of prison until now. “I’ve known for years that
this man was scum,” he says. But Rosen represents only a fraction of the incredible human and financial wrechage Steinger has left in his wake. He destroyed the lives of friends, relatives and countless stragers. The longevity of his freedom from incarceration can be traced back to one
truth: he was a huge political donor.

“It’s clear you were the mastermind of this criminal enterprise,” Judge Scola told the defendant. Still, Scola handed down a measely 20-year sentence out of a maximum 50 years, illustrating that even record-breaking fraudulent schemes that wipe out the savings of thousands of households and further tarnish the reputation of the insurance industry aren’t worthy of even half of a recommended sentence. For that, Judge Scola earns his place in the Rogue’s Gallery.

Anthony Kennedy, Supreme Court Justice Anthony Kennedy was born in 1936 and was appointed to his current post by President Ronald Reagan.

He has a bachelor’s degree from Stanford, a law degree from Harvard, and a post as a law professor at the University of the Pacific. He has been a member of the National Guard. He has three children. He presents the appearance of being a fine, upstanding citizen.

But he is also a rogue, because he is the “swing voter” justice on the Supreme Court.

The court has nine justices. Four usually rule for the positions Democrats favor. Four usually rule for the positions Republicans favor. Kennedy is unpredictable.

Because Kennedy is so unpredictable, it’s hard ever to know whether any particular controversial provision in the Patient Protection and Affordable Care Act (PPACA) will live or die.

Can Congress make us eat broccoli?

Ask Anthony Kennedy.

Can Congress make us pay for broccoli, whether we eat it or not?

Ask Anthony Kennedy.

Can the secretary of the U.S. Department of Health and Human Services let exchange plan users get PPACA premium subsidy tax credits in the states in which HHS itself runs the PPACA exchange? Can the HHS secretary, in general, interpret ambiguous language in the PPACA tax credit provisions in any reasonable way, as authorized by PPACA, or only to the extent that Antonin Scalia and Clarence Thomas are willing to provide enough rope for her to use it get the Obama administration all tied up in policy implementation knots?

Ask…that guy.

You may have learned in school that we have three branches of government: the executive branch, the judicial branch, and Congress.

Now, we have only branch of government of consequence: Anthony Kennedy.

He is a rogue because it’s atrocious that one man has so much power over health policy simply because he refuses to address the issues with a made-up mind.


The American College Back in 2012, Larry Barton, president and CEO of The American College took exception to comments attributed to incoming Financial Planning Association CEO Lauren Schadel, who stated that “…one profession and one designation is the best way to build the financial planning profession.” Barton retorted that consumers must be able to choose from among financial professionals with other “reputable designations.”

Given this viewpoint, it would seem odd that The American College’s relationship with the Certified Financial Planning Board of Standards — the standards-setting organization that administers the Certified Financial Planner certification program — has been marked in the years since by a war of words.

The cause of the conflict: competition between the CFP mark and the American College’s own proprietary Chartered Financial Consultant or ChFC designation.

Both designations cover much the same ground. Income taxation, retirement planning, estate planning, investment planning, insurance planning, among other topics, are core topics of the two programs.

Yet the CFP mark is by far the more widely recognized of the two. More than 68,000 insurance and financial service professionals hold the designation nationwide. Accounting for foreign designees (overseen by an international CFP Council) brings the total to more than 126,000 planners. And the CFP certification exam is administered at more than 50 locations across the U.S., including The American College.

All of which doesn’t sit terribly well swith the Bryn Mawr, Pa.-based institution. As part of its ongoing anti-CFP campaign, the college has promoted the ChFC mark as the superior one. Clearly, the college hopes to make its proprietary designation the gold standard for planners — and to marginalize the CFP program.

The attack plan won’t work. The CFP mark is too well established at this point for the college to make much of a dent in the educational marketplace.

The college would do better to focus its resources on supplementary coursework the college offers and which the CFP curriculum covers lightly or not at all: post-retirement income planning, behavioral finance, long-term planning, to name only a few topics.

As Larry Barton said, there’s in the room in the marketplace for many designations – not least the CFP mark.