This week, a California insurance agent, Glenn Neasham, was sentenced to 90 days in jail after being convicted of felony-theft by a jury for selling an annuity to an 83 year old woman with signs of dementia. As San Francisco insurance attorneys, we are always especially concerned about the vulnerable being preyed up on by unscrupulous insurance companies and agents. (see another post about the elderly here)
Hopefully this case sends a clear message that California will not tolerated this. When the insurance agent was arrested in 2010, then Insurance Commissioner Steve Poizner said agents “who steal from vulnerable seniors will not get away with their shameful tricks.” Mr. Neasham may be the first insurance agent ever put behind bars for selling an annuity. His bail was set at $20,000 and needs to be posted by April 18 to be allowed to remain free while his appeal is pending, but Mr. Neasham, once earning $500,000 a year, claims to be “financially ruined” from this case.
Mr. Neasham claims that the elderly woman, Fran Schuber, came to him in 2008 with her octogenarian boyfriend, Louis Jochim, who had bought a similar annuity from him years before. The annuity he sold Ms. Schuber was an “indexed” annuity, meaning that it pays interest based on the performance of stocks and bonds. The buyer is guaranteed not to lose the money they put into it-the principle-but they face very steep penalties for withdrawing the money early, sometimes being required to keep their money in the annuity for more than a decade. The annuity was to be through Allianz SE. Mr. Neasham denies that he noticed any signs of dementia in Ms. Schuber at the meeting.
The criminal case started when Ms. Schuber and Mr. Jochim went to her bank to withdraw $175,000 to pay into the annuity. Bank officials noticed she was confused and notified California’s elderly protection officials as required under California law.
The prosecutor in this case stated that there was evidence at trial that Ms. Schubert, who was too ill at the time of trial to testify, was not competent to make this decision and that Mr. Neasham knew it at the time. She claimed that the 8 percent commission he was earning, which amounted to $14,000, played into his criminal intent. The California Department of Insurance also investigated this incident and determined that it was illegal.
At a 2007 meeting of the National Academy of Elder Law Attorneys, these indexed annuities were discussed and an experienced elder and insurance lawyer asserted that they are completely inappropriate for anyone over the age of 75, and possibly for younger people as well, because they defer payouts for such lengthy periods of time.
The Wall Street Journal noted that the conviction of Mr. Neasham was “sending shivers down the spines” of insurance agents across the country. Our California insurance attorneys think that insurance agents thinking twice before selling an annuity, or any kind of financial or insurance product, to an elderly customer is only a good thing. As Baby Boomers continue to retire, the industry needs to be more vigilant than ever.
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