December 27, 2016 Comments (0) Blog, Current Investigations, Securities Fraud

Outlaw Annuity Advisors in 2016

(Last Updated On: January 3, 2017)

Some of the worst offenders in 2016, these outlaw annuity advisors took advantage of their clients and lost, according to Insurance News Net.com.

Joseph Anthony Mele, 31, of Ventura, California was arrested in June 2015 after he allegedly advised one of his two victims to sign blank checks totaling more than $800,000 so he could invest the funds for her. The money was instead allegedly deposited into Mele’s personal bank account and used for entertainment, vacations, gambling and plastic surgery, authorities said.

Mele pleaded no contest to multiple felony counts including financial elder abuse, grand theft and embezzlement, authorities said. His victims lost more than $2 million. But Mele earned hundreds of thousands of dollars in commissions and allegedly caused the victims to incur over $650,000 in surrender fees, penalties and lost premiums, according to the California Department of Insurance.

Mele took advantage of two elderly victims, ages 93 and 74, and acted as their “financial planner,” said the California Department of Insurance. Then he purportedly bought, sold and repurchased long-term annuities without their knowledge. He collected additional commission in the process, an illegal industry practice known as “churning.”

Roger S. Zullo, a Boston securities broker, was recently charged with profiting on sales of unsuitable, illiquid, high-commission variable annuities and violating the firm’s own sales policies.

Zullo allegedly fabricated client risk profiles in order to sell “scores” of annuities from 2013 through April 2016.  He made $1.8 million in commissions and many of his clients surrendered cost of thousands of dollars, according to the complaint filed by Secretary of the Commonwealth William Galvin. The majority of the commissions allegedly came from sales of Polaris Platinum III B-share variable annuities sponsored by AIG.

LPL allegedly ignored red flags and warnings from Zullo’s supervisors about the formulaic nature of his sales, and rewarded him with a membership in its “Chairman’s Club” for top producers. Zullo allegedly collected 90% of the commissions he produced.

Massachusetts ordered LPL in 2014 to pay $541,000 in restitution to investors who were not properly informed about surrender charges on variable annuities. LPL also paid Illinois regulators and investors $2.8 million in fines and restitution in 2014 for failing to properly document variable annuity exchanges. (See Roger S. Zullo and LPL Financial Annuity Investigation).

John Vernon Heath, of JVH Wealth Management in Bloomington, Minnesota was charged with stealing more than $220,000 from an 88-year-old client who suffers from Alzheimer’s disease and had been a client for 20 years.

Heath admitted to taking the money from his client’s Jackson National annuity to pay for a shopping spree, cell phone bills, airport shopping and credit card reimbursements, the criminal complaint indicates.

The fraud began in 2008 when Heath was working for Amiot Financial Group. At that time, he along with his client signed off on the Jackson National annuity. The client paid an initial premium of $67,926, and paid additional premiums in 2009 and 2014.

By the end of 2014, the premium value of the annuity had reached $180,000, according to state officials.

Heath allegedly opened a bank account in the client’s name in September 2015, and drew down on the Jackson annuity without the client’s knowledge.

On Oct. 30, the “full contract surrender” value of the annuity — $194.172 — was wired into the Wings account.

Over a six-week period last fall, Heath allegedly stole $224,652. By Jan. 20, 2016, he had spent the funds on credit cards, ATM withdrawals and retail purchases, authorities said.

Independent Financial Group terminated Heath on March 1, after he admitted to “wrongful taking of funds,” after an investigation by the Minnesota Department of Commerce. Heath was registered with Independent Financial Group from 02/11/2011 – 03/09/2016. He was permanently barred from the securities industry by FINRA in April 2016.

Paul M. Bardine, 54, a former insurance agent from Minnetrista, Minnesota., allegedly convinced the widow of a deceased client, along with other clients, to cash in their annuities to fund an “investment opportunity” in 2013 and 2014. He ended up charged with three counts of insurance fraud and three counts of theft after allegedly stealing more than $270,000 from a 79-year-old woman and a couple in their 70s, state investigators said.

Bardine’s insurance license expired in 2012. He faces a maximum sentence of 20 years in jail and or a $100,000 fine.

Mario Ferreri, former Orlando insurance agent found guilty of stealing annuity payments from clients was sentenced to seven years in jail and ordered to return nearly $1.3 million in restitution, authorities announced in May.

Ferreri was arrested in 2014 and charged with several counts of fraud after Lincoln Life filed a complaint against him with the Florida Department of Financial Services Division of Insurance Fraud. Working out of his Winter Park-based firm, Financial Management Resources, Ferreri allegedly bilked one client out of $750,000 and another out of $427,000, between July 2009 and March 2014, authorities said. Ferreri currently residing in Windemere, FL, faced up to 30 years in prison.

Joseph Allen Gaines, Texas insurance agent, was indicted June 24 in Swisher County in connection with the theft of $700,000 from one or more elderly clients, the Texas Department of Insurance (TDI) announced earlier this year.

Gaines was arrested in May by TDI investigators and the Lubbock Police Department after investigators discovered he was allegedly diverting annuity premiums for his personal use.

Timothy T. Rush of Bradenton, Fla., was arrested for allegedly stealing $224,600 designated toward the purchase of a Bankers Life annuity, the Florida Division of Insurance Fraud announced in January.

An insurance agent, Rush, allegedly diverted four checks from his Port Charlotte, FL, victim into the bank account of a phantom company he set up instead of sending the funds to the annuity company, Division of Insurance Fraud investigators also allege.

Rush was arrested on Dec. 30, 2015.

Celia Castillo, a Houston insurance agent and former bank employee was sentenced to 20 years in prison for allegedly stealing more than $3 million from elderly clients in a multiyear annuity scam, authorities said.

Castillo accepted the prison term rather than face trial given the sums involved in the alleged scam which tricked nearly a dozen elderly clients.

Castillo did business as FTS Life Gibraltar out of the FTS Life Insurance Agency with offices in an around Dallas. She allegedly cheated at least three separate victims of sums ranging from $232,000 to more than $1 million, authorities also said.

One of the plaintiffs, Diane Crumley, with whom Castillo had done business for 25 years, lost more than $1 million after following Castillo’s instructions to write three separate checks in amounts ranging from 200,000 to $600,000 in 2006, 2008 and 2011, legal documents show.

Annuities issued by Sentinel, Dearborn and Athene were subsequently found to be fakes and that no such polices existed, court records show.

The foregoing information, which is all publicly available on FINRA’s website, is being provided by The White Law Group.  The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

If you suffered losses investment losses and would like a free consultation to discuss your litigation options, please call The White Law Group at 1-888-637-5510.

For more information on the firm, please visit http://www.whitesecuritieslaw.com.