Drama in real life

I told Lakemen that I would keep the community informed of the absolute latest scandals to hit the insurance world. Here's the next one.

No Teacher Left Behind

When most of us think of teachers, we think of learning. We think of those glorious people, whom many claim are overworked and underpaid, that get up every morning and do their very best to make sure our children are educated and grow to be a productive part of society. The proverbial door, however, often swings both ways in that teachers also learn.

For example, in a class action lawsuit filed in 1999 in the state district court of Laredo, Texas, 164,000 teachers learned that the College/ Americo Life Insurance Company may not have had their best interest in mind when they were sold 403(b) retirement plans by several of that company's Independent Marketing Organizations (IMOs).

The lawsuit that settled in 2002 for around $24 million charged the College/ Americo Life Insurance Company with unlawfully selling annuities to school employees at several districts in Texas by marketing them with cafeteria plans. The lawsuit says that College/ Americo Life engaged in fraud, breach of duty and good-faith, and negligent misrepresentation.

Specifically, the suit charges that school employees were misled into purchasing under-performing annuity products from agents representing that company, said plaintiff attorney G. Wade Caldwell, a partner at Martin, Drought & Torres, Inc., in San Antonio.

The suit also took issue with the life insurance policies sold by College/ Americo Life, which were sold as part of the 403(b) annuities. The arrangement was supposed to allow teachers to pay for their life insurance premiums with pre-tax payroll deductions from their annuity plans. Many of the sales, Caldwell alleges, were in violation of Internal Revenue Service regulations.

A few weeks ago, Atwater's Mark Colbert, who in February 2000, Insure.com called one of the best-known Life Insurance Fraud Experts in the nation, discovered that Americo obviously hadn't learned anything at all from its $24 million lawsuit. Colbert claims that as recently as February 2006, members of Americo's independent marketing organizations were still selling fraudulent 403(b)-based retirement plans to teachers across California.

Colbert said that the Americo Financial Life and Annuity Insurance Company, which was given A- ratings by both of the insurance industry's premier rating authorities, Standard and Poor's and AM Best, somehow made arrangements to get their agents onto several of the local school campuses and in front of teachers. Here, the 43 year-old, who was instrumental in the investigations of Metropolitan Life and Prudential back in the mid 90s, said the agents falsely claimed to be affiliated in some way with the CA State Teachers Retirement System CALSTRS.

Colbert said that he has already investigated nearly two dozen cases in California from Shasta County all the way down to San Diego. In these cases, Americo agents were allowed onto the school campuses, given access to a teacher's lounge or classroom, and had teachers ushered in to meet with them throughout the day. “Once the agents convinced the teachers that they were working with CALSTRS and were there with the school district's blessing, it must have been like shooting fish in a barrel,” Colbert said.

Buhach Colony High School Earth Science teacher, Robert Davey, said “I had no idea what was going on. I met with the agents when they were sent to my room. They told me they were with CALSTRS and I had no reason to not believe them. After meeting with Mark [Colbert] and having him show me what was really going on with my retirement, I couldn't believe I had been so stupid.”

Other teachers and school administrators claimed they received notices in their school mailboxes informing them of a 403(b) Retirement Workshop to be held at a local restaurant. A Counselor at Golden Valley High School claimed there were 20 – 25 people at the meeting she attended.

Mr. Davey and at least 10 other school administrators and teachers from central California will represent the teachers in California in a class action suit being brought against Americo by the law firm of Casper, Meadows, Schwartz and Cook in Walnut Creek, CA. Colbert, who is currently working for that firm, will also contribute the results of his investigation to investigators at the CA State Dept. of Insurance. “I have been investigating insurance fraud in America for a little more than 14 years,” Colbert remarked, “and my investigations have led to the permanent revocation of a number of agents' insurance licenses. I have no idea what the Dept. of Insurance may choose to do with these bad agents but, if I was earning my living from the sale of insurance products, I'd hate to be in their shoes.”

When asked if he had been in contact with representatives of the CA Teachers Association, Teachers Union, Merced Union High School, and Merced City School Districts, Colbert said that he had received a little help from the President of the Teacher's Union, Sheila Whitley, but for the most part had run into nothing but resistance and denial from everyone else.
“I literally pleaded with the CTA for help in getting the word out to teachers who may have been hurt by Americo and their agents,” Colbert said, “I even sent them copies of my documents and carefully explained how they could do the most with the least amount of effort. To date, I've received no help whatsoever.”

When asked why he thought the school districts were taking the position of “look the other way,” Colbert stated, “ think about it, someone at the district level actually allowed Americo's agents to come onto the campuses, set up shop, pull teachers out of class, and sell them products in direct violation of IRS regulations. I guess they're under the impression that if they just ignore the potential problems this has created for the teachers, they'll just go away. From the very beginning, it was my intention to keep the district's officials out of the spotlight. They are human and can be sold a bill of goods just like anyone else. Then, when I started getting ignored, my phone calls not returned, and meetings canceled because principals claimed, it wasn't their department, I realized I'd have to do this on my own. If, unfortunately, I have to step on a few toes to help the teachers, it's a decision I'll just have to live with.”

Could there be other school districts involved in this scandal? “Absolutely” Colbert said. “I've spoken directly with Superintendent, Mike Hansen at Fresno Unified and was impressed with the interest he has taken in this matter.” Why Fresno? “Americo has a large IMO in Fresno and I suspect their agents have thoroughly saturated that area. You know, why wouldn't they start with Fresno teachers before going out of the area to other districts?”

Have you identified any potential problems there? “I've received word from Fresno Unified that there could be more than 120 potential victims in that district. I haven't had time to follow up on those cases yet.”

Can someone become a member of a potential lawsuit without contacting you? “Yes, once the class suit is certified, anyone who purchased life insurance and/or annuity products from Americo within a specific time frame should be included in it.”

What sort of “time frame” are you talking about? “Americo seems to get sued every few years for hurting teachers somewhere in America. In the Texas case, the release (a 10-K filed with the SEC) had an Exclusion Date of October 1, 2001. That means that anyone who purchased a policy from Americo prior to that was part of the last lawsuit and, unfortunately, cannot be included in the new one.”

What if there are teachers who were part of the last class suit against Americo and weren't told about it? “In the industry, we call that “getting Pru'd.” When Prudential was sued by around 11.7 million people back in the 90s, there were around 1.4 million people who weren't told anything about it. I guess Prudential figured that they had their chance to come forward and chose not to - so they are just out of luck. Once the case was settled, these people had no recourse whatsoever.”

There could be Teachers who after reading this article realize they may have fallen victim to Americo's agents. What would you suggest they do? “They can always call the company. I suppose someone there might be able to help them. I certainly can't promise anything though. Back on October 19th, I personally notified the Vice President of Americo's Compliance Department of my findings in central CA. To date, I haven't heard that anyone has gotten a phone call from that company. People are always free to contact me as well. Your case will be kept completely confidential and you may choose to either become a member of the suit or forget the whole thing. Then, at least you'll know the truth.”

You worked on cases against MetLife and Prudential that involved over 25 million people, how large is this one and where do you see it going?

“What if there were [only] 70,000 teachers in California affected by Americo's choice to target teachers for this type of fraud,” Colbert asked, “who is going to help them? They haven't received any help at all from the CTA and I literally handed them this case on a silver platter. Don't teachers pay dues to receive protection and support from that organization? That's really pathetic,” Colbert laughed.

“I'd like to contact some our local political representatives on this matter,” he continued. This is an election year and someone might want to be known as the politician who went out of their way to help the teachers in California out of a jam.” “I would hate to think,” he continued, “that long after this case settles, a teacher has to file a death claim or collect the money they believe they are accumulating for their retirement and find they have nothing. At that point, they'll have no recourse and are just out of luck,” he added.

“Wouldn't it be great if a Senator or someone in Congress stepped up to the plate and officially told Americo that they can't rip the teachers off in California? A few years ago, they basically got away with it in Texas and just a few years later, they're coming after our teachers,” Colbert stated. “I think that if I were in charge of Americo's sales division, I might not want to relax completely.”