RICO Lawyer & Attorney : Thomas Walker : Cosho Humphrey Law Firm : RICO Act, Federal and State Racketeering Litigation, Boise Idaho

On January 14, 2009, LawyersandSettlements.com reported that two Arizona senior citizens filed a proposed class-action lawsuit against EquitTrust Life Insurance Company, claiming the Iowa-based financial company duped consumers into purchasing financial products through deceptive sales practices, among other charges.

According to the lawsuit, EquiTrust designed a scheme that defrauds policyholders, especially the elderly -- a group in need of retirement saving and spending vehicles without onerous surrender charges and lengthy maturation periods -- to create large product spreads in order to pay its agents oversized commissions, to lure prospects with illusory bonuses, and to earn a large profit margin.

To help protect this group, 47 states have adopted a consumer protection statute -- the Standard Nonforfeiture Law for Individual Deferred Annuities (SNFLIDA) -- that limits surrender penalties through a prospective test. This test generally protects those over the age of 60 from individual deferred annuity products that have optional maturity dates and surrender charges that exceed 10 percent of the policyholder's premium.

The suit claims EquiTrust's surrender charges are often 20 percent, twice the permitted amount. The SNFLIDA test also prohibits issuing such annuities to the elderly that have surrender penalty periods in excess of 10 years. EquiTrust's annuities often have surrender penalty periods of up to 14 years.

The lawsuit claims EquiTrust builds into its annuities package a maturity that occurs after the policyholders' 105th birthday. As the fine print is built into plaintiff's contracts with EquiTrust, these dates cannot be changed. This conniving tactic protects the insurance company from risk while significantly damaging the financial security of the policyholder, the suit claims.

Annuities receive a beneficial tax treatment under U.S. Tax Code in that the growth on principal within the annuity accumulates on a tax-deferred basis until the funds are withdrawn. This is a big incentive for prospective purchasers and one EquiTrust offsets by its product spread in its indexed annuities, plaintiffs claim.

The lawsuit claims the "scheme was devised and intentionally crafted to ensure that plaintiffs and class members would purchase indexed annuities and not receive full benefits from the annuities or be subject to exorbitant surrender charges."

Plaintiffs claim the class has been forced to pay hundreds of millions of dollars in premiums and surrender charges for annuity products that, by design, could not perform as advertised.

The lawsuit names several counts against EquiTrust including violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), unjust enrichment and common law civil conspiracy.

The suit seeks to represent anyone who purchased an indexed annuity product from EquiTrust from 2004 until present.
 

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A New Jersey federal judge on Friday, September 28^th, threw out the remaining racketeering claims pending against several dozen insurers and brokers in a class action lawsuit stemming from industry wide investigations into bid-rigging and client-steering allegations.

The decision, which follows a recent ruling dismissing antitrust claims against the brokers and insurers, resolves the major claims in the consolidated litigation brought on behalf of commercial property/casualty insurance policyholders and employee benefit plan sponsors, who sued the firms following the investigations initiated by then-New York Attorney General Eliot Spitzer.

Plaintiffs alleged that the companies engaged in a conspiracy in which they allocated clients, fixed prices and restrained trade in violation of Racketeer Influenced and Corrupt Organizations Act and the Sherman Antitrust Act. In earlier rulings, Judge Brown and a previously assigned judge rejected antitrust and RICO allegations against the insurers and brokers. Judge Brown earlier this year gave plaintiffs a final chance to amend their filings and bolster their case with supplemental pleadings.

After ruling in late August that the consolidated suit lacked factual support for claims of a widespread antitrust conspiracy, U.S. District Judge Garrett E. Brown Jr. said Friday the suit also lacked factual evidence of a RICO enterprise.

“Plaintiffs’ allegations offer nothing more than a kaleidoscope of acts executed by a kaleidoscope of actors, and combine broker-defendants and insurer-defendants in such a fashion that the court is unable to discern any systemic permutation,” Judge Brown wrote in his 73-page decision. “While discussing dozens of transactions and hundreds of actors, plaintiffs fail to outline even a single set of actors that interacted with each other and executed their transactions systemically.”

The plaintiffs alleged the brokers and insurers participated in the operation or management of a RICO enterprise by, among other things, reaching agreements with each of the insurers regarding the amount of contingent commissions to be paid to the broker and the level of business to be steered to each insurer defendant and then coordinated the concealment of the scheme, according to court papers.

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