Fraud is fraud - regardless of "fiduciary duty"

[DHK]

Brokers, advisers and insurance agents implicated in alleged $100 million investment fraud

Dozens of financial intermediaries — including stockbrokers, financial advisers, financial planners and insurance agents — are being sued for an alleged investment fraud that attorneys claim cost more than 1,000 investors, many of whom were retirees, at least $100 million in lost savings.

The lawsuits, targeting intermediaries in areas near Los Angeles, Houston, Chicago, northern Florida and Philadelphia, claimed advisers were negligent and breached their fiduciary duty and contracts when selling these investment products.

The alleged scheme worked on two levels, attorneys said. First, Future Income Payments offered pensioners upfront, lump-sum payments in return for a portion of their monthly pension payments over a specific term, often three to five years.

FIP used these pension streams to fund the cash flows sold to investors. Investors paid a lump sum to FIP in order to receive a monthly income stream for around 5 to 10 years, and were promised returns in the range of 6%-8%.

In addition, some investors were urged to fund premium payments for indexed universal life insurance policies with the income from these structured cash flows. Since FIP stopped making payments to investors in April 2018, many investors will likely lapse their policies, said Mr. Peiffer.

FIP is run by a convicted felon, Scott Kohn, who pled guilty in 2006 to three felony offenses related to trafficking in counterfeit goods, according to the lawsuits. He was sentenced to 15 months in federal prison. Attorneys say he is on the run, and believe he is somewhere in the Philippines. No one from FIP could be reached for comment. Mr. Kohn formed Pensions, Annuities, and Settlements in 2011, and changed its name to Future Income Payments in 2014.

"Were starting to focus on the investment advisers," said Mr. Peiffer. The firm will then "start looking up the chain" at distributors, life insurance companies, accountants and custodians, he added.

You read about **** like this and you wonder why there was all this push for insurance agents to become investment advisers, or make annuities regulated... when there are so many other fully licensed advisers who fall for **** like this.

More regulations don't fix **** like this. Fraud is fraud, regardless of whether you're under a suitability or fiduciary standard of care.

 

[IsaacA]

You right.
What would you think we can do to help?
It’s such a shame. Puts a stain on our industry.

 

[Tim Resnick]

So much for licensing and common sense. These guys 'with their Fancy Licenses' were selling a Ponzi Scheme (guess they saw some good commission dollars).

What kinda commissions they were paying?

?

 

[DHK]

My biggest recommendation would be to not sell anything that your insurance license and your E&O doesn't cover. These kinds of "private placement" deals SEEM to end up being such a gamble.

I would stick to well established and well rated insurance companies and their products.

The only thing I ever want to "apologize" for... is if the underlying index was negative, and so the policy had a zero return for the year (minus any IUL policy cost of insurance fees).

 

[Tim Resnick]

I wonder what kinda disclosures they had the buyers sign?

Always 2 sides to the story.

Are you saying their E/O doesn't cover private placements?

I've seen these private placement deals advertised quite often in my area. Security Firms are always pitching them...

 

[DHK]

It may... for investment advisors and/or registered reps. But then, the broker/dealer and/or RIA firm may also be "on the hook" if it was approved.

I highly doubt it would be covered for insurance agents.

 

[DHK]

So much for licensing and common sense. These guys 'with their Fancy Licenses' were selling a Ponzi Scheme (guess they saw some good commission dollars).

What kinda commissions they were paying?

?

The article says that intermediaries were paying commissions in the areas of 6-10%.

 

[IsaacA]

Do they all plan something like this out. Or does it kind of just happen?

 

[HealthGuy]

IsaacA if you think that all of those on the street selling this (as the downline) knew what was going on - that is wishful thinking...advisors, insurance agents, marketing groups all get caught up in this type of activity from time to time...to say that they knew it was going on would be presumptuous.

 

[Stephen]

There was a group here in Arkansas that got in trouble for running a similar scheme, I think that one of them was a forum member for a short amount of time.

Buying income streams that come from pension payments usually fall apart when the original pensioners discover that they can keep the lump sum and then also divert the pension payments back to themselves instead of the person that they sold the payments to.

The pension fund is going to send the money to whatever account that the pension owner tells them to , and then it becomes a civil issue. After it becomes a civil issue the investor that bought the pension payments as an investment learns that it isn't the original pensioner that they need to be litigating. It's a very ugly deal.