Agents Behaving Badly Part V: Five recently charged or sentenced due to insurance fraud

A fearsome fivesome for the fifth installment of our occasional series on ethics-challenged agents running afoul of the law includes a “premature” funeral home director in West Virginia, a Texas annuity scam artist praying on the elderly, two separate premium-stealing Iowans, and a former Massachusetts agent who had a lot of trouble with his taxes.

As usual, they serve as a reminder of what seems obvious. Like…

  • Ponzi schemes eventually collapse
  • Premium payments do not go into your personal account
  • You can’t take an “advance” on a living person’s pre-need funeral policy
  • The IRS frowns on failure to disclose hundreds of thousands of dollars of commission income

Without further adieu, here are real life stories of the latest Agents Behaving Badly.

W.V. funeral home owner sentenced for cashing in more than 100 pre-need funeral policies

The owner of a funeral home in West Virginia was sentenced on Feb. 8, 2018, to up to 30 years in prison for selling and cashing in on pre-need funeral arrangements for more than 100 people who weren’t actually dead.

According to a Feb. 8 article in the Charleston Gazette-Mail, Chad Harding, the owner of the Gatens-Harding Funeral Home in Poca, W.V., previously pled guilty to three charges of felony insurance fraud. He was sentenced to 1 to 10 years for each charge, with the sentences to run one after the other. He was also ordered to pay $30,000 in fines and court costs.

From the article:

Putnam County Prosecuting Attorney Mark Sorsaia said that, while Harding does have a strong reputation in the community, the level of fraud he committed and the “gravity of the matter” warranted the sentence.

“I’ve been involved in criminal prosecution in one way or another for 28 years,” Sorsaia said. “I can’t recall in this county or any other counties a situation, quite frankly, where circuit court had to deal with a fraud case that involved an amount over $900,000. I think the major question at hand is, what’s the appropriate thing to do when a person engaged in fraudulent activity and stole over $900,000?”

…Dozens of Harding’s family, friends and fellow church members … wrote character-reference letters in support of Harding, and asked Reeder to consider probation.

Harding’s attorney, David Moye, told Reeder that Harding was facing financial hardship when he cashed in on the 108 pre-need contracts, and said he is otherwise a well-known and “upstanding” figure in the community. Moye described the payments Harding received as “advances” to help him make ends meet, and asked Reeder to consider probation or home confinement…

… “He’s going to wear a scarlet letter on him for the rest of his life,” Moye said. “He will; his family will. All of his friends know about this.”

…Tracy Whitaker, vice president and legal/compliance and assistant general counsel for Homesteaders Life Insurance Co., said Harding denied all culpability, engaged in stalling tactics and blamed HomeSteaders for his actions.

“These were all policies for insurers who trusted him,” Whitaker said. “These were not advances. These were false insurance claims. If the policy owners had decided to take these life insurance policies to another funeral home prior to their death — which they have the right to do — what would have happened to these insurers? Their policy had already been claimed. How is this an advance?”

Restitution for the policies is still being researched and settled. For more details click on this link to the article.

Former Texas agent gets life sentence for annuity scam targeting elderly

A former Lubbock, Texas insurance agent was sentenced Feb. 15 to life in prison and ordered to pay back $810,000 to his victims after a Texas Department of Insurance (TDI) investigation.

Officers with the Texas Department of Insurance Fraud Unit found that Joseph Allen Gaines, 66, persuaded senior citizens in West Texas to purchase annuities, but then kept the money for himself.

Gaines came to the attention of TDI and the Lubbock Police Department when a 94-year-old woman’s family called an insurance company to confirm her $700,000 investment. They were told there was no policy in their mother’s name.

“We believe that Mr. Gaines had been a financial adviser for this woman’s family for decades,” TDI Sgt. Steve Richardson said in a statement in 2016, when Gaines was arrested. “He took advantage of her trust and encouraged her to invest in a fraudulent annuity.”

TDI’s investigation also identified other victims of the scheme. Gaines was charged with felonies in Swisher, Wilbarger, and Howard counties. Several of his victims testified at the sentencing in Swisher County.

Former Iowa insurance agent sentenced for ongoing criminal conduct

Billie J. Holmberg. Photo Courtesy of State of Iowa Department of Corrections

Billie J. Holmberg, a former insurance agent in Bettendorf, Iowa, was sentenced on Feb. 12 to five years supervised probation after pleading guilty to the charge of Ongoing Criminal Conduct, a class “B” Felony.

Holmberg was originally charged in connection with an investigation conducted by the Iowa Insurance Division’s Fraud Bureau, which concluded that Holmberg altered and endorsed a series of checks which in total exceeded $7,000. The checks obtained by Holmberg were from insurance policyholders of American National Property and Casualty Insurance Company and were actually intended to pay their insurance premiums. Holmberg deposited the insurance premium proceeds into her own bank accounts and ultimately used the funds for personal use rather than as originally intended.

“Holmberg is no longer authorized to sell insurance in Iowa as her license was revoked by the Division on April 4, 2017 for this misconduct. This type of conduct cannot and will not be tolerated as consumers need to be able to put their trust in their insurance agents,” Iowa Insurance Commissioner Doug Ommen said. “The vast majority of licensed agents are doing right by their clients every single day, but we will continue to work to bring cases like this to prosecutors in order to protect Iowans.”

The criminal prosecution was the result of a collaborative effort of the Scott County Attorney’s Office and the Iowa Insurance Division’s Fraud Bureau.

Iowa agent charged with defrauding clients who thought they bought policies

A Windsor Heights, Iowa agent is accused of selling fraudulent life insurance policies, annuities and other investments and using the money for his personal expenses.

On January 23, 2018, Roger Duane Goodwin, age 59, was charged with seven counts of mail fraud as the result of an FBI investigation, according to a news release from U.S. Attorney Marc Krickbaum, who represents the U.S. Attorney’s Office for the Southern District of Iowa.

According to the Indictment, Goodwin owned and operated “Goodwin Network of Advisors, Inc.” which sold life insurance, annuities, and similar investment products to individuals in the Des Moines and Houston, Texas areas. From at least February 2013 and continuing through at least August 2016, Goodwin advised several of his clients to purchase insurance products from him.

Instead of purchasing insurance policies or contracts for these clients, Goodwin deposited the clients’ checks into a bank account associated with Goodwin Network of Advisors – which only Goodwin and his spouse could access. The indictment alleges Goodwin kept all or large portions of the funds and used the money for unauthorized purposes that were not for the benefit of the affected clients. Goodwin used his clients’ money, unbeknownst to them, for his personal expenses, directly repaying other clients of Goodwin’s, and making payments to the insurance companies for the benefit of other clients whose money Goodwin had failed to earlier send to the insurance company.

Goodwin has a preliminary trial date of April 2, 2018, before U.S. District Court Judge Rebecca Goodgame Ebinger, at the Des Moines Federal Courthouse. Mail Fraud is punishable by a maximum prison term of 20 years and a maximum fine of $250,000. The indictment is only an accusation, and the defendant is presumed innocent unless and until proven guilty.

Massachusetts broker sentenced to prison for tax fraud after failing to disclose commissions, other income

A Dover, Mass. insurance broker was sentenced in federal court in Boston on Jan. 25, 2018 in connection with filing fraudulent personal tax returns.

Anthony J. May, 62, was sentenced by U.S. District Court Judge William G. Young to eight months in prison and one year of supervised release. In April 2017, May was convicted by a federal jury of two counts of filing false tax returns for 2008 and 2009.

May owned and operated Clients First Financial Insurance Agency, LLC, through which he sold life insurance products as a broker, and Advantage Life Settlements, LLC, through which he which he served as a broker for insured individuals looking to sell their personal life insurance policies to third party investors.

May operated his businesses out of an office suite in Hingham, Mass., where he also leased space to other independent insurance agents. May filed false 2006 through 2009 individual income tax returns that did not report $735,000 in income that he received from insurance commissions, broker fees and lease rental payments.

Special agents of the Internal Revenue Service Criminal Investigation unit conducted the investigation.