North Carolina Department of Justice
North Carolina Department of Justice
North Carolina Department of Justice
Submit this request

Cooper stops living trust scheme that hurt seniors

Release date: 10/11/2006

Companies pushing living trusts and annuities ordered to stop deceptive sales to seniors

RALEIGH: A judge has agreed with Attorney General Roy Cooper’s request to stop American Family Prepaid Legal Corporation and Heritage Marketing and Insurance Services from bilking North Carolina seniors out of hundreds of thousands of dollars.

“These companies targeted seniors, using tricky sales practices to pressure them into spending their savings on living trusts and annuities they may not need,” said Cooper. “We’ve stopped them from preying on any more seniors, and we’ll keep working to root out similar schemes.”

Wake County Superior Court Judge Michael R. Morgan has ordered American Family and Heritage to stop selling or offering to sell estate planning documents, including living trusts or wills, powers of attorney, and health care directives, to North Carolina consumers while the lawsuit is ongoing.

The preliminary injunction also bars the companies from providing legal advice, answering legal questions about estate planning, preparing or executing legal or estate planning documents, and misrepresenting the benefits of annuities and the length and cost of the probate process. In addition, the companies must stop misleading consumers during in-home sales presentations and must cease making sales calls or presentations to consumers who haven’t asked for them.

According to evidence Cooper presented, a Heritage agent convinced one Charlotte couple in their seventies to cancel an insurance policy, cash in their investments and put all of their savings into an annuity he promised would earn seven percent interest. But the Heritage agent never told them the interest rate was guaranteed for only one year and that they would pay steep penalties if they needed to withdraw their money. Only later, when the couple considered buying a house using funds from the annuity, did they learn that they would lose nearly one-fifth of their money in fees.

Another senior from Cary cashed in an IRA worth $67,000 to purchase an annuity at the urging of a Heritage agent. When she told the agent that she depended on monthly payments from the IRA to cover her living expenses, he claimed that her current investment would run out of money in five years while the annuity would not. He failed to tell her that switching to the annuity would cut her monthly income from $1,700 to less than $300.

Last May, Cooper filed suit against American Family and Heritage alleging that the companies use aggressive, unfair and deceptive tactics to pressure elderly consumers to purchase living trusts and annuities that are often unsuitable to the consumers’ age and circumstances. In addition to today’s preliminary injunction, Cooper is seeking a permanent injunction to stop these practices and has asked the court to cancel

NC Department of Justice y 9001 Mail Service Center Raleigh, NC 27699-9001 y (919) 716-6400

the companies’ contracts and order them to pay refunds to consumers and civil penalties. The North Carolina State Bar joined Cooper in bringing the suit, alleging American Family is practicing law without a license.

Cooper contends that American Family sales agents bullied seniors into purchasing living trusts for $1,995 by preying on fears related to the handling of their estates and by misrepresenting facts about the probate process. Once the paperwork for the living trust was complete, a Heritage sales agent delivered it to the consumer. Cooper contends that these follow-up visits were really designed to convince the senior to purchase insurance products such as equity-indexed deferred annuities. Annuities pitched by Heritage typically have a term of up to 20 years and include stiff financial penalties if consumers withdraw the principal within 15 years, making them a poor choice for many seniors.

The Attorney General’s office has received a total of 44 written complaints about American Family and Heritage from seniors and their family members across North Carolina. American Family and Heritage are affiliated companies from Irvine, California that share an office in Greensboro. The suit and today’s order also name Stanley Norman and Jeffrey Norman, both of California, who serve as officers and directors of the companies.

“Scam artists and other dishonest businesses try to take advantage of consumers of all ages, but we know that seniors can be special targets because they’ve built up a lifetime of savings and may be more trusting,” said Cooper. “If you or a loved one has been hurt by a similar scheme, let my office know about it.”

Consumers can call the Attorney General’s Consumer Protection Division at 1-877-5-NO-SCAM.