Tuesday, October 20, 2020

No. 394: Equitable Financial (f/k/a AXA Equitable)—An Update on the Reinstatement of Universal Life Policies

In No. 391 (September 30, 2020), I wrote about two individual federal court lawsuits against Equitable Financial Life Insurance Company (Equitable), which was formerly known as AXA Equitable Life Insurance Company, relating to the reinstatement of universal life insurance policies. Both lawsuits were filed by the same plaintiff. One of the cases is in New York and the other is in North Carolina. There is nothing new to report on the New York case. Here I provide an update on the North Carolina case and describe an amazing email from one of my readers.

The North Carolina Case
On October 8, 2020, Equitable filed three post-trial documents in the Wiener v. Equitable case in North Carolina: (1) motions to dismiss and for post-trial relief, (2) brief in support of motions to dismiss and for post-trial relief, and (3) consent motion to extend stay of judgment enforcement. It is anticipated that Wiener will oppose the motions, Equitable will reply to the opposition, and the judge will rule on the motions. The three documents are shown in their entirety in the complimentary package offered at the end of this post.

An Amazing Email
In response to No. 391, I received an amazing email from a reader. In it he reported an incident involving an Equitable universal life policy issued many years ago. My reader was not the writing agent, but became an advisor to the insured after the policy was issued. The policy was owned by a trust and had a face amount of more than $1 million. After the estate tax credit was increased, the insured decided he no longer needed the policy. In 2012, the insured transferred the policy to a child who planned to continue paying premiums.

In 2018, the insured called Equitable regarding the status of the policy. The insured was told the policy had lapsed. The insured was not told the lapse date at that time. The insured asked my reader what to do. My reader suggested that the insured (1) request in writing (by FedEx so delivery could be documented) a copy of the 60-day lapse pending letter, (2) copies of any correspondence from the USPS or any other service indicating that mail was returned as undeliverable or improperly addressed, and (3) copies of annual reports for 2017 and prior years. The insured sent the request by FedEx.

The following day, the insured received a letter from Equitable saying the policy lapsed in 2014. The letter said "in the interest of good customer service," Equitable was willing to reinstate the policy. The conditions were payment of a premium to cover two months of cost-of-insurance (COI) charges and the signing of a settlement agreement and release. The deadline for those steps was about 30 days after the communication was sent to the insured.

The communication from Equitable also included a copy of a 60-day lapse pending letter, a lapse notice, and a copy of the policy annual report for the preceding policy anniversary. The communication did not say these copies had previously been mailed to the insured.

Thus Equitable reinstated the policy without any evidence of insurability and without requiring payment of COI charges from the 2014 lapse date up to the 2018 reinstatement date. At the time of the reinstatement, the insured was more than 75 years old and the COIs were substantial.

General Observations
My reader and I surmise that Equitable drastically altered its reinstatement practices in an effort to avoid more individual lawsuits, or class action lawsuits, over its reinstatement practices. If our supposition is correct, universal life policyholders of Equitable, and perhaps universal life policyholders of other companies, owe a debt of gratitude to Wiener for his two lawsuits against Equitable, irrespective of the final results of those cases. My reader and I also realize there may be other explanations for Equitable's generosity in the case described in my reader's email.

Available Material
I am offering a complimentary 27-page package consisting of Equitable's three post-trial documents in the North Carolina case. Email jmbelth@gmail.com and ask for the October 2020 package about Wiener v. Equitable.

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Friday, October 16, 2020

No. 393: Greg Lindberg—Another Update on the Federal Criminal Case against Him and His Associates

No. 388 (August 24, 2020) was the latest of several updates on the federal criminal lawsuit against Greg E. Lindberg and three associates. Here I provide another update to reflect important recent developments in the case. (See U.S.A. v. Lindberg, U.S. District Court, Western District of North Carolina, Case No. 5:19-cr-22.)

District Court Judgments
On August 28, U.S. District Judge Max O. Cogburn Jr. issued a judgment against Robert Cannon Hayes, who was the chairman of the state Republican party in North Carolina. He had pleaded guilty to five counts. Counts 1 through 4 were dismissed on the government's motion. On the fifth count, Judge Cogburn sentenced him to one year of probation, a $100 assessment, and a fine of $9,500.

On September 4, Judge Cogburn issued a judgment against Lindberg sentencing him to 87 months in prison on each of two counts to be served concurrently, followed by three years of supervised release on each count to be served concurrently, an assessment of $200, and a fine of $35,000.

Also on September 4, Judge Cogburn issued a judgment against John D. Gray, a Lindberg consultant who had been found guilty by the jury on two counts, sentencing him to 30 months in prison on each count to be served concurrently, followed by two years of supervised release on each count to be served concurrently, and an assessment of $200. The judgments against Hayes, Lindberg, and Gray are in the complimentary package offered at the end of this post.

Notices of Appeal
On August 19, as indicated in No. 388, when Lindberg was sentenced to 87 months in prison, his attorney told Judge Cogburn that Lindberg planned to appeal, and asked the judge to allow Lindberg to remain free pending the appeal. Judge Cogburn denied the request and ordered Lindberg to report to prison when directed by prison officials.

On September 2, Lindberg filed a notice of appeal to the U.S. Court of Appeals for the Fourth Circuit of Judge Cogburn's August 19 denial. On September 9, John D. Gray, a Lindberg consultant who was found guilty by the jury, filed a notice of appeal to the Fourth Circuit.

On October 7, after Lindberg was instructed to report to prison on October 20, Lindberg filed a motion to extend the self-surrender date for two reasons associated with the COVID-19 pandemic. One reason related to Mr. Lindberg's health, and the other related to interference with the preparation of his appellate brief. On October 13, Judge Cogburn denied the motion. Lindberg's motion to extend and Judge Cogburn's denial of the motion are in the complimentary package offered at the end of this post.

The Appellate Court
On September 10, in the Fourth Circuit, Lindberg filed a motion for release pending appeal. On September 15, the government opposed the motion. On September 18, Lindberg replied to the government's opposition. On September 23, in a one-sentence order, Circuit Judge Diana Gibbon Motz, with the concurrence of Circuit Judges Barbara Milano Keenan and Stephanie D. Thacker, denied Lindberg's motion for release pending appeal. (See U.S.A. v. Lindberg, U.S. Court of Appeals, Fourth Circuit, Case No. 20-4470.)

General Observations
At this writing (October 14), Lindberg's date of October 20 for reporting to prison apparently still stands. I plan to report further developments in this case.

Available Material
I am offering a complimentary 38-page package consisting of the judgment against Hayes (5 pages), the judgment against Lindberg (7 pages), the judgment against Gray (6 pages), Lindberg's motion to extend the self-surrender date (17 pages), and Judge Cogburn's denial of the motion to extend (3pages). Email jmbelth@gmail.com and ask for the October 2020 package about Lindberg.

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Friday, October 2, 2020

No. 392: The Commodity Futures Trading Commission and Thirty State Securities Regulators File a Lawsuit Against Eight Defendants

On September 22, 2020, the Commodity Futures Trading Commission (CFTC) and the securities regulators of thirty states filed, temporarily under seal, a complaint in federal court against TMTE Inc. (also known as Metals.com) and seven other defendants. The regulators are those in Alabama, Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Mississippi, Nebraska, Nevada, New Mexico, New York, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Washington, West Virginia, and Wisconsin. 

On the same day, the plaintiffs filed an emergency motion for a statutory restraining order, a memorandum in support of the motion, an appendix in support of the motion, a bench memorandum, and a recommendation for appointment of a temporary receiver. Two days later, CFTC lifted the seal on the complaint. (See CFTC v. TMTE, U.S. District Court, Northern District of Texas, Case No. 3:20-cv-2910.)

The Complaint
The plaintiffs allege that, from at least September 1, 2017 through the present, the defendants "have engaged and continue to engage in a fraudulent scheme to defraud at least 1,600 persons throughout the United States into purchasing gold and silver bullion." Here are four items from the "Summary" section of the complaint:
4. Defendants' scam is particularly egregious because they preyed on persons between 60 and 90 years of age and swindled them out of their retirement funds by charging them fraudulent prices to purchase Precious Metals Bullion.
6. Defendants directed SDIRA [self-directed individual retirement accounts] and Cash Account investors to purchase specific Precious Metals Bullion at grossly inflated prices that bore no relationship to the Prevailing Market Price. Defendants did not disclose the actual value of the Precious Metals Bullion and instead provided investors with invoices showing exorbitant and unreasonable prices.
9. Contrary to Defendants' material misrepresentations and omissions, Defendants knew or had a reckless disregard for the truth that virtually every one of their SDIRA and Cash Account investors during the Relevant Period lost the majority of the funds invested in fraudulently overpriced Precious Metals Bullion.
15. Unless restrained and enjoined by the Court, Defendants are likely to continue engaging in the acts and practices alleged in this complaint or in similar acts and practices, and funds they have obtained fraudulently may be misappropriated or otherwise dissipated.
The complaint includes thirty counts of alleged wrongdoing, one count for each of the thirty states. The complaint is in the complimentary package offered at the end of this post.

The Order
The case has been assigned to U.S. District Judge Sam A Lindsay. On September 22, U.S. District Judge David C. Godbey issued an order granting the plaintiffs' emergency motion for a statutory restraining order. He also approved the plaintiffs' recommendation for the appointment of a temporary receiver, and appointed Kelly Crawford to that position. The order is in the complimentary package offered at the end of this post.

General Observations
I learned of this case through a press release issued by the Texas State Securities Board, which is headed by Texas Securities Commissioner Travis J. Iles. The fact that the CFTC and the securities regulators of thirty states are the plaintiffs prompt me to believe that this is an important case.

Available Material
I am offering a complimentary 129-page package consisting of the complaint (106 pages) and the order (23 pages). Email jmbelth@gmail.com and ask for the October 2020 package about CFTC v. TMTE.

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