Monday, June 16, 2014

No. 53: Florida's Pasco County School District Rejects a Proposed Life Insurance Plan

In Nos. 43 and 48 posted April 21 and May 12, I discussed a life insurance plan promoted to the Pasco County School District (Land O'Lakes, FL) by Pollock Financial Group (Chagrin Falls, OH). I said this in both posts: "My unsolicited advice to the district is to reject the plan." As reported in No. 48, the Florida Office of Insurance Regulation (FLOIR) initiated an "official inquiry" into the plan. In this follow-up, I discuss the results of the inquiry.

The Miller Letter
On June 12, Belinda Miller, general counsel of FLOIR, sent a five-page letter to Alison Crumbley, chairwoman of the Pasco County School Board. The letter says FLOIR reviewed documents submitted by Pasco in response to the "official inquiry" letter, documents submitted by Pollock Financial Group, and documents relating to similar proposals by Pollock Financial Group to two other governmental units in Floridathe City of Sarasota and the Gulf County School Board (Port St. Joe, FL).

On May 8, FLOIR met with William "Bill" Olive (Clearwater, FL), Mark G. Pollock, Rene Stuifzand, John "Drew" Smith, and attorneys for Pollock Financial Group. The attorneys were Bruce D. Platt and Edward L. Kutter of Akerman LLP (Tallahassee, FL).

Stuifzand was introduced to Pasco by Olive as the "architect of this entire program." According to the Miller letter, Stuifzand "was allegedly a participant in an alleged fraud scheme at InsCap Capital Markets, LLC."

The Miller letter says the earlier versions of the plan proposed to the City of Sarasota and the Gulf County School Board listed William A. "Tinker" Kelly (Nashville, TN) and Derek Siewert (Jacksonville, FL) as team members. The letter mentions consent orders they entered into with the Pennsylvania Insurance Department regarding a "Legacy Life Insurance Program" implemented in Pennsylvania in 2012-2013.

The Miller letter says FLOIR does not have any "finalized documents" relating to the proposed Pasco plan, such as "a finalized life insurance policy form or the name of the Bermuda life insurance company that would issue the policies." The letter mentions these other concerns:
  • Neither Pasco nor its employees would be an owner or beneficiary of the policies. Rather, the policies would be owned by an offshore investment vehicle, and the investment vehicle and an offshore trust would be the beneficiaries. Thus, other than any contractual obligations between the Cayman Islands trust and Pasco's trust, Pasco has no guarantee of receiving any money from the plan.
  • There is significant doubt that Pasco would have any enforceable rights to insurance money in exchange for the effort and expense of administering the plan.
  • Money from the plan may be taxable to the employees' designated beneficiaries.
  • Issuance of insurance may potentially exhaust or limit the employees' ability to purchase life insurance in the future.
  • The plan may violate Florida's insurable interest law.
  • The plan may violate Florida's group life insurance law.
The Miller letter uses strong language to discourage Pasco from entering into the arrangement. The next to last sentence reads:
In sum, as explained more fully above, the Office [FLOIR] has significant concerns relating to this proposal and has significant doubts that such an arrangement would comply with Florida law.
The Lathrop Memorandum
FLOIR conducted a records and background search on individuals involved in making the proposal to Pasco, including Stuifzand, Olive, and Mark Pollock. The results of the searches relating to them are presented in a six-page thoroughly sourced memorandum dated June 11 and sent to Miller by Alyssa S. Lathrop, assistant general counsel of FLOIR.

With regard to Stuifzand, the Lathrop memorandum discusses not only the InsCap matter but also some subsequent litigation. It also mentions a Chapter 7 individual bankruptcy filing in 2012 and says Stuifzand does not currently hold a broker's license.

With regard to Mark Pollock, the Lathrop memorandum says he currently has appointments with Lincoln National, Connecticut General, Berkshire Life of America, Guardian Life, Principal Life, and Great-West Life & Annuity, none of which is featured in the proposal to Pasco. The memorandum also says that he and his wife filed for Chapter 7 individual bankruptcy in 2012, and that Pollock Financial Group is not registered with the Florida Division of Corporations to do business in Florida.

With regard to Olive, the Lathrop memorandum says he holds three life insurance, health insurance, and variable annuity licenses with the Florida Department of Financial Services. The memorandum also says he currently has no active appointments with any insurers licensed in Florida.

The Platt/Kutter Memorandum
On May 14, Platt and Kutter, attorneys for Pollock Financial Group, sent a four-page memorandum and several attachments to Miller responding to several issues that arose at the May 8 meeting. As mentioned earlier, one of Miller's concerns is the possible effect of the program on the ability of an employee to purchase life insurance in the future. The version of the program provided to FLOIR does not indicate the amount of insurance on each life, but in No. 48 I said one version of the program mentioned $250,000 and another mentioned $350,000. Either way, it is a fairly substantial amount for Pasco teachers and other employees.

On that point, Platt and Kutter explain why the program would not affect an employee's ability to buy life insurance in the future. Here is the explanation, which contains the troublesome implication that the employee, in any future application, would be expected to conceal from the life insurance company the existence of the Pasco coverage:
Insurance companies use various formulas and information sources when calculating the total insurance capacity for an individual. The information is heavily weighted toward (a) reason for insurance and (b) net worth. The central database for information on individual insurance policies is maintained by MIB [Medical Information Bureau] Group. MIB is owned by its insurance company members who voluntarily report information on insureds to the central database ( The sole source of information for MIB is information that is self-reported by its members. The potential Bermuda insurance company is not a member of MIB and does not report information to MIB. Additionally, MIB contains information relating solely to individual life insurance policies. Group life insurance policies are not reported to MIB. Additionally, the individual insured is not a beneficiary under a group life insurance policy. As such, the death benefit accruing thereunder would not be counted in an individual's total insurance capacity. In light of the foregoing, the Contract should have no impact on an individual's eligibility for individual life insurance coverage.
General Observations
I requested but have not yet received an official statement from Pasco that it will reject the plan. In answer to my inquiry on June 13, however, a spokesperson made this unofficial statement, which leaves no doubt about what will happen:
At this point, I can say we will not be moving forward with any agreements with Pollock Financial Group, Bill Olive, or any of them. We were waiting on the FLOIR report, and we are grateful for their research and recommendation. From the board members I have spoken with today, they have no interest in continuing discussions about Legacy Life, a Benefit Stabilization Plan, or any other metamorphosis of the product.
On June 14, The Wall Street Journal carried an article about the situation. The article is entitled "'Doubts' Over Insurance Plan" and is under the byline of reporter Leslie Scism.

In No. 48, I offered a "Pasco Package," a complimentary 14-page PDF containing several important documents. In this follow-up, I offer a "Second Pasco Package," a complimentary 15-page PDF containing the Miller letter, the Lathrop memorandum, and the Platt/Kutter memorandum (without attachments). Send an e-mail to and ask for the second Pasco package. Also, the first Pasco package is still available.