A sales trainer, testifying in one lawsuit, said agents were coached to bad-mouth the Federal Deposit Insurance Corp., which insures bank deposits, by saying that the agency "had troubles" in the early 1990s and could take as long as 20 years to repay customers if a bank failed.

To avoid leaving a written record of these tactics, the trainers used a chalkboard rather than handouts, said Rob Gianelli, a Los Angeles attorney for the plaintiffs.

In a recent settlement of that suit, an AmerUs subsidiary agreed, among other things, to reimburse seniors for fees they incurred by switching annuities. Settlement talks are continuing with the state, which is seeking more than $110 million in fines and restitution.

Guaranteed Income

Regulators say deceptive practices are driven by the prospect of rich commissions. On a $100,000 annuity, the agent's take typically runs $3,000 to $10,000, although it can reach $16,000, according to industry experts.

"In many cases, the agent or broker ignores the senior's circumstances and locks him into an inappropriate annuity, and fat commissions are the motivation," said California Insurance Commissioner John Garamendi.

Annuities allow people to shield retirement savings from taxes for years and then receive regular payments, much like a pension. When investors die, their estates generally can get lump sums equal to at least what they contributed.

Surrender charges, however, can be in force for up to 20 years. During that period, investors who take out more than 10% of their money in any year can be subject to steep penalties. In addition, investment gains are diminished by commissions paid to sales agents and by fees for insurance features.

Proponents of annuities say abusive sales practices are far less widespread than regulators contend. They say their products make sense for many older Americans.

"The people who are doing right in this industry are not greedy with their earnings, and the great majority of us don't buy mansions and Jaguars at the expense of seniors," said Mark Kennedy, a Woodland Hills financial advisor who is a member of the insurance industry's Million Dollar Round Table of top sales producers.

Los Angeles billionaire Eli Broad, who founded SunAmerica Inc., one of the nation's biggest annuity providers, notes that the products are unique among investments because they can provide guaranteed income for life.

"People are living how many years now? If they start investing at 65, they need a variable annuity more than they need a mutual fund," said Broad, 72. "They need a guarantee that if something bad happens to the stock market, they or their heirs will get their money back."

But Broad conceded that people of advanced age should be leery of annuities. An 85-year-old, for example, might see only a few months of payouts — and withdrawing money early for medical care or other emergencies could trigger penalties.

Rita Steinberg was 78 when a salesman for Family First Advanced Estate Planning, an AmerUs subsidiary, prepared a living trust for her in May 2000.

A month later, the salesman returned to Steinberg's San Jose apartment and sold her a $156,000 annuity, according to a suit filed by her son, Stephen, a software engineer.

That August, another Family First agent sold her a second annuity for $200,000. A year later, Stephen Steinberg was visiting his mother when three Family First agents arrived to update her trust.

Steinberg, 53, said his mother treated the trio "like family," even inviting the female agent to stay with her. Steinberg said the agents had ingratiated themselves by giving his mother gifts including a teddy bear and a small safe.

A few months later, Rita Steinberg spent the last of her savings — $89,000 — on yet another annuity from Family First.

Her entire nest egg, more than $400,000, was now tied up in long-term annuities. Then her health declined and she moved into an assisted living facility. Strapped for money, she cashed in one of the policies, incurring a $31,000 penalty.

Her son has sued Family First and the annuity issuer, American Investors Life Insurance Co., also an AmerUs subsidiary.