Insurer Fined for Alleged Sales Deception : Consumers: Regulators say hundreds of Equitable customers were tricked. Company agrees to penalty but does not admit guilt.
Securities regulators fined Equitable Assurance Society $1.5 million, accusing the nation’s sixth-largest insurance company Wednesday of letting agents trick hundreds of customers--including many born-again Christians--into buying expensive life insurance policies by falsely offering them as retirement investments.
Many of the allegations leveled by the National Assn. of Securities Dealers involved Anthony J. Amaradio, 41, a former Equitable agent in Michigan and Southern California. Co-workers said Amaradio became the insurance giant’s top agent by advertising heavily on Christian radio stations.
For the record:
12:00 AM, Nov. 18, 1993 For the Record
Los Angeles Times Thursday November 18, 1993 Home Edition Business Part D Page 2 Column 6 Financial Desk 3 inches; 73 words Type of Material: Correction
Insurance investigation--In a Nov. 3 article about regulatory action against the Equitable Assurance Society, it was mistakenly reported that regulators censured insurance agent Anthony J. Amaradio last year for failing to tell Equitable that he sold customers stock in a firm in which he had a financial stake. The censure, fine and suspension of Amaradio by the National Assn. of Securities Dealers was related to his work on behalf of Coordinated Capital Securities, a Wisconsin firm. It did not involve Equitable.
An NASD spokesman said the fine was at least the third-largest ever assessed by the regulatory agency.
The action comes as intense regulatory attention has begun to focus across the country on deception in the sale of life insurance policies. Last month, Florida’s insurance commissioner charged Metropolitan Life with selling thousands of life insurance policies to nurses who thought they were investing for retirement. In September, a task force of the National Assn. of Insurance Commissioners recommended sweeping reforms of insurance rules to stop allegedly widespread misrepresentation by insurance companies.
Equitable said it fired Amaradio--who has a lengthy record of customer complaints, lawsuits and disciplinary action--in 1991. Nonetheless, he was almost immediately hired by Prudential Insurance and now works out of a Prudential agency in Irvine.
“He’s a big producer,” said Joseph A. Vecchione, Prudential’s chief spokesman, adding that Prudential was aware of numerous complaints against Amaradio but believed he had left Equitable voluntarily.
“We were satisfied that there was no basis for not hiring him,” Vecchione said. Since Amaradio joined Prudential, “there have been some minor complaints against him,” Vecchione said, adding that they involve fewer than 1% of his clients.
Amaradio could not be reached for comment. A man who called The Times and identified himself as Amaradio’s attorney said pending charges against Amaradio “are being vigorously contested.”
Gregory Slack, a former manager in Equitable’s Bloomfield Hills, Mich., office, said Amaradio frequently brought married couples into his office and had them join hands with him and recite a prayer: “Jesus give us the strength to go through with this.” The couples then signed on the dotted line of what turned out to be variable life insurance policies.
(An innovation of the 1980s, variable life policies pay death benefits linked to the performance of an underlying portfolio of securities.)
Slack said he ultimately quit in disgust after receiving large numbers of complaints from customers who had believed they were making investments. Instead, he said, they discovered they had bought a life insurance policy--and that most of their money went to paying the first year’s premiums and commissions.
Amaradio’s customers claimed they were told they were buying an investment and would have to pay no further premiums, NASD records show. But investors allegedly discovered after 18 months that all of their money had gone to paying an initial premium, of which at least 40% went to Amaradio in commissions. The customers also discovered that they were expected to make additional premium payments.
In the Equitable case, the NASD took the unusual step of charging and censuring a former high-level executive of the firm, Robert W. Barth, who until 1990 was executive vice president in charge of Equitable’s domestic insurance operations.
He was accused of being responsible for Equitable’s failure to supervise Amaradio and a current Equitable agent in Michigan, Miguel A. Cruz.
Both Equitable and Barth, now an Equitable agent, agreed to the charges and penalties without admitting or denying guilt. Cruz did not respond to a message left with his office seeking comment. Barth could not be reached immediately for comment.
The NASD charged that Amaradio and Cruz made “material misrepresentations” to the public about sales of variable life policies, recommended the policies to customers whose financial circumstances made them unsuitable, and violated NASD rules by failing to report large numbers of complaints from customers. It also charged Cruz with using misleading radio commercials.
Former colleagues contend that because Amaradio and Cruz sold huge volumes of life insurance--generating big profits for Equitable--senior company officials overruled strident complaints about them by their local managers.
But Robert E. Garber, the firm’s deputy general counsel, called that assertion “absolutely not true.” Equitable declined to release specific figures on how much insurance Amaradio sold and would neither confirm nor deny statements by former colleagues that he earned at least $1 million in commissions in some years.
Slack said the insurer had Amaradio and Cruz handle their business through Equitable agencies located out of state after local managers in Michigan registered their complaints. Equitable confirmed the arrangement, but said it was done to help the agents concentrate “on upscale markets.”
Until he was fired, Amaradio conducted business through an Equitable office in Santa Ana and began selling heavily in Southern California. Cruz, although he was based in Michigan, now sells through an Equitable agency in Edison, N.J.
Amaradio, who joined Equitable in 1978, advertised heavily on a Christian radio station in the Detroit area, former co-workers said in interviews. The ads emphasized retirement planning, they said.
According to Slack, Amaradio described himself as a born-again Christian, and his clients “believed that if you were a Christian, you would do no harm to another Christian.”
Amaradio is now affiliated with Prudential’s AJA Agency in Irvine. In a statement Wednesday, Equitable accused him of contacting his former Equitable customers over the past two years and trying to persuade them to buy new insurance policies through Prudential.
In a separate NASD action in December, Amaradio agreed to a censure, a $10,000 fine and a 10-day suspension for allegedly failing to tell Equitable that he had been selling customers stock in a company in which he had a personal financial stake. Amaradio neither admitted nor denied the charges.
NASD records show that he also is the subject of additional pending NASD charges relating to alleged misrepresentations to customers.
Other NASD records obtained by The Times show that Amaradio was the subject of at least 55 customer complaints, 37 of which resulted in settlements by Equitable with customers. He also was a defendant in five lawsuits, including several settled for a total of at least $1.65 million.
The records show that Amaradio denied all the allegations and accused Equitable of attempting to smear him in retaliation for attempts to draw away Equitable customers after he left.
On Wednesday, the NASD also charged Equitable with failing to supervise agents in its Milford, Conn., office. There, agents allegedly sold customers interests in real estate partnerships sponsored by a now-bankrupt real estate firm. The firm’s two principals recently were sentenced to prison.
Equitable said it “took responsive action when it received indications of irregularities in connections with the sales activities” of Amaradio, Cruz and the Connecticut agents.
The settlement document signed by Equitable officials specifically forbids the firm from denying any of the NASD charges. Nonetheless, company attorney Garber said in an interview that Barth, the former executive vice president, had violated no rules and “there is no allegation that he violated any rules.”
According to Garber, “The only reason that Barth is named in the proceeding is that the NASD refused to settle unless someone came forward and said that as a senior officer of the company he would agree to put his name in the settlement.”