Suit Accuses PaineWebber of Fraud
PaineWebber Inc. is being sued by an investor who alleges that the firm improperly sold life-insurance policies as retirement and savings plans.
The suit, filed in federal court in New York, seeks class-action status in behalf of 5,000 clients who were said to have bought PaineWebber “Provider” and “Builder” life-insurance policies under the impression they were part of an investment plan.
New York-based PaineWebber failed to disclose that customers were paying a monthly insurance premium because the firm expected to make more profit if customers thought they were making monthly investments, the suit alleges.
“We believe these allegations are completely without merit and we will contest them vigorously,” said a PaineWebber spokeswoman.
In recent years, several major insurance companies, including Metropolitan Life and Prudential Insurance, have been sued and investigated by state insurance regulators for alleged misrepresentations in the sale of life-insurance policies.
The PaineWebber suit seeks more than $250 million in damages in behalf of people who have bought Provider and Builder policies since 1989.
PaineWebber’s training videos instructed brokers to tell customers that Provider and Builder provided retirement income, savings, deferral of taxes and other benefits --anything to veer clients away from the idea that they were buying life insurance, the suit alleges.
Brokers also mislabeled the monthly premiums as “deposits” or “investments” on account statements, the suit said.
The suit was filed by Robert Moore of Palm Beach County, Fla.
Moore said his PaineWebber broker sent him a thank-you letter stating, “I’m convinced that you have made an excellent choice in selecting the PaineWebber Provider as a retirement planning vehicle. The PaineWebber Provider enables you to plan for retirement safely and systematically.”
“They did not disclose at any time prior to the sale of the policy that it was essentially a whole-life insurance policy,” said Moore’s attorney, James Johnson.
