O.C. Firm to Pay Fine, Quit Selling Trusts to Seniors

An Orange County firm sued by the state for using fraudulent tactics to sell expensive living trust retirement investments to senior citizens has agreed to pay $1.1 million in fines and restitution and to stop marketing and preparing the trusts.

In a settlement announced Friday, the state attorney general’s office said Alliance for Mature Americans will pay $1 million to clients who purchased living trusts from it after Aug. 1, 1991, and will pay a $100,000 civil penalty to the state.

The Lake Forest company did not admit any wrongdoing.

Alliance owners Stephen Fred Adams and Victoria Adams said in a prepared statement that the settlement was preferable “to continued years of litigation and millions and millions of dollars in legal fees.”

Alliance has sold about 25,000 trusts since 1986.

The state is continuing to sue Newport Beach lawyer Harry J. Rhodes Jr., Alliance’s legal advisor, and an Orange-based insurance company, Fremont Life Insurance, which marketed investments for Alliance. Neither would agree to the settlement, said deputy attorney general Margaret Reiter.

The suit was filed in July. The state alleged that the company engaged in fraud to market its living trust investment packages and to sell clients more than $200 million worth of high risk investments.

Living trusts enable people to shelter their estates while they are alive and to avoid expensive probate proceedings in court after they die. They usually are prepared by lawyers trained in probate and tax law.

Alliance charged from $1,000 to $2,000 to prepare a trust, regardless of the size of the estates, the suit said. Its agents routinely urged trust clients to cash in their stocks, certificates of deposit and other investments and reinvest the money in insurance annuities but seldom warned that they could lose thousands of dollars in penalties imposed for early termination of those investments, the state charged.