A New Low Hit in Hustling the Elderly

Zelda and Ralph Brodsky live on Social Security, so they’re always looking for bargains. The pizza they share at the Target snack shop, for instance, or coupons for discounted dinners at the IHOP.

Last October, they thought they found a real winner when Mrs. Brodsky saw an ad in The Times offering a fat return on a one-year certificate of deposit.

“The interest was so fantastic,” Mrs. Brodsky says. She and Mr. Brodsky hurried over to Fidelity Insured Deposits in Woodland Hills and spoke with an agent about investing a chunk of their nest egg in the CD.

“I said I wanted to invest for one year, and the agent nodded and agreed with me,” Mrs. Brodsky says. “I kept mentioning the one year, and she kept agreeing with me.”

Well, at 81, Mrs. Brodsky isn’t as sharp as she used to be, and she admits that financial matters can be mind-boggling. And Mr. Brodsky, 77, is getting to be forgetful, they both agree.

So neither realized that when they signed a check for $12,000, they weren’t buying a one-year certificate of deposit, but a 15-year insurance annuity.

Not until recently, when Mrs. Brodsky inquired about her investment, did she realize her money was locked up for years.

“I’m 81 and don’t know if I’ll even live that long,” says Mrs. Brodsky, who found out the only way she could have her money back was in small annual withdrawals. “I don’t want them to dribble my own money out to me like that.”

Mrs. Brodsky tried to reach the woman who sold her the policy, but the agent no longer worked at Fidelity.

She then complained to National Western, a Texas company that issued the annuity on Fidelity’s referral, but was told she had gotten exactly what she signed up for.

“So I’m the loser and they’re the winners,” Mrs. Brodsky snapped indignantly.

She was so angry, she decided just this week to cancel the annuity, even though early withdrawal comes with a 25% penalty that cost her $3,000.

“I want to warn all elderly people,” Mrs. Brodsky told me in an old-fashioned handwritten letter, and she repeated the warning when I paid a visit to the couple’s Encino apartment.

The state Department of Corporations also wants to warn consumers -- particularly senior citizens -- about a sudden rash of hustles in California that range from questionable to dastardly.

Spokeswoman Susie Wong said the agency had launched a statewide sweep of brokerage scams involving inappropriate insurance and securities investments.

(If you’ve been fleeced, or need information on current scams, call (866) ASK-CORP or go to www.corp.ca.gov).

As for Fidelity, I did a quick computer search and found that a complaint similar to Mrs. Brodsky’s had been filed against Fidelity two years ago.

When I called the San Clemente company, I was referred to attorney John Baker.

“There have been complaints that people go in and get a sales pitch for an annuity when they went in to get a certificate of deposit,” Baker admitted, though he didn’t know what happened in the case of Mr. and Mrs. Brodsky.

But he said this brand of “loss leader” marketing was no different from what happens when a supermarket advertises a great price on a gallon of milk, then puts the milk at the back of the store so the customer will buy other items along the way.

Yeah, except that a can of soup is a lot cheaper than an annuity.

Besides, Baker said, if the customer insists on an advertised CD rate of, say, 5.5%, as offered in Thursday’s Times, Fidelity will make a referral to a company that actually sells them.

The rate will be lower, of course, but Fidelity will pay the difference for a year.

In other words, I said to Baker, Fidelity advertises CDs, but doesn’t even have CDs to sell.

Correct, he said.

At least Ralphs has the milk when it runs an ad for milk.

What does Fidelity sell, then, if not the CDs it advertises?

“Annuities,” Baker said.

Well, if Baker doesn’t have a problem with this operation, the state Department of Corporations certainly does. On Thursday, after I visited Mr. and Mrs. Brodsky, I learned Fidelity was already under investigation.

By day’s end, California Corporations Commissioner William P. Wood had issued a desist and refrain order against the company, along with its chief officers and a related company called Family Estate Insurance Services.

The state alleges, among many other things, that Fidelity Insured Deposits conceals the fact that “the CD offer is a mere ruse to sell annuities.... On some occasions persons who respond to advertisements

An ad executive with The Times told me the newspaper might discontinue ads by Fidelity, pending review of the state desist and refrain order.

Baker called the allegations bunk, and expressed little doubt that Fidelity would have trouble defending itself before a state administrative law judge.

He also said, by the way, that Fidelity would cover Mrs. Brodsky’s $3,000 loss for early withdrawal.

Mrs. Brodsky was thrilled at the news.

“But even if I don’t get it back,” she said, “it’s a load off my mind just to let other people know what’s going on, so they don’t make the same mistake I did.”

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Steve Lopez writes Sunday, Wednesday and Friday.