Insurance Agent Given Jail Time for Selling Annuity to Elderly Woman With Dementia

A California insurance agent has been sentenced to 90 days in jail for selling an annuity to an 83-year-old woman who allegedly showed signs of dementia.  The agent, who is appealing the conviction, may be the first to be put behind bars for selling an annuity.  

Glenn Neasham, 52, sold Fran Schuber what is known as an “indexed” annuity, which pays interest based on the performance of the stock and bond markets.  Owners of these annuities don’t risk losing their principal but they are subject to often severe penalties if they withdraw their money before the annuity begins paying out, which can take more than a decade.  Indexed annuities are also typically quite lucrative for the agents who sell them.

Neasham says Schuber was brought to him by her octogenarian boyfriend, who had purchased a similar annuity from Neasham years earlier.  Neasham contends that Schuber showed no signs of dementia when she agreed to purchase an annuity issued by Allianz SE for $175,000, a transaction that earned Neasham a $14,000 agent’s commission. 

But when the boyfriend took Schuber to her bank to withdraw the funds, the bank manager said she appeared confused and overly influenced by the boyfriend. The manager alerted Adult Protective Services and criminal charges were eventually brought against Neasham.  He was convicted of felony theft by a state-court jury in Lake County, California.

If Schuber had withdrawn her money within the first year, she would have paid a nearly $22,000 penalty.  Schuber was too ill to testify at trial, according to an article on the case in The Wall Street Journal, and Allianz has returned the annuity principal to her son, who has become her conservator.  The insurer did not charge a penalty.

The Journal reports that the case “is sending shivers down the spines of Mr. Neasham's peers across the country.”  "It's very scary," Peter Langelier, an agent in Maine, is quoted as saying. "There is nothing in insurance-licensing that prepares you as a nonmedical person to diagnose dementia."

At a meeting of the National Academy of Elder Law Attorneys in 2007, Andrew Friedman, a specialist in class actions against the insurance industry, said annuities that defer their payouts are "uniformly horrendous products" that are unsuitable for people over age 75 and arguably for people at much younger ages as well.

Neasham, who is to report to jail on April 18, 2012, is appealing his conviction and is asking to be freed on bail pending the appeal.  UPDATE: A Lake County judge has granted Neasham bail pending appeal. 

In 2004, two California senior citizens organizations sued five companies that sold annuities to seniors, charging them with elder abuse, among other crimes.  For details, click here.

For a detailed article on the Neasham case by InsuranceNewsNet, click here.