Earlier this week, we began sharing a story with you about a lawsuit filed against an insurance company accusing it of misleading seniors into unnecessary annuities transactions in order to generate fees for the company. Annuities can be useful tools for asset protection as part of a comprehensive retirement and estate plan, but can also carry hefty fees for cancelation.

This lawsuit was filed by competing insurance companies whose clients were allegedly encouraged to cancel their accounts with the competing companies and create new annuities with the company that is the target of the lawsuit. Given the current and past accusations against the company, questions have arisen about the accuracy of the information that the company supplied to regulators. In addition to the lawsuit filed by competing insurance companies, another lawsuit was filed by a Phoenix couple that accuses the president of the company of defrauding them.

According to story in this week's Arizona republic, the insurance company has a history of complaints in addition to the lawsuit from the Phoenix couple. This year, the company was investigated by Arizona Adult Protective Services. Despite these apparent red flags the Arizona Department of Insurance renewed the company's president's license in July.

Last week state officials indicated that they had not been previously aware of the allegations against the president. After being contacted by the Arizona Republic, the state has launched an investigation to determine whether the president made false statements in his application for a renewal of his license. A spokesman for the Department says that he had failed to report the lawsuits as is required by the application. In his own defense, the president claimed that omission was a clerical error made by an employee.

In January an elderly Phoenix couple filed a lawsuit against the president of the insurance company. Similar to the lawsuit by the competing insurance companies, the couple alleges that the president convinced them to cancel existing annuities, costing them nearly $150,000 in fees. They also claim that the president befriended them and persuaded them to loan him hundreds of thousands of dollars and that he convinced them to name him as their personal representative and trustee.

It seems like the last few years have given us many examples of individuals in the financial industry that could be described as bad apples. For those seeking to develop an estate plan, or protect their assets for retirement, confidence that their assets will be handled in an above-board manner is one of the most important commodities. Beware of those who offer seemingly unrealistic returns or products that do not seem to make sense for you. If it sounds too good to be true, it likely is.

Source: Arizona Republic "Arizona seniors lost millions in annuity fees," Robert Anglen, Nov. 7, 2011