Pennsylvania Sues Living Trust Scheme

November 3, 2004

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Pennsylvania Attorney General Jerry Pappert has filed a civil lawsuit accusing 16 defendants of engaging in an elaborate statewide living trust sales scheme that deceived older Pennsylvanians into buying Revocable Living Trusts, long term annuities or charitable gift annuities that were costly, not in their best interest or unnecessary.

The alleged victims documented approximate losses that range between $1,800 and $80,000.

Along with the complaint, Pappert filed a preliminary injunction seeking to ban the defendants from engaging in the unlawful advertising, promotion or sale of estate planning products or services in Pennsylvania.

"This alleged scheme was heavily promoted and potentially hurt hundreds of senior citizens across the Commonwealth who may be unaware that they were cheated," Pappert said. "Today, I'm asking the court to ban the defendants from engaging in the illegal advertising, promotion and sale of estate planning products or services in Pennsylvania."

The seven-count complaint accuses the various defendants of violating Pennsylvania's Unfair Trade Practices and Consumer Protection Law, Solicitation of Funds for Charitable Purposes Act, Telemarketer Registration Act, as well as the Judicial Code Provisions barring the Unauthorized Practice of Law.

According to investigators, defendants Barry O. Bohmueller and Brett B. Weinstein between 2001 and 2004 promoted their estate planning services using telemarketing, newspaper ads, mass mailings, senior expos and local seminars held in restaurants, country clubs, synagogues or other facilities throughout the state.

The two attorneys used sales agents from the marketing, insurance or brokerage firms to sell the estate planning products. The sales efforts were primarily focused on consumers located in Central, Northeastern and Southeastern Pennsylvania. Those responding to the ads or promotions were typically senior citizens often 70 to 80 years old.

According to the lawsuit, the defendants encouraged consumers to meet with their "Estate Planning Advisors" or "Certified Senior Advisors" to explain "What Everyone Should Know About Estate Planning Techniques, Financial Planning Strategies" and "Estate Preservation." The promotional materials from the defendants' estate planning advisor companies led consumers to believe that they were receiving impartial estate planning advice.

The complaint claims that consumers who attended the presentations or allowed the defendants into their homes were advised to purchase a Revocable Living Trust. The trust was presented as an estate planning document that was in the consumers' best interest, regardless of their individual financial holdings. Many were sold living trust kits for approximately $1,800 whether they needed them or not. Consumers said they were unaware that the sales representatives were insurance agents who received sales commissions.

To encourage the sale of living trusts, the suit claims that the defendants used scare tactics and deceived consumers by falsely claiming that living trusts are superior to wills.

The alleged victims said they fully trusted the representatives and followed their advice because they were led to believe that they were lawyers or estate planners. Consumers said the sales agent defendants gave them Bohmueller Law Offices business cards and wrote their names at the top, implying that they are lawyers who work in Bohmueller's firm. None of the consumers met or spoke with Bohmueller, yet his name appeared on all of their completed estate planning documents.

"In reality, the individuals advising consumers about estate planning products are not unbiased legal professionals but sales or insurance agents working on commissions," Pappert said.

"These older citizens were given legal advice from non-attorneys who intentionally steered them toward purchasing living trusts as a way to find out the contents of their financial portfolios. After profiling the portfolios, the defendants deceptively convinced consumers to convert their stocks or other non-real estate investments into charitable gift annuities or long-term deferred annuities that paid the agents even higher commissions," he added.

The defendants, among other charges, are accused of knowingly providing legal advice and services that can only be lawfully performed by licensed attorneys.

Pappert said the defendants exploited the trust that many elderly consumers placed in them when they knew these older citizens could not determine what was in their best interest. In one case, an 85-year-old Delaware County man unknowingly was sold a 10-year deferred annuity with his first payment due when he turns 95.

"In my view, these actions are unconscionable. Consumers were lied to and deceived into purchasing long-term annuities based on what the defendants would make in commissions. The sales commission rate was higher if the payout period to consumers was longer. I am proceeding against these defendants with every appropriate remedy available under the law," said Pappert.

Pappert said undercover agents from his Charitable Trusts and Organizations Section posed as potential customers and presented the various defendants with a dummy portfolio. Even though the bogus investments paid generous dividends and interest, the defendants recommended that the entire portfolio be liquidated and converted to deferred annuities.

Pappert said several consumers told his office that they lost thousands of dollars in their life savings due to the failure to realize the promised returns, extra fees or costs, additional tax expenses and the inability to have access to their investments without paying huge penalties.

The Commonwealth also claims that the sales representatives for New Life Corporation were not registered and bonded as professional solicitors, in violation of the Charities Act. Additionally, defendant Weinstein is accused of violating a November 2001 agreement with the Office of Attorney General involving similar alleged illegal business practices.

Prosecutors asked the court to ban the defendants from engaging in the unlawful telemarketing, advertising, promotion or sale of estate planning products or services in Pennsylvania.

The complaint asks the court to:

• Require the defendants to pay full restitution to consumers who come forward with proof that they were harmed in the case.

• Require defendants to pay civil penalties of $1,000, $3,000 or $5,000 per violation.

• Permanently ban defendants from engaging in the illegal telemarketing, advertising, promotion or sale of estate planning products or services.

• Require defendants to pay for attorney fees, investigation costs and an accounting and audit of their commissions and income.

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