Varieties of Truth in a Tale of an Unwanted Annuity

Treatment of the elderly, particularly when it involves suggestions of exploitation, is a sensitive subject in our society.

So I shouldn’t be surprised at the outpouring of sentiment I received after writing about an 89-year-old Santa Monica woman who was sold an annuity by an Independent Financial agent at a First Federal Bank of California branch, then discovered it could not be canceled without penalty.

About 100 telephone calls and e-mail messages came in and almost all sympathized with the woman, who had not wanted to be identified, and pointed to alleged dangers of some of the investment products being peddled today.

Some of my correspondents said that annuity sales are fueled by high sales commissions.

A few mentioned a pending lawsuit by the state attorney general against Fremont Life and Fremont General Corp. for allegedly targeting seniors for questionable sales of annuities in their own homes.

Others told of cases in which transactions completed at other banks were occasionally rescinded under legal pressure after cancellation deadlines had passed.

But, to me, the most intriguing call came from Agnes Crown, 75, another Santa Monica woman, angry and in her case agreeable to her name being used.

Crown said that since the 1940s she had been a customer of the same branch of First Federal at Wilshire Boulevard and 4th Street in Santa Monica, and also had suffered mistreatment.

She told of going to the bank in May 1997 after her husband, Marvin, had died, to change the names on their accounts. But--without her permission, she said--she was sold a $12,000 annuity she didn’t want.

Crown said that without a word of explanation, a bank employee took two of her account books and said she would be called when the transaction was done. Two days later, she said, she learned they had been converted to a fixed annuity.

“I was confused,” she recalled. “I was very vulnerable at the time, a 73-year-old widow. . . . I didn’t like the idea, but then I thought, it’s done. I’ll just let it go.”

This sounded lamentable, and I called Ann E. Lederer, general counsel of the bank, to see what she would say about it.

She came up with some compelling answers. And Crown agreed with part of what she said. So it turned out to be a case that could be viewed in various ways.

Lederer, while immediately promising an investigation when I called, quickly had added:

“I would find it incredible if this occurred the way she said.”

Lederer said she would need Crown’s written permission to discuss details of her accounts.

I took Crown to the bank to sign the permission.

Lederer greeted Crown by saying, “I’m sorry you didn’t come to see us first. . . . Obviously, this is a misunderstanding.”

Crown, for her part, was frosty. And her attitude remained so when we spoke to Independent Financial’s present agent at the bank, Steven Negri.

Negri confirmed that he had called Crown twice in the past six weeks to invite her in to “review your accounts and examine your options.” It sounded as if he might want to switch her accounts again.

But when Lederer completed her inquiry, documents she had assembled showed that Crown had initialed disclosures about the nature of the annuity on her very first visit to the bank, May 7, 1997.

“And she returned and signed the documents accepting the annuity two days later, May 9,” the attorney said. “That’s when the actual closing of her other accounts took place.

“In fact, some months later, in November of 1997, because this was an IRA annuity and she needed to start taking distributions, she gave written instructions to Independent Financial for the distributions,” Lederer said.

“It is my impression the annuity was at a significantly higher interest rate than Mrs. Crown had on her earlier accounts,” she added.

Lederer acknowledged that bank personnel are paid $10 for each referral to the Independent Financial desk. But she said this is a nominal amount and not an incentive to change customers’ accounts without their permission.

I read Lederer’s statement to Crown.

“That sounds about like it,” she said, agreeing she had signed the papers. “It’s a higher interest rate than the bank was paying me.”

But, she added, “I don’t feel I ever said yes. I feel they just did it.”

So, I asked Crown, does she want to cancel the annuity?

“I finally came to the conclusion that I might as well leave it the way it is,” she answered.

Yet Crown still views herself as a victim.

One of the messages I received last week was from Paul N. Young of the National Mediators Group, based in Marina del Rey. He talked about the uncertain emotions of many older people when faced with such decisions.

“When a victim of financial abuse realizes the trouble they are in, many suffer the dual emotions of embarrassment and anger, [which equals] inertia,” he said.

“Elderly victims are additionally disinclined to take action . . . because some think that their adult kids will think that they have lost their ability to function.”

At First Federal Bank, the woman I wrote about last week waited nearly nine months to ask for an annuity cancellation, and Crown never asked for one.

But Lederer asserts that Crown was not a victim, that she got something better than she had.

“She may have some regrets,” she said, “but for a third party dealing with a person who doesn’t express her concerns at the time, how should the third party deal with that person?”

And Lederer concluded, “It is very important for all people, regardless of their age, to carefully read and understand what they sign, and realize they will be held to it. That can’t be overemphasized for all of us.”

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Ken Reich can be contacted with your accounts of true consumer adventure at (213) 237-7060, or by e-mail at [email protected]