Don't Buy What the Scammers Are Selling

Don’t Buy What the Scammers Are Selling

By Steve Lopez

Aug. 4, 2004 12 AM PT

All up and down California, senior citizens who invested a chunk of their life savings are discovering they’ve been snookered.

They thought they bought a short-term certificate of deposit or another security, but later realized they had purchased an insurance annuity instead, locking up retirement funds for years.

After I wrote about it last Friday, the state Department of Corporations received 58 calls by 9 a.m. from consumers who thought they might have been scammed.

On Monday, “one of our attorneys took three calls from seniors who took out annuities but weren’t sure what they were,” says Robyn James of the department’s senior education program. “Those three annuities equaled $1 million.”

My phone, as well, turned into a consumer-action hotline after I told the story of Zelda and Ralph Brodsky. The Encino couple answered an ad in The Times and ended up with a 15-year annuity instead of the 1-year CD they thought they had purchased. Pulling out cost them 25% of their investment.

“I had an uneasy feeling that I might have been had in the very same way,” said a 90-year-old Brentwood woman named Ethel. She thought she had invested $25,000 for one year at her neighborhood bank, but found out she had a five-year annuity.

“I may be 90, but I still have a very clear recollection of what I do with my money,” said Ethel. “I won’t even sign up for five years at my gym.”

A Long Beach insurance man named Jim Alden said a dozen seniors have walked into his office recently for help unraveling investment nightmares. When Alden guessed they had bought 15-year annuities, they all insisted he was wrong until he examined their paperwork and explained how they had been bamboozled.

“These are sharp people,” Alden said, but unscrupulous agents are even more shrewd, selling annuities without ever using that name. “There are different lines a salesperson can use to sell anything from soup to nuts.”

In the classic bait-and-switch con, a company fraudulently lures the customer with an unbelievably good CD rate or a living trust and then sells something else. “If it sounds too good to be true,” says Jerry Whitfield, an attorney with the state Department of Insurance, “it is.”

Scamming the elderly is as old as the hills. Many seniors have time and money, so they’re available to hear a sales pitch. But they’re even easier targets now, as they look for alternative investments because of the stock market slump. For a coldhearted agent, an annuity that makes no sense for a senior can bring a commission of up to 5%.

The Department of Corporations is running a three-week crackdown on these kinds of shenanigans. Thus far, only Fidelity Insured Deposits -- an Orange County firm unrelated to Boston-based Fidelity Investments -- has been hit with a desist and refrain order. But the state’s targets include large, mid-size and small companies.

So how can you avoid a con?

Experts say it’s your responsibility to figure out what you’re signing, so take your time, ask lots of questions and insist on getting every promise in writing. Don’t assume that a friendly agent with a handsome family photo on the desk can be trusted for a minute.

If you’re suspicious of an agent or company, check them out by calling the Department of Corporations at (866) ASK-CORP or the Department of Insurance at (800) 927-HELP.

“Any time we can save a senior citizen’s life savings,” said James, “that’s a good day.”

Steve Lopez writes Sunday, Wednesday and Friday.