Ohio SC fines companies over annuity scheme

Kathy Woods Oct. 14, 2009, 2:29pm

COLUMBUS, Ohio (Legal Newsline)--The Ohio Supreme Court has ordered two out of state companies -- American Family Prepaid Legal Corp., Heritage Marketing and Insurance Services Inc. -- to pay over $6 million in fines.

The companies were accused of unauthorized legal advice and selling unnecessary annuities and other estate-planning products.

The California companies, operating under a "trust mill" practice, ran their scheme from 2003 through 2005, the Columbus Bar Association alleged.

Third party marketers were hired to send out thousands of fliers to elderly Ohioans, telling them of the problems their families could face in the distributing of their assets through a will. They then followed up with a home visit, where they delved out unauthorized legal advice.

The advice given often led to these victims handing over almost $2,000 for a living trust package. This was paid to cover legal services but, often the only service rendered was the preparation of the documents by non-attorneys in California.

Columbus attorney Edward Brueggeman would sign off on the documents.

In their decision the court stated: "In many cases, the elderly customer who purchased an annuity would not live long enough to be able to be able to withdraw more than a limited amount of principal without being subject to a significant penalty, which the agents failed to explain to the plan members."

The court handed down a penalty of $6 million in addition to the $10,000 fine to Paul Chiles, American Family's marketing director; $7,500 to Harold Miller, the company's office manager; and $2,500 fine to a number of agents working for the companies.

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