Veterans life insurance

New lawsuit seeks class action for victims of alleged fraudulent IUL sales – InsuranceNewsNet

A new lawsuit filed last month adds to the legal liability of Minnesota Life Insurance Co. and its partner independent marketing organization caught in an alleged retirement fraud scam.

Shurwest, an Arizona-based IMO, appeared to be poised to consolidate, negotiate and settle the numerous lawsuits he faces. The IMO filed for Chapter 11 bankruptcy on August 31, 2021, while firmly maintaining that company executives knew nothing of a pension fraud scheme tailored to hundreds of indexed universal life sales. .

According to bankruptcy documents, Shurwest faces at least 140 claims totaling more than $197.5 million. Shurwest is also being sued by Minnesota Life.

A new lawsuit filed in Arizona bankruptcy court by Eleanor and Rocco Ciofoletti of South Carolina and Larry Stospal of Texas names Shurwest and Minnesota Life as defendants.
All three plaintiffs purchased Minnesota Life IUL products from Shurwest producers.

According to their lawsuit, the Ciofoletti and Stospal were sold IUL policies that came with a feature of future income payments.

Using various marketing efforts, the agents reportedly targeted retirees with the FIP strategy by offering them a lump sum in exchange for a portion of their future pension payments. The scammers pushing the FIP allegedly used brokers and insurers to find investors – often retired veterans, teachers and firefighters.

Unbeknownst to many investors, future pension payment terms required them to pay what often amounted to an annual interest rate of more than 100% over a five-year term.

“Illegal loan sharking”

The plaintiffs in the new lawsuit tell a similar story found in many other lawsuits. The Ciofolettis and Stospal allege that Shurwest and Minnesota Life must have known that the FIP was a scam.

“FIP products were notorious as early as 2015, when several state regulators investigated FIP products and determined that they constituted illegal loan sharking,” the lawsuit states.

Both the Ciofolettis and Stospal accepted Minnesota Life’s offer to rescind and return premiums, but did not sign any document waiving claims against the defendants, according to court documents.

Their lawsuit is seeking class action status, a request that must be approved by the court.

Andy Kvesic is a managing partner at Radix Law and is part of the legal team representing Shurwest. Opposing attorneys representing the Ciofolettis and Stospal are doing “forum shopping,” a proposed class action lawsuit that was dismissed by a Minnesota court, Kvesic said.

The Ciofolettis and Stospal initially sued Minnesota Life, Shurwest and others in Minnesota District Court. A judge there denied class-action status in August 2021, ruling, in part, that the plaintiffs had failed to prove a fiduciary duty on the part of the defendants. The plaintiffs say those concerns have been resolved in the Arizona retrial.

“We asked them to identify a class and they couldn’t,” Kvesic told InsuranceNewsNet. “Class does not exist from our point of view. We are optimistic that the court will grant Shurwest’s motion to dismiss the complaint. »

Although the new lawsuit claims “millions of dollars” lost by the class, the three defendants lost bounties totaling less than $50,000, Kvesic said.

Similarly, attorneys for Minnesota Life called the new lawsuit a “frivolous attempt by plaintiffs (and their attorneys) to get a third chance to litigate a class claim that failed all along.”

Earlier this year, plaintiffs filed a proof of claim on behalf of a putative group in the bankruptcy, which was dismissed by an Arizona court.

Ongoing feud

The new lawsuit could significantly damage what remains of the Shurwest business, said Anil Vazirani, president and CEO of Secured Financial Solutions, a fiduciary advisory firm. Secured Financial is in Scottsdale, Arizona, not far from Shurwest’s former offices.

Beginning in 2019, Shurwest began branding itself as The Quantum Group. The two companies appear to share the same address, phone number and employees, Minnesota Life noted in a lawsuit it filed against Shurwest in July 2021 in U.S. District Court for the District of Minnesota.

Vazirani and Ron Shurts, one of the founders of Shurwest, are bitter rivals who have faced each other in the past. Nevertheless, Vazirani insisted that his concern was to rid the industry of “abusive marketing techniques” used to fund IUL sales.

“I feel like my energy is going in the right direction,” said Vazirani, a Securities and Exchange Commission-certified whistleblower. “Rather than fueling it with vendetta, I fuel it with consumer protection, because I believe then and I believe now that these people are not acting in the best interests of consumers.”

Shurwest sold Minnesota Life products for several years until problems arose with alleged fraudulent sales. Minnesota Life says policy claims were changed on more than 1,000 policies sold through Shurwest between 2014 and 2018. Minnesota Life itself is reportedly being sued by several disgruntled customers.

Shurwest filed a lengthy bankruptcy settlement plan in November. This plan is the best way for Shurwest to reimburse injured parties, its lawyers said.

According to court documents, Shurwest is offering to pay the claims through an arbitration process using proceeds from three years of revenue, which it expects to be around $6.14 million. Shurwest reported current gross income of approximately $125,000 to $150,000 per month and future operating expenses of $35,000 to $40,000 per month.

To date, Shurwest has made “a ton of progress” in resolving claims, Kvesic said.

Editor-in-chief of InsuranceNewsNet, John Hilton has covered business and other beats in more than 20 years of daily journalism. John can be reached at [email protected] Follow him on Twitter @INNJohnH.

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