Claims agents coached them to tell insurer they were paying for policy premiums when outside parties actually did so
Aviva Life & Annuity Co. last week amended its lawsuit against six insurance agents in an alleged charity-owned life insurance scheme, claiming that parishioners of a Los Angeles church were coached to lie to the carrier about the source of premiums for their coverage.
The amended suit, filed Aug. 11 in the U.S. District Court in the Central District of California, is the latest chapter in litigation that dates back to March against a group of life agents, including Kazimir Patelski, Candice H. Hobdy and Rene Williams. In addition, DesignLife Insurance Services LLC, Mr. Patelski's insurance general agency, and Wilshire Coast Consultants, a trustee over 119 of the policies, are also named in the suit.
The updated lawsuit by Aviva now includes elements from a July deposition of two of the agents.
Ms. Williams provided Aviva's attorneys with documents indicating that a quarter of the parishioners' death benefits would go to the church, a quarter would go to Citadel Urban Development Foundation Inc. — a nonprofit group that caters to inner-city churches — and the remaining 50% would go to the church members' beneficiaries.
According to Ms. Williams' testimony, DesignLife set up temporary bank accounts at Wells Fargo for the parishioners, while Citadel “gifted” the premium funds into the accounts. Churchgoers were told that they were technically paying for the policies, as the bank accounts were in their names, according to the deposition.
But another document from Ms. Williams — a script allegedly created by DesignLife for the agents — instructed parishioners on what to say if Aviva called them to verify the information on their insurance applications.
“They may ask you, ‘who is paying for your policy', and like we stated in our presentation, we made it very clear that ‘you are,'” the script says. “If your answer is not responded to in this way, they will think something ‘fishy' is going on.”
In the amended litigation, Aviva also added defendants Richard C. Huitt, who allegedly solicited churchgoers for the coverage, and Citadel, which Aviva claims provided funds to cover the premiums in return for its 25% cut of the parishioners' death benefit proceeds. Mr. Huitt is Citadel's vice president of memberships.
Aviva also added a dozen more individuals to its list of insureds in the scheme, bringing the total to 131. The carrier is seeking $2.1 million in the suit.
Mr. Huitt had no comment on the suit. Sue Park, an attorney for Mr. Patelski, Wilshire Coast, DesignLife and three other agents named in the suit, did not immediately return a call for comment.
Initially, Aviva claimed that the parishioners were solicited at church for an “endowment program,” which involved taking out a policy on a church member and dividing the death benefits between that person's beneficiaries, the church and an unknown third party. But Aviva said questions about the policies arose after some parishioners contacted the insurer stating that they never paid premiums on their policies or that they paid only the initial premiums, with another entity making subsequent payments.
Two churchgoers contacted by InvestmentNews in April claimed that the program was offered as a way to help their church.
Aviva spokesman Kevin Waetke reiterated the insurer's earlier statement: “We are fortunate this issue was discovered early before any claims were made on any of the policies. In conjunction with the litigation, we will work closely with each family to evaluate their individual circumstances to provide them with coverage, if appropriate and desired.”
Agents Ms. Hobdy and Ms. Williams in their testimony claimed they were paid $100 for every policy they delivered. Commissions for the sale of each policy were as high as $10,000, and the women received only a sliver of the amount, said their attorney, Okorie Okorocha.
“There wasn't a single commission check that went to those girls,” Mr. Okorocha said of his clients. “The thousands of dollars went to the ones running the scam; these women with young kids wouldn't risk federal prison over a couple hundred dollars.”
The agents aided people in filling out their insurance applications, according to the deposition.
“There were a few that I had to fill out the whole application for them ‘cause they could not read and write very well,” Ms. Hobdy said in her testimony. “So I'd just sit there and ask all the questions and fill it out for them.”
