A 78-year-old attorney from Cliffside Park, New Jersey, is suing a salesman and TD Bank, claiming fraud. He claims that a bad investment has left him in danger of losing his home to foreclosure. Convinced by the salesman that the investment was foolproof, he took out a loan in order to participate, and it wasn’t until after the fact that the man discovered the salesman is a convicted scam artist who is now serving time in federal prison on an unrelated fraud conviction.
The salesman promised he could get the lawyer what is called a life settlement. The attorney’s retirement portfolio suffered during the recession, so the proposal was appealing. The supposed low-risk venture would allow the man to take out a life insurance policy and then sell it to an investor for 40 percent of the $1.5 million policy.
TD Bank approved the man for $245,000 in home equity loans to buy two life insurance policies and a further $51,000 in unsecured loans. Just one month earlier (before the salesman was involved), the same bank told the man he only qualified for a maximum of a $51,700 in a home equity line of credit. Further, his home was not even appraised before he was approved for the loan.
A year after the man bought the first life insurance policy, no investor could be found to sell it to. As a result, the man was unable to keep up with the premium payments and both policies lapsed. Under New Jersey law, life insurance policies can be sold to investors. However, the insurer must disclose the risks involved as well as possible tax consequences. In addition, the insurer must also disclose that the settlements may disqualify them from government programs such as Medicaid. The victim alleges that he was not advised of these risks.
No one goes into an investment expecting to be duped. Unfortunately, it happens. Anyone so victimized would benefit from a full and frank discussion of debt relief options, including bankruptcy protection from nefarious opportunists.
Source: NorthJersey.com, “Attorney says scam left him deep in debt,” Kibret Markos, Nov. 27, 2011