Security Benefit Life Insurance EIA Annuities False Illustrations RICO Class Action

This class action is about certain equity-indexed deferred annuities (EIAs) sold by Security Benefit Life Insurance Company. The complaint alleges that Secure Benefit provided deliberate misinformation on the annuities’ potential performance while rigging the rules for them so that they provided little or no return. The complaint alleges violations of the Racketeering Influenced and Corrupt Organizations (RICO) laws.

Annuities are investment products normally used for retirement income. An EIA’s return is “equity indexed,” that is, based partially on a stock index, normally the S&P 500 or Russel 1000. They also receive a guaranteed minimum in earnings, usually 1-3% of 90% of premiums paid in. 

Security Benefit was failing in August 2010, the complaint says, when Guggenheim Partners acquired it. “Soon thereafter, with the active assistance of an independent marketing association known as Advisors Excel, Security Benefit devised and implemented a fraudulent racketeering scheme to exploit the national market for EIAs…”

EIAs credit a percentage of account amounts with only a portion (say, 80%) of the increases in the chosen index (the “participation rate”) or limit the annual amount of any account increase with a cap. Security Benefit offered EIAs that purportedly offered larger returns with “uncapped” or “100% participation” returns. 

However, the company did not base its annuity accounts on the standard indexes but used others that “tracked the performance in certain equity or commodity markets,” the complaint says, such as the Morgan Stanley Dynamic Allocation (MSDA) Index, the Annuity-Linked TV (ALTV) Index, or the BNP Paribas High Dividend Plus (HD Plus) Index, which the complaint calls the “Synthetic Indices.” 

The complaint says the company then used “uniformly misleading marketing materials and illustrations” to claim that these indexes were “capable of producing double-digit returns” for the annuities. However, the complaint says, the company used “a grossly misleading, cherry-picked ‘backcasting’ of the indices’ hypothetical performance” that were based on imagining that those indexes had existed in the past.

The complaint says Security Benefit did this “with the present knowledge that they designed the Annuities not to perform as represented, especially given the embedded costs, risks and product features of the Annuities;” and it also “mispresented the nature, attributes and performance of the Synthetic Indices in so-called ‘Statements of Understanding’ delivered to and signed by” those who bought the annuities.

The purchasers were locked into the investments by various provision, the complaint says, while Security Benefit knew it had designed the annuities to “generate virtually zero returns over the periods in which the consumer is locked into them…”

The Nationwide RICO Class is all persons who owned a secure Income or Total Value Annuity from Secure Benefit issued in the statute of limitations period, who lived in the US at the time, and who received an illustration on or before the date of application for the annuity. There is also an Unjust Enrichment Florida Subclass.

Article Type: Lawsuit
Topic: Securities

Most Recent Case Event

Security Benefit Life Insurance EIA Annuities False Illustrations RICO Complaint

November 20, 2019

This class action is about certain equity-indexed deferred annuities (EIAs) sold by Security Benefit Life Insurance Company. The complaint alleges that Secure Benefit provided deliberate misinformation on the annuities’ potential performance while rigging the rules for them so that they provided little or no return. The complaint alleges violations of the Racketeering Influenced and Corrupt Organizations (RICO) laws.

security_benefit_eia_indexes_complaint.pdf

Case Event History

Security Benefit Life Insurance EIA Annuities False Illustrations RICO Complaint

November 20, 2019

This class action is about certain equity-indexed deferred annuities (EIAs) sold by Security Benefit Life Insurance Company. The complaint alleges that Secure Benefit provided deliberate misinformation on the annuities’ potential performance while rigging the rules for them so that they provided little or no return. The complaint alleges violations of the Racketeering Influenced and Corrupt Organizations (RICO) laws.

security_benefit_eia_indexes_complaint.pdf
Tags: Annuities, Deceptive Advertising, RICO laws, Securities