Best’s News & Research Service - September 01, 2016 02:46 PM (EDT)
MetLife to Appeal $15.6 Million Jury Verdict Related to Retirement Fund
LOS ANGELES //BestWire// - MetLife said it will appeal a $15.6 million jury verdict against it and two affiliates handed down by a California jury to a woman who, according to her attorney, lost her life savings in what he described as “a bogus investment fund that was offered by a MetLife insurance agent.”
“We are disappointed with the outcome and we anticipate appealing this decision,” MetLife said in an email.
Attorney Richard E. Donahoo, who represents the plaintiff, Christine Ramirez, said in a statement after an eight-week trial, a Los Angeles Superior Court jury unanimously found MetLife and two of its subsidiaries, New England Life Insurance Co. and New England Securities, and a former managing partner, Tony Russon, “were liable on four civil counts including aiding and abetting violation of California securities laws, negligence, and aiding and abetting deceit and financial elder abuse.”
On Aug. 31, the state court jury awarded Ramirez $10 million in punitive damages from MetLife Inc., $2.5 million in punitive damages from New England Securities, $2.5 million in punitive damages from New England Life Insurance Co., and $330,000 in punitive damages from Russon. On Aug. 30, the jury awarded Ramirez $239,890 in compensatory damages, Donahoo said.
An effort to reach Donahoo for further comment was not immediately successful.
Donahoo, of Donahoo & Associates in Tustin, California, said the jury found MetLife “allowed Russon to use insurance sales meetings with prospective customers of MetLife to promote investments in Diversified Lending Group, a real estate fund that was run by convicted felon Bruce Friedman.” The attorney said the U.S. Securities & Exchange Commission sued Friedman and DLG in 2009, alleging the enterprise was actually a $216 million fraudulent scheme to sell unregistered securities that financed what he called “Friedman’s lavish lifestyle.”
According to Donahoo, Ramirez, a retired Simi Valley mortgage processor, invested nearly $280,000 in DLG on the “guarantee” the unregistered and what he called “ultimately worthless” securities would provide a 12% annual return.
Donahoo said Ramirez is one of 98 DLG investors whose pursuit of a class-action case against MetLife was denied in 2015. Individual cases, however, were allowed to proceed and Ramirez’s was the first to go to trial, he added.
She was represented by Thomas Foley, a founding partner in Foley Bezek Behle & Curtis LLP, who was co-lead counsel with Donahoo.
Testimony at the trial proved Friedman and DLG were brought into the MetLife sales operation by Russon, who was owed $750,000 by Friedman, the attorneys said in their statement. “Friedman promised Russon half of any future income from the sale of DLG securities to help Friedman repay his debt to Russon. Friedman fled the country after the SEC sued him, but died in jail in France in 2012 while awaiting extradition to the United States.”
Ramirez’s legal team successfully argued MetLife was negligent in inadequately training and supervising its affiliates. “The evidence we presented in this case clearly showed that MetLife was aware that the branch office run by Tony Russon was not following MetLife’s own policies and procedures, and that they failed to act to correct this dangerous behavior,” Foley said.
A debate over retirement investment advice has been in the works at the federal level as the U.S. Chamber of Commerce and eight financial services groups in June filed a federal lawsuit to vacate a U.S. Labor Department’s fiduciary rule update, saying the agency overstepped its authority in regulating retirement investment advice and expanding adviser oversight (Best’s News Service, June 2, 2016). The plaintiffs in that case said the rule would have serious adverse consequences for retirement savers and will disadvantage lifetime income products. The lawsuit was filed in U.S. District Court Northern District of Texas.
New England Life Insurance Co. and Metropolitan Life Insurance Co. have current Best’s Financial Strength Ratings of A+ (Superior).
(By David Pilla, news editor, BestWeek: David.Pilla@ambest.com)