Treasurer Grossman made the disclosure in a letter to the State Ethics Commission
Treasurer Grossman has disclosed that due to a calculation error involving the aggregation of various life policies he held, he will likely be required to pay back taxes of more than $500,000. Mr. Grossman, who agent is the Arons & Dunsmore Insurance Agency says that he only recently became aware of the this situation. His aggregated life insurance policy is issued by Lincoln Benefit Life.
Apparently before being elected as Treasurer and Receiver-General of the Commonwealth of Massachusetts, Mr. Grossman was advised to aggregate various life insurance policies he had been issued by Lincoln Benefit Life via a tax-free exchange. In his letter, he asserts that he had relied on a cost-basis calculation furnished by a third party and was only recently advised that this information was indeed incorrect. While Treasurer Grossman alludes to a possible “adversarial dispute” resulting from this situation, no lawsuit has been filed as of yet.
Agency Checklists’ has obtained the official copy of Treasurer Grossman’s letter, reprinted below:
“Dear Ethics Commission:
Prior to being elected Treasurer and Receiver-General of the Commonwealth of Massachusetts, in my personal capacity, I held several different life insurance policies. In 2009, prior to my election as Treasurer, these policies were aggregated into a single policy issued by Lincoln Benefit Life through a tax-free exchange, relying on a cost-basis calculation that was furnished by a third party. I have only recently become aware that information was provided to my brokers/agents that was relied upon to restructure my life insurance policies was not accurate and that calculations utilizing this inaccurate information created a situation that potentially results in a considerable financial impact on me through a substantial tax obligation that may exceed $500,000. Although it is unclear how this potential dispute will proceed, and whether a business resolution can be achieved, there is the potential that an adversarial dispute will ensue. This dispute could potentially include the following parties or individuals: Bruce Arons, Richard Dunsmore, Arons & Dunsmore Insurance Agency, David Greenberg, Brokers’ Service Marketing Group, The Lincoln National Life Insurance Company, Lincoln Life and Annuity Company of New York, Lincoln Benefit Life, and Lincoln Financial Group. As discussed above, any business resolution and/or litigation is entirely a personal matter and arises out of events that precede my role as Treasurer.
Separately, in my role as Treasurer, I am aware of only one instance in the past that one of these parties, Lincoln National Life Insurance Company (“Lincoln”), has had a direct interaction with Treasury. Earlier this year, Lincoln signed a global resolution agreement to resolve a multi-state audit that Verus Financial LLC (“Verus”) is doing for many state unclaimed property divisions. This agreement, which I signed for Treasury and was entered into by numerous other states, is similar to other agreements that Verus has negotiated with large life insurance companies over the past several years as part of an ongoing multi-state effort involving several companies. This matter transpired before I became aware of this potential dispute and the parties involved. As part of this agreement, Verus and Lincoln are engaged in an ongoing auditing process to identify funds that will be provided to the Commonwealth. Apart from this agreement, I not (sic) aware of any other past, ongoing, or anticipated particular matters regarding any of these parties that involve Treasury. More specifically, I am unaware of any pending or anticipated matters regarding these parties that would require my involvement or participation as Treasurer. However, in order to dispel any appearance of a potential conflict of interest occasioned by the potential for a legal dispute in which I possess a financial interest with these parties listed above and the potential for future Treasury interactions with these parties, I am formally disclosing these matters pursuant to G.L. c. 268A, §23 (b)(3).
In addition, given the adverse nature of this potential dispute and the considerable financial interest that I have in the matter, I am further recusing myself, pursuant to G.L. c. 268A, §6A, in the event that any new matters arise with any of these parties that would require my involvement as Treasurer. Furthermore, although I have no present involvement in the implementation of the multi-state agreement with Lincoln and would not, in the normal course of business, anticipate any particular matters that require my participation, due to this potential dispute involving at least one of these parties in which I possess a considerable financial interest, I am recusing myself, pursuant to G.L. c. 268A §6A, from any further involvement in any particular matters related to this agreement with Lincoln.
Going forward, I will continue to monitor this potential dispute and, consistent with my obligations under Chapter 268A and my commitment to transparency, I will make all the necessary disclosures when I become aware of the potential appearance of a conflict of interest. Specifically, if new parties or developments dictate further disclosures or actions under Chapter 268A, I will take prompt action to address these matters.
Treasurer and Receiver General”
Treasurer Grossman was elected State Treasurer in 2010, his first time running for elective office. A resident of Newton, the 67-year old was the head of the Democratic National Committee from 1991 until 1993 and is running for Governor of the Commonwealth in 2014. He is the former President of Grossman Marketing Group, a family-owned company based in Somerville. Mr. Grossman graduated from Princeton and received his MBA from Harvard.