AG says Defendants convinced clients to invest in risk financial products in order to earn commissions
The Attorney General of Massachusetts announced this week that it had brought suit against a Norwell-based mortgage broker, one of its loan originators and an outside insurance agent for deceptive sales tactics toward elderly homeowners. These tactics included helping elderly homeowners apply for reverse mortgages as well as advocating that they invest in risky financial products, including variable annuities, in order for the defendants to reap hefty commissions.
“It is wrong to take advantage of seniors who spend decades building up equity in their homes,” AG Healey said. “We allege these defendants preyed on elderly homeowners so they could earn more money at their clients’ expense. Individuals and businesses who target vulnerable populations by promoting these risky transactions will be held accountable.”
The complaint, filed last week in Suffolk Superior Court alleges that mortgage broker Direct Finance Corp. (DFC), its employee Daniel Matthews, and insurance agent, James Moniz, earned significant commissions as a result of their scheme against their elderly clients. In particular, the complaint alleges the defendants worked in concert to convince their senior clients to take out reverse mortgages and put the mortgage proceeds into risky financial products that carried hefty surrender charges.
According to AG Healy’s office, several affected clients were widows who had engaged the defendants to help them gain ready access to their money. The defendants instead advised the trusting widows to put their money into variable annuities that paid high commissions, but saddled the widows with heavy withdrawal penalties when they tried to access their money.
When not pushing restrictive variable annuities, the defendants are also alleged to have conspired to convince other seniors to apply for reverse mortgage loans on their homes. Unlike traditional mortgages, reverse mortgages do not require borrowers to make monthly payments to pay off the loan. Rather, a borrower will receive a lump sum from a lender, who is generally paid back when the last surviving borrower dies by the sale of the property. With this type of mortgage, however, home equity generally decreases over time as the mortgage’s imputed interest and other fees which the lender accrues against the borrower’s account balance each month.
In one particularly egregious case, the AG claims that the defendants Moniz and Matthews convinced a widow with little financial investment knowledge to invest the proceeds of her reverse mortgage into a variable annuity, thereby tying up her money for several years. Mr. Moniz also is alleged to have persuaded the widow to sign blank forms in order to place her money into the annuity without her knowledge.
The defendants are alleged to have failed to disclose or misrepresent material information about many risky financial vehicles to their clients. As a result, each defendant was able to earn hefty commissions for their coordinated efforts. For each reverse mortgage originated, Mr. Matthews would receive a commission, while Mr. Moniz earned a commission for each deferred variable annuity sold.
Last year, Mr. Moniz’s employer settled allegations of wrongdoing with the Attorney General’s office
The defendant James Moniz is a former employee of the John Hancock Life Insurance Company. Last fall, the AG’s office and John Hancock entered into settlement agreement over allegations that the life insurer had failed “…to effectively supervise Moniz, permitting him to sell unsuitable variable life insurance policies, variable annuities, and other insurance and financial products.” As a result, John Hancock paid more than $550,000 to various Massachusetts seniors who had fallen prey to Mr. Moniz and Mr. Matthew’s scheme.
The latest lawsuit involving Mr. Moniz and his cohort, Mr. Matthews, seeks injunctive relief, restitution for consumers, including the return of fees senior clients had paid. The complaint also asks for civil penalties, attorneys’ fees and a repayment of commissions.