On February 2, 2016, the Division of Insurance Hearing Officer Jean F. Farrington entered an Order under General Laws Chapter 175, § 166D against Grace W. Smith, of Charlotte, North Carolina, revoking her insurance licenses in Massachusetts and ordering to dispose of any interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer. Additionally, Hearing Officer Farrington fined Ms. Smith $3,000.00 pursuant to General Laws Chapter 176D § 7.
Worked for Teachers Insurance & Annuity Association of America out of Charlotte, North Carolina
Ms. Smith was employed by Teachers Insurance & Annuity Association of America (TIAA).
TIAA arose as the result of the philanthropist Andrew Carnegie’s gift at the beginning of the 20th Century of $15 million to fund pensions for professors. When the original fund proved inadequate, TIAA was created in an Act of the New York State Legislature in 1918 as a stock life insurance company for the purpose of providing retirement income for professors through fixed premium guaranteed deferred annuity contracts. In1952, CREF (College Retirement Equities Fund) was created to allow professors to invest in the stock market through the nation’s first variable annuity.
Today, TIAA-CREF is a full-service financial services company that markets in the academic, research, medical and cultural fields. The company has over $880 billion in assets under its management.
Ms. Smith lived and worked in Charlotte, North Carolina. As an employee of TIAA-CREF, Ms. Smith held a number of nonresident insurance licenses for the states where she might place coverage for the company. Her licenses were for annuities and life insurance consistent with the main marketing focus of TIAA-CREF. She also had her series licenses from FINRA for the sale of variable annuities offered by her employer.
Ms. Smith was first licensed by the Massachusetts Division of Insurance as a non-resident insurance producer on June 6, 2011.
Daughter dutifully cashed mother’s Social Security checks till she would have reached 100
Ms. Smith renewed her Massachusetts renewed on March 5, 2014. However, March 2014 turned out to be a bad month for Ms. Smith
In June, 1979, Ms. Smith’s mother had begun receiving Social Security retirement benefits. The benefit checks were paid by direct deposit into a joint bank account in the name of Ms. Smith’s mother and Ms. Smith.
One of the programs that the Social Security Administration initiated in 2010 was the Centenary Project. This project sought to conduct interviews with Social Security beneficiaries age 103 and older to assess, in part, if these superannuated beneficiaries were still living and to prevent fraud, through either identity misrepresentation or a representative payee’s misuse of funds.
Ms. Smith’s mother would not have been 103 until about 2017. Unfortunately for Ms. Smith, however, the Social Security Administration expanded the Centenary Project in 2013, to include verifying whether beneficiaries approaching 100 years of age to whom the Social Security Administration still paid benefits were actually alive.
In March 2014, the Social Security Administration stopped paying Ms. Smith’s mother’s Social Security benefits after learning that Ms. Smith’s mother had actually died in August of 1999.
Ms. Smith never informed the Social Security Administration of her death. Instead, she simply kept receiving her mother’s Social Security retirement benefits in the bank account that she solely controlled.
By the time the Social Security Administration finally stopped paying Ms. Smith, she had received some $82,628 in payments issued to her long dead mother.
U.S. Attorney brings felony charge for embezzlement of Social Security benefits
The Social Security Administration initiated criminal proceedings along with the United States Attorney for the Western District of North Carolina over Ms. Smith’s fraud. By December 2014, Ms. Smith had agreed to plead guilty to a one count Bill of Information alleging that she had:
knowingly and willfully did and attempted to embezzle, steal, purloin, and convert to her own use…Social Security retirement benefits intended for her deceased mother…having a value of approximately $82,628.
Additionally, the Bill of Information sought a forfeiture money judgment in the amount of at least $82,628.
The criminal violation alleged in the Bill of Information, Title 18, §641, carried a maximum sentence of up to ten years’ imprisonment. Ms. Smith, however, received a substantially lesser sentence. In August 2015, she was sentenced to four months of home detention, five years of probation, and restitution of $80,236.54. In a relatively unusual occurrence, the Court sealed papers relating to Ms. Smith’s guilty plea including, but not limited to, the sentencing memorandum and the court’s reasons for the lesser sentence.
TIAA notifies insurance departments of Ms. Smith’s termination for cause
Ms. Smith’s employer, TIAA, learned that she had been charged in the United States District Court for the Western District of North Carolina by an information alleging that for a number of years she had committed Social Security fraud.
in response, on January 15, 2015, the TIAA terminated her employment and agency relationship for cause and began notifying all the jurisdictions where she held licenses as an agent for TIAA.
Resident license lapses and two states revoke non-resident licenses others do nothing
Although Ms. Smith held nonresident producer licenses in a number of states such as Georgia, Minnesota, Indiana, and Colorado, as well as a resident producer license in North Carolina, only North Dakota and Nebraska, ultimately initiated actions based upon the notice from TIAA.
North Dakota began proceedings in August 2015 based upon the fact that Ms. Smith had, unsurprisingly, let her license lapse in North Carolina. Based upon this lack of a resident producer license, the North Dakota Department went on to find that “Since Respondent no longer holds an active resident license from another state, she no longer qualifies to hold a nonresident license in this state and, therefore, is subject to license revocation pursuant to [statute].
The North Dakota Department’s complaint also stated that it had been notified in February 2015, by the Teachers Insurance & Annuity Association of America that Ms. Smith’s appointment with the company had been terminated effective January 20, 2015. The reasons for the termination for cause, according to the North Dakota Department, “were a felony charge and allegations that the “employee…convert[ed] to her own use, on a recurring basis, money and things of value from the Social Security Administration, [including] retirement benefits intended for her deceased mother and having a value of approximately $82,628.”
In Nebraska, the Department of Insurance there apparently negotiated with Ms. Smith and obtained her signature on a consent order revoking the license. By the time that Nebraska had obtained the consent order in September 2015, Ms. Smith had already been sentenced in Federal Court. As part of the consent order she admitted that she had failed to report this complaint within thirty days of her arraignment on December 30, 2014 to the Nebraska Department.
Massachusetts revokes license for failure to report criminal case or administrative actions
On November 19, 2015, The Massachusetts Division of Insurance initiated it is on complaint against Ms. Smith notifying her to show cause why her license should not be revoked for her failure to report the administrative actions by North Dakota and Nebraska, as well as, the Bill of Information filed against her in the United States District Court for North Carolina.
Ms. Smith did not appear at the administrative proceeding brought in Massachusetts. The hearing officer found, however, that he had received sufficient notice and entered a default. The hearing officer then found that Ms. Smith had failed to report, as required by Massachusetts law, the revocation of her producer licenses by North Dakota and Nebraska. Additionally, the Hearing Officer found that this method failed to report the federal criminal proceedings relating to her Social Security fraud.
Hearing Officer finds violations and fines Ms. Smith
Hearing Officer Farrington summed up her findings and consistent with similar proceedings involving nonresident licensees who failed to read administrative actions or criminal proceedings held:
The number and the seriousness of the grounds relied on by the Division to support its disciplinary action fully warrant revocation of Smith’s Massachusetts producer license. On this record, I find that, in addition to revocation of her license, Smith should be prohibited from transacting any insurance business or acquiring, in any capacity whatsoever in Massachusetts, any insurance business in Massachusetts and shall dispose of any interests she may have in any insurance business in Massachusetts.
Additionally, Hearing Officer Farrington imposed fines for Ms. Smith’s violations stating:
The maximum penalty permitted under Chapter 176D, §7 is $1,000 per violation. Smith, by failing to report to the Division two administrative actions in other jurisdictions revoking her license, committed two violations of c. 175, §162V(a). Her failure to report the criminal prosecution is a violation of c. 175, §162V(b). Because these actions constitute serious violations of the insurance laws, in addition to license revocation…I will impose the maximum fine for each of them.
The final order entered by the Hearing Officer revoked “any insurance producer license issued to Grace W. Smith,” ordered her to return any licenses “in her possession, custody or control” to the Division, prohibited her from “directly or indirectly transacting any insurance business or acquiring, in any capacity whatsoever, any insurance business in Massachusetts,”, and to “dispose of any and all interests in Massachusetts as proprietor, partner, stockholder, officer or employee of any licensed insurance producer…”
Finally, the Hearing Officer ordered that “Grace W. Smith shall pay a fine of Three Thousand ($3,000) (sic) within 30 days of the entry of this order.”
