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Pennsylvania Asks Court to Shut Down "Living Trust" Sales Scheme

May 1, 2006

Living Trust • Minnesota Sues "Trust Mills" • Pennsylvania Asks Court to Shut Down "Living Trust" Sales Scheme • California Sues "Living Trust Mill" • Investment, Real Estate Scams Target Seniors • Pennsylvania Sues Alleged Living Trust Scam --- • News for Seniors

Pennsylvania Attorney General Tom Corbett has filed a second civil lawsuit against the operators of a living trust sales scheme, who are accused of deceiving elderly consumers into purchasing Revocable Living Trusts and other estate planning products that pay the sellers high commissions, but may not be in the consumers' best interest.

The Attorney General's Charitable Trusts and Organizations Section simultaneously filed a motion for special injunction and for preliminary injunction that asks the court to require that the defendants immediately cease all illegal operations until the lawsuits are decided.

The suit identifies 11 defendants, including lawyer Brett B. Weinstein, who was named in the Attorney General's original October 2004 complaint. Corbett said this latest legal action follows an investigation into additional complaints from elderly consumers, who claimed that they were defrauded by the defendants.

Both legal actions accuse the defendants of intentionally deceiving consumers into believing that they were receiving competent legal and impartial estate planning advice, when in reality, they were coaxed or deceived into purchasing only the products that the defendants sold.

According to the complaint, the defendants market their estate planning services to mostly older consumers through mass mailings and seminars to induce the purchase of their estate planning documents and annuity products.

To make the sale, the defendants falsely imply that:

• The non-lawyer representatives are attorneys or employed by Weinstein as members of his legal office, when they are actually insurance agents who work for American Family or Heritage Marketing or both.

• The non-lawyer representatives are qualified to advise consumers legally regarding the advantages or disadvantages of revocable living trusts, probate and other estate planning matters.

• The probate process will greatly reduce the size of the decedent's estate because of attorney and executor fees.

• Revocable living trusts will lessen or eliminate taxes.

• Probate will expose private matters to the public but a trust will keep everything private.

• Probate exposes a decedent's estate to litigation but a revocable living trust will not.

• Court costs are very expensive and probate will result in delays.

• Revocable living trusts meet their needs without fully explaining or examining other estate planning vehicles.

• Other estate planning vehicles are inferior and have negative drawbacks.

• They were "representatives," "estate planners," "asset preservation specialists," or other titles when they were insurance sales persons.

• They were exercising independent, unbiased judgments about the consumers' estate planning options when they were primarily interested in making large commissions from the sale of revocable living trusts and annuity contracts.

After consumers agreed to purchase the revocable living trust plans, the defendants then persuaded them to exchange or convert their investments for various types of annuity contracts, even if that move had a negative financial impact or tax consequence, the suit alleged.

As part of the overall scheme, the complaint also accuses the defendants of preying on elderly consumers by selling long-term deferred annuity contracts to those who would not live to derive full benefits, misrepresenting the rates of return, costs, penalties and other terms of the contracts, plus using scare tactics or omissions to sell estate planning products that were not appropriate to their needs.

"In our view, the defendants horribly misled older Pennsylvanians about the financial consequences of the trust or annuity packages that they purchased," Corbett said. "The allegations in this case are among the most insidious financial misrepresentations perpetrated on the elderly to be investigated by this office."

In at least one case, investigators said a non-attorney salesperson, without full consent or knowledge of an elderly consumer, was marking "no" to medical life support procedures on the documents being prepared.

The suit alleges violations of Pennsylvania's Consumer Protection Law and unauthorized practice of law provisions of the Judicial Code.

Corbett said Weinstein is accused of failing to comply with an interim consent decree regarding the October 2004 lawsuit and an Assurance of Voluntary Compliance he entered into with the Attorney General in 2001 that barred him from violating the law in the sale of estate planning products.

The suit and preliminary injunction asks the court to halt the defendants from illegally conducting any current or future marketing or sale of estate planning products and forfeit any profits that were made as a result of their illegal actions.

Additionally, the legal action asks the court to require the defendants to pay full restitution to consumers and pay fines of as much as $3,000 per violation along with the Commonwealth's investigation costs.

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