“CLA Estate Services, Inc. and CLA USA, Inc. made millions deceptively selling estate-planning services and annuities, in a scheme targeting Washington seniors.”
After a lawsuit filed by Washington State Attorney General Bob Ferguson, a King County Superior Court judge granted a preliminary injunction ordering an estate planning company to immediately halt its deceptive conduct. The suit asserts that the Texas-based company operated a “trust mill” scheme that preyed upon Washington seniors.
The Washington State Office of the Attorney General recently announced in a press release entitled “Court orders estate-planning company to immediately halt deceptive “trust mill” practices” that Ferguson filed an action against CLA Estate Services, Inc., CLA USA, Inc. and Mitchell Johnson, a former CLA agent. The lawsuit claims that CLA held misleading estate planning seminars and sold financial products in the state to seniors, without sufficiently disclosing that their products could lock up their assets for years and carried large penalties for early withdrawal. The products made CLA millions in commissions, at substantial cost to Washington’s elderly.
“CLA targeted seniors with their deceptive scheme, the opposite of giving them ‘peace of mind,’” Ferguson said. “They made millions through their trust mill scheme. This court ruling puts an immediate halt to CLA’s misleading and unlawful conduct.”
Judge Michael Scott granted a preliminary injunction that prevents CLA from conducting estate planning seminars and prevents both CLA and Johnson from marketing annuities to seniors who have bought the company’s “Lifetime Estate Plan” during the lawsuit.
CLA invited seniors to attend free meetings about estate planning, where their salespeople encouraged participants to set up living trusts and buy CLA’s “Lifetime Estate Plan” packages. However, the ultimate goal was to obtain detailed financial information to sell complex financial products that most seniors didn’t understand. These “Lifetime Estate Plan” packages included a referral to an attorney and annual review meetings, where insurance agents, under the auspices of reviewing the estate plans, tried to sell life insurance and annuities. These annuities lock up seniors’ retirement savings, where they can only make nominal withdrawals during a deferral period, typically 10 years, without incurring high surrender penalties. Many seniors in the State of Washington incurred substantial penalties for early withdrawal of funds they needed for living expenses.
CLA failed to adequately disclose the terms of the annuities to clients. Johnson and other agents also provided investment advice to seniors, without proper registration.
CLA operates in at least 35 states. The company can still sell annuities to individuals who are not “Lifetime Estate Plan” clients but is prohibited from continuing their deceptive practices. They can also continue their annual review meetings with clients in Washington state, but can’t use these meetings to sell annuities or any other insurance product.
Reference: Washington State Office of the Attorney General (August 27, 2018) “Court orders estate-planning company to immediately halt deceptive “trust mill” practices”