National Underwriter is a watchdog publication - our mission, among other things, is to be a hard, but fair critic of the life and health industry, pointing out its shortcomings so it might do better, but also pointing out where the industry is being treated unfairly in an age where the default perception most people have of insurance is a negative one.
It was with that intent that we investigated the case of Glenn Neasham, an insurance agent in California who sold an annuity to an 83-year-old woman in 2008. Even though California law allowed the sale of such products to clients up to 85 years of age, and even though Neasham’s client made money on the deal (to the tune of some $40,000), she was also revealed to be suffering from dementia at the time of the transaction. This was something Neasham claimed not to have known, but by then it was too late. Local prosecutors threw the book at him, and a jury of his peers convicted Neasham on a felony theft charge. Nesham is currently free on bail, and his jail sentence - originally 300 days but reduced to 90 days - has been postponed until the outcome of his appeal. In the meantime, Neasham’s insurance career has been ruined, as one might imagine.
Full disclosure: when I first heard of Glenn Neasham, my thought was that he must have been up to something at least a little dodgy. Who sells a 10-year financial instrument to a client who is already a few years past the national average life expectancy? There are tens of millions of people who surely need annuities more than an octogenarian; why not sell to them instead? Neasham’s choice of client seemed odd.
When I mentioned the case to friends and colleagues outside of the insurance industry, some of whom were fairly skeptical of the annuity industry in general, they had little sympathy for Neasham. The skeptics felt that annuity agents could be untrustworthy, sometimes feigning interest in the client’s financial needs mainly so they could justify the sale of products that bore good commissions.
These were smart, educated, professional people who, like most others in this country, know what they know about annuities from second-hand sources, and who had cultivated opinions largely informed by mainstream media coverage and a sense of skepticism of financial services in general. And while they figured that Neasham probably did something wrong to merit the legal attention he got, they were also quick to note that his case was happening in California, where otherwise normal legal expectations go to die. Maybe Neasham got what he deserved, they said, but maybe he didn’t. Maybe he didn’t, indeed.
I was reminded of my father, who was a lawyer. Mainly, he did real estate proceedings and civil liability work, but he was on the county’s team of volunteer public defenders as well, and sometimes, this threw him the occasional criminal defense work. Plus, he liked to take cases where he figured somebody was getting a raw deal. When I was in high school, there was a bank robbery where somebody gunned down a few patrons in cold blood. The crime shocked the entire county, and the public demanded that the robber be caught and punished. This was in Pennsylvania, mind you, where there was a death penalty. Sure enough, the police soon had their man, who was pictured on the front page of the local paper as he was walked into the police station.
I remember clearly my family and I talking about this over dinner. At one point, I looked up and told my father they had the wrong guy. My dad had already come to the same conclusion. There were several eyewitness sketches of the robber, and in each the guy was relatively clean-shaven with a mustache. The guy who was collared for the crime had these really thick mutton chop sideburns, the kind that take months to grow out. There was no way multiple witnesses could all have produced similar descriptions of the robber, and for them all to have overlooked that detail. My dad contacted this guy and offered to defend him for free. It wasn’t easy for him; he got more than a few nasty comments for defending a murderer. But in the end, my father prevailed, and his client walked away a free man. Under scrutiny, the prosecution’s evidence just didn’t hold up.
Shortly afterward, the real murderer was caught, convicted on a much more solid case, and sentenced to die. When his execution was carried out, I told my dad how glad I was that he defended the first guy who got picked up for the crime. My dad didn’t say anything. He just nodded in agreement. Even though victorious, my father knew what would have happened had he lost the case.
I thought about all of this, and then I thought about Neasham. I had to keep an open mind;. I can be a judgmental jerk like anybody else, and I knew it would be a grave mistake to write off Neasham as a villain without looking into the actual details of his case. After all, a felony conviction is no laughing matter. That kind of thing stays with you forever. And the system is not infallible.
I wanted to know three things. First, what were the details of the case against Glenn Neasham - how does a guy get nailed on felony theft for selling an annuity to somebody that actually makes them money? Second, I wanted to know to what degree this case was a harbinger of things to come. Was the prosecution of Glenn Neasham something that could only happen in California, or was Neasham himself a canary in the annuities coal mine, a case that signaled a greater interest in cracking down on suitability? And third, I wanted to know more about the annuity Neasham sold - who was it meant for, what did it actually do, was it appropriate for Neasham’s client, and what conditions would have had to have been in place for Neasham to have made this sale and not gotten in trouble for it.
What we discovered, of course, is that there is much more to the Neasham case than meets the eye. There are troubling questions over how biased Neasham’s jury was going into the trial - one juror purportedly was looking to send a message to the insurance industry by convicting Neasham. There were concerns over the skill of Neasham’s legal defense - any time your defender dismisses witnesses yet to testify because he thinks the case is going well enough not to need them, it’s probably time to get a different defender. The case itself seems to be confined very much not just to California, but to Lake County, where there is a large senior population and, apparently, a prosecutor’s office eager to go after anything it feels is elder abuse. As our elder population grows in an increasingly litigious society, how often might that repeat itself? And most troubling, there is no ironclad set of rules that agents can abide by when selling an annuity to make sure that their clients are, in fact, mentally sound.
My grandfather had Alzheimer’s Disease. I saw firsthand how you can have good times and bad times, and how you can even have bad times where you can be in full-on senility and not really appear as such. How was Neasham to know, at the time of the sale? And more importantly, how was anybody to know the state of his client without any evidence of how she behaved during the sale itself?
There are just too many weird details to this case for me to believe that Glenn Neasham deserved what he got. I do think that if you’re going to sell annuities to the elderly, you are playing with fire, though. And unless your professional reputation is utterly immaculate, you need to accept the fact that there are people out there who will think that your job as an annuity agent entails the fleecing of the public. And unless you are the most likable person in the world, when you defend yourself in the public arena, you are going to invite withering criticism from those who have already decided that you are guilty until proven innocent.
Such is the reputational burden of the annuity industry in specific and the insurance industry in general. It’s not fair, but it is there, and this industry ignores it at its own peril. Most of the time, the industry just shrugs it off, thinking that since they can never get rid of the negative perceptions of the ignorant and biased, why bother? Better to focus on serving your clients and take heart in that. That’s nice, but it is also naive.
Glenn Neasham didn’t get convicted on solid evidence. He got convicted on the preconceived suspicions of the public. And until the industry addresses that, then the Neasham case can and will replicate itself elsewhere. Maybe not exactly as it has in California, but some agent somewhere will get nailed for business practices somebody considers shady, some prosecutor thinks is an easy score, and some folks from the public think is cause enough to pike a head at the city gate. Don’t believe me? Go ask Glenn Neasham what he thinks.