Guggenheim Partners accused of racketeering

Editor's Note: Whitmore v. Guggenheim Partners LLC was dropped one day after filing. View the follow-up story here.

(Bloomberg) -- Guggenheim Partners LLC and three insurance companies it controls were accused in a fraud and racketeering lawsuit by annuity buyers of concealing the true state of the carriers’ finances.

Lawyers for plaintiffs Clarice Whitmore and Helga Maria Schulzki claimed the asset manager raided the insurers’ cash reserves after taking control of them, threatening the security of the annuities they sold, according to their complaint filed yesterday in federal court in Chicago.

“Guggenheim’s plan was pernicious,” they alleged, “acquire insurance companies weakened by the recession and use them to sell seemingly safe and secure annuity products” while “funneling cash” to Guggenheim, its friends, affiliates and associates, the women alleged.

Lawyers for the women likened the defendants’ conduct to that of the collapsed Houston-based energy firm Enron Corp., claiming they used complex accounting to create an appearance of financial strength and stability where there was none.

The companies are “properly and well capitalized” and the complaint is filled with false and inaccurate allegations, said Michael Sitrick, an outside spokesman for Guggenheim, a unit of Chicago-based Guggenheim Capital LLC.

“All investments, reinsurance contracts are proper, legal and disclosed,” Sitrick, chairman and chief executive of the public relations firm Sitrick and Co., said in an emailed statement. “All service contracts between Guggenheim and insurance companies are proper, legal and approved by the regulators.”

Schulzki and Whitmore seek class-action, or group, status to represent anyone who has bought an annuity since Jan. 1, 2010, from Security Benefit Life Insurance Co., Guggenheim Life and Annuity Co., or Equitrust Life Insurance Co. The women said in their complaint that the Guggenheim Partners and the insurers engaged in a single racketeering enterprise that overcharged annuity purchasers.

In addition to class status, the plaintiffs seek an unspecified amount of money damages, tripled under the federal racketeering law.

The case is Whitmore v. Guggenheim Partners LLC, 14- cv-00948, U.S. District Court, Northern District of Illinois (Chicago).

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