• Question
  • Helping senior investors fight fraud - articles and sources for seniors - background checks

    Asked by a 69 year old man from Rochester, NY on 7/8/2007

    Seniors who are using or considering using a financial advisor should do their homework first. There are a lot of people who are eager to exploit seniors and they should carefully check the backgrounds, certifications, resumes and references for anyone they want to work with.

    These articles from the New York Times point out some of the risks:

    Credentials of value and those of less value in senior financial advising: http://www.nytimes.com/2007/07/08/business/08advisor.html?_r=1&hp&oref=slogin

    Life Insurance Settlements: http://www.nytimes.com/2006/12/17/business/17life.html?ex=1183953600&en=a3b027052524a411&ei=5070

    Telemarketing Fraud: http://www.nytimes.com/2007/05/20/business/20tele.html?ex=1183953600&en=f022dfa3758f2328&ei=5070

    Long Term Care Insurance: http://www.nytimes.com/2007/03/26/business/26care.html?ex=1183953600&en=fed83ad9608d7ab1&ei=5070

    NASD provides good resources for senior investors:
    http://www.nasd.com/InvestorInformation/InvestorProtection/NASDW_019140

    and a NASD background checking tool:
    http://www.nasd.com/InvestorInformation/InvestorProtection/ChecktheBackgroundofYourInvestmentProfessional/index.htm

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  • Categories: Life Insurance, Rollovers, Retirement Investing, Financial Advisors, Retirement Assets and Savings, Retirement Planning

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  • Please warn your senior readers:

    State of Maine

    Office of Securities


    21 State House Station

    Augusta, Maine 04333-0121



    IN RE: NOTICE OF INTENT

    06-073



    JAMES L. CLIFFORD

    ALLEGATIONS

    1. James L. Clifford (“Clifford”) (CRD # 1419478) is an individual who has been licensed in Maine as a sales representative or agent since at least 1985. His last known address is 955 Eastern Avenue, Holden, Maine 04429.

    2. From December 4, 1997, to the present, Clifford has worked as a sales representative or agent at the Brewer, Maine, branch office of Investors Capital Corp. (“ICC”).

    3. Pearl P. Schoppe (“Ms. Schoppe”) was a life-long resident of Orono, Maine, and the valedictorian of the 1936 graduating class of Husson College in Bangor, Maine.

    4. In May of 1996 Ms. Schoppe established a living trust (the “Schoppe Trust”) with herself as trustee and with two of her relatives designated as trustees upon her death. The original trust document directed that upon Ms. Schoppe’s death, after payment of any of Ms. Schoppe’s debts, expenses and taxes, and certain distributions, the remainder of the trust property was to be held in trust for Husson College with income distributions to fund a scholarship program.

    5. Ms. Schoppe was conservative with her investments. She essentially bought only certificates of deposits and fixed annuities.

    6. In October of 1998, Ms. Schoppe, then age 80, amended the trust document to, among other things, change the trustee upon her death to Clifford. The amendment also changed the provision regarding the distribution of the remainder of her trust property. As amended, instead of the property being held in trust for Husson, the trust instrument dictated that the property was to be “distributed to the National Heritage Foundation F.B.O. Pearl P. Schoppe Foundation.”

    7. The charitable purpose stated by Ms. Schoppe on the National Heritage Foundation application was “Assist students of the Greater Bangor/Brewer, Orono/Old Town, ME area who need financial aid to attend Husson College. To be paid out interest only 80% of interest to go to students, 20% of the interest to go back into the Foundation so foundation will continue to grow.”

    8. Ms. Schoppe died on January 19, 2000.

    9. On March 7, 2000, in Singer Island, Florida, Clifford and John T.”Dock” Houck, II, CEO of National Heritage Foundation, (“NHF”) completed the paperwork for “National Heritage Foundation Inc. FBO Pearl Schoppe FNDTN” to purchase a $150,000 variable annuity from Conseco Variable Annuity Insurance Company through ICC, using funds from the Schoppe Trust.

    10. On May 11, 2000, Clifford sent an additional $50,000 from the Schoppe Trust’s checking account to Conseco to add to the variable annuity.

    11. The subaccounts chosen by Clifford and Houck were largely more-risky growth funds, when Ms. Schoppe’s stated intent and investment history dictated the use of more conservative income-producing investments.

    12. The variable annuity sold by Clifford to the foundation was unsuitable for the charitable purposes expressed by Ms. Schoppe. There was no tax benefit and no value to having a death benefit on the life of Mr. Houck to offset the higher costs and reduced liquidity of the investment.

    13. Clifford received $12,600 in commissions on these transactions. In addition, Clifford has paid himself trustee fees exceeding $42,000.00 from the trust assets despite the fact that he appears to have provided little if any valuable services to the trust.

    14. Since the purchase of the variable annuity in March of 2000, Husson College has received no scholarship money from the Pearl P. Schoppe Foundation.

    15. Under federal law, variable annuities are securities and the offer and sale of variable annuities is regulated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act

  • Login to rate this answer:   Answered on 11/21/2007
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  • why do long term providers use scare tactics whe you seek information on long term ins? Why isn't there information that is readily available about what ny state provisions are relating to what assets a senior can have is his/her home taken when either relating to home /finacials as many have the understanding that you can loose your home and assets if you enter a nursing home . I fianlly after many phone calls found out that both have to be in a nursing home before home can be taken plus assets. Please i would like all the info avail on this subject. Thank you Kindly Mr Miller

  • Login to rate this answer:   Answered on 11/23/2007
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  • why do long term care providers use scare tactics in relationship that you loose your home/assets if you enter nursing home in ny state??? please reveal all info that relates to what ny state definition of what assets are taken and also if one the the wife/spouse enters nursing home ? With many phone calls i have had found out a different definition as what long term providers tell> Also why has more detail info made to the seniors on this subject? I spednt quite amount of time on phone trying to get the correct answers and still am puzzled. I would like any info on this matter as more seniors would have or an understanding of the true defintions . thank you mr miller

  • Login to rate this answer:   Answered on 11/23/2007
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  • The National Heritage Foundation/Congressional District Programs and their salesmen are under investigation by Federal and State agencies.
    If you have any questions please feel free to contact the owner of the NHF, JOHN HOUK, at (561) 301-3891 or dock@nhf.org.
    Posted by:
    Eduardo Alarcon
    19319 Inverness Dr.
    Spicewood, TX 78669
    (512) 217-6655
    eduardo.alarcon@sbcglobal.net

  • Login to rate this answer:   Answered on 5/6/2008
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  • Here is a letter that HOUK has been sending to his unsuspecting customers trying to put a spin on his conduct. If you would like copies of any of the documents mentioned please feel free to shoot me an email.

    ***************************************************************************

    We apologize for the email you have received from Eduardo Alarcon. He is
    not a part of our organization and has been harassing us too. NHF is not
    involved in any "investigation".

    *If you want to know if you are on the list please contact the SEC at:

    SEC File Number: HO-HO939849
    Specialist Name: Merrily Katz
    Telephone Number: (202) 551-6317

    Or you can call HOUK at (561) 301 3891 or dock@nhf.org

    We have followed a policy of ignoring Mr. Alarcon. However, we believe it
    is important for you to understand the background to and context of his
    e-mails.

    In 1997, Mr. Alarcon created a foundation at NHF. For miscellaneous
    "reasons"' which NHF believed to be groundless, Alarcon became resentful of
    NHF. This resentment led to his filing in 2004 an ill-considered civil
    lawsuit against NHF. The lawsuit was summarily dismissed (translation: the
    claim had no merit whatsoever) by the Travis County (Texas) District Court.
    The order of dismissal is a public record. We can send it to you, if you
    are interested.

    * The question here is what is going to happen to you when it’s your turn?? The true translation is that it was dismissed because of the statute of limitations. Which means you only have so much time to file a lawsuit to recover your damages. Are you going to have to file a lawsuit as well? I’ve included some recent email communication between HOUK and myself at the end of HOUK’s letter to give you some idea of what you are facing.


    Mr. Alarcon did not appeal the dismissal. Instead, soon thereafter he
    launched his e-mail campaign to discredit NHF.

    * There is no discrediting the NHF. Note that I gain nothing from informing you of the truth. I ask nothing. I don’t even want you to believe me. I just want to make sure you are aware and are not victimized.

    Mr. Alarcon scours the Internet to find odds and ends of information related
    in any way, no matter how tangential, to NHF or any person with even the
    most tenuous relationship to NHF. He then puts "negative spin" on this
    information and sends it to a mailing list he has culled from the web pages
    of our programs, from our website, or from any other sources he can find.

    * The information I share with you is public information. The truth is that where there is smoke there is fire. There are too many instances of the involvement of the NHF in these criminal activities. In fact many of the salesmen for the NHF have criminal histories. Does your PDO have a criminal record?? Do you really want to associate with this type of people?


    Much of this "information" is over a decade old, irrelevant, uninformed and
    unsubstantiated opinions gleaned from Internet discussion boards and
    blogs--- where anyone can post anything (some are his own posts). He also
    sends stale articles published many years ago, e.g., ones that discuss
    charitable split dollar insurance which became moot when Congress amended
    the Internal Revenue Code in 1999.

    *There is no time limit on the truth. If your reputation is stained, it’s stained forever and it will follow you into the grave and beyond. As an example if you are named in the SEC investigation, will that go away in a decade? The willingness of HOUK to be involved with a criminal element (PDO’s with criminal histories) speaks volumes. Only criminals associate with criminals.


    Other attachments have nothing to do with NHF and seem to be other
    organizations with a similar name. Or attachments about people with similar
    names that have no affiliation whatsoever to any associate of NHF.

    *I’ll be happy to remove any documents that truly have nothing to do with the NHF. Yet HOUK has never bo

  • Login to rate this answer:   Answered on 8/18/2008
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  • *I’ll be happy to remove any documents that truly have nothing to do with the NHF. Yet HOUK has never bothered to point those particular files out to me.

    He also sends publicly available documents (such as the one discussed below)
    which cast "negative light" on individuals who have only the slightest
    degree of association with NHF. These individuals are not employed by NHF
    and do not serve in any leadership role whatsoever, whether as an officer,
    director, or otherwise.

    *Yet HOUK is willing and even promotes the schemes these individuals engage in provided the money generated goes to the NHF. Mind you these are “Regents” of the NHF. Leaders of the NHF role. Quite a role model if you ask me.

    NHF is associated with over 10,000 individuals. We obviously do not control
    and are not responsible for their private matters.

    *When it involves money going into the NHF coffers it sure should matter to HOUK where the money comes from.

    An example of an email he has sent refers to an out-of-date administrative
    order of the National Association of Securities Dealers ("NASD"). The
    order, posted to the Internet, concerned the failure of a registered
    representative to notify his broker-dealer that he was offering charitable
    gift annuities of several charities, one of which was NHF.

    NASD rules are very strict in regard to requiring a "registered
    representative" to "clear" any financial product he or she wants to offer
    with his or her broker-dealer before it is offered to the public.

    The sole purpose of the NASD order was to impose sanctions on this
    registered representative for his failure to adhere to this NASD rule. The
    order was not directed at NHF. Nor did the order in any way criticize NHF.
    The order mentioned NHF only because NHF was one of several charities whose
    gift annuities were offered by this individual. In short, the reference to
    NHF in the order was purely contextual and benign.

    *In fact the ROY M. STRONG case involves a “Regent” of the NHF. This particular case is what triggered the current SEC investigation. This is a perfect example where HOUK is selling a nonregistered CGA to unsuspecting individuals thru a “Regent”. Tell me HOUK didn’t know what was going on. The other so called “charities” are also being investigated so don’t feel you are being singled out. Far from being “out of date”.

    Keep in mind that these “Regents”, PDO, are just code words for salesmen for the NHF. HOUK compensates these guys for the sales. They do it for a reason. If you see a website pushing the NHF or CDP programs he probably is making good money doing it.

    Mr. Alarcon sent this NASD order with his e-mail cover page suggesting that
    anyone who offers NHF's charitable gift annuities similarly would be
    sanctioned. This is, of course, a complete distortion of the NASD order.

    *See above. The SEC has NOT finished it’s investigation yet.

    I would be pleased to answer any questions about his e-mails, about NHF's
    longstanding integrity and about our status as one of the premier donor
    advised funds in the United States. We have our 4 star rating from Charity
    Navigator 2 years running now. Here is the link:

    http://www.charitynavigator.org/index.cfm?bay=search.summary&orgid=4182

    *This is very interesting because I asked Charity Navigator just how they come to grant a 4 star rating. If you play their game your foundation can get 10 stars. Their rating carries no weight.

    As a matter of longstanding policy, NHF always has disclosed our Form 990
    and audited financial statements on our website. We invite you to review
    them.

    * It’s interesting. If you go to HOUK’s website you have to ASK for their 2008 Form 990. If you take the time to read it you’ll see that HOUK has set aside an enormous amount of money for legal fees. Why would a charity have to set aside so much money to defend the owners of the NHF against legal actions?


    Thank you for taking the tim

  • Login to rate this answer:   Answered on 8/18/2008
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  • Press Release
    September 11, 2008
    Yesterday, a Cameron County jury awarded $9 million in damages to Dr. Juan and Sylvia Mancillas in their lawsuit against the National Heritage Foundation (“NHF”). Dr. and Mrs. Mancillas sued NHF in 2005 because NHF changed the beneficiaries of three multi-million dollar life insurance policies from the Mancillas children to itself.
    NHF is a 501(c)(3) organization headquartered in Falls Church, Virginia that manages thousands of accounts called “donor advised accounts” created by individuals who engage in various charitable projects. NHF acts as the bookkeeper for the hundreds of millions of dollars kept in these donor advised accounts.
    The lawsuit involved what the IRS called an abusive tax shelter known as a charitable split dollar life insurance plan. Between 1997 and 1999, NHF peddled this tax scheme to people across the country. The typical arrangement worked like this—a donor made a charitable “donation” to NHF and took a tax deduction. NHF used those donations to pay premiums on large life insurance policies. The beneficiaries of the life insurance policies were primarily the donor’s heirs, but a smaller portion of the death benefit would go to a charity chosen by the donor. NHF made money by charging a 4.5% fee on the full amount of the death benefit.
    In December 1997, NHF sold Dr. and Mrs. Mancillas a charitable split dollar life insurance plan with annual premiums of about $85,000 on $7 million in life insurance. The Mancillases two sons were the beneficiaries of $5 million of the life insurance, and the Sisters of the Incarnate Word, a organization of Catholic nuns in Brownsville, were the beneficiaries of the other $2 million. The large amount of life insurance was necessary because the Mancillases youngest son suffered a severe brain injury at the age of 6 that has left him unable to speak, walk or care for himself.
    In 1999, the IRS determined that donations made in connection with these plans were not tax deductible. At that time, NHF had about 600 of these plans nationwide, with potential life insurance death benefits aggregating between $600 million and $2 billion. If these deals went away, NHF stood to lose between $25 and $90 million in fees.
    NHF did not inform the Mancillases that the tax deduction was not allowed or that it could have just paid the premiums themselves to insure that their sons still got the life insurance benefits. Had they done that, NHF would be out of the picture and would lose out on their substantial fees. NHF instead modified the plan—without telling Dr. or Mrs. Mancillas—so that it was the sole beneficiary of millions of dollars in life insurance policies and the Mancillases children would get nothing. Believing that their sons were still the beneficiaries, Dr. and Mrs. Mancillas continued paying the premiums. They paid a total of $548,000 in premiums over seven years with no knowledge that NHF had changed the beneficiary to itself.
    “I can’t help but wonder how many of the other 600 families with charitable split dollar life insurance plans with NHF have also had their children removed as beneficiaries just so that NHF could be the sole beneficiary”, said the Mancillases attorney, Albert Garcia. “Hundreds of families may still be sending NHF millions of dollars each year for life insurance premiums, thinking that their kids will receive the death benefits when they die,” warned Mr. Garcia. He added, “NHF said nothing to the Mancillases so why wouldn’t they pull the same stunt with these 600 other families.”
    NHF is no stranger to controversy. Its founder, J.T. “Dock” Houk started the original NHF in 1968. In 1982, the IRS filed suit to revoke NHF’s charitable status for violations of the federal tax laws. Mr. Houk was then ousted as NHF’s CEO and the organization changed its name to the National Foundation. In 1993, he started the current NHF and installed himself as the CEO, his son, J.T. “Tick” Houk as President, his wi

  • Login to rate this answer:   Answered on 9/19/2008
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