Learn how to spot and avoid common scams! Visit the AARP Fraud Resource Center.
by Robin Gerber, AARP Bulletin, March 8, 2010
Gloria Wolk has been a teacher, family counselor, financial planner, insurance consultant and tax preparer, but her current mission is the one that fuels her passion. Wolk, who gives her age as “over 65,” has made it her business to expose abuses in the practice of reselling life insurance policies known as viatical settlements.
Viatical settlements allow people to cash in their assets before they die by selling their life insurance policies before they mature. Often, older people who are close to death will sell their policies to get extra money to pay for medical care or household expenses or to realize a final dream.
During the process, a settlement firm fronts the capital to purchase the policies, keeping 20 to 30 percent of the death benefits as its fee. The firm then sells the policies—through brokers—to investors who also get a percentage of the death benefits. (The brokers can earn sales commissions of 9 percent or more.) The original policyholder gets money immediately.
But since no government agency regulates the viatical industry, and many settlement firms are not licensed, each stage of the viatical process presents an opportunity for fraud. Both the policy seller (who wants quick money from a viatical settlement) and the buyer (who invests in viaticals to bolster retirement savings) are the potential subjects of fraud, which has become much more common in this complicated, little known and misunderstood business. Enter Wolk.
Wolk posts her discoveries about settlement companies and brokers on her website, Viatical & Life Settlements Consumer Info. Her site contains information about broker licenses, the lawsuits clients have brought against their brokers and investigations of brokers by governmental agencies.
In one of her postings, Wolk targeted Scott Wilbanks, a viatical settlements broker, alleging unfair practices. She warned her online readers to “be very careful when dealing with this broker.” She said that Wilbanks and Assoc. was under investigation by the California Department of Insurance, and that a complaint from a client had resulted in a judgment against Wilbanks.
“Wilbanks and Associates provided incompetent advice,” Wolk wrote, concluding, “Wilbanks and Associates is unethical.”
Wilbanks sued Wolk for defamation and unfair business practices. He argued that Wolk did not have the facts to prove that he was incompetent or that he had engaged in unethical business practices. Wilbanks said that what Wolk wrote made it sound like he had committed serious offenses. He claimed that she knew, but did not disclose, that the state insurance department investigation was obligated to investigate any claim submitted to it and that the court judgment against him was from small claims court. Wolk also did not check with him about the truth of the claims against him, Wilbanks said, and showed a reckless disregard for the truth. He asked the court to award him $1,080,667 in lost income.
The right of free speech?
Wolk argued that Wilbanks’ defamation suit was nothing more than an attempt to stop her from acting in the public interest by burdening her with the expense and time commitment of a lawsuit, known as a strategic lawsuit against public participation, or SLAPP suit. California’s anti-SLAPP suit legislation barred Wilbanks’ suit, Wolk argued. She was exercising her constitutional right to free speech by exposing Wilbanks’ abuse, particularly of older policyholders, who were lured with false promises to invest in viatical settlements. Wilbanks should not be allowed to silence her, Wolk claimed, by saddling her with costly, stressful and time-consuming litigation.
Your turn! Should Scott Wilbanks win his suit for defamation? How would you decide?
Robin Gerber is a lawyer and the author of Barbie and Ruth: The Story of the World’s Most Famous Doll and the Woman Who Created Her.
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