Ventura insurance agent pleads no contest in $2 million annuity scam
News: 2015 Press Release
SANTA BARBARA, Calif. - Joseph Anthony Mele, 30, of Ventura pleaded no contest to multiple felony counts including grand theft by false pretenses, theft from an elder and money laundering for ripping off two senior victims for $2 million in an annuity scam.
"Elder financial abuse is an egregious crime," said Insurance Commissioner Dave Jones. "Mele lined his pockets with profits gained by violating his client's trust and fiduciary responsibility as a licensed insurance agent."
The California Department of Insurance Investigation Bureau began a joint investigation with the Santa Barbara Police Department in October 2014 after receiving notification of suspected elder abuse from the Santa Barbara Financial Abuse Specialist Team and Adult Protective Services.
The investigation revealed that Joseph Anthony Mele acted as a financial planner for a 93-year-old woman and convinced her to reinvest her existing retirement portfolio with him. In June 2007, he sold her $1,154,268 in long-term annuities. Over the course of seven years, Mele twisted and churned these annuities, a deceptive practice of rewriting annuities in order to obtain additional commissions under the guise of providing better returns. Mele earned $295,965 in commissions and caused the victim to lose more than $500,000 in surrender penalties. In addition, Mele wrote himself $800,000 in unauthorized checks from the victim's checking account so he could invest the funds for her. Bank records revealed this money was never remitted to an insurance company but used for personal expenses including entertainment, travel and gambling.
Department investigators also uncovered a second victim, a 74-year-old woman who lost $80,000 in surrender penalties, lost premium and interest, and suffered additional tax liability after Mele convinced her to surrender her annuities early.
Department investigators were able to get some insurers to refund surrender penalties for victims, once Mele's scam was revealed.
The department has taken legal action to permanently revoke Mele's insurance license. The Santa Barbara County District Attorney's Office is prosecuting this case. Mele faces up to 30 years in prison, restitution of more than $800,000 and fines of $1.6 million when he is sentenced on January 4, 2016 in Santa Barbara Superior Court.
- Joseph Anthony Mele was arrested on June 3,2015 and is currently out on bail.
- Joseph Anthony Mele's arrest photo. https://www.flickr.com/photos/ca_dept_insurance/18444410503/in/album-72157654932385021/
- Consumers considering annuities as an investment, should read all materials carefully, have a trusted family member or friend review all documents and contact the Department of Insurance Consumer Services toll-free hotline at 800-927-4357 with any questions or concerns.
- Commissioner Jones has sponsored several pieces of legislation that provide new protections for seniors and consumers buying annuities, to avoid these types of scams.
- AB689 (Blumenfield) requires agents and brokers to verify that an annuity transaction is appropriate for the consumer, based on an evaluation of a number of factors. In cases where the sale is found inappropriate, the agent faces revocation of their license, fines and restoration of the consumers' financial losses.
- AB2347 (Gonzalez) requires enhanced annuity disclosures to make sure all insurance investment annuities have consumer protections that are easy to read and understand.
- AB793 (Eng) makes the cross-selling of reverse equity mortgages and annuities illegal. The law is designed to stop the predatory practices of insurance agents and brokers who know that a senior has recently acquired a reverse mortgage to inappropriately steer them into tying up those same funds in an annuity or other non-casualty product.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $289 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.