Sharon Brady realizes that she will never see the 16 percent annual return she was promised on her $50,000 investment. Worse, she realizes she may have lost most of her money.

“This actually makes you physically ill,” she says.

The retired Tarrant County sheriff’s deputy invested in what regulators describe as an alternative investment: life settlements. Her money was used to buy insurance policies of older adults who want to cash out and sell their benefits to investors. When the original policyholder dies, investors, who pay the premiums, reap the death benefits. The quicker the person dies, the greater the payoff.

As I reported in the spring, the company she invested with, Retirement Value LLC. of New Braunfels, has been shut down by the state. Now comes word from the court-appointed receiver that commissions paid to financial advisers and company officials were 30 percent. Read the report here.

Of $77 million raised in a year from 900 investors like Brady, about $10 million went to Retirement Value and $13 million went to sellers of the program. Brady says nobody told her commissions would be that high.

Eduardo Espinosa, the receiver, told me: “Every time I’ve spoken to an investor, they did not realize the commissions were coming off the top, or the extent of the commissions.”

Texas is one of a few states that don’t regulate life settlement investments specifically. The term does not appear in state law.

The Texas State Securities Board, which closed Retirement Value, evaluates each complaint case by case. The agency’s enforcement director says that fraud is growing and that Texas is wide open for abuses.

A lengthy report released last month by the Securities and Exchange Commission recommends that Congress toughen federal laws for life settlements. Texas lawmakers may do the same in the 2011 session.

The state receiver’s report is the first full look at the workings at Retirement Value.

The contents, which Espinosa describes as allegations, portray, in his words, “substantial evidence of fraud.”

Although the company was a little more than a year old, its sellers raised $77 million in the first year. Investors were promised that their money would be placed in third-party escrow accounts. That didn’t happen. The money was kept under the control of Retirement Value, the report alleges.

As the state prepared to seize the company’s assets, CEO Richard Gray moved $1 million from company coffers to another company set up by friends. The receiver found out and seized the money. The receiver has seized $25 million all told.

The company purposefully underestimated the life expectancy of policyholders to lure investors, the report alleges. The estimates used were calculated by a company run by a convicted felon.

The report also alleges that investors were told false information that prevented them from making informed decisions. That’s against state law.

How much Brady and the other investors get back is up to the receiver. He has to decide whether to pay back the 900 investors from that seized $25 million or keep the investments alive by using that money to continue paying insurance premiums.

“I anticipate there will be a loss,” he says. “How big? I don’t know.”

Brady made the investment last year at the Camp Bowie Boulevard office of James E. Poe, owner of Senior Retirement Planners. Poe introduced Brady to Bruce Collins, chief operating officer of Retirement Value.

“They really played it up,” Brady says of the investment, sometimes called “death bets” by critics.

After the state came down on the company, Poe wrote Brady and about 20 other investors that they should be wary when contacted by state investigators.

“You are under no obligation to respond, or even continue the conversation,” Poe advised his clients in a letter.

Poe told me in June that the investments were good and that the company would come out of this. The receiver’s report makes that seem unlikely. (The Retirement Value receiver’s website is www.rvllcreceivership.com.)

Last week, Poe said that the company’s side is not being told. He said his lawyer advised him not to discuss specifics with his clients.

“There’s not enough room in your paper to present a fair and balanced argument on both sides of this, sir,” he said.

Barry Bishop, a lawyer for former CEO Gray, did not respond to a request for an interview.

When I asked about commissions, Poe answered: “Every business in America operates on a profit margin. And a 30 percent profit margin for a company that creates a product can be made to look disgraceful. Or it can be made to look like a reasonable return.”

The receiver says the story of Retirement Value offers a warning to investors: Whenever someone touts an alternative investment that promises low risk and high rewards, be skeptical.

“That should trigger an alarm in your head that something is not right,” Espinosa says. “Dig a little deeper.”

The former sheriff’s deputy knows that now: “It affects your life in all directions. Even though you pick up the pieces and act normal, it’s always there in your mind.”

# # #

Read our previous stories on this subject below:

Life settlements are the wild west of the investment industry

Financial adviser warns clients about investigators

# # #

Dave Lieber, The Watchdog columnist for The Fort Worth Star-Telegram, is the founder of Watchdog Nation. The new 2010 edition of his book, Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong, is out. Revised and expanded, the book won two national book awards in 2009 for social change. Twitter @DaveLieber

Two Fort Worth neighbors are fighting about whether to bee or not to bee.

A hive began growing two months ago behind the siding of the house next door to Cody Tucker’s. Tucker talked to his neighbor and offered to help pay to have it removed. But the neighbor rebuffed him, saying he could handle it.

The hive grew larger.

The neighbor, who asked not to be identified, tells me he has been working on the hive problem for weeks.

Not fast enough for Tucker. The hive grew to thousands of bees.

A week ago, after his daughter and dog were stung, Tucker called Fort Worth’s code enforcement department. At first, he says, a code officer told him there was nothing the city could do. Tucker insisted on filing a complaint.

Tucker also called the police, who sympathized but couldn’t do much. So Tucker called The Watchdog.

The Fort Worth city code states that a bee infestation is a hazard to the public health and safety. But it’s not considered a nuisance. The difference is that the city can issue a citation for a hazard. If it were a nuisance, the city could also hire someone to solve the problem and bill the homeowner. Not here.

For a hazard such as this, “we generally give citizens a reasonable amount of time to comply,” says Brandon Bennett, the code compliance director. “We could have written a citation on Day One, but that generally does not speed things along. We would rather see the citizen put their time and money into abatement as opposed to court fines.”

And that’s what the neighbor says he is trying to do.

He called in two bee companies for estimates, listened to their free advice and decided to go it alone. Estimates were several thousand dollars — and that didn’t include repairs to the house.

The neighbor says he doesn’t want to remove the siding. He decided to use expanding foam and caulk to lock the bees in and keep the rest out.

He built himself a bee suit using masking tape and nylon. “They sting you right through the stuff,” he says, adding that he has been stung “multiple times.”

When I asked him about Tucker’s complaints to the city, he answered, “He can see from his property what we’re doing. Short of waving a magic wand, there’s not much he can do.”

Tucker says he is worried about his neighbor’s attempt to seal the bees in. From what he learned through research, sealing a hive inside a house is asking for trouble. “The bees could potentially bore their way through the drywall and into the house,” he says.

I checked that with Tarrant County Extension Agent Steve Chaney. He told me, “You can’t just seal it up with them in there. They will either exit outside or into your house. You’ve got to get rid of them somehow, whether you do it yourself or have someone come out and do it.”

Pete Glasser, an Arlington hive removal specialist, says the bees most likely are in a small area between the first-floor ceiling and second floor.

“They will find another way out,” he predicts. “It may be into the guy’s house. It’s really hard to get rid of a hive in there. You have a queen laying 2,000 eggs a day. There could be 30,000 bees in there.”

Bee removal specialists sometimes must open an interior wall to remove the hive, he says.

That’s why Glasser recommends preventive maintenance. “Seal up openings between the siding and brick. It doesn’t take a big opening for a bee to get in there and decide ‘This is a great place to live.’ Pretty soon, he brings in tens of thousands of his buddies. Then it gets complicated.”

Tucker was also stung by the city’s response. Buzzing like an angry bee, he spent a week making phone calls, pleading with code enforcement to get serious about his problem. At first, he says, he was rebuffed. Then his complaint number wasn’t entered properly. Then nobody got back to him.

Code officials say they didn’t have a callback number for Tucker. (Note: Write a letter.)

The neighbor acknowledges that he has placed a big bet that his sealing measures have curtailed the problem. But he doesn’t know yet.

When I met with the neighbor, I saw less than a dozen bees flying near the house.

Later, leaving the property, I watched as he vacuumed live bees off his window frame.

# # #

Dave Lieber, The Watchdog columnist for The Fort Worth Star-Telegram, is the founder of Watchdog Nation. The new 2010 edition of his book, Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong, is out. Revised and expanded, the book won two national book awards in 2009 for social change. Twitter @DaveLieber

Watchdog Nation introduces you to another watchdog. His name is Riley. He’s 14 months old. A Vizsla. A real dog.

From his point of view, it’s easy to see why he might have nipped at the gloved hand that reached over the fence in his back yard in Crowley, Texas.

The hand belonged to a smart-meter installer from Oncor Electric Delivery.

The installer’s other hand reached for his can of HALT! — a dog repellent spray — and fired away.

Riley ran back into his house. His eyes had swollen, and he wiped his head frantically on the carpet. His owners, Carter and Mandy Forbes, didn’t know what had happened. They rushed him to the vet, where the doctor explained that someone had apparently sprayed the dog with repellent. Riley was treated and released. The bill was $90.

Back home after that, Mandy Forbes saw an Oncor installer in the neighborhood. She says she watched him take off his hard hat and butt a neighborhood Chihuahua that was barking at him in the head.

“Did you spray my dog?” she says she asked him.

“I haven’t done it in six months,” he replied.

“Do you have the right to do that?”

“Yes,” he answered. “If we feel threatened.”

She told him what Riley went through. He apologized but said it must have been the other installer working the neighborhood.

The Forbeses contacted Oncor. Days later, the company, which delivers electricity to much of North Texas, agreed to pay the medical bill.

Oncor doesn’t like to pay claims. But it did so in this case because the installer didn’t follow company policy.

“It was really in the spirit of customer service that we decided to pay this claim,” spokeswoman Megan Wright said. “There wasn’t anything legally that would make us pay this claim. But the fact that the meter installer did not knock before he installed the meter, which is not required by law, we felt that we wanted to pay this claim.”

The front-door knock, she said, is “something we like to do as a courtesy.”

When I pressed for more details, she said, “His body was not bit, but he said the dog’s teeth did make contact with his really thick gloves.”

Riley is fine. The installer, however, was reprimanded. “We tell our employees they have to put their safety first,” Wright said. “He had to do what he could to protect himself.”

Previously, I’ve reported how smart-meter installers have the right to climb backyard fences to change out meters and how, during the installation, the power to your home or business will go off for several minutes. I’ve recommended that you install surge protectors on valuable electronics and even consider purchasing a whole-house surge protector, usually best installed by an electrician. Oncor says it doesn’t pay claims on electronics that are ruined by power surges.

As far as dog bites, Oncor says installers have been bitten by dogs 12 times this year and were bitten 22 times last year.

Oncor provided me with photos of installers and the nasty bites they received. The photos are difficult to look at.

Oncor says it trains installers how to handle dogs without spraying them.

“We talk to them about how to spot the danger signs of aggression,” Wright said. “How to walk away. Move slowly and carefully. You don’t look in a dog’s eyes. You do not smile, because you don’t want to show your teeth. The dog will think that’s an aggressive move.

“Never run. You just stay calm and quiet. We also talk to installers about being aware of their surroundings, looking to see if there are any dog toys, dog runs, well-worn paths.

“Our meter readers also carry with them a stick with a little tennis ball on the end of it. The dog will oftentimes attack the tennis ball.

“No one wants to hurt an animal.”

Oncor has almost 2 million smart meters left to install. That’s a lot of back yards to enter — and a lot of watchdogs that have no idea what’s coming.

# # #

Dog bite stats

• 2005 – 43 dog bites
• 2006 – 31 dog bites
• 2007 – 32 dog bites
• 2008 – 27 dog bites
• 2009 – 22 dog bites
• As of 8/1/2010 – 12 dog bites

Source: ONCOR

# #  #

Dave Lieber, The Watchdog columnist for The Fort Worth Star-Telegram, is the founder of Watchdog Nation. The new 2010 edition of his book, Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong, is out. Revised and expanded, the book won two national book awards in 2009 for social change. Twitter @DaveLieber

My doorbell might be the worst one to ring if you’re a slippery salesman who doesn’t play by the rules. Ask the sales guy who pestered me the other day. I bet he wishes he never stopped by.

At first, I talked to him through the glass. I rarely open the door for anyone except the pizza deliveryman. But he was one persistent son of a gun.

He told me he was from an alarm company. I asked which one, and he pointed to the logo on his sleeve — GE Security.

When I finally opened the door, he moved the notebook that he was holding against his chest, revealing his real company logo on his breast pocket — Pinnacle Security. I wrote about Pinnacle selling 60-month contracts previously.

I told him I already had an alarm system. He said my analog system wasn’t good enough.

“There’s a city ordinance in the works in Tarrant County where they’re going to require everybody to switch over to the new digital system,” he said. “That’s kind of what we’re advertising.”

There’s a lot wrong with that. He confused Fort Worth, where I live, with Tarrant County. Tarrant County doesn’t adopt alarm ordinances. The city does.

But I told him that nothing like what he described was in the works in either the city or the county.

“You can research it online,” he insisted. “I’m telling the truth.”

I told him he wasn’t.

“I promise you!” he said.

No, I repeated. It’s not happening.

“The honest truth,” he said. “I’m not lying.”

But he was wrong.

I asked to see his state license for door-to-door alarm sales.

Instead, he pulled out his company ID card.

I told him state law required that he show a license. He didn’t have one with him.

“You’re in violation,” I said.

“You gotta have it right now?” he asked.

Yeah, man.

“I’ve only been at the company for a month,” he said.

I identified myself as The Watchdog columnist at the Star-Telegram. Told him I wrote about his company in October. Seemed as if I knew more about Pinnacle than he did.

I went inside and fetched a copy. Brought it outside. Started reading excerpts aloud.

“Alarm salesmen and installers must carry a pocket card with their photograph issued by the Texas Department of Public Safety’s Private Security Bureau. If they don’t have a card, they are not licensed to work in Texas.”

Hmm, he said. “I didn’t think I was breaking the law.”

He told me he was 23 years old, finishing up college in Arizona. This is a summer job, and he expects to return home in a month with his wife. He wasn’t doing too well in the new job either, he confessed.

No wonder.

Later, I checked with a Fort Worth spokesman, who confirmed that the city is not contemplating forcing burglar alarm users to switch from analog to digital. Why would it?

I looked on the Texas Department of Public Safety website and saw that this salesman did have a license. Perhaps his boss never bothered to give it to him.

Checked also with the agency, which investigates unlicensed alarm salesmen. In this case, I was told, if a complaint were filed, the company would be cited, not the salesman, because management didn’t give him proper credentials.

Looked up the company’s Better Business Bureau rating and saw that Pinnacle has the same F grade it had when I checked in October. But the numbers are worse. In October, there were 800 consumer complaints going back three years. Now there are 1,200.

Checked the Orem, Utah-based company’s record with the Utah Division of Consumer Protection, too. In November, the company was fined $6,000 for disobeying state rules. Among the violations cited was “indicating that a replacement or a repair is needed when it is not.”

Called Chris Russell, president of the Fort Worth-based Texas Burglar and Fire Alarm Association, who told me, “It’s very frustrating to hear a story like that because we try to warn homeowners of these types of sales tactics. I guess we haven’t been effective yet to put a stop to it.”

Contacted Pinnacle, where Chief Operating Officer Steve Hafen told me he would contact the Dallas office “to make sure we are not misstating or exaggerating facts.”

He added: “He should have been carrying that license. … There’s no excuse for that. … We’ll follow up with that office to make sure that all the representatives follow the comprehensive code of conduct we have in place.”

As for the salesman, when we said our goodbyes at my front door, I suggested that his best bet was just to boogie on out of my neighborhood. I watched as he stopped knocking on doors, at least on my block.

One down. A zillion more to go.

# # #

After the above Watchdog column first appeared in the Fort Worth Star-Telegram, a former alarm salesman sent this confessional e-mail to the paper’s comments board:

Burnsengine wrote on 8/6/2010 1:02:19 AM:

When I moved back to D/Fw, I went to work for a major company that sells alarms systems. This kid, though I feel sorry for him, probably has little idea about the law. I didn’t.

This is likely what they trained him to do and say. And, in this working environment today, it was probably the only job he could get. When I left the company (after 6 horrible months), I realized that I too may have been violating the law.
These salesmen are trained to sell. That’s it. They are trained to say whatever it is they have to say to scare, worry, frighten, nag or break you down to make the sale. They are only given a brief summary on what’s legal and what is not at a local seminar. The rookies know very little compared to the veterans.. and the veterans don’t have time to teach anyone. I believed this was purposeful then, and I still do now.

Ignorance is bliss, right? I witnessed lie after lie from my own managers to my customers about their systems OR lack thereof. Leaving this company was one of the best decisions I ever made.

# # #

For Texas alarm customers

– Alarm salesmen and installers must carry a “pocket card” with their photograph issued by the Texas Department of Public Safety’s Private Security Bureau. If they don’t have a card, they are not licensed to work in Texas.

–  To check whether a salesperson or installer is licensed in Texas, visit www.txdps.state.tx.us/psb/individual/individual_search.aspx.
To check whether an alarm company is licensed in Texas, visit www.txdps.state.tx.us/psb/company/company_search.aspx.

–  Texas consumers can complain to the Private Security Bureau at 512-424-7710  or e-mail: privatesecurityboard@txdps.state.tx.us.

–  If you have fallen victim to an unlicensed salesman, complain to the Texas Attorney General at 1-800-621-0508.

–  Alarm system companies in Texas operate under Chapter 1702 of the Occupations Code (the Private Security Act.)

–  Texas customers who have a complaint about a Utah-based alarm sales company may file a complaint with the Utah Division of Consumer Protection Web site at www.consumerprotection.utah.gov. Or call 801-530-6601.

TIPS

Be cautious about purchasing an alarm system from door-to-door salesmen.

Be wary of offers of free systems. Equipment and installation fees may be free, but don’t forget the monthly monitoring fee.

Check the company’s reputation before signing any contract. Get other bids and compare.

Ask for the company’s security procedures when an alarm sounds so you know how it handles your security.

Learn the length of the contract. Get the shortest possible.

The Federal Trade Commission requires a “cooling off period” of three days in which you can cancel any contract you signed with a salesman who came to your door.

Source: BBB

# # #

Dave Lieber, The Watchdog columnist for The Fort Worth Star-Telegram, is the founder of Watchdog Nation. The new 2010 edition of his book, Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong, is out. Revised and expanded, the book won two national book awards in 2009 for social change. Twitter @DaveLieber

I keep meeting older adults who have lost money in exploitative financial investments.

There was the financial adviser who convinced his clients to invest $50,000 in a life settlements, but the company they invested in was put out of business by state regulators. Read that here.

There was the 79-year-old man who lost $20,000 to an ex-convict in a home foundation scam. Read that here.

There were the retired teachers getting hit with postcards enticing them to invest in financial instruments that are loaded with excess fees. Read that here.

As I continue to research why the elderly are so vulnerable, I receive troubling letters from adult children of older adults.

Christine writes me that her father fell for a Jamaican prize scam and lost $50,000. “He is so upset with the final realization that he lost all of his money that he won’t let me help him,” she writes.

Annette writes that her father lives alone and is inundated with mail announcing that he has won lotteries, sweepstakes and other contests. All he has to do is send money to claim the rest of the prize. “He believes the windfall of money will land in his mailbox,” she writes. “This encompasses his daily life. It’s all he talks about, the money he is waiting for.” But it never comes.

There’s a name for this: elder investment fraud and financial exploitation. Although the problem is expected to get worse as more Americans grow older, initial signs are that one possible solution is coming out of Texas.

A pilot program originated by Baylor College of Medicine in Houston looks at how older adults may lose some mental abilities that helped them avoid risky situations. The medical term is cognitive impairment, and one-third of all adults older than 71 show some signs of it.

Couple that with a strong desire for more money, as shown by Christine’s and Annette’s fathers, and you’ve got the making of a financial catastrophe.

The Baylor program trains Texas doctors to detect warning signs of mental impairment that may make people susceptible to fraud. The doctors are shown how to report what they find to authorities such as the Texas State Securities Board and Adult Protective Services.

The experiment has its roots in a revelation by former Securities and Exchange Commissioner Christopher Cox. He said a few years ago that his elderly mother, besieged by throat cancer and unable to talk, was pestered by salesmen with a barrage of annuity schemes and bad mortgage offers.

“Even though my father was suffering from Alzheimer’s disease, the brokers would prey upon him as well,” Cox said.

The products horrified Cox: They included annuities with huge penalties and a low-rate 30-year mortgage with a short-term loan that had a balloon payment and a teaser rate.

“That would have cost my parents their home when it came due,” Cox said.

Robert Roush, an associate professor of geriatrics at Baylor, heard about Cox’s statements and decided to pursue the matter as a field of study.

He learned that older adults can be especially susceptible to schemes where the true penalties of the investment are hidden in fine print. As adults grow older, they may take greater risks. Cognitive impairment is found in half of all adults older than 85, some researchers say.

When baby boomers reach senior citizen status, 1 in 5 Americans will be older than 65.

“We’ve got a large, growing population that is going to roughly double in the next 20 years,” Roush said. “It will change the way this country operates.”

He wants to change the way older adults are protected, too. His project is growing. Regulators from 30 states, including the Texas State Securities Board, have joined.

The program is built around red-flag questions that a doctor can ask a patient. Samples from the project’s Clinician’s Pocket Guide include: Who manages your money day to day? How is that going? Do you regret or worry about financial decisions you’ve recently made?

In Texas, almost 70 doctors participated in the study. About half reported to state authorities that they encountered potential victims before they were hurt and, in some cases, after they lost money.

June 15 was designated World Elder Abuse Awareness Day. The Investor Protection Trust released a study that day showing that 1 in 5 Americans 65 and over has been victimized by financial fraud. That’s 7 million people.

During his research, Roush learned about older adults hurt through cellphone contracts, credit card offers, car loans and “on almost every financial transaction you can think of.”

“If there’s a hell, those scammers are the ones that will burn the hottest,” he said. “At least I hope so.”

His project, if successful, may turn up the heat on them here, too.

# # #

WARNING SIGNS:

You run out of money by the end of the month.

You regret or worry about financial decisions.

Your bills are confusing, and you have trouble paying them.

You don’t feel confident making big decisions alone.

You don’t understand financial decisions others are making for you.

You give loans or gifts that you can’t afford.

Your children are pressuring you to give them money or change your will.

Someone is accessing your accounts, and money is disappearing.

You can’t reach your financial adviser.

Source: Baylor College of Medicine’s Texas Consortium Geriatric Education Center.

# # #

RESOURCES:

Here’s the “Pocket Guide on Elder Investment Fraud and Financial Exploitation.”

Research investment advisors at the Securities and Exchange Commission website here.

Spend some time at the National Committee for Prevention of Elder Abuse website.

Learn about the Duke University student that shows that one in three people over 70 have memory impairment

Read about the Investor Protection Trust study that showed  that one out of five Americans older than 65 have been victimized by financial fraud.

# # #

Dave Lieber, The Watchdog columnist for The Fort Worth Star-Telegram, is the founder of Watchdog Nation. The new 2010 edition of his book, Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong, is out. Revised and expanded, the book won two national book awards in 2009 for social change. Twitter @DaveLieber