Life Insurance Company of the Southwest, National Life Insurance Company and Premier Financial Alliance, Inc. are staring down a proposed class action that alleges they lured individuals—mainly immigrants—into a pyramid scheme with a “false promise of achieving an entrepreneurial dream.”
According to the complaint, the companies preyed on Chinese, Vietnamese and Filipino immigrants by promising they could earn millions of dollars and attain independence in the United States by selling Living Life Indexed Universal Life Insurance policies. The companies allegedly failed to disclose, however, that any money made would be used to enrich individuals at the “top of the chain” rather than sales associates themselves.
As the suit tells it, the alleged scheme required that recruits pay a $125 membership fee and purchase the expensive insurance policy before becoming licensed sales agents. Associates were then “pressured to recruit and sell the policy within their network of friends and family members,” a practice the SEC calls “affinity fraud,” through which the trust within communities is exploited, the case says. The lawsuit explains that in a pyramid scheme, money is primarily made by recruiting other sales agents rather than selling products to customers. The defendants’ insurance policy is so overpriced, the suit notes, that the only way for associates to meet their sales goals is to recruit people they know into the business.
The result, according to the complaint, is that recruits were tricked into paying thousands of dollars in insurance premiums with “no meaningful chance” in profiting off the defendants’ enterprise themselves. The suit notes that within the first six months of selling the life insurance policy, tens of thousands of associates generated $1.3 billion in sales, from which only a few at the very top of the alleged scheme profited.
The case has been recently reassigned to a judge who participates in the Cameras in the Courtroom Pilot Project in California, in which court proceedings are recorded and archived online.