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Taylor Wants Answers for Insurance Meeting

Location: Unknown

Taylor wants answers for insurance meeting

By Matt Smith
Cleburne Times-Review
Wednesday, August 30, 2006

The Republican candidate for U.S. Rep. Chet Edwards' seat earlier this month called for Edwards to release information about his dealings with a Waco insurance company and clarify what role, if any, he played in the Army's decision to let the company keep selling financial products on U.S. military bases.

"Texans throughout the district are telling me it's high time that Congressman Edwards release to the news media his official, internal schedule, telephone and e-mail records in an effort to finally answer their lingering questions about the meeting he arranged, and attended, in his congressional office between American Amicable [Life Insurance Co.] and Army officials that occurred just 10 days after Edwards took two $1,000 campaign contributions from Amicable President Lanny Peavy," Van Taylor said.

At the time of the meeting, American Amicable, which agreed this month to a $70 million settlement for allegedly employing deceptive sales tactics to target American soldiers, was under a two-year ban from selling its products on Army bases in Europe. It faced the possibility of a worldwide ban, which precipitated the meeting.

Then-Army Adjutant Gen. Maj. Kathryn Frost, spouse of former U.S. Rep. Martin Frost, D-Dallas, also attended the meeting in Edwards' office and made the decision not to ban American Amicable from selling on U.S. bases.

Edwards said voters know his passion and record regarding military and veteran's matters and labeled Taylor's accusations false. Edwards said he facilitated the meeting in attempt to help American Amicable work out its differences with the military and in no way attempted to influence the Army's decision.

Taylor, nonetheless, urged Edwards to release all details of the incident. Releasing such information would show whether Edwards discussed the situation with Army officials prior to the March 23, 2000, meeting, Taylor said.

"Edwards simply needs to certifiably document exactly when did he first hear from Amicable about the worldwide ban from Army bases the company faced?" Taylor said. "[And] on what day did Congressman Edwards agree to help Amicable? What specifically did the congressman agree to do? On precisely what day did Congressman Edwards set up the March 23, 2000, meeting between [American Amicable and Army officials]?"

Taylor said voters expect such answers.

"Texans expect their congressman to be above and beyond reproach," Taylor said. "Edwards' failure to certifiably document the answer to each and every one of these serious and legitimate questions will simply leave Texans to conclude that Congressman Edwards has no respect for their right to expect answers from the man whose salary they pay."

Sales to soldiers

The problem springs from alleged deceptive sales practices American Amicable, and other insurance companies, used to sell life insurance and other financial products to military personnel on bases. Many have characterized the practices as predatory and deceptive tactics used to persuade young and financially unsophisticated soldiers and Marines into buying financial products that are unnecessary and may not fit their needs.

A military-sponsored plan in effect at the time offered $250,000 in life insurance coverage at a cost of $16.25 a month. Articles in The New York Times and other media outlets reported incidents of insurance companies selling policies on base, which had much higher premiums and much lower payoffs. The articles reported that — thanks to alleged deceptive sales practices — many young soldiers and Marines believed they were buying into savings plans or mutual funds, not insurance policies.

Times ' articles from 2004 and 2006 cite many examples such as a Marine at Camp Pendelton in California who purchased a 20-year insurance policy in 2005 with a death benefit of just under $28,000 and some cash value in the distant future. The $6,600 in premiums the Marine paid over the policy's first seven years equaled more than 14 times the amount the same death benefit would have cost under the military-sponsored plan. The same article also cites a type of mutual fund that was heavily promoted in which half the first-year contributions are consumed by fees. Such funds have been all but extinct from the civilian, commercial market for more than two decades.

Defense Department regulations prohibit insurance agents from soliciting troops in a mass or captive setting on a military installation. Despite such prohibitions, the Securities and Exchange Commission complained that American Amicable trained its agents to present themselves not as insurance agents, but as financial advisors or teachers on military bases.

Insurance companies involved in such alleged deceptive practices blame rogue agents for the problems and claim they dismiss such agents when allegations come to light.

Others blame the financial inexperience of many young troops, insurance lobbyists in Congress, how the decentralized operations of many military installations ensures word of problems on one base doesn't necessarily reach other bases, and how insurance companies frequently recruit ex-military personnel to sell products, giving the taint of military approval.

Several military officials quoted in the Times' articles said allowing insurance or financial service salespeople on a base gives the implication of military approval and can damage morale and recruitment because a soldier who feels cheated or misled is just as likely to blame the military as the financial company.

Others, such as former Oklahoma Gov. Frank Keating, the current president of the American Council of Life Insurers, a lobbying group, argue people old enough to defend the country ought to be able to decide what kind of life insurance they wish to purchase.

Peavy apologized for any violations by American Amicable agents who violated Army "rules against improper and misleading sales practices," and promised "remedial actions" during the 2000 meeting in Edwards office according to a July 21, 2004, Times article.

The company experienced further trouble, however, two and three years later when military officials banned it from Fort Benning in Georgia and Camp Pendelton for similar improper sales tactics. On Aug. 3, the company agreed to a $70 million settlement, which includes $10 million in cash payments to troops who purchased American Amicable's Horizon Life policy between 2000-2006 and nearly $60 million to state insurance regulators in Georgia, Texas and the U.S. Attorney's Office for the Eastern District of Pennsylvania.

The responses

Taylor and Edwards both commended American Amicable's agreement to pay the settlement. A Marine himself, Taylor said he knew of Marines under his charge who had fallen victims to such deceptive practices from insurance companies while in the military.

"I salute the SEC for stopping the deceptive insurance sales to our troops, but I question whether $175 on average per serviceman or -woman fully compensates them for their purchases," Edwards said.

Arlene Wohlgemuth, Edwards' 2004 Republican opponent, also questioned Edwards' role in the incident during that campaign.

Edwards said he never attempted to influence the Army to do anything other than what the Army felt was right.

"Peavy asked me to help set up a meeting [in 2000] between his company and Army officials to try and solve the problems which had occurred, which I did on a routine basis as I would any business or citizen in the district who needed to talk with a federal agency," Edwards said.

Edwards said a representative from the company contacted his office in February 2000 asking Edwards' help to set up a meeting between them and Army officials to discuss problems that occurred with several of American Amicable's agents. Edwards said he agreed to help because "working as an ombudsmen between agencies is part of my job." Edwards added that the company, founded in 1910, employees more than 100 people in the Waco area.

Edwards dismissed Taylor's call for phone and e-mail records.

"If Mr. Taylor wants to make false, unsubstantiated rumors that's fine," Edwards said. "I'm not going to spend hours and hours trying to find 6-year-old records."

Edwards said he does not know why Peavy contributed $2,000 to his campaign in 2000 and added that he was in Washington, D.C., when the donations arrived at his Waco campaign office. Edwards said he did not know of the donations until after the meeting had been set up.

"We raised over $1 million in that race," Edwards said. "To say I'd reverse 14, at that time, years of service to our military and veterans is ludicrous. Folks in our district know better and so should Mr. Taylor."

Edwards said he learned of American Amicable's continuing alleged infractions through the 2004 Times articles.

"I visited Fort Hood constantly between 2000 and 2004 and not one Army official ever said to me a problem was present," Edwards said.

Taylor's campaign responded by providing a May 15, 2000, Department of Defense report titled "Final Report: Insurance Solicitation Practices on Department of Defense Installations," which lists American Amicable infractions stretching back to the 1980s on European bases as well as a 1997 incident at Fort Hood that resulted in a one-year ban for three American Amicable agents.

When he heard of continued violations, Edwards said he took "several immediate steps" to fix them.

Edwards said such steps included a July 21, 2004, letter to Peavy requesting a list of corrective actions taken by the company, a letter to Secretary of Defense Donald Rumsfeld requesting Service Members Group Life Insurance coverage be raised from $250,000 to $500,000 and calling upon the Government Accountability Office to investigate predatory sales practices of insurance products on military installations. Edwards said he sponsored or co-sponsored bills to raise death benefits on military-sponsored insurance from $250,000 to $500,000 (the amount was eventually raised to $400,000) and the supplemental military death gratuity from $12,000 to $100,000 and a bill to prevent the sale of abusive insurance and investment products to military personnel. The last bill, sponsored by U.S. Rep. Geoff Davis, R-Ky., passed the House but awaits Senate action.

Taylor claimed Edwards had little to do with the Davis-sponsored bill past signing on to it. Justin Brasell, Davis' campaign manager confirmed Taylor's claim, in part.

"Geoff Davis is on the House Financial Services Committee, which is where most of the substantive work on the bill took place," Brasell said. "But it's common for members of both parties who didn't take part in the substantive part of a bill to co-sponsor or show support and we're happy to have them sign on."

Taylor called Edwards' steps too little too late.

"It's terribly regretful Chet would think he's not required to answer to Texans who have concerns with American Amicable," Taylor said. "I urge Edwards to reconsider his refusal to answer these questions and to provide these public records."

Taylor said Texans need to know what Edwards knew, when he knew it, what he did, who he contacted about American Amicable and what he agreed to do about the problems.

"I'm concerned the congressman's refusal to release public records will only raise more concerns among citizens of Central Texas," Taylor said. "Texans own these records, which they paid for with tax dollars. Edwards owes us answers."

Taylor said Edwards has a record of saying one thing in Texas and doing another in Washington, D.C., and that requires him to put forth those records so Texans will know if he is telling the truth.

Taylor said addressing problems surrounding insurance sales on military bases would be a priority if he is elected in November.

"Absolutely," Taylor said. "When a group of crooked insurance agents comes to my door and asks for help, I'm not going to open my door to them. I'm going to work to make sure they're not in a position to harm our soldiers again, no matter how much they offer our campaign."

Edwards said he did nothing wrong, stands on his record and took steps to rectify such problems after he learned they were ongoing.

"Veterans and military personnel know my strong support and passion over my 16 years in office for a strong national defense," Edwards said. "For Van Taylor to suggest I would try to hurt our troops is a shameful personal attack."

Edwards said Taylor is simply recycling unfounded rumors from the 2004 campaign.

"This is a false, desperate attempt to get a struggling campaign, with less than 80 days to election, off the ground," Edwards said. "It backfired in 2004 and if Van Taylor had lived here then he would know that. Van Taylor is concerned that I have the support of Democratic and Republican veterans who support my proven track record on military and veteran issues."

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