Swanson files another lawsuit over annuity sales

For the third time this year, Minnesota Attorney General Lori Swanson is suing an insurance company, alleging that it sold unsuitable investments to as many as several hundred older Minnesotans.

The lawsuit, filed Thursday, claims that Midland National Life Insurance Co. sold deferred annuities to Minnesotans 62 and older, with terms that kept their money beyond reach for as long as 14 years unless they paid penalties of as much as 25 percent.

In Minnesota, it is illegal to sell an annuity that is not suitable to someone's particular circumstances. The lawsuit also alleges consumer fraud, false advertising and deceptive trade practices.

Esfand Dinshaw, president of Midland National's Iowa-based annuity division, said in a prepared statement that the lawsuit is unnecessary and the attorney general is wrong.

Dinshaw said that Midland's procedures help ensure that each annuity contract meets the needs of the buyer. It also has a dispute resolution process for customers who have concerns. The privately held company, which also has operations in Sioux Falls, S.D., has more than 10,000 sales representatives in 49 states, according to its website.

"We believe deferred fixed annuities are appropriate for people seeking to preserve assets, while obtaining a steady stream of income," Midland National chief legal officer Stephen Horvat said.

Deferred annuities and similar investments have captured legal and regulatory attention recently, because of widespread abuses among senior citizens. They are different from immediate annuities, a popular investment that provides regular retirement income immediately. Deferred annuities delay that income for a set period, and regulators across the country have seen them delayed until the owners were more than 100 years old.

Kenneth Stiles, 78, of Rochester cashed out retirement investments and stock to buy $190,000 in Midland annuities from 2001 to 2003, he said during a Thursday news conference at the Capitol in St. Paul. Stiles said that he was told the annuities would pay a better interest rate, but they didn't. When he asked the company for a refund in 2005 he was refused, he said.

"I felt stupid because I didn't understand it," until he took the paperwork to his attorney, "and he said, 'Tell you the truth, I don't understand them, either.'"

Joseph Grenier of East Grand Forks, Minn., said he put his wife's $50,000 life insurance payment in a Midland deferred annuity after she died in 2002.

Grenier, a 77-year-old retired teacher, can't take out that money until 2011 without penalty and surrender fees.

He doesn't like the implications of that math: "I hate to say it, but I find out now I gotta die to get it."