Subj: Amended Fraud Report
Date: 09/12/2000
To: cmcnenny@doi.state.in.us, ungerl@sec.gov
File: C:\WINDOWS\Documents\SEC Letters & Walker.txt (22723 bytes)
DL Time (28800 bps): < 1 minute
Ms. Laura S. Unger
Commissioner
Securities and Exchange Commission
Ms. Colleen McNenny
Chief Deputy Commissioner
Consumer Protection Unit
Indiana Department of Insurance
Dear Ms. McNenny:
I have amended the original fraud complaint! Some of the additions include Ms. Laura S. Unger at the SEC and include additional information concerning the conviction of one of MONY's Board members. I wanted to give you and Ms. Unger a chance to review for accuracy the information concerning her and the SEC prior to placing it on the Internet. If any of this information is incorrect or you disagree with its publication I request that you immediately contact me by e-mail or fax at 817 267-5055 with any corrections. If I have note heard from you by the close of business on Friday of this week, I will assume that you are in agreement with the content.
Respectfully,
R. Dale Abshire
4316 Pembrooke Pkwy N.
Colleyville, Texas 76034 817 267-2020 RAbshire@AOL.com
_____________________________________________________________________
o: cmcnenny@doi.state.in.us
CC: heyld@sec.gov
File: C:\AOL30A\AMERIC~1.0\MISC\TEMP\LEVITT1.ZIP (7948 bytes)
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Ms. Colleen McNenny
Chief Deputy Commissioner
Consumer Protection Unit
Indiana Department of Insurance
Dear Ms. McNenny:
RE: Your letter of April 9, 1999
Thank you for responding to my 2-8-99 request for information concerning the last examination of The Mutual Life Insurance Company of New York as of December 31,
1996, which you received on October 26, 1998.
Please consider this letter as a report of "suspected fraud" as mandated by Article 1.10 D of the Texas Insurance Code.
BACKGROUND
During the early 1980s MONY sustained heavy financial losses as the result of a failed attempt at expansion into the financial services industry. In an effort to recoup the losses, MONY's management team concocted a number of schemes to circumvent state insurance laws and adopted a "shoot it all" attitude with policyholders funds. Those laws were designed to protect policyholders by limiting investments in risky investments such as real estate and junk bonds. Management also introduced ill conceived insurance products designed to provide immediate cash flow to the company while encouraging current policyholders to roll their existing polices into the new "investment grade" contracts that would yield greater future dividends. This allowed for a shifting of current dividend obligations to later years. These "investment grade" life insurance policies were a "PONZI" scam.
Example: In 1985 Mr. Brown purchased a $100,000 MONYCOMIZER policy on his
3 yr. old son for an annual premium of $354.00. The illustration, which MONY's actuaries claimed to be "CONSERVATIVE," shows Mr. Brown stopping his payments after just 9 years for a total out of pocket expense of $3,186.00. Seventy-two years later at age 75 the illustrated surrender value is $962,805.00 and the death benefit has grown to $1,372,233. After Mr. Brown had fullfilled his obligation he was informed that he would need to continue to pay. He received a ledger showing him paying the premium for 72 years and receiving age 75 surrender benefits of $314,153 and a death benefit of $454,453.00. In essence, he now has to pay 8 times the premium to receive 1/3 of the benefit.
The New York Department of Insurance knew the shaky financial condition of MONY and that it was highly unlikely that they could ever pay anywhere near the dividends that were being illustrated. With total disregard for the public's interest, the New York Department of Insurance granted approval for the sale of these products to the public. Every other state followed suit and approved the products.
The company gave guaranteed profit / buybacks to "front men" who invested in real estate and junk bonds to enable the company to exceed the limits allowed by law. The schemes began to unravel during 1987 as the result of the S&L failures and real estate crash. The New York Department of Insurance was aware of the problems and violations of law that had occurred at MONY. A new management team was brought in to cleanup the mess that lawlessness and failure of the regulatory system had created. The "New Management," with the full knowledge of the illegal activities of prior management and the New York Department of Insurance, took full advantage of the opportunity to line their pockets. MONY's former Senior Executive Vice President and number two person in the company, Mr. Albert J. Schiff, has testified that the company used erroneous accounting practices and admitted under oath that he had received more than a million dollars when he left the company in 1989, none of which was reported on the Schedule G as required by New York law.
During the early 90's, I became aware of a secret "Phantom Stock Plan" for officers of the company that was not disclosed on the financial statements. I also learned that the Schedule G filings to the state of New York had been intentionally falsified to hide millions of dollars in compensation paid to individuals and to cover-up a multimillion dollar money laundering scam in the Los Angeles agency during 1991. An officer of the company admitted in March of 1995 that the scam was for a "War Chest" and that the President of the company, Samuel J. Foti, had given the order to "take" the money. I also learned that Mr. Foti had falsified his credentials upon his arrival at MONY and that he did not have a degree from Oxford nor did he have an MBA from the Wharton School of Business as published in the company newspaper. It appears that Mr. Foti has also failed to disclose his ownership of an unregistered corporation in Massachusetts that has been doing insurance business with MONY.
As a policyholder, I was shocked when an officer of the company told of Mr. Foti's longtime affair with his secretary and that at one company meeting in Atlantic City, he had slapped her around and bruised her face. I later heard the same story from a close friend of hers. As a policyholder, whose dividends were being slashed during this time period, I found it disgusting to read the deposition testimony of California agents and members of management concerning the sexual misconduct of MONY board members and officers including the current Chairman.
In late 1994 I obtained a copy of the 1992 audit of the company by the New York, Georgia, Oklahoma and Nevada Departments of Insurance which was done in accordance with N.A.I.C. guidelines. The audit, which, revealed hundreds of millions of dollars in illegal transactions and erroneous accounting practices made no mention of the Secret Phantom Stock Plan and the millions of dollars that had been "looted" from the company as a result of the illegal activities. The New York Department of Insurance first denied any knowledge of the Phantom Stock Plan and denied having any documents relating to the plan. Mr. William Tardogno of the New York Department of Insurance later admitted that the examiners had audited the plan and that it was a "sweetheart deal" for the officers and involved lots of money. He also confirmed that MONY's financial statements were definitely false and that they had not filed proper amendments as required. The New York Department of Insurance then granted "Trade Secret" status to the Phantom Stock Plan and refused to produce any information. During Feb of 1995, as mandated by Article 1.10 D of the Texas Insurance Code, I reported suspected fraud to the Texas Department of Insurance. The investigator repeatedly stood up appointments with witnesses and did nothing. Later I became aware of the repeated Grand Jury investigations of the Fraud Unit at the Texas Department of Insurance over their corruption and problems with influence by political figures and lawyers. I wrote to Governor George W. Bush seeking his help. In September of 1995, Mr. Jose Montemayor and Mr. Steve Harper phoned to discuss the issues of falsified expense vouchers being used to steal money from the company. Mr. Montemayor said he had no problem with Officers of the company using falsified expense vouchers for "GAMBLING MONEY" as long a a contest was involved. They never called back about the $5,000,000 per acre vacant lots that were improperly valued on MONY's financial statements. In December of 1995, I was ordered to Austin by the head of the Fraud Unit (Ms. Kerry Key) where she explained to me that they weren't happy that I had written the Governor and that the Texas Department of Insurance wasn't interested in investigating insurance executives who only steal $500.00 per month from insurance companies and that they were not interested in investigating the $55,000,000 false entry on MONY's financial statements.
During July of 1996 I wrote to Senator Al D'Amato and supplied him with a number of documents including the "Condello Affidavit" along with the "Alexis Daniels Affidavit" which detailed the "Home Theater and Stereo" projects that Mr. Foti and two other officers had determined should be paid for with policyholder funds. The issue of Coopers and Lybrand's lack of independence was also raised in the documents. When Mr. D'Amato did not answer I asked another Senate Finance Committee member, The Honorable Senator Phil Gramm, to help me obtain an accurate financial statement for MONY. I also raised the question of the false financial statements being used to secure 10's of millions of dollars in bank loans. After his reelection, his office reported that he was "POWERLESS" and could not cause anyone to produce an accurate financial statement for MONY. The following January, I went to the FBI office in Dallas and briefly met with an agent who took the documents to review. I later received a letter saying that they were transferring their file titled "Samuel Joseph Foti" to the New York office. I then went to Senator Kay Bailey Hutchison's office and met with Ms. Mary Fae Kamm, Director of Constituent Services for the Senator. I showed her a copy of the 1992 Audit with the $600,000,000 in illegal transactions and a copy of the FBI letter. I asked if she could help me get an accurate financial statement for MONY and help move the FBI investigation along. After several months had gone by, the best that they could do was provide me with a copy of the same audit that I had showed them at the original meeting. By January of 1998 the FBI could find no record of there ever having been any file or investigation. MONY's 1994 Schedule "J " fails to disclose a payment of $687,000 to Senator Hutchison's, husband's law firm. The same law firm that charged MONY policyholders more than $200/hr for a conference call with a former MONY Manager that they had named as a witness in a law suit in Alaska. The man had been dead for 2 years when they first named him as a witness!
In September of 1997, I went to the Ft. Worth office of the Securities and Exchange Commission and meet with a staff attorney regarding the false financial statements and lack of independence by Coopers and Lybrand. The next day he asked me to contact Mr. Joseph Dimaria in the New York office. At Mr. Dimaria's request, I submitted to him between 450 and 500 pages of documents on Sept. 20, 1997. He later admitted that MONY's financial statements were false. On November 5th, 1997 Laura S. Unger was sworn in as the fifth member of the Securities and Exchange Commission and promptly conducted a top-to-bottom review of the Commission's Enforcement Division. Prior to her arrival at the SEC Ms. Unger had worked as Counsel to Senator Alphonse D'Amato.
Attached you will find a copy of the March 1, 1998, letter to Mr. Arthur Levitt, Chairman of the SEC, and the April 15, 1998, letter to Ms. Walker at the SEC. I am also attaching a copy of the May 28, 1998, letter to Mr. Levitt asking for his help in obtaining a copy of the last audit of MONY. You will also find a copy of a letter of clarification to Ms. Donna Garcia Davidson regarding an "Open Records Request" to Governor George W. Bush which contains an admission that he as the Governor of Texas cannot produce or cause to be produced an accurate financial statement for MONY for anytime while he has been in office. Governor Bush and his close associates and financial partners at Crescent were reported by the Houston Chronicle in early 1998 to have paid MONY $155,000,000 for real estate in Houston. Governor Bush also received substantial PAC contribution from V&E during the time they were padding their bills to MONY. It should also be noted that a V&E partner, Mr. A. Frank Smith, was on MONY's Board of Directors during the time that MONY illegally purchased much of the real estate and junk bonds previously mentioned and during the time that the financial statements were fraudulently submitted to governmental agencies.
During October of 1998 the Northwest Arkansas Times ran a story on MONY concerning some of the issues I raised. On October 16, 1998, MONY faxed a copy of the audit to the reporter doing the story to support their claim that all the allegations were false and that MONY's financial statements were accurate. The final signature page of the audit contains the signatures of three examiners who supposedly conducted the audit. Two of the three individuals have stated to me that they have never seen the final draft of the audit, they were pulled off the audit before its completion and that the undated signature page that was affixed to the audit to authenticate it as a "Government Record" should not have been used. This was also confirmed by Mr. Michael Schroeder at the Wall Street Journal.
On December 2, 1998, the Arizona Department of Insurance reluctantly admitted that Coopers and Lybrand L.L.P. ( MONY's "INDEPENDENT" outside auditor) had acted as the vendor on the sale of financial instruments to MONY as well as billed millions of dollars in non audit related services. It should also be noted that MONY's Chairman, Mr. Michael I. Roth, is a former partner of Coopers and Lybrand L.L.P. The current Superintendent of the New York Department of Insurance, Mr. Neil Levin, is a former staff assistant to Senator Alphonse D'Amato as well as a former Vice President at Goldman Sachs. Mr. Claude Ballard, is a Limited Partner of Goldman Sachs and has been on MONY's Board since 1990. In December of 1999 Mr. Ballard was found guilty by the U.S. Tax Courts of having taken $13,000,000 in "kickbacks" on real estate transactions from 1972 to 1988 while accociated with the Prudential Insurance Company. MONY's financial statements list a real estate holding at 3700 Buffalo Speedway in Houston, Texas that was acquired through Goldman Sachs (while Mr. Levin and Claude Ballard were there) in May of 1988 for 16.4 million dollars. The Harris County Tax Appraisal District in 1997 valued the property at less than half the original purchase price. This transaction stinks as bad a the $18,080,000 Turtle Creek transaction in December of 1987 which resulted from illegal activities by MONY officers and board members.
Mr. Andrew Fois, Assistant Attorney General for the U.S. Department of Justice, has previously determined that investigation of state insurance laws belongs with the states. Your decision to let the SEC investigate violations of Indiana Insurance laws does not hold water. In the first place, if the SEC were going to take any action, they would have done it before they let Goldman Sachs take MONY public with false financial statements. They knew in September of 1997 before Mr. Levitt made his "Declaration of Independence" speech in October of 1997 when he complemented Nicholas G. Moore. You may want to read the April 26 issue of Business Week for an example of the work the SEC does.
This company has been looted, MONY's financial statements are false, elected officials and state regulators have conspired to cover-up and conceal the true financial condition of MONY to the detriment of it policyholders and stockholders. Coopers and Lybrand L.L.P./ PricewaterhouseCoopers L.L.P. has issued false opinion letters and knowing caused thousands of false documents to be entered into the government record with the intent to defraud the policyholders and investors. Neil Levin and other members of the New York Department of Insurance have purposely caused the fraudulent audit that you received on October 26, 1998 to be entered into government records in Indiana and other states with the intent of deceit.
As an officer of the court you are fully aware of the term "criminal conspiracy"! The Indiana Department of Insurance can't produce an accurate financial statement for MONY for more than 14 years! Thousands of Indiana citizens have been victims! I ask that you and the Indiana Department of Insurance reconsider your position and just enforce the laws like you were hire to do and swore you would.
If you have any questions, please do not hesitate to contact me at 817 267-2020, fax at 817 267-5055 or e-mail RAbshire@AOL.com. I would appreciate a prompt response regarding your intentions.
Respectfully,
R. Dale Abshire
4316 Pembrooke Pkwy N.
Colleyville, Tx 76034