In 2014, a class-action lawsuit was filed against Guggenheim Partners, a financial services firm, alleging that it defrauded investors in its annuity products. The lawsuit claimed that Guggenheim saddled its insurance affiliates with risky assets and siphoned cash from them for purposes including helping Guggenheim CEO Mark Walter buy the Los Angeles Dodgers baseball team.
What Are the Allegations?
The lawsuit alleged that Guggenheim violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and various state laws. Specifically, the lawsuit claimed that Guggenheim:
- Fraudulently designed and marketed its annuity products
- Misrepresented the risks of its annuity products to investors
- Invested annuity policyholder funds in risky assets
- Siphoned cash from its insurance affiliates for its own purposes
What Happened to the Lawsuit?
In 2019, a federal judge dismissed the lawsuit, ruling that the plaintiffs had failed to plead their case with sufficient specificity. The plaintiffs appealed the decision, but the Third Circuit Court of Appeals upheld the dismissal in 2021.
The Guggenheim annuity lawsuit was a high-profile case that raised serious concerns about the financial services industry. While the lawsuit was ultimately unsuccessful, it served to highlight the potential risks associated with annuity products.
What is an annuity?
An annuity is a financial product that provides a stream of income payments over time. Annuity payments can be guaranteed or variable, and they can be paid out for a set period of time or for life.
What are the risks of annuities?
Annuities can be complex products, and there are a number of risks associated with them. Some of the risks of annuities include:
Investment risk: Annuity investments can lose value, just like any other investment.
Market risk: Annuity payments may be reduced if the insurance company that issues the annuity experiences financial difficulties.
Liquidity risk: Annuities may have surrender charges or other restrictions that make it difficult to access your money before the end of the contract term.
Who should invest in an annuity?
Annuities can be a good option for people who are looking for a guaranteed stream of income in retirement. However, it is important to understand the risks of annuities before investing.
How can I protect myself from fraud when investing in an annuity?
There are a number of things you can do to protect yourself from fraud when investing in an annuity:
Do your research: Before investing in any annuity, be sure to research the insurance company that issues the annuity and the product itself.
Understand the risks: Be sure to understand all of the risks associated with the annuity before investing.
Get it in writing: Get all of the terms and conditions of the annuity in writing before signing anything.
Be wary of high-pressure sales tactics: If you feel pressured to invest in an annuity, don’t do it. Walk away and take some time to think about it.
Where can I go for help if I think I have been defrauded by an annuity?
If you think you have been defrauded by an annuity, you can contact your state’s insurance department or the Securities and Exchange Commission (SEC).
What is the status of the Guggenheim annuity lawsuit?
The Guggenheim annuity lawsuit was dismissed in 2019 and the dismissal was upheld by the Third Circuit Court of Appeals in 2021.
- Reuters: https://www.reuters.com/article/us-funds-guggenheim-lawsuit-idUSKCN1UA2KM
- InvestmentNews: https://www.reuters.com/article/us-funds-guggenheim-lawsuit-idUSKBN1JS20A
- Wink: https://www.reuters.com/article/us-funds-guggenheim-lawsuit-idUSKCN1UA2KM
- Third Circuit Court of Appeals Opinion: https://www.evanslaw.com/practice-areas/annuities-fraud/annuities-fraud-company/security-benefit-life-insurance-co/