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Ohio High Court Hits Alleged Trust Mill With $6.4 Million Fine
The National Law Journal
October 19, 2009
The Ohio Supreme Court on Oct. 14 fined a so-called trust mill and its affiliate company nearly $6.4 million for the unlicensed practice of law in the biggest penalty of its kind in the state's history.
The ruling ended seven years of legal wrangling between the Columbus Bar Association and American Family Prepaid Legal Corp. and its affiliated Heritage Marketing and Insurance Services Inc., both former companies based in California and owned by the father-and-son team of Jeffrey and Stanley Norman.
In addition to the penalty, the three-judge Ohio Supreme Court panel barred the companies from operating in the state, where they allegedly duped thousands of senior citizens into buying living trusts and insurance products that they often didn't need and couldn't afford.
"The Columbus Bar Association is committed to protecting central Ohio's citizens from unlawful schemes and enterprises, and we are thrilled that the Ohio Supreme Court has reaffirmed that such schemes are unacceptable and those tempted to profit by taking advantage of consumers through the unauthorized practice of law will be dealt with severely by the court," said bar president Elizabeth Watters.
Jeffrey Norman insisted that his business was run in accordance with the law and that the legal proceedings against him, his father and their companies were marred with corruption and "manufactured evidence." Norman said that instead of taking advantage of clients, as the bar association charged, his companies helped senior citizens by providing low-cost legal plans and annuities that didn't lose money even during the past year. He plans to fight the court's ruling and perhaps take legal action against the attorney who led the case for the Columbus Bar Association.
"I'm the best thing that's happened to the state of Ohio and its senior citizens," Norman said.
Joyce Edelman doesn't see it that way. The attorney with Columbus-based Porter Wright Morris & Arthur represented the Columbus Bar Association on the matter pro bono, and said that the Supreme Court reached the right decision. The bar association began receiving complaints about the two companies in 2002 and started looking into their practices.
According to court documents, American Family purchased lists of individuals in Ohio aged 65 and older and sent postcards with warnings about huge probate costs. Those who sent the cards back, and some who didn't, received calls from the company to schedule in-home appointments with sales representatives. The representatives, who were not lawyers, used aggressive, high-pressure tactics to sell the customer a $1,995 plan that purported to include an array of legal services. However, the only services rendered in nearly all cases was the creation of a living-trust portfolio, according to court records. The sales agents also answered questions, sometimes incorrectly, about the probate process, according to the court.
Jeffrey Norman disputed that the company's sales representatives dispensed legal advice.
"They would give general information about legal issues, like, 'Are you aware there is such a thing as probate? Don't you think you would like access to an attorney to discuss that?' " he said.
The customers' financial information was passed to an attorney in the company's Ohio office, then forwarded to the company's California headquarters where living trust form documents were completed and sent back to Ohio. There, they received a review by the attorney. The court concluded that the attorney did not provide enough supervision during this process, however.
The documents were then forwarded to Heritage Marketing and Insurance Services Inc., which shared the same Ohio office. Heritage agents delivered the documents to the customers to be signed and notarized. While there, the agents would attempt to sell the customers insurance, the court said.
"This was all under the auspices of getting into people's homes with their financial information and selling annuities and other insurance products, which, of course, was how they would make their money," Edelman said.
In 2003, the Columbus Bar Association reached a consent agreement with the companies not to engage in a number of practices that were considered unlicensed practice of law. However, the unlawful practices allegedly continued.
It remains to be seen what the nearly $6.4 million penalty will mean for customers of the two businesses. American Family declared bankruptcy in 2007; heritage ceased operations that same year, Norman said. The Norman family owns another insurance company called Quest Financial that operates in Ohio. Edelman said she is looking into whether the penalty can be collected from Quest and redistributed to customers of the former companies.
