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For 15 years he sold chemicals and the raw ingredients to make paint. Five years ago he earned his law degree attending night school at Orinda, Calif.’s John F. Kennedy University. Now at 50, Prescott Cole is counsel for San Francisco-based California Advocates for Nursing Home Reform, or CANHR. He tracks abuses in 1,600 state homes, advocating on behalf of seniors and is holding center stage in a major battle that’s been fought three times in the Legislature since 1997. The battle rages over whether attorneys should be barred from selling annuities to seniors with whom they have an attorney-client relationship. Such sales pose a basic conflict of interest, says Cole, the former salesman who thinks attorneys should be zealous advocates for their clients, not for their products. But his opponents have labeled the recent bill as attorney-bashing that is based on a claim of widespread unethical conduct with precious little evidence. This year’s version of the perennial struggle has pitted the multibillion-dollar insurance industry, the estate planning section of the State Bar and numerous elder law attorneys against senior advocacy groups, the Consumer Attorneys of California — and numerous elder law attorneys. The problem, say proponents, arises from the desperation and vulnerability of seniors who are increasingly misled into the purchase of unsuitable annuities as a way to preserve their life’s savings yet still qualify for Medi-Cal-funded nursing home care. The kind of annuities acceptable under Medi-Cal are low-interest insurance products that pay down the principal invested over the holder’s life-span. “We’re interested in cleaning up an area where there’s too much sharp dealing,” said Cole, who fields up to 20 calls a day from seniors confused over conflicting advice on Medi-Cal. “Attorneys are officers of the court: They take an oath to uphold the law. … Their license is not a hunting permit.” These are boom times for the annuities market generally: $164 billion worth were sold in the United States last year, according to Limra International, a Connecticut-based financial consulting service. That’s three times more than a decade ago. Regulators have long been concerned over depredations by so-called trust mills, which offer free seminars on how to beat probate costs and create living trusts, but in fact seek information about assets for the purpose of selling annuities. The commissions for such annuities range from 8 percent to 12 percent. In 1996, the state attorney general’s office went after one of the most egregious of such trust mills, filing suit against the now-defunct Alliance for Mature Americans, based in Lake Forest, Calif. The company targeted the ill and Alzheimer’s patients. Its insurance agents sold 9,700 annuities, mostly to California seniors. The company was ultimately fined $1 million, and insurance companies issuing the annuities were compelled to refund upwards of $130 million, according to news accounts. Legislation that would have ended the practice of attorneys selling annuities was initially vetoed by Gov. Pete Wilson. Similar legislation was enacted in 1999 after being carved down to a requirement for disclosure of possible conflict. The law did not have CANHR’s support. This year, California Assemblyman Jack Scott, the affable former president of Pasadena City College, took up the measure again as AB 2107. Under fierce opposition, he too has dropped the section that would prohibit annuity sales by attorneys, but is continuing with other controversial safeguards. Undaunted, Cole has already lined up a co-sponsor for a fourth assault next year. The sale of annuities by lawyers licensed as insurance agents is an issue that deeply divides the 3,400 members of the National Academy of Elder Law Attorneys, says Greg Wilcox of Berkeley, president of NAELA’s Northern California chapter. Linked to the larger debate over multidisciplinary practices, the issue has more than polarized NAELA’s members, it’s fragmented them, Wilcox says. As a result, the organization has taken no position on the practice. The division among attorneys played out as well among the legislator-lawyers who voted on AB 2107 in its first hearing in the Assembly’s Judiciary Committee hearing in April. “We have enough problems with public perceptions as it is: We should avoid the appearance of conflict of interest at all costs,” said Democratic Assemblywoman Hannah-Beth Jackson, an attorney from Santa Barbara. “Huckstering products is not what we should be doing.” But Republican Assemblyman Dick Ackerman, an attorney from Fullerton, reading from a list supplied him by the State Bar’s lobbyist Larry Doyle, said: “The clear trend is toward expansion of services from all purveyors. … Attorneys can already perform as real estate brokers, public accountants, private investigators, insurance adjusters … and even yacht and ship brokers without licensing.” Why single attorneys out for separate treatment, he wondered, when they can already sell so many other services and products? PROPONENTS But attorneys who support the ban point to the particular vulnerability of seniors as a group too often targeted for their life’s earnings at a time when the money can’t be replaced. “Elders are definitely easy pickings,” says San Francisco-based elder law attorney Dan Murphy. “It’s a combination of age, isolation, known reserves, disease, dementia” — and sometimes victimization by their own families. To estate planning attorney Ann Melfi of Laguna Hills, Calif., lawyer-generated sale of annuities always creates a perception of bias, while the type of annuities sold to qualify for Medi-Cal are generally a poor investment anyway. For single people, whatever the annuity pays out goes to the nursing home. And now, she says, the Department of Health Services is putting into place rules allowing it to go after any residue left if a policyholder dies before the annuity runs out. Even elder law attorneys who won’t sell annuities themselves acknowledge the temptation. Selling annuities can be so lucrative, says Larry Wright of Bakersfield, Calif., an attorney with 80 percent of his practice in Medi-Cal planning, that he’s considered dropping his bar number and going into sales instead. He cites an insurance agent working for the Alliance for Mature Americans who made $250,000: that’s “more than you can playing attorney — if you want to deceive and lie to people,” says Wright. While he will not sell annuities and would like to see them banned as a way to qualify for Medi-Cal, he is not totally opposed to salesmen-attorneys. “At least an attorney has to provide options — and he has a license to lose,” says Wright. “How are you going to malpractice an insurance agent?” But malpractice charges are not easy to levy against lawyers either, says Cole. He cites the case of an 83-year-old San Francisco Bay Area woman who was told by her attorney that she needed to cash in $250,000 worth of stocks and bonds, at a capital gains liability of $35,000. When she bought a $250,000 annuity, the attorney took a 10 percent commission and put her own two children on as beneficiaries. CANHR helped the woman’s family file a complaint with the State Bar, only to have it conclude last year that it could not prove by clear and convincing evidence that the attorney had intended to defraud her client. “The State Bar is not in the business of second-guessing estate planning advocates,” says Cole. OPPONENTS But opponents say the CANHR-sponsored bill would have unfairly singled out attorneys, and that the Legislature has rightfully and repeatedly rejected such lawyer-bashing. “The implication for lawyers was very negative,” says Doyle, the Bar lobbyist representing the 5,333 attorneys enrolled as specialists in the estate planning and probate section. “It said you — and you alone — are incapable of resisting temptation, so we’ll remove it from you.” It was being singled out as a profession that drew the most criticism; in fact, most estate planning lawyers do prefer “to keep the [sales and advising] functions separate based on client loyalty,” said Betty Orvell, a vice chairwoman of the section’s executive committee and a partner with Oakland, Calif.’s Crosby, Heafey, Roach & May. But dual practitioners like Thomas McKenzie of Orange County, Calif., argue that they better serve senior clients because they can offer a wider range of choices than either an attorney or an agent. They can often have fewer conflicts because they don’t have to rely on any particular product or service for income. Attorney/agents are currently the most highly regulated sector among financial planners, and a recent survey of state bars by the American Bar Association did not turn up any complaints against them, said McKenzie. Calling the attorney who put her own children on a client’s annuity as beneficiaries “scum who should be disbarred if that’s true,” McKenzie says that nonetheless, “I can give you 100 cases of non-attorney agents who’ve done worse.” Seniors, he concludes, “are way safer with lawyers because we have a law degree to lose.” WHAT REMAINS In the face of vehement and concerted opposition, Assemblyman Scott has agreed to wait a year to see if new disclosure requirements provide seniors a sufficient safeguard. “If not, I’ll go for complete abolition [of attorney-generated annuity sales],” he says. Meanwhile, he argues his bill still has plenty of teeth — and lots of opposition from insurers and others. Scott still hopes to impose a controversial new duty of good faith and fair dealing for all insurance sales involving the elderly, to ban kick-backs between attorneys and agents and to ensure that elders receive accurate information about what is required to qualify for Medi-Cal. Finally, elder law specialist Murphy is at work on one section that would revise the definition of financial abuse under laws protecting elders. It would clarify that liability for financial abuse extends beyond individuals who fraudulently take seniors’ property to include third parties who assist in that taking, like the sponsors of trust mills or unethical attorneys who facilitate financial abuse by others. Acknowledging the controversy still swirling around AB 2107, Scott’s consultant Beverly Hunter sighs, “It seems like the whole world has looked at this bill and told me what’s wrong with it!”

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