A group of 29 plaintiffs has filed a lawsuit accusing Penn Mutual Life Insurance Co. and several co-defendants of operating a tax-avoidance scheme centered around whole life insurance policies. The amended complaint, filed in the U.S. District Court for the Central District of California, alleges fraud, negligence, and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). The plaintiffs, who are from various states, are seeking $23.5 million in damages.
“Unbeknownst to the Plaintiffs, these tax avoidance and related scams were a sham and their purported tax advantages illusory and/or illegal,” stated attorneys from Los Angeles-based firm Holmes, Athey, Cowan & Mermelstein in the complaint. The defendants include former Penn Mutual agent Randall Scott Boll, who was indicted in 2021 on charges related to federal money laundering laws and banking regulations. Boll pleaded guilty to one count of conspiracy to cause a financial institution to fail to file currency transaction reports and to structure financial transactions. Court records indicate he received a one-day sentence and two years of supervised release. According to court updates, Boll resides in Arizona and is currently pursuing a divinity degree at Liberty University. He could not be reached for comment. Penn Mutual has not responded to requests for comment.
‘Racketeering Enterprise’
The lawsuit claims that Penn Mutual, Boll, and several law, lending, accounting, and financial planning firms, which are also named as defendants, formed a “High-Premium Insurance Enterprise.”
“The HPI Enterprise was an organization consisting of individuals and business entities associated for the common or shared purpose of selling, promoting and/or marketing high-premium life insurance policies and related products to plaintiffs through deceptive and misleading sales tactics and materials, and deriving profits from those activities,” the lawsuit details.
Plaintiffs claim that Penn Mutual whole life policies were aggressively marketed as providing “significant tax advantages.”
“Boll and other members and associates of the enterprise would reap high commissions (as much as 75-125% of the initial annual premium paid by the policyholder) for each HPI policy sold,” the lawsuit states. The plaintiffs further accuse Penn Mutual of disregarding its underwriting guidelines by accepting insurance applications that “falsely inflated the net worth of plaintiffs.” The policies purportedly generated considerable profits for the insurer because the policies “were designed to (and in fact did) terminate long before the insureds’ life expectancies,” the lawsuit claims.
One alleged “sham tax avoidance strategy” involved premium financing life insurance loans to fund the policies. The lawsuit states, “The HPI Enterprise Defendants took advantage of plaintiffs’ lack of sophistication and convinced them that such policies were affordable due to the tax deductions they would generate—in essence promising them that the HPI policies would pay for themselves.” The use of life insurance in a premium financing strategy is still a contentious practice within the industry.
Policies Lapsed
Plaintiffs assert that they did not receive the promised tax benefits and incurred “significant sums” in losses due to premiums, interest, and fees paid to the defendants. The HPI enterprise is alleged to have been in operation since “at least March of 2016” and “is continuing, because it is an ongoing business practice of the HPI Enterprise Defendants.”
“Ultimately, plaintiffs typically lost the HPI policies themselves (into which they had contributed significant funds) when they could no longer afford to pay the premiums,” the lawsuit claims. Founded in 1847, Penn Mutual maintains an A+ Superior financial rating from AM Best.
