Newspaper article THE JOURNAL RECORD

22 Securities Firms, Insurance Regulators Reach Agreement

Newspaper article THE JOURNAL RECORD

22 Securities Firms, Insurance Regulators Reach Agreement

Article excerpt

A tentative $5 million settlement agreement was reached Tuesday between 22 securities firms and insurance regulators in 47 states over the brokers' sales of annuities issued by subsidiaries of the bankrupt Baldwin-United Corp.

If the agreement had not been reached, it was expected that even larger payments would have to be made by the insurers to state insurance guaranty funds as a result of Baldwin's collapse.

Gerald Grimes, Oklahoma's insurance commissioner, and Attorney General Mike Turpen announced the agreement jointly late Tuesday in a written statement. Neither could be reached for comment.

The securities dealers have agreed to pay the $5 million in a one-time cash settlement in lieu of fines, forfeitures or other claims, which state officials could have assessed.

Assistant Attorney General Richard Mildren said Oklahoma officials got involved at the invitation of Francis X. Bellotti, attorney general of Massachusetts.

"Oklahoma will get about $80,000 of that $5 million settlement," Mildren said.

Mildren said he did not know how many Oklahomans have bought the single-premium deferred annuities issued by the Baldwin-United insurance companies.

Based in Cincinnati, Baldwin-United Corp. filed for Chapter 11 bankruptcy protection in 1983.

From 1979 to July 1983, two Baldwin-United subsidiaries sold more than $3 billion in single-premium deferred annuities, mostly through brokerage firms, to 165,000 customers nationwide.

"No one ever questioned whether these would be good because annuities have such a good reputation," said Horace Rhodes, general counsel and executive vice president of the Oklahoma Life and Health Guaranty Association.

The annuities wre sold by brokerage firms as high-return, low-risk, tax-deferred investments.

The failure of the Baldwin insurance companies left policy holders with no access to their money initially, and later, only a limited right to withdraw some of their investment.

"If this agreement had not been reached, it would have been a "deal buster' as far as the global settlement is concerned," Rhodes said.

Bellotti, the Massachusetts attorney general, said of the $5 million settlement:

"No amount of money can ever fully rectify the harm people have suffered by being mislead into investing their life savings in these Baldwin companies.

"However, we believe that this settlement will ensure policy holders a fair return on their investment without subjecting them to the risks and uncertainties of years of protracted litigation," Bellotti said.

"My office and many others have alleged that the Baldwin products were marketed aggressively by most of the major brokerage firms in violation of state consumer protection and insurance laws," Bellotti said. …

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