Myrtle Beach Life Insurance Peddler "A Financial Assassin," Says Attorney Whose Elderly, Unsophisticated, High-Equity Homeowner-Clients Were Allegedly Targeted For Mortgage Refinance Racket Where Proceeds Were Illegally Used To Indirectly Finance $2M+ In Unnecessary Policies, Annuities
In Myrtle Beach, South Carolina, The Sun News reports:
- Peggy Allen was born and raised across the street from the house where she now lives – a house that her grandfather built by hand, using timber he cut from his own land, more than 100 years ago.
Bakers Chapel Road was a dirt road when Allen was a child, and Allen said she remembers “running across the field to Grandma’s house” to play when the weather was warm. Allen’s father and his four siblings grew up in the two-bedroom home, which still has its original, unpainted exterior.
Today, a bank is threatening to foreclose on the home that’s been in Allen’s family for three generations. What should have been a comfortable, albeit modest, retirement with her husband, Charles, has instead turned into a gut-churning, constant worry over money.
“We used to be able to pay all our bills and we could go out to eat whenever we wanted,” said 80-year-old Charles Allen, whose health has been in steady decline ever since he suffered a stroke in 2000. Charles Allen said that when the couple splurges on a restaurant meal these days they split a sandwich to save money. “I never dreamed something like this would happen to me.”
The Allens blame Rick McDavid, a Myrtle Beach life insurance salesman, for their financial problems.
They aren’t alone – nearly two dozen lawsuits have been filed against McDavid by families who say the insurance salesman scammed them by talking them into mortgaging their homes and properties for high-dollar life insurance policies they didn’t need and didn’t understand. The allegations include fraud, breach of contract and negligent misrepresentation.
“I hope he goes to jail,” said Wanda Causey, whose husband Jackie uses a wheelchair to get around due to years of diabetic neuropathy and other health problems. The Causeys have been served with a foreclosure lawsuit on their property, which they say McDavid convinced them to mortgage for a whole-life insurance policy. Jackie Causey, who was used to making the financial decisions as the man of the house, was on methadone for pain when McDavid made his sales pitch.
“Anybody that takes advantage of sick people and elderly people, I don’t know what’s good enough for them,” Wanda Causey said.
Jackie Causey puts it more bluntly: “If I weren’t in this wheelchair, I’d go after him.”
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- McDavid is not facing any criminal charges and he denies any wrongdoing in his answers to the civil lawsuits. McDavid declined to talk to The Sun News. His lawyer, Stephen Brown of Charleston, said he has “a standing policy that I do not discuss litigation.”
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- Sid Connor, a Surfside Beach lawyer who represents the families suing McDavid, said the salesman preyed on elderly people and others who had plenty of equity in their homes but lacked financial sophistication.
“Rick McDavid is a financial assassin,” said Connor has spent nearly two years building cases against McDavid at no cost to his clients. “He comes armed with everything he needs to take your money, and these people don’t know it.”
Connor estimates his clients have paid more than $2 million for insurance they didn’t need, in addition to mortgage payments they would not have had and the emotional trauma each of them has suffered. Connor spends more than half his time working on the McDavid lawsuits, with the rest of his schedule spent working on “a lot of routine stuff that pays the bills.”
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- The Allens were living on about $38,000 a year in Social Security and pension income when McDavid convinced them in August 2008 to mortgage their 100-year-old, debt-free home for $102,500 at 9.3 percent annual interest. Charles Allen, who retired to Aynor after working in a Rock Hill textile plant for more than 30 years, said his brother introduced McDavid as “someone who might be able to help us, so he [McDavid] called us and came over.”
Charles Allen’s brother, Larry Allen – along with his wife, Betty – had taken out $3.5 million in life insurance polices just two months earlier, mortgaging their home for $320,000. Flush with cash from the mortgage, Larry and Betty Allen were singing McDavid’s praises, Charles Allen said. They now are among the clients suing McDavid after having paid $160,000 for insurance they can no longer afford.
Charles and Peggy Allen, who recently celebrated their 59th wedding anniversary, said they did not fully understand McDavid’s sales pitch – “The stroke messed up my brain; I can read something but I don’t know what I’ve read,” Charles Allen said – yet the couple went through with the deal, figuring Charles Allen’s brother must know what he’s doing and counting on McDavid’s church-going background for assurances.
The mortgage closing was a blur – “He [the lawyer] had a stack of papers and he kept flipping them, saying, ‘Sign here . . . sign here’,” Charles Allen said.
Court records show proceeds from the mortgage were used to purchase three whole life insurance policies with death benefits totaling $350,000 for Peggy and Charles Allen. Because of Charles Allen’s poor health, the premiums for those policies totaled nearly $3,000 a month.
“I told him [McDavid] I’ve had a stroke, that I can’t get life insurance,” Charles Allen said, adding that a nurse who conducted a physical for the insurance company initially told him he didn’t qualify for coverage. “He [McDavid] just said, ‘I’ll take care of it’. He told us we could buy whatever we wanted and we could put some money in the bank.”
Things went fine for more than a year, despite McDavid’s repeated requests for premium payments. The Allens’ bank records show the couple made five payments totaling $66,500 for their insurance policies between August 2008 and December 2009. That is in addition to an $847 monthly mortgage payment the Allens now had to pay.
When the Allens’ bank account ran low, McDavid urged them to refinance their home. In December 2009, McDavid arranged a new mortgage that netted about $30,000 but also carried a lower interest rate that cut the Allens’ house payment to $716 a month.
Connor said the lower interest rate was by design, because an anti-churning law in South Carolina forbids multiple refinancings in a short period of time unless there is a tangible benefit to the consumer. That’s one reason McDavid initially arranged a high-interest mortgage.
“By lowering their monthly payment, it counted as a tangible benefit,” Connor said.
There was another reason: McDavid was getting a kickback from the yield spread premium – the difference in the actual interest rate paid versus the market rate a borrower qualifies for – on the initial, high-interest mortgage, according to court documents.
All told, the Allens paid $94,000 on their life insurance policies and kept up with their mortgage for more than two years before the money ran out.
“He wanted some more money and I told my wife we just can’t afford to make these payments any more,” Charles Allen said.
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- Connor said McDavid typically had the policies mailed to his office instead of his clients’ homes. McDavid then held onto the policies until after the cancellation period had expired and his clients could no longer get back their money.
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- Connor’s clients say they are confident they’ll eventually get their money back – if they live long enough to make it through all the court proceedings and their homes aren’t taken first. So far, Connor has been able to fend off the foreclosures by filing counterclaims against the lenders.
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- Connor is hedging much of his case on a state law that made it illegal, beginning in 2005, for a home lender to finance – either directly or indirectly – life insurance premiums. Although insurance premiums weren’t paid directly at the mortgage closings, Connor said the policies were written within weeks of the closings, sometimes within days, and his clients would not have been able to afford the premiums except for the proceeds from the mortgages that were arranged by McDavid.
“The law says directly or indirectly – that’s not a mistake, someone wrote that in there for a purpose so you can’t get around it,” Connor said. “If you are selling life insurance and orchestrating the mortgage, that is an indirect violation of the law.”
Connor hopes to cancel the mortgages, recoup the insurance premiums his clients already have paid and get punitive damages against McDavid and the insurance companies.
Connor said he knows some critics will argue that his clients should have been more careful, that they should have read and understood any document before they signed it, but he bristles at the notion of blaming the victims.
“Is that what they’d say if it was their mom or dad?” Connor said. “These are simple, country people who go to church and trust people. Wouldn’t everyone like to have a little more money? Sure. That’s how McDavid got his foot in the door. But when you get older, your ability to think about these kinds of things diminishes and it becomes more difficult to fight off someone who wants to take advantage of you.”
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