by Brian Mahany
According to records obtained from the clerk of the Federal District Court in Baton Rouge, Louisiana, Timothy Schlatre was indicted earlier this week in a novel insurance scam designed to generate huge commissions by making false statements and fraudulent applications.
Schlatre was charged with both money laundering and mail fraud. If convicted he faces 30 years in prison.
Prosecutors say that he helped falsify applications so that his clients would qualify for larger policies for which they were other entitled. They say he helped his clients make the early payments on the policy. Doing so called “rebating” and is also against the law.
By inflating the income and assets of his clients and then helping them make the payments they could otherwise not afford, Schlatre earned huge commissions. How large? Court documents say that he assisted clients in obtaining over a $100 million in coverage and earned hundreds of thousands of dollars in commissions.
Although prosecutors don’t say how Schlatre was caught, we believe once he received his commission, he stopped advancing money to his clients and they could no longer make the payments. He got paid huge commissions and New York Life and Lincoln Financial were left holding the bag.
This scam reminds us of agents who sell life insurance products to clients and promise tax benefits that simply aren’t true. These so called 419 and 412 plans also generate huge commissions. Unfortunately, the IRS calls these plans listed transactions and believes most are nothing more than abusive tax shelters. That means that the customers are saddled with both huge tax bills and insurance they can’t afford.
If you believe you were ripped off by an insurance agent or purchased a 419, 412 or chapter 70 plan and have received an audit notice from the IRS, give us a call. We have helped people unwind these plans and policies and get back their hard earned money. Insurers are often responsible for the actions of their agents. That means that even if the agent heads to prison or goes bankrupt, it may be possible to recover your lost premiums. Of course, if you participated in the fraud like Schlatre’s clients apparently did then you have “unclean hands” and can’t collect.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many jurisdictions.