No. 176: Annuity Churning Leads to Federal Prison Time for an Agent
August 30, 2016 by Joseph M. Belth
On September 14, 2016, Gary Edward Hibbing, a former insurance agent, will report to a federal prison to begin serving a sentence for actions related to the churning of annuities. The federal charges to which he pleaded guilty are wire fraud and unlawful monetary transactions, but his insurance license had been revoked earlier for, among other things, annuity replacements described as “twisting.” Where the apparent sole motive for replacements is to generate agent commissions, I have used the securities industry’s word “churning” instead.
On March 4, 2013, the Oklahoma insurance commissioner issued an order revoking the insurance licenses of Hibbing and his wife. According to the order, the respondents had sold replacement annuities to one particular senior citizen in 2007, 2008, 2009, and 2010, and to another senior citizen in 2010. The order said the respondents had provided false information not only to the senior citizens but also to the insurance companies that had issued the annuities. The order described the scheme as “a deliberate and concerted effort to receive exorbitant upfront commissions each year at the financial expense of senior citizens.” The order also said the respondents had violated various Oklahoma statutes, including the prohibition against twisting.
The Federal Charges
On February 4, 2015, a U.S. Attorney in Oklahoma filed a 24-count grand jury indictment against Hibbing. It consisted of 15 counts of wire fraud, four counts of unlawful monetary transactions, and five counts of aggravated identity theft. (See U.S.A. v. Hibbing, U.S. District Court, Northern District of Oklahoma, Case No. 15-cr-29.)
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