The Securities and Exchange Commission on Monday accused four former metro Atlanta brokers of deceiving federal workers into rolling over money from retirement accounts into high-fee variable annuities.
In a civil lawsuit, the SEC said the brokers targeted federal employees who were near retirement and held large sums in Thrift Savings Plan (TSP) retirement accounts. The lawsuit said the brokers misled the workers about fees and other significant details of the investments, including that the investments were privately issued and weren’t endorsed by or affiliated with TSP.
The complaint accuses Alpharetta-based Keystone Capital Partners Inc. and brokers Christopher S. Laws, Jonathan D. Cooke, Danny S. Hood and Brandon P. Long of securities fraud. The lawsuit seeks permanent injunctions against the defendants as well as disgorgement of ill-gotten earnings, plus interest.
“As alleged in our complaint, these brokers were motivated by the prospects of higher commissions as they targeted federal employees age 59½ and over and intentionally obscured important details when recommending variable annuity purchases,” Aaron W. Lipson, associate director of the SEC Atlanta Regional Office, said in a news release. “They even allegedly excluded the words ‘variable annuity’ from some materials they shared with TSP account holders.”
Attempts to reach the four defendants were not immediately successful.
Stephen Councill, an attorney with Rogers & Hardin who represents Laws and Cooke, said he had only reviewed the SEC’s press release and not the complain, but called it “shockingly false and misleading.”
“My clients Mr. Laws and Mr. Cooke did not do what the SEC claims, and they are extremely disappointed in our government, as they should be,” Councill said. “I have no doubt they will vigorously defend themselves. I also expect they will issue their own press release soon.”
The business operated under the name Federal Employee Benefits Counselors, the complaint says, and used logos similar to those used by federal agencies.
The SEC alleges the defendants sold about 200 variable annuities totaling more than $40 million that federal employees purchased from funds in their TSP accounts. In turn, the government said the defendants collected about $1.7 million in commissions.
The federal government offers employees retirement accounts under the Thrift Savings Plan, which is a tax-deferred defined contribution account that is similar to a 401(k). After workers leave the government, they can withdraw funds from the account in full, set up a system of monthly payments or roll the money into an annuity that pays out monthly for the life of an employee or their spouse.
Current federal employees who are older than 59½ can also choose to take part or all of their money from their TSP accounts.
The SEC said the brokers got a list of federal employees with large savings accounts via the internet and various databases, and Laws and Cooke allegedly trained Hood and Long how to sell federal workers on the annuities during so-called counseling sessions.
The SEC alleges the defendants misled investors into believing the annuities they sold were recommended or approved by the TSP, or that they were related to the TSP’s own life annuity.