Class Calls ING Annuities a Fraud
SAN DIEGO (CN) - ING Life Insurance defrauds senior citizens by selling them indexed annuity contracts without telling them they are "embedded" with high-risk, complex derivatives, an 83-year-old man claims in a federal class action.
Ernest Abbit sued ING USA Annuity and Life Insurance Co., alleging financial elder abuse, fraudulent inducement and other charges.
Abbit claims that Iowa-based ING assures elderly customers that its contracts are a safe haven for retirement savings and offer generous returns linked to the S&P 500 stock market index.
"In fact, however, ING exercised its investment discretion under the contracts in a manner that ensured that its indexed-annuities did not protect or build-up retirement savings," the 52-page complaint states.
Abbit claims ING promised but failed to credit interest to customers on a daily basis and issued inaccurate financial statements masking the annuities' poor performance.
"In sum, ING indexed-annuities are wolves-in-sheep's-clothing, devouring retirement savings while dribbling out meager investment returns that lag far behind much-safer investments," the lawsuit states.
ING did not disclose to investors that its annuity contracts are "embedded" with "exceedingly complex, opaque, and illiquid" derivatives, Abbit claims. He claims that ING shares in the rewards of the investment while burdening investors with the risk.
Derivatives are "especially dangerous to a vulnerable class of senior citizens, such as plaintiff and the class, who lack the knowledge and understanding of such complex financial products," the lawsuit adds.
"Nationwide, unsuspecting senior citizens have entrusted ING with retirement savings worth billions of dollars, under what was portrayed as a protective umbrella that provides competitive investment returns," the complaint states. "Instead, the senior citizens have lost retirement savings paid directly to ING and now are trapped in horrendous long-term contracts with substantial surrender penalties (also payable to ING). In sum, ING has unfairly tilted the exchange of risk for reward under a complex derivative structure, causing plaintiff and the class to lose up to 20 percent or more of the value of their retirement savings." (Parentheses in complaint.)
Abbit seeks restitution, imposition of a constructive trust, and damages for breach of contract, breach of faith, breach of fiduciary duty, financial elder abuse, fraudulent concealment, concealment of insurance contract, deceptive trade, deceptive advertising and failure to supervise.
ING's Dutch parent company ING Group is not a party to the lawsuit.
Abbit is represented by Andrew Hutton of the Hutton Law Group.
ING did not immediately respond to a request for comment.