It's not easy to convert a reasonably safe annuity into a reckless toss at two now-notorious Ponzi schemes.
But Neal Greenberg cleverly crafted a way to do this for his elderly clients, according to a lawsuit filed recently in Boulder, Colo.
Greenberg is an insurance broker who got a license to sell securities and then started an investment firm called The Agile Group, which was not.
His big idea was to put 85% of his clients' funds with Bernie Madoff and Tom Petters, a Minnesota mogul awaiting trial for an alleged $3.5 billion Ponzi scheme, the lawsuit alleges.
Along the way, Greenberg even sucked up the savings of former Congressman and GOP presidential candidate Tom Tancredo.
Greenberg blew up his firm last year, freezing all client accounts. But to hear Greenberg tell it, he's just another victim:
"Agile, like thousands of other investors, was a victim of the Madoff and Petters frauds," the company responded in a prepared statement. "We sympathize with the victims who have brought this lawsuit against Agile, but we believe victims should not be suing other victims. Instead, the victims should work together to try to obtain justice from the real wrongdoers."
Greenberg apparently sees no wrongdoing in allegedly taking about $448,000 from 77-year old Dorothy Jackson, and sticking it into what the lawsuit calls a "leveraged hedge fund of leverage hedge funds."
Other folks who Greenberg calls victims-suing-victims include Carol Curran, 70, who invested more than $700,000, and her husband, Wade, 68, who put in more than $350,000. Then there's Robert Gahan, 58, who was in for nearly $1.4 million.
The lawsuit -- which alleges fraud, conspiracy and even racketeering -- seeks class-action status for more than 80 victims. Many of them were at or near retirement, and had no business investing in leveraged hedge funds, particularly ones that turned out to be alleged Ponzi schemes.
The lawsuit also details the cockamamie scheme Greenberg allegedly concocted to generate fat fees and commissions for himself and others named in the lawsuit.
Greenberg searched far and wide for a company that would accept his novel ideas about rolling over annuities, the lawsuit states.
He found a partner in AGL Life Assurance Corp. of Plymouth Meeting, Pa., which is part of Phoenix Cos. Inc. (PNX) in Hartford, Conn. A spokeswoman for Phoenix declined comment.
The suit claims AGL accepted traditional annuities from Greenberg's clients.
These annuities had been invested in relatively safe mutual funds holding large-cap stocks. But AGL exchanged them for private placement variable annuities that invested all their assets with Greenberg. Greenberg, in turn, gave the money to Madoff and Petters.
"AGL agreed with Greenberg to create an annuity .. for the sole purpose of diverting .. pre-existing traditional annuity funds into Greenberg's new leveraged hedge fund of leveraged hedge funds," the lawsuit alleges.
"Greenberg and AGL knew that Greenberg's leveraged hedge fund of leveraged hedge funds was new, untested, and highly risky," the lawsuit said.
Investors did not receive proper disclosure of this incredible risk, the lawsuit alleges.
All the while, Greenberg presented himself to the public as some kind of financial wizard who could magically provide both safety and steady returns to high-net worth investors -- not little old ladies and retirees with nest eggs.
One way Greenberg did this was to hire a seasoned AM-radio pitchman, the lawsuit alleges.
He turned to Mike Rosen, a fiscally conservative talk-show host who often lectures listeners on economics and free-market capitalism on Denver's 850-KOA AM.
Rosen not only analyzes the news of the day and writes a column that appears in The Denver Post , but he's also a well-paid huckster who has hawked Agile for years. Tancredo, incidentally, told me it was Rosen who personally steered him to the firm.
Neither Tancredo nor Rosen are involved in the lawsuit, though. Rosen, despite his self-proclaimed business acumen, says he's been parted with much of his life savings, and is a victim just like Tancredo and everyone else.
Rosen's radio spots, however, provide telling insight into how Agile presented itself to anyone with an AM radio while its alleged plan was just to bag commissions as it blindly tossed people's life savings at Madoff and Petters.
"If your net worth is between $2 million and $50 million, listen carefully," Rosen would command.
"In the years I've been talking about Agile Group, they've grown into a private wealth management firm, attracting prominent families and institutions from around the world.
"If you're a serious, demanding investor .. their skills make them especially suited to your unique needs. ...
"You'll be impressed with their knowledge, originality and professionalism. Their sophisticated and flexible investment strategies have worked in all types of markets. Not just up markets, but during difficult times as well.
"Don't just go to any adviser .. And tell them Mike Rosen sent you."
(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. The column is published each Tuesday and Thursday at 9 a.m. ET. Contact Al at al.lewis@dowjones.com or tellittoal.com)
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