Roll of the Die - Human Life Speculators Bet on Elder Deaths

Plymouth, California, a town of a little more than 1,000 souls in the Sierra Nevada foothills just east of Sacramento, seems an unlikely site of global financial intrigue.

But then nothing seemed ordinary about the sheaf of papers retired librarian Jeannette Cranford obtained a few weeks ago from her 85-year-old mother (whose name we're not printing at Cranford's request).

The papers are the by-product of an unusual come-on directed toward elderly people in California, Idaho, and perhaps other U.S. states, in which seniors are offered $1,000 if they'll sign notarized contracts in which they commit to handing over detailed personal medical and financial information.

Prescott Cole of California Advocates for Nursing Home Reform urges state legislators to convene hearings about the survey program.
Paolo Vescia
Prescott Cole of California Advocates for Nursing Home Reform urges state legislators to convene hearings about the survey program.
Suite 312 of this Burbank office building is registered as the business office for the company conducting the $1,000 "longevity survey," as well as several linked companies involved in reselling the right to collect life insurance death benefits.
Rena Kosnett
Suite 312 of this Burbank office building is registered as the business office for the company conducting the $1,000 "longevity survey," as well as several linked companies involved in reselling the right to collect life insurance death benefits.

This deal was briefly advertised on Bay Area Craigslist in mid-October under the heading "PAID survey for senior citizens ages 72-85." But it's being marketed for the most part directly by insurance agents, who've been recruited by a secretive Burbank company called Lighthouse Insurance Marketing Inc. to promote this "survey program" in exchange for $100 per signed contract.

In addition to completing the survey, Cranford's mother was also asked to sign, in the presence of a notary public, an agreement permitting a private company to continue obtaining updates on her personal medical files until after her death.

Seniors who sign up for this deal also agree to have their personal health information used in what is vaguely referred to as "longevity transactions," which, the contracts say, will be somehow based on the subject's "mortality."

As any reasonable person reading such language would be, Cranford was baffled. What kind of transactions are based on mortality? And why don't the contracts spell out what those transactions are?

The mystery seemed to dissipate when Cranford got a call from her estranged sister, who had persuaded her mother to sign the contracts at the urging of a friend who is a former insurance agent.

"After all this worry, and trying to figure out what they're going to do with this information, my sister calls me to try to reassure me that everything is fine," Cranford says. "She proceeds to tell me that it's to take out a life insurance policy. All she told me is that, 'Let's say they take out a million-dollar policy on mom, and this company buys it from her beneficiaries for $25,000 each.'"

It appears these "mortality" contracts are connected to a group of companies involved in a little-known type of speculative investment scheme that might be likened to a high-stakes death pool.

An attorney for Lighthouse denied the information was being used to sell life insurance policies without seniors' knowledge. However, there seems to be evidence that the longevity and mortality transactions mentioned in the contract might have something to do with a little-known and macabre corner of the life insurance industry.

According to a lawsuit filed in Los Angeles in connection with a dispute among Lighthouse business partners, the company was established as the marketing arm of a complex scheme that involved finding elderly strangers upon whom to take out multimillion-dollar life insurance policies. Lighthouse's owners, Burbank insurance agents Tigran Khrlobian and Razmik Khachatourians, allegedly planned to resell, as a speculative investment, the right to collect the policies' death-benefit payout, according to the lawsuit complaint. The legal action contested whether profits from the scheme had been distributed fairly among partners.

Brian Manson, an attorney for Khrlobian and Khachatourians, says the suit incorrectly characterizes their business. "I want to be clear that the litigation has absolutely nothing to do with the survey program, or anything to do with the operations of Lighthouse Operations Marketing," Manson wrote in an e-mail.

Whatever plan was behind the "longevity survey," the whole affair seemed fishy to Jennifer Morse, a Napa estate planning attorney. A client recently contacted her for advice about Lighthouse Insurance Marketing contracts she had been asked to sign.

"My first gut reaction when she said they asked her for her Social Security number and driver's license number was, 'That's not right. Something is wrong with this whole thing,'" Morse said. "She said, 'What can be wrong with that?' I said, 'Identity theft is a big problem.' I suggested to her that she not only not sign this thing, but that she contact whomever had contacted her and ask them to give back whatever she had given them."

It's probably too late for Morse's client or Cranford's mother to rebottle their once-private medical and financial information now that it's been sold. But it may be possible to protect other seniors, who are largely ignorant of such modern risks as identity theft, and who, like most of us, had no idea that businessmen exist who profit by prospecting for old people they can convince to take out life insurance policies.

California Insurance Commissioner Steve Poizner's office said it was unaware of the Lighthouse longevity survey. But in Idaho, regulators recently asked purveyors of a similar $1,000 survey program to halt. "The information people are being asked to provide is very sensitive, and that's why we're concerned about it, and that's why we've asked them to stop the program until we've finished our information-gathering process," said Shad Priest, deputy director of the Idaho Department of Insurance.

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