Oceanside Woman Sues A.G. Edwards
By Edmond Jacoby
North County Times
An Oceanside woman has sued national brokerage firm A.G. Edwards alleging that the company earned secret commissions when it sold her nearly $500,000 of a type of security known as a variable annuity.
Kathleen Mitton, described in the suit as a retiree and an elderly investor, became the latest person in the San Diego area to file a complaint in federal court over the sale of the investment products, which combine a form of life insurance with mutual fund shares. Similar suits were filed on Jan. 20 by William Dornan of Vista against Morgan Stanley Inc. and on Jan. 21 by Jane Westbrook of Santee against Merrill Lynch & Co. Inc.
According to Mitton, the company sold investments she held and reinvested the money in the variable annuities, which left her in the position of having to pay large penalties for early termination of the annuity contracts to gain access to the money.
A.G. Edwards "never informed Ms. Mitton that the annuity products offered were limited to products offered by the participating insurance companies and that it had entered into ... undisclosed fee sharing agreements providing undisclosed compensation to (Edwards) for the sale of certain annuity products," the suit says.
The company did not return a call seeking comment.
"When I came to North America from Scotland," Mitton said, "I had to borrow my fare from the Canadian government. After a few years in Canada, I came to the United States with $2,000 in my pocket."
She said she accumulated the money in her IRA slowly by repeatedly buying homes that she renovated and sold, and by putting every cent she could into her retirement fund during the 14 years she worked at the San Onofre Nuclear Generating Station.
As a retired investor with an adult son and no other potential heirs, Mitton said she had no need for the nearly half-million dollars of life insurance that was a component of the annuity. Moreover, she said, some of the mutual funds in which she had invested were sold to pay for an annuity that in turn invested in those same mutual funds. She was forced to refinance her Oceanside home twice to avoid paying up to 20 percent in early termination fees to withdraw money from her Individual Retirement Account, she said.
"I'm really in favor of cracking down on these people selling these variable annuities," she said.
Michael Fangman, who is named in the lawsuit as her A.G. Edwards financial adviser but who is not named as a defendant, said he does not recall enough of the details to comment on Mitton's complaint.
No longer employed by A.G. Edwards, Fangman said that when he worked for the company, he was not aware of any undisclosed compensation arrangements the company might have made.
San Diego attorney Ronald Marron, who represents Mitton and the other two plaintiffs, is seeking court recognition of all three cases as class actions, and he says that in each case, the class might be as large as tens of thousands of people.