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Insurance Agent Charged with Felony Grand Theft

David Abraham allegedly collected $1.3 million in bogus commissions from annuity transfer scheme.

A Santa Barbara insurance agent has been charged with one felony count of grand theft for allegedly stealing more than $1.3 million in an annuity scheme, state Insurance Commissioner Steve Poizner has announced. David Abraham, 48, formerly of Brown & Brown Insurance of Santa Barbara, faces up to five years in prison if convicted.

Abraham, a licensed life insurance agent with Brown & Brown until just over a year ago, is accused of “churning,” a method by which an insurance broker or agent excessively buys and sells their clients’ securities to generate commissions. According to investigations by the state Department of Insurance, after selling a client an annuity policy, Abraham allegedly would wait until a policy was at least a year old so he would retain a commission, and then transfer the annuity policy to another company. The transfer would result in a sizable commission for Abraham, Poizner said, while the policyholders faced surrender charges of more than 10 percent of the principal. Abraham allegedly repeated this scheme until he had made more than $1.3 million in commission payments.

According to state insurance officials, when asked about the surrender charges by clients, Abraham purportedly told them the new companies would pay bonuses to make up for the surrender penalties. The unsuspecting clients were not informed that they needed to maintain their annuities for a specified period of time to realize the bonuses. Abraham’s clients suffered surrender penalties amounting to $1.9 million as a result of his alleged actions, Poizner said.

Abraham also faces lawsuits from Brown & Brown for activities the company deems were out of the scope of his employment. He allegedly did this work using his own home address as the clients’ mailing address and faked company letterhead. Abraham also faces civil lawsuits from former clients.

“We were told of the investigation about a year and a half ago, confronted the situation and summarily terminated Mr. Abraham,” said Susan Rodriguez, branch president of Brown & Brown.

The Santa Barbara County District Attorney’s Office is handling the case.

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