UPDATED: Beware predators use of “estate planning” presentations

EDITOR’S NOTE:  An update on this story is available at Harms of ‘attorney driven’ litigation shown in CLA, estate-planning class action lawsuit (TX).

$16 M default judgment entered against seller of living trust
Michelle Massey
April 1, 2009
The Southeast Texas Record
TEXARKANA, Ark. – Shortly after certifying a class action against The Estate Plan, a company accused of preying on senior citizens in Texas and Arkansas, U.S. District Judge Harry F. Barnes granted plaintiffs a default judgment for more than $16 million.

The Estate Plan and other living trust sellers are facing allegations of “masquerading as qualified financial advisers, estate planners, lawyers, and paralegals” to “exploit and prey” upon senior citizens with the creation and selling of “unnecessary and often useless” living trusts.

The original class action was filed against 12 defendants in the Circuit Court of Miller County, Ark., on Dec. 19, 2007, and transferred to the Texarkana Division of the Western District of Arkansas on Feb. 5, 2008.

Plaintiffs allege the defendants created and sold living trusts as part of a scheme to gain access to senior citizens’ financial information in order to then sell annuities and other financial products.

Defendants are accused of fraud, unauthorized practice of law, negligence, breach of fiduciary duty and conspiracy.

One of the defendants, The Estate Plan, was severed from the original lawsuit on June 12, 2008, after failing to answer the complaint which resulted in the default judgment.

The final judgment orders The Estate Plan to pay approximately $2.5 million in compensatory damages, $10 million in exemplary damages, $4.16 million in attorney fees, non -taxable costs, and post-judgment interest.

The class includes Arkansas or Texas consumers who purchased living trusts documents from The Estate Plan or any of their affiliates from Jan. 1, 1998, to March 6, 2009.

In the default judgment, Judge Barnes ordered that the company must stop all presentations that include giving legal advice without the presence of a licensed attorney.

In presentations the company must explain to consumers that a living trust is not needed to avoid estate taxes because of the federal estate tax exemption.

The Estate Plan was also ordered to undertake a public information campaign about its prior practices and stop the production and sale of living trust documents which contain misrepresentations and omissions.

Case background

Class representatives James P. Birts, Nate S. Orben, and Darlene M. Orben filed the original lawsuit on Dec. 19, 2007, in the Circuit Court of Miller County, Ark. The case was transferred to the Texarkana federal court of the Western District of Arkansas on Feb. 5, 2008.

Defendants named in the lawsuit are John R. Vermillion, John Vermillion and Associates LLC, CLA USA Inc., CLA USA Insurance Services, CLA Marketing, CLA Estate Services, CLA Insurance Services, Charles Loper Jr., Charles Loper III, Steven Morgan, Robert Reese and The Estate Plan Inc.

The plaintiffs filed an amended complaint on Sept. 11 adding defendants Winning Strategies Marketing, Inc., Quest Staffing Group Inc., James E Bradshaw Jr, Joel Carson and Olaf Turek.

According to the original complaint, the scheme begins with advertisements that persuade senior citizens to attend a free lunch or dinner. At these meetings, the “unlicensed” living trust defendants conduct presentations and distribute materials that allegedly misrepresent the impact of probate fees and estate taxes.

Plaintiffs claim the misrepresentation creates fear among the senior citizens that they need to buy a trust to prevent heirs from losing their estate.

The presentations include references to celebrities such as Elvis and describe the large amounts these celebrities have paid in estate taxes, according to the complaint.

The plaintiffs state these presentations do not include information about the federal estate tax exemption, the sliding scale of the exemption amount, or the possibility of the elimination of future estate taxes.

Further, the presentation does not tell senior citizens with estates larger than the exemption amount that the purchase of these living trusts will not automatically eliminate all estate taxes.

The class action argues that the defendants’ forms and decisions fail to take into account the entire senior’s assets and ultimately, fail to serve the legal purpose as presented.

In addition, the complaint contends that the defendants convince the seniors to execute a pour-over will at the time the living trust and the other documents are executed.

“Senior consumers are unaware and are never told verbally that any property not disposed of in the trust will be disposed of according to the pour-over will, which will need to be probated,” the class action maintains.

The senior citizens are often convinced to use their IRA accounts or other tax-exempt accounts to purchase variable annuities.

However, according to the plaintiffs’ accusations, the defendant’s presentation or documents do not inform the consumer of the associated fees, surrender charges and commissions associated with these variable annuity products.

The class action argues that after an initial down payment, defendants’ representatives conduct a follow-up meeting with the seniors and will often execute the living trust documents among other legal documents. The second payment is collected after the documents are executed.

The complaint states that up until this point, the defendants involved in the estate planning, drafting and execution of legal documents are not licensed to practice law. However, in a “feeble attempt to escape liability for the unauthorized practice of law,” the defendants use attorney John R. Vermillion to rubber stamp his name as approval, the suit states.

Although the attorney receives a check directly from the seniors, the plaintiffs state the attorney does not advise or draft any of the legal documents involved.

The plaintiffs accuse Vermillion of violating rules of professional conduct, failing to advise clients, engaging in unsolicited contact with clients and practicing law in Arkansas while unlicensed.

Common questions of law and fact among the potential class include:

Whether defendants made misrepresentations to entice potential class members to purchase living trusts and other products;
Whether defendants fraudulently concealed material omissions;
Whether defendants engaged in unauthorized practice of law;
Whether there was conspiracy among the defendants to commit fraud;
Whether defendants breached fiduciary duties;
Whether defendants’ conduct was intentional;
Whether plaintiffs are entitled to rescission, refund, or restitutionary damages; and
Whether plaintiffs are entitled to injunctive relief.

The class is represented by the Texarkana law firms of Patton, Roberts PLLC and Norton & Wood LLP and Texarkana attorney Ronald S. Burnett.

Case No: 4:08cv04011

  • jimmie wilson

    I was under the impression that John R. Vermillion had been dropped from the law suit. Is that correct?

  • admin

    We haven’t been able to confirm if Vermillion was dropped from the suit.

  • Ron Coppage

    These charges could be applied to every state in which they do business as their process is the same…use unecessary revovable living trust to obtain financial information to conduct sales of insurance products. This practice is deceptive as clients unaware of what’s coming. Their financial well being is dependent upon sales of insurance products, not sales of trust service packages. They also do business in OK, KS, MO, MI, Ohio, GA, AL TN, MN, and other states. Consumers beware!!!

  • Ed Wallace

    Doc Gallager at KAAM had a guy named John Vermillion discussing estate planning mistakes elders make on his 770 AM radio program on Saturday July 24th.

    Is this the same John Vermillion?

  • john stanson

    Yes, its the same John Vermillion.

  • Stacy Payton

    I am appalled that folks assume that everything written in a petition is taken as truth. The fact is that CLA has never drafted or created any legal documents for any of its clients. To date, there is no evidence to support any of the allegations made against the CLA entities or their employees. One should look at the other defendant, The Estate Plan, who was severed from the case so a default could be taken. They are the ones that create and draft legal documents.

  • Paul H

    I have been approached recently to work for these people in NC. I have a trust education, and am very knowledgeable about trust funds and alternatives,but I am afraid this might put me in the way of legal action. (I am not an attorney)

    Does this mean I should stay away from this company? Also, is this just a feeble attempt from estate attorneys to eliminate the competition. We all know they make a ton of money getting people to set up wills, so they can be charged twice (once for drafting, next for probate process). What should I do?

  • Skeptical Bear

    It seems as The Estate Plan was the wrongdoer and the rest of it was just fishing for deeper pockets.

  • anonymous

    I use to work for these money sucking monsters. its all a scam to sucker people into buying trust they don’t need. they make us call these people and scare the mess out of them to come to the workshops and some people are even turned away at the door. some people have even been told if they are not gonna purchase a service package they should leave and they were not gonna receive there free meal. we even had to find a way to make these people take off from work or cancel there doctors appt. even if they were dealing with the death of a loved one they would make us harrass these people into coming and if you don’t work these people over they fire you. as of now they have had to lay off half there employess and shut down several workshops. I hope they go down.

  • Linda Murat Martin

    I have a meeting with them tomorrow so are you saying they are not a good company to go with? please let me know asap!

  • BobBurnitt

    You know for YEARS and YEARS, I have had people tell ME that, “All you have to do to avoid the Death Tax or Inheritance Tax was to simply put your stuff in a ‘Trust”. I am NOT an attorney but I can tell you the IRS does NOT go along with that. It is a MYTH that has been around for decades. If you have MORE than the exemption SOMEBODY is going to PAY or have it SEIZED and / or go to JAIL.