Photo by James Sanna | Banker & Tradesman staff
A $2 billion insurance fraud case has affected some Citizens Bank customers who purchased annuity products through Citizens Financial Group’s securities division, which reportedly is now being investigated in Massachusetts.
The Wall Street Journal reported yesterday that Secretary of the Commonwealth William Galvin’s office is investigating a unit of Providence-based Citizens Financial Group that sold annuities to customers through Colorado Bankers Life Insurance, an insurance company controlled by Greg Lindberg.
Lindberg was indicted by a federal grand jury in North Carolina in February on charges related to an alleged scheme to deceive state insurance regulators and defraud thousands of policyholders.
Colorado Bankers Life Insurance was deemed insolvent and is going through what is known as a rehabilitation process with North Carolina’s insurance regulator. The Wall Street Journal reported earlier this week that thousands of policyholders have had funds totaling $2.2 billion frozen as part of the investigations into Lindberg and his insurance companies.
Regarding the reported investigation into Citizens Securities by Galvin’s office, a spokesperson for Citizens said in an email that the bank does not comment on investigations or potential investigations. Banker & Tradesman has reached out to Galvin’s office for comment.
In an 8-K report filed today with the Securities and Exchange Commission, Citizens acknowledged the media reports and said the bank had provided customers with fixed annuity products from November 2017 to October 2018 that were underwritten by Colorado Bankers Life Insurance. Citizens noted that the products were also offered by other broker-dealers and insurance agents.
“Citizens conducted appropriate diligence on CBL and considered CBL’s investment rating and third-party research in placing CBL’s products on its platform,” the securities filing said. “At the time, CBL’s Financial Strength rating was investment grade equivalent from AM Best. Citizens also noted that ALIRT Insurance Research had issued a 65 rating for CBL, well above the industry average, and an overall ‘Size and Credit Quality’ rating of ‘A’, in their report as of June 2017.”
Citizens said it became aware in October 2018 of an investigation into Lindberg and stopped selling Colorado Banker Life Insurance’s fixed annuities. The bank added that it has been closely monitoring the rehabilitation and liquidation process in North Carolina.
Citizens’ spokesperson said the bank has been assisting customers affected by the fraud case.
“As has previously been reported, this is a matter of large-scale criminal fraud that impacted many investors,” the spokesperson said. “It is very unfortunate that our customers and others have suffered as a result of this situation and we are committed to doing what we can to help alleviate the impacts, including offering liquidity programs for customers who are experiencing hardship.”
