Is licensing protecting consumers? Or should the consumer be better protected in a “buyers beware” approach to buying life insurance. The Thibault case is raising some serious questions and concerns with the consumers. You will probably tell me that it is unfair to condemn an industry for the actions of one individual. “You don’t save a tree by killing the forest…” You are right! However the consumers are not concerned by the actions of Thibault. Fraudsters will always exist in any industries. Consumers as a result judge the integrity of an industry based on how this industry addresses the fraudster and the people who helped him. The frauds committed by Thibault could not have been committed by himself alone. He needed to (1) first be licensed, (2) have regulators and insurers look the other way and (3) have employees such as underwriters and sales directors helping him and facilitating the transactions where Thibault was involved in contravention with the procedures established by the insurers to protect the consumers. This association between the employees and Thibault was never investigated. In fact can it be investigated objectively when insurers and regulators may share a responsibility which could cost them millions of dollars if the victims of Thibault understood what really happened? To demonstrate this we have recreated the time line of the Thibault frauds. This timeline is critical since it raises some serious questions that have yet to be answered.
1981: Thibault is agent of Colonia selling COLSPOL policies.
1981: Purchased policies COLSPOL on himself and his wife
1981: Thibault sells policy to Lacroix
1985: Thibault offers a bribe of $1 million to an employee of Colonia named Oliver to falsify values of his policies in order for him to leverage several millions out of these policies with TD Bank. Oliver accepts the bribe.
1991: Thibault buys policy of Lacroix
1997: Empire buys Colonia
1997: Oliver resigns from Empire/Colonia
1997: Wayne Slimmon employee of Empire and previous assistant to Oliver takes over and continue supporting Thibault with his fraud
1998: Thibault sells large Transamerica policies to the Audet falsifying their income and using an aggressive investment strategy based on Maritime Life seg funds invested in equity. Illustrations are done at 8%.
2001: Financial Director at Empire Michael Schneider discovers irregularities with Thibault policies
2002: Slimmon is fired by Empire
2002: New cash values are communicated to TD Bank and Empire assume responsibilities for the collateral shortfall with the loans.
2002 Thibault sues Empire
2003: Audet proceed with complaint against Thibault at la Chambre Financiere and a trial takes place during that year. Strangely the trial is not about the insurance falsely issued by falsifying the income of the Audet. Thibault is found guilty of 4 minor charges 1) of having used the term paidup in selling Trans policies, 2) of not knowing that Maritime Life taxed its seg funds differently than the rest of the industry, 3) having pressured the Audet in taking the policies and 4) of having put his interest ahead of his client
2003: Thibault is sanctioned by Chambre Financiere to pay $18,000 fine and a suspension of 1 year
2004 Empire answers lawsuit by Thibault with a countersuit
2006 Thibault sells large life policies from AIG where income of the insured is misrepresented and where illustration rates are done at 11.75%
2007: Audet appeals judgment of Chambre Financiere and partially wins with judge Bourduas reducing his sanction to 6 months (Note: Since la Chambre Financiere never charged Thibault for the severe infraction of falsifying an insurance application, judge Bourduas had not other choices to only review and consider the less severe infractions)
2009: AMF finally acts against Thibault but strangely only restricts him in his ability to be principal of his agency. He is left unrestricted and unsupervised in his role as agent.
2010: Audet sues Thibault, Transamerica and Llyods for losses
2010: Audet wins judgment of $1.4 million against Thibault but loses against Transamerica and Llyods
2011: Empire wins judgement of more than $12 million against Thibault
2013: Thibault enters bankruptcy for more than $70 millions
2014: Chambre Financiere suspends Thibault for 11 years
Consumer’s concerns about the time line:
1. It was already known in 2002 by the investigation conducted by Empire that Thibault had committed an unbelievable act of fraud. Why is it that no regulators were involved? Upon cancelling Thibault agent contract did Empire informed the regulators or their suspicions? If Empire did inform the regulators why did they not take any actions? This would have prevented all frauds that occurred after 2002.
2. The first infraction of Thibault was in 1991 when he bought the policy of one of his client. Again why was this change of ownership allowed and not investigated?
3. In 2003, finally Thibault is the subject of a complaint of the Audet. Audet specifically declared that falsifying the income of his clients on an application was one of Thibault standard practices. This was not investigated by la Chambre Financiere and no charges were brought against Thibault relating to this matter. Also la Chambre Financiere should have known about the fraud committed by Thibault against Empire. This was never mentioned in the trial which would have resulted in a greater sanction and would have made it difficult for Thibault to appeal the sanction. As a result, Thibault was only found guilty of small charges that could only resulted in small sanctions. Why did la Chambre Financiere failed to do its job in 2003 when this could have prevented Thibault from defrauding new victims after this date.
4. Transamerica cancelled the agent contract of Thibault but Thibault was able to secure a new agent contract with AIG and Canada Life with Thibault doing most of its sales with AIG after 2003. AIG knew about Thibault’s past about falsifying income in order to get the insurance company to issue large policies. However AIG did not take any precautions or steps to prevent Thibault from doing this again. Why? How was these policies issued when any reasonable person would have known these death benefits amounts were not justified? Did Thibault again offered bribes to employees of AIG such as underwriters to get these policies issued?
5. In 2003, Thibault was illustrating at 8% which was not reasonable in order to take advantage of the fraudulent illustration values produced by the software of Transamerica at that rate of return. In 2006, Thibault was illustrating with AIG at 11.75%. No other companies would have accepted these illustrations not at a time when I was educating and forcing advisors to illustrate using a 5% rate of return. This clearly shows that someone at AIG was facilitating and helping Thibault.
6. It is only in 2009 that the regulator, the AMF, issued a sanction against Thibault. Using the probity section of the law, the AMF restricts the license of Thibault. Amazingly the AMF only restricts Thibault in being a principal of an agency. Despites all the frauds so far committed by Thibault, the AMF does not restrict Thibault’s ability to sell insurance when it could have easily done by deciding that Thibault did not have the probity to be an advisor or that he was required to be supervised. Why was the AMF protecting Thibault?
An industry not willing to be responsible:
For the consumers these questions raise a lot of concerns. The reasons the victims were defrauded was because Thibault was a licensed advisor who was paid enormous commissions up front if he sold large policies. If this heap commission had not existed, the victims would have not been defrauded. This is undeniable. As a result, would the customer be better protected by dealing with salaried employees when purchasing insurance? When AIG was contacted by one of the victims to get relief on the policy sold by Thibault through AIG, a VP at AIG laughed at the victim. Is this the hallmark of a responsible industry?
What about the regulators?
We have to question ourselves about the conduct of the regulators and the length of time they took in investigating Thibault. Still today the regulators have not charge Thibault with falsifying the income on the applications and they have not investigated how Thibault was able to have certain underwriting rules overlooked in order to have these policies issued. We can only note that the regulators have done everything in order not to charge Thibault with any frauds. Is this linked to the fact that if Thibault had been charged with fraud, the regulator would have had to indemnify the victims which would have cost the Indemnity Fund more than $50 millions… The regulators have now told the victims they were not entitled to compensation because they are past their prescription date…Is there a conflict of interest here?
The victims become criminals
A lot of victims of Thibault are afraid to come forward. In fact the scheme employed by Thibault was very effective by making his victims complicit in his crimes. He did this by using the enormous amount of commission he received where he returned a little part of this commission to his victims. No member of the public would know about the Act pertaining to the distribution of financial products and services. As per the title of this Act, it applies to people and organizations involved in the distribution of financial products and services. As a result, the public would have no motivations to read or learn about this Act since it does not apply to them. This is almost true except for one article of this Act which states that anyone who is not licensed and receives part of the commission resulting from the sale of life insurance is guilty of an infraction to the penal code. Someone receiving a return of commission based for example on the explanation that the insurer is paying too much commission and the advisor does not feel right in accepting such a large commission, this victim would not think a moment that he is committing an infraction in accepting commission which comes from the premium he has paid… You can therefore imagine the reaction of these victims of frauds who also learned they were victims of entrapment by Thibault.
It is clear that this section of the Act must either be removed or changed in order to encourage victims of frauds in coming forward. We should not prosecute victims of fraud… As a result, the Financial Services Consumer Alliance intend to lobby the government in order to change this Act.