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many farmers, petitioner's selling strategy included conversion
of whole life policies into universal life or annuity devices.
Farmers with whole life policies were persuaded to surrender the
policy and withdraw the cash surrender value, or some portion
thereof, to purchase other forms of insurance in larger amounts.
It was the conversion from one type of insurance to another or to
an annuity that generated revenue for petitioner.
In 1981, Roy sought to become reaffiliated with petitioner.
Petitioner and Roy became loosely affiliated, in that they each
operated separate insurance agencies and shared some common
overhead and administrative expenses. During September 1982, Roy
introduced petitioner to Dean Cooper (Cooper), who along with Roy
had a plan to acquire a small insurance company with 5,000
policyholders, named "United Savings Life" (United), of Hinsdale,
Illinois.
On September 24, 1982, Mid-Continent Acquisitions Corp. was
organized for the purpose of acquiring insurance companies, and
Mid-Continent Marketing Corp. was organized for the purpose of
marketing insurance. Petitioner was a director and officer of
both corporations.
In order to acquire United, new customers were solicited and
persuaded to surrender their life insurance policies and invest
the cash surrender value in securities (shares of stock or debt
instruments denoted "money multiplier notes") issued by the
corporations formed by Roy, Cooper, and petitioner. The money
received by the Mid-Continent corporations from sale of the
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