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The fair market value of the insurance coverage that Charles
Sutter received pursuant to the Royal policy was equal to the
first-year premium.
Knowing that the Royal policy would lapse, one of the
Schwabs recommended that Charles Sutter purchase another life
insurance policy in 1992. This time the policy involved was
offered by the Columbus Life Insurance Co. (Columbus). During
1992, Charles Sutter was employed by Aviat, Inc., and Dory
Logging, Inc. His wages for that year totaled $20,410.43. Upon
the recommendation of one of the Schwabs, Charles Sutter
purchased a universal life insurance policy from Columbus that
provided death benefits in the amount of $270,000. The first-
year premium on this policy was $6,705.60. The sale of this
policy was an even better deal for the Schwabs than the sale of
the policies described above that were offered by Royal.
Columbus paid the selling agent a commission (including bonus and
other incentives) in excess of 190 percent of the first-year
premium on this type of life insurance policy. Consequently,
Vance Schwab, who was listed as the selling agent on the Columbus
policy, was paid a commission of $12,791.48 by Columbus on the
sale of the Columbus policy to Charles Sutter in 1992.
In 1992 the Schwabs sold a life insurance policy to Cheryl
Sutter as well. At the time she was employed as a cook for the
local school district and by Marc Barrus. Her wages for that
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