Fresh customer-fraud allegations against Globe Life

A third scathing short-seller report offers more detailed allegations of customer deception at Globe Life and its subsidiary American Income Life.

• A third short-seller report alleges fraud at the insurance giant Globe Life and American Income Life.
• A former manager said a colleague taught her how to write policies using fake information.
• An Ohio customer alleges five years of bank withdrawals by AIL for a policy she knew nothing about.

The embattled insurer Globe Life and its subsidiary American Income Life face new allegations of fraud, kickbacks, and misclassifying its army of sales agents. The charges appear in a new 109-page report from Viceroy Research, the third scathing short-seller report on Globe this month.

Short-sellers make money when their research drives down a company's stock price.

The report, released Tuesday, builds on previous allegations of customer fraud. It cites a document from a Texas sales agency that advises agents to "sell cancer," describes high levels of churn among both agents and policyholders, and reveals a regulatory action against a former AIL agent who had issued fraudulent policies.

The document speculates that AIL might be forced to reclassify its 1099 contract workers — constituting nearly its entire salesforce — as employees. Such an event would carry "a deep 9-figure price tag" for Globe, the report claims. AIL has faced misclassification lawsuits in at least three states.

Viceroy Research was founded by Fraser Perring, an influential and controversial London researcher who identifies himself on X, formerly Twitter, as the "Grand Poobah of 'criminal' shorts." Viceroy has a short position in Globe, according to the report, but describes the publication as "educational" and says it should not be read as a recommendation to buy or sell Globe. Viceroy's report comes on the heels of short-sale recommendations by Orso Partners' Nate Koppikar on April 3 and by the anonymous trader Fuzzy Panda on April 11. Globe lost $5 billion of its market value the day Fuzzy Panda's account appeared. It has since risen to $78.09 a share from its $49.17 low on April 11, still down from its $104.93 close on April 10.

Globe said the Koppikar report cited Business Insider articles that were "inaccurate and misleading." Neither Globe, AIL, or any affiliated agencies have requested a correction on BI's series, which has been cited in all three short-seller reports.

Globe issued a statement on April 11 saying the Fuzzy Panda report "mischaracterizes facts and uses unsubstantiated claims and conjecture to present an overall picture of Globe Life that is deliberately false, misleading and defamatory."

Spokespeople for Globe, AIL, and Arias did not respond to inquiries about the Viceroy report.

An admission of fraud to regulators

The regulatory document Viceroy unearthed is an April 19 order issued by the Insurance Department of the Commonwealth of Pennsylvania against Erica Robertson, a former managing general agent at the Arias Organization, one of AIL's top sales forces, which BI has independently obtained.

The insurance regulator said that between January and May 2023 Robertson "submitted ten fraudulent life insurance policy applications involving ten fictitious Maryland customers."

She did this by "intentionally" using false names, addresses, phone numbers, Social Security numbers, and dates of birth, according to the order, which revoked her licenses to sell insurance. The order said Robertson testified that she filed the phony applications "in order to meet her employer's, Arias Agencies, quotas and avoid her ranking and associated bonus compensation from being negatively impacted" and that she had been taught "by a licensed coworker at Arias Organization LLC" to produce applications using the fake information. AIL fired Robertson more than nine months after she began submitting the sham policies, the regulator said.

"We question how it took so long for the company to realize it had at least 10 policies for people who did not exist," Viceroy wrote.

In a potentially risky development for AIL, the consent order says that Robertson will assist the Pennsylvania regulator in conducting investigations and prosecutions of others. Robertson did not respond to a written inquiry.

Potential misclassification of agents

The new report devotes several pages to analyzing AIL's dependence on contract workers.

BI has reported that AIL's policy of requiring agents to work as contractors has allowed it to avoid federal oversight that protects employees from discrimination — which may have allowed a culture of abuse to go unchecked.

AIL has faced multiple misclassification lawsuits and arbitrations in recent years. In 2022, AIL settled a misclassification case with a group of agents who had worked in Arias's Wexford, Pennsylvania, office. In 2021, AIL reached a $5.75 million settlement with a group of California agents who said they were misclassified. (AIL denied wrongdoing in both cases.) Another misclassification case filed against AIL and Arias Agencies in 2022 remains in arbitration.

Amy Williamson, an attorney who represents a former Arias agent, Renee Zinsky, in a sexual assault complaint against an Arias manager, says that she has filed more than a dozen arbitration cases against AIL over misclassification of its agents in four states.

Former agents have argued in court filings that their regular hours and the close oversight of their work by AIL bosses mimicked the relationship that employers have with employees, not contractors.

The Viceroy report says there is a "significant risk" that AIL will have to reclassify its agents as employees, noting that a change in the Department of Labor's definition of employee that took effect on March 11 will "make it more difficult for employers like AIL to abuse contractor labor." The DOL faces multiple lawsuits challenging that change.

Globe said in its 2023 annual report that an adverse judgment in any misclassification litigation against it could result in "substantial damages." It said federal rule changes could require the company to reclassify some or all of its agents, leading to an "increase in our operating costs and negative impact on our insurance business."

Newly unearthed claims of customer fraud

In its April 11 report, Fuzzy Panda wrote at length about an insurance testing company, Xcel Solutions, that had been involved in kickbacks to top AIL executives, according to court complaints. Fuzzy Panda sent undercover recruits to Globe subsidiaries AIL and Liberty National Life who said recruiters told them to use Xcel for training. During an April 24 earnings call, Globe said it "does not contract with or recommend any test prep companies to prospective agents" and was not aware of bribes or kickbacks.

Viceroy today published excerpts from a civil complaint alleging that Globe Life required recruits to purchase the course from Xcel for $149, $119 of which was kicked back to Globe Life, AIL, and agency executives, an allegation Globe has denied.

BI reviewed the complaint and independently obtained a screenshot of a May 18, 2023, email from an AIL sales director, Jamie Winters, in which she instructs colleagues to use Xcel. "Be sure that you are getting a commitment from the hires to start xcel training the same day as hire," she wrote. Winters did not respond to inquiries.

Viceroy said it reviewed dozens of statements from complainants, defendants, and witnesses that "paint a fuller picture of the pervasive nature of fraud at AIL," including previously unreported information about claims of customer fraud.

For example, Viceroy reprinted a handwritten 2019 complaint to the Ohio Department of Insurance from an Ohio woman who said she had just discovered five years of withdrawals from her bank account and had "no knowledge" of any policy with AIL.

Viceroy also obtained a copy of a 2022 agent "Playbook" published by AIL's San Antonio–based Carvajal Agencies, which BI has reviewed. The document includes multiple scripts agents were instructed to use, including sample answers to give to customers who didn't want to purchase insurance.

If a cancer policy has been rejected for one person in the household based on preexisting health conditions, the handbook says, "place policy on someone else in house. Sell cancer."

"As you might expect, these sales tactics do not engender long-term retention of policies," the Viceroy report states.