The State of Californias Business, Transportation and Housing Agencys
Fidelity Insured Deposits heavily advertised CDs "with promised yields substantially higher than those being offered by actual FDIC-insured institutions," according to the order. Interested customers met with insurance agents representing FEP, an insurance company operating in California as Family Estate Insurance Services, who then tried to interest them in a fixed annuity.
Fidelity Insured Deposits had no authority to offer a CD at all, and the company itself was "nothing more than a marketing device whose sole purpose and function is the placement of CD advertisements to attract potential annuity purchasers to FEP," according to the department.
If a potential client insisted upon purchasing a CD at the advertised rate rather than an annuity, the agents referred that individual to someone who could actually sell them a CD, and then the company issued a "bonus check" to cover the difference.
Rick Leon, who is named in the order, told one customer in early June that the CD advertising was a "loss leader" intended to get people in the door. That customer was offered
According to published reports, the scheme netted almost 1,000 annuity sales between February and August of this year.