Washington attorney general says local salesman, company misled seniors
Dorothy Clawson, 65, a retired school bus driver and grandmother in Battle Ground, told KATU a local salesman, Mitchell Johnson, misled her.
"I cried. I said, 'I can't believe this happened.'" Clawson recalled telling a company the salesman worked with. "I said, 'He tied up my money 'til I'm like 70 years old.'"
Washington Attorney General Bob Ferguson accuses Johnson and a company he sells for, CLA Estate Services, of deceiving possibly hundreds of elderly people throughout the state.
Ferguson said the estate-planning firm promoted "free lunch" seminars as a way to sell expensive investments to consumers who didn't understand what they were getting into.
A lawyer for the company said the attorney general's case is unproven and that CLA is disappointed he filed a lawsuit and issued a one-sided press release about the case.
Johnson, who's based in the Portland area, has disputed the accusations as well.
“It’s a little ego-damaging letting people know about this but I don’t want it to happen to anybody else," said Clawson, who lives with her husband and a grandson they adopted in 2012.
She's proud of the fact that she was able to save nearly $180,000 before she retired. But it wasn't easy.
"My first husband had died of brain cancer and I knew that I needed to be able to take care of myself because we were so broke when he died," Clawson said. "And so I made sure that I saved and we just lived frugally."
About five years ago, Clawson, unhappy with her retirement advisor at the time, attended one of CLA's trust-planning seminars.
"They offered the free dinner and so you go to the dinner and they talk to you about not a free trust, they talk to you about a trust," she explained.
Clawson said she and her husband liked the idea. Once they paid to set up the trust Johnson contacted her and set up an in-home appointment.
But she said instead of talking about her trust Johnson convinced her she'd make more money by transferring her retirement savings to annuities, insurance investments that came with penalties for withdrawing money and high fees she said were never explained.
"I haven't made a dime in my annuities," she said.
In fact, Clawson told KATU she's lost thousands.
Ferguson said she's not alone.
"CLA, what they're doing is engaging in what we call a trust mill," he explained.
He said they used more than 700 "free lunch" trust seminars throughout the state to sell people complex financial products.
"But they fail to disclose the terms of those financial instruments," Ferguson said, "and in some cases, they actually misrepresent information on those forms."
Ferguson said Johnson, who works out of Lake Oswego, is "an especially egregious example of an individual, independent contractor working with CLA who engaged in particularly bad conduct. He's an example of someone who actually made misrepresentations on forms, inflating individuals' assets for example that led to great harm to consumers."
Johnson did not immediately respond to a voicemail and multiple emails sent Thursday morning. A KATU crew knocked on his door Thursday afternoon. He answered and quickly shut it after a KATU reporter started asking questions.
Johnson's license to sell insurance was revoked in Washington in January but he's set to fight to get it back at a hearing in May. He's currently licensed to sell insurance in Oregon.
Brian Moran, an attorney for CLA, sent KATU the following statement:
“We are disappointed both that the Washington Attorney General decided to bring an action against CLA Estate Services, Inc., and CLA USA, Inc., and issued a one-sided press release about their, as yet, unproven case.
The CLA companies are long-standing and legitimate businesses, who care about their customers, have done so for many years and plan to do so for many more. CLA Estate Services has helped many customers implement their estate planning, often for the first time, after the customer consults an independent, experienced attorney in Washington for their legal estate planning needs. CLA customers have the peace of mind knowing that they have a valid, legal estate plan in place to handle their affairs upon incapacitation or death.
CLA has always been transparent that it will offer its customers insurance products to meet their financial goals. CLA USA only offers insurance products that have been authorized and approved by the Washington Office of the Insurance Commissioner. CLA USA stands by the products we offer as providing a conservative financial planning strategy.
CLA strives diligently to ensure their customers are satisfied with the services and financial products it provides to its customers and will work with any customer to resolve any issues or concerns. This commitment to our customer satisfaction is evident by CLA’s A+ Rating with the BBB.
The CLA companies have fully cooperated with the Attorney General’s office and provided independent analyses from Washington state experts in probate and trust law to demonstrate that CLA is not a trust mill, does not provide legal advice, and does not sell living trusts, but rather provides valuable services to clients. It is unfortunate the Attorney General decided to ignore these experts and other relevant information in bringing this action.
CLA will hold the AG’s office to their burden of proof and seek the appropriate reimbursement for the defense of this action on behalf of their client’s interests.”
The Better Business Bureau (BBB) did not immediately respond to questions about CLA's A+ rating on Thursday, but on Saturday a KATU reporter noticed the company's rating was changed to NR, no rating, with the BBB saying it's under review.
Ferguson said, in general, you should never simply trust a business that reaches out to you through a sales call, an advertisement, an email or through the mail.
"Folks should be very, very cautious before they trust any organization or business that they do not know," he explained. "They should also make sure that they're getting independent advice from their own lawyer, their own financial advisor or if they don't have those individuals in their life talk to your family members."
Ferguson said if a business is deceptive there's a limit to how much you can protect yourself so "on the front end just be very, very cautious.”
Neither Oregon's attorney general nor the state's division of financial regulation is investigating CLA Estate Services or Johnson.
Kristina Edmunson, a spokeswoman for Oregon's attorney general, said via email, "Oregon’s Unfair Trade Practices Law (our consumer law) exempts the insurance industry and Washington’s law statute does not."