Investors Equity clients learn settlement details

Policyholders are glad to be getting money back

By Rick Daysog
Star-Bulletin

For George and Pearl Kam, it was a pleasant surprise.

The retired Kalihi Valley couple likely will get back all of the $40,000 they had invested in Investors Equity Life Insurance Co. tax-deferred annuities. Those annuities lost most of their value after Investors Equity was seized by state regulators in 1994 in Hawaii's largest insurance failure.

"It seems that we were real lucky," said Pearl Kam. "We could have lost everything altogether."

The Kams were among hundreds of Investors Equity policyholders who attended a crowded informational briefing yesterday on the state's recent settlement with Bank of America over sales of the annuities.

Bank of America in March agreed to pay $39 million to about 5,500 annuity investors to settle a state suit against the bank. The settlement gives the investors the full value of their investments.

The settlement is subject to a Circuit Court confirmation hearing on June 4.

"This is not only a fair and reasonable settlement but it is an excellent settlement," said James Duffy, an attorney who represented policy holders.

In its 1995 suit against Bank of America, the state alleged that the bank's predecessor, Honfed Bank, misled 4,000 bank customers in their sales of Investors Equity annuities at bank branches.

The state suit came after attorney David Schutter filed a class-action suit against the bank in 1995, alleging fraud and deceptive trade practices.

"I will probably get just my original investment back," said Hawaii Kai retiree Richard Tanaka. "It's a good thing I didn't put more money into them."

John Yamano, the court-appointed liquidator of Investors Equity, said the policies have been taken over by Hartford Insurance, which will open an account and pay 100 cents on the dollar for each Hawaii policy. The account will be fully funded by August, at which time regular distributions can begin, said Yamano.

The state also will open a second account, which eventually could have as much as $20 million to be shared by the policyholders, he said. If it reaches that amount, policyholders could get 120 cents for each dollar invested.

The special account would be funded by awards from pending lawsuits and arbitrations that are affiliated with the Investors Equity case.

Yamano noted that the settlement ends what could have been a prolonged litigation process. He said it would have taken five to seven years to complete the suit. Many customers couldn't wait that long since the average age of policyholders is about 72, he said.

For Doris and Richard Tachera, the settlement doesn't come fast enough. The retired couple said they needed the money from the annuities several years ago to help fund repairs at their Kalihi home. Instead, the Tacheras said they had to refinance their house and take out a loan.

"I'm not satisfied with everything," said Doris Tachera. "But at least we're getting back something."