Client Sues Barred Broker Over 'Devastating' Life Insurance Plan

The cash Alldridge paid into the policy, along with $456,000 he contributed in June 2023 based on Defendants’ recommendation to further secure the plan, “is gone,” it says.

Alldridge has forfeited the investment returns that he would have enjoyed had Gottlieb “not instructed him to invest in this ill-fated insurance premium financing scheme and instead provided them with competent investment advice,” the suit contends.

“Mr. Alldridge would have enjoyed a record-breaking period for the market instead of investing those monies in Defendants’ plan,” it says.

Further, since the life insurance scheme unraveled, it will be impossible now for Alldridge, who has reached age 56 and been diagnosed with Type II diabetes, to obtain life insurance similar to that originally solicited by Gottlieb, leaving him and his family with a less secure financial future, he argues.

According to the suit, Gottlieb introduced Alldridge to what he called a “white collar” life insurance plan that provided wholesale cost and exposure to the stock market for growth.

Gottlieb told the client he could borrow against the plan at special low rates, allowing for the insurance policy to accumulate wealth through the spread between the low borrowing costs to fund the insurance premium and tax-sheltered growth of investment assets linked to the S&P 500, the suit alleges.

Gottlieb sells life insurance for Penn Mutual Life Insurance Co., which isn’t a party to the lawsuit, according to the complaint, which alleges Gottlieb’s firm falsely represented Alldridge’s finances and goals to the insurer.

Gottlieb and a representative from his firm didn’t immediately respond to an email seeking comment sent Wednesday. A call made to The Gottlieb Organization was answered by a voice mail system.

Joe Wojciechowski of Stoltmann Law Offices, who represents Alldridge, told ThinkAdvisor by email Wednesday that the case is an example of the current regulatory environment, “which allows previously barred financial advisors to slide down the worm hole and sell extremely complex life insurance plans, all under the guise of investment advice, and frankly, make more money doing it.”

Scenarios like that described in the lawsuit are “an expanding problem,” he said. “Where we had one of these premium financing cases in five years, we now have several at various stages of litigation.”

Wojciechowski confirmed that the Gottlieb in the lawsuit was the broker barred by FINRA in 2017 over findings that he didn’t respond to an information request.

FINRA was examining outside business activities that Gottlieb had disclosed to his member firm to determine whether the broker he had participated in private securities transactions that violated FINRA rules, according to the authority’s website.