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Phil Cannella Sells Fear –and Fixed Index Annuities — At His Free-Meal Seminars

That night, like most nights, Phillip J. Cannella 3rd warned that the financial world was at the brink of a massive meltdown, one that would wipe out savings and crush retirees.

“We’re about to enter a horrible period, crash followed by recovery, followed by inflation,” the insurance agent said last fall, pacing excitedly in front of nearly 100 retirees and middle-aged guests at the Springfield Country Club, enticed by the promise of a free dinner.
When he asked for a show of hands of who lost money in the 2008 financial crash, about half raised theirs. “It’s going to be a world collapse, economically speaking,” Cannella warned them. “You need to plan for this storm coming. You need to be in a vehicle that’s not going to sink when Wall Street sinks.”

If Wall Street is the problem, Cannella believes he has the solution: fixed index annuities, a popular but complex insurance product known for lucrative commissions and opaque fees.

Sales of these lightly regulated investments have surged since the 2008 financial crash, when mom-and-pop investors saw the stocks and mutual funds they counted on for retirement plummet in value. Seizing opportunity, insurance agents began pitching these annuities on cable TV and radio infomercials, telling seniors how to protect their savings with investments reassuringly described as “risk free” and “no fee.”


At a free dinner to promote fixed index annuities, Phillip J. Cannella 3rd asks for a show of hands to illustrate how many lost money in the 2008 market crash. His spiel includes warnings of economic collapse, but he leaves out key information to prove his product is safer than stocks and mutual funds.
But in Pennsylvania and most states, sales agents aren’t required to disclose their commissions, typically 6 to 10 percent, that insurance carriers pay them for putting retirees’ money into these long-term investments. Seniors also can face huge penalties for early withdrawals for unexpected medical bills or other emergencies.

California Insurance Commissioner Dave Jones, who oversees the nation’s biggest insurance market, urged caution: “We’ve seen people being sold annuities that are entirely unsuitable because of their age, because of their financial circumstances. … It’s an area of increasing complexity, a population that is extremely vulnerable, and one in which there is a lot of room for mischief.”

“It’s an area of increasing complexity, a population that is extremely vulnerable and one in which there is a lot of room for mischief.”
Dave Jones, California Insurance Commissioner
The U.S. Department of Labor, which has oversight of retirement plans, became alarmed about insurance agents and investment brokers pushing clients into inappropriate retirement investments with high or undisclosed commissions. These practices, it estimated, cost retirees $17 billion a year in excess fees.

The department crafted a regulation, set to take effect in April, that would require financial advisers to put their clients’ interests first when selling investments for retirement. Known as the “fiduciary rule,” it was the first federal regulation of insurance agents, including some of the 230,000 in Pennsylvania.
With its potential for curtailing high-commission insurance sales, Cannella said, the rule was “going to knock out half” of the agents selling annuities.

But in February, President Trump, by an executive order, halted the long-debated regulatory change and called for another review. The insurance and investment industry had fought the new rule for years and hope the new administration can kill the Obama-era reform.

If so, sales of insurance products will remain overseen primarily by state regulators, unlike sales of stocks and mutual funds, which have some federal consumer protections.

In Pennsylvania, investors have poured billions of dollars into fixed index annuities over the last decade just as the state Insurance Department has been slashing its staff. It has 225 employees, slightly more than half its 2006 workforce of 414.

Fewer regulators for a growing market
The number of employees at the Pennsylvania Insurance Department fell from 414 in 2006 to 199 in 2016. As a rate per premiums sold, the state has fewer than half the regulators than the national average.
Asked whether the department could keep up with its thousands of annual consumer complaints, spokesman Ronald G. Ruman said the agency has enough staff to be “fully able to do the job needed to enforce our laws and protect Pennsylvania consumers.”

  • Q: What is an annuity?
  • An annuity is a contract between you and an insurance company—a contract that promises to pay you a certain amount of money over a specified time. Social Security is one example of an annuity that pays retirees steady cash flow in retirement.
  • Typically, retirees who wish to guarantee a minimum income stream during their retirement years may purchase annuities.
  • Q: What should I look out for when buying an annuity?
  • Commissions & Fees
    Agents typically reap commission of 6% or more, depending on the contract. So on a $100,000 annuity the agent makes $6,000. Annuities can lock up your money for a decade or longer, and if you cash out early, you may pay a “surrender charge” of between 10 to 22 percent. That means on a $100,000 annuity, if you cash out early, you could pay a penalty of $10,000 to $22,000, not including commissions. Surrender charges decline the longer you leave in your money.
  • Q: Who should buy an annuity?
  • For those who have no pension or want a supplement, annuities can provide income, help avoid overspending and provide a floor of guaranteed money. Annuities may be inappropriate or too expensive for people who have shorter-than-normal life expectancies. The elderly, who may not outlive these insurance contracts, should likely avoid annuities.

 

Do-it-yourself retirement planning

Consumer protection for seniors has become all the more important because of a tectonic shift in how Americans prepare for their retirement. Today, old-standby pension plans – in which the employer provides a fixed monthly payout for life – are offered by only 5 percent of Fortune 500 companies, down from 50 percent in 1998, according to a recent study.

Retirement planning is now more do-it-yourself, with some turning to fixed index annuities. They’re marketed as a way to give investors a portion of the stock-market gains while protecting against market downturns. But they’re hard to understand for most investors. The “fixed” part of the annuity is this: The company will set a minimum rate of return on money invested, often about 1 to 2 percent a year over the term of the contract, often six to 17 years.

The “index” part is tied to the S&P 500 or another well-known market index, and can provide an upswing of several more percentage points, depending on how the stock market performs. But the insurance company typically caps how much of the upswings an investor receives.

For those who find comfort in a minimum guaranteed return, even if small, and strict control on their money, some experts say putting a portion of savings in index annuities can be a good choice. But Barbara Roper, director of investor protection at the nonprofit Consumer Federation of America, said “absent real reforms … just stay away.”

“A magical mutual fund”

Cannella, 61, founder of the King of Prussia-based First Senior Financial Group, is something of a local celebrity. He hosts an hour-long paid radio infomercial every Saturday and Sunday on 1210 AM, the Philadelphia affiliate of CBS. He says he spends as much as $2 million a year on advertising, a lot of it airing on cable TV news shows. His company, headed by his wife, Joann Small, writes $100 million in contracts annually taking in $6 million to $8 million in commissions, he said. He also is licensed to sell insurance in Florida.

At his events, Phillip J. Cannella portrays himself as a lone, fearless advocate for seniors, unafraid to reveal harsh truths about Wall Street. Stock brokers compete with insurance agents for retirees’ money.
“I am the expert on fixed index annuities. No one knows more because I’ve taken the time to care and learn,” he said. But he doesn’t call them annuities at his presentations. He prefers to describe them as “crash-proof” investments, “like a magical mutual fund.”

He portrays himself as a lone, fearless advocate for seniors, unafraid to reveal harsh truths about Wall Street, willing to sacrifice everything to its counterattacks. Stock brokers compete with insurance agents for retirement investments, and Cannella criticizes them. But his characterizations are harsh: greedy, corrupt, the enemy. As a result, he said in an interview, his competitors are responsible for numerous complaints against him with state regulators. (The state Insurance Department doesn’t reveal or discuss consumer complaints. In contrast, consumer complaints about stockbrokers are publicly searchable in the national BrokerCheck database.)

“Wall Street wants control of fixed index annuities”

Some of his clients, Cannella said, are even worried that he’s putting himself in harm’s way for exposing “the atrocities on Wall Street.”

“If I get picked off for doing something great nationally, I’m OK with that,” he said. “Isn’t that how Martin Luther King died? They all died for a cause, and the cause still survives. … So, I’m not afraid to die.”

What is important to understand, he said, is that his product is safer than stocks and can earn bigger returns. At the Springfield Country Club last fall, he showed the crowd a version of a promotional chart that insurance agents across the country use to push fixed index annuities. Annuities, Cannella told his audience, out-performed the stock market “every year.”

The chart, by industry giant American Equity Investment Life Insurance Co., shows one of its fixed index annuities outperforming the S&P 500 index from 1998 to 2015. But there was a major omission:

What Cannella and other agents don’t mention is the S&P 500 returns on the chart do not include reinvested dividends. With dividends included, the stock market’s aggregate return handily outperformed Cannella’s favorite annuity product over the same period.

Asked later why he used a chart without telling his audience that stock dividends aren’t included, Cannella said he was using insurance company marketing material, all of which is approved by the Pennsylvania Insurance Department. Ruman, the department spokesman, said promotional materials get vetted and approved if the agency has received a complaint about them. He couldn’t confirm whether the department received a complaint about such a chart.

Cannella also said customers of First Senior Financial are protected because insurance agents are held to a higher standard than Wall Street demands.

“Licensed professionals in our insurance industry must operate under a fiduciary duty,” he said in an interview. “There is no fiduciary duty with Wall Street.”

  • Questions to ask before you buy a fixed index annuity
  • Ask yourself:
    ‍ When do I want the income to start?
    Ask the salesperson:
    ‍ What are the A.M. Best and other financial strength ratings of the insurance company?
    ‍ For how long after I receive my annuity contract can I cancel for a full refund?
    ‍ What charges, if any, are deducted from my premium & when?
    ‍ What charges, if any, are deducted from my contract value & when?
    ‍ What are the surrender charges if I want to take out all of my money?
    ‍ For how many years will the surrender charges apply?
    ‍ Can I get a partial withdrawal without paying charges or losing interest?
    ‍ What are the risks that my annuity/earned interest could decline in value?
    ‍ Is there a guaranteed minimum interest rate?
    ‍ How will my annuity income be taxed?
    ‍ What happens to my account balance and income payments if I die?

Under federal law, only Registered Investment Advisers, who typically charge clients hourly fees for advice and file annual compliance documents with the federal Securities and Exchange Commission, have a fiduciary duty — putting a client’s interest ahead of earning a bigger commission. Cannella does not have to offer the best deal for consumers; his obligation is to sell products that are “suitable” for the consumer. The suitability standard varies state to state. In contrast, stockbrokers are governed by a national standard.

Roper of the Consumer Federation of America says “suitable” is a low standard for the financial industry. In her view, it offers the public little protection. “Suitability lets you recommend the worst of all suitable options,” she said.

“The seller remains free to recommend the one most profitable to him or her, rather than the one best for you.”

Fans and critics
Cannella has critics dating to the 1990s — when the Pennsylvania Insurance Department fined him $10,000 and suspended his license for three months. It accused him of improper sales of health insurance policies to the elderly. The department said he had been involved in “misrepresenting the benefits and coverage of the policies being sold” and selling “duplicate coverage to persons in excess of 60 years of age.”

Cannella said the case was ginned up by his competitors and was unsubstantiated. He said he paid the fine and accepted the suspension without admitting wrongdoing because he was a young insurance agent, supporting a family, and was financially unable to face a drawn-out court battle.

Cannella’s brother-in-law, who worked for him for about a year, once described the company’s sales tactics at its senior seminars.

“The theme was very consistently gloom and doom, and the market is going to crash and bad things are going to happen,” Stephen M. Fine, after he left the company, said in a deposition filed in a lawsuit First Senior brought against a former accountant. “Wall Street is bad and everything about Wall Street is bad and only we’re good.”

“We want to make sure that we leave the least amount of money on the table and we get — garner back the highest commissions to us”
Stephen M. Fine
Fine said the company sought to invest as much of the clients’ money as possible. “We want to make sure that we leave the least amount of money on the table and we get — garner back the highest commissions to us,” Fine said.

In an interview, Cannella disputed that his firm put the totality of its clients’ savings in annuities. He provided account statements for a dozen clients that showed his company invested no more than 80 percent in annuities. As for his brother-in-law, Cannella said he fired him and disputes his account.

More recently, the family of Delaware County resident Kay Guzman, 68 at the time, complained she was inappropriately persuaded to cash out a long-held $1 million insurance policy to buy fixed index annuities. When Guzman realized the mistake, she said in court records, she couldn’t get a new life insurance policy because she was a cancer survivor. She sued Cannella, First Senior, and others.

Cannella said competitors may have convinced Guzman she could make money by filing suit. Both parties said they expect to settle soon.

“I did a billion with no complaints, no lawsuits… that’s almost like walking on water.”

Cannella does have many clients who swear by him. Stephen Desirey, 69, of Schwenksville, and his wife are satisfied with the fixed index annuities they purchased. “If an individual is looking for a safe place to hold extra retirement funds that they believe will not be needed until after the next 10 years, they are terrific vs. the alternative risk,” he said in an interview.
Some claims on Cannella’s website raise questions. Cannella says many of his clients got “double-digit returns” on their investments with First Senior. Below the photo of John J. Wallin, now 83, a retired Philadelphia Electric manager, the text read: “8.3% 1 YEAR AVG.”

Stealing retirement
The Nave sisters were victims of annuities salesman Richard Piccinini Jr., who pocketed nearly $200,000 from their $500,000 retirement savings by moving them through dozens of complicated, commission-rich insurance contracts.
How Annuities Can Drain Seniors’ Savings

Courtesy of the Nave family
Wallin, of Chester County, said he never earned anything near 8.3 percent since he put $300,000 in the annuity in 2014. He’s gotten 4 to 5 percent a year, a return he’s happy with.

The difference appears to be in the way Cannella’s firm calculates the returns. Wallin’s 10-year contract came with a 10 percent first-year bonus from the insurance company. Cannella said his company includes the one-time bonus to help investors “get out of the gate” and his figures are accurate.

Wallin’s fixed index annuity matures when he’s 90 but will be transferred without penalty to his wife if he dies before then. More important, he said, none of the principal will be lost if the stock market drops.

A photo of John Vitko, who invested in a 15-year contract in 2013, appears above the words “6.2% 2 Year Avg.”

Vitko, 66, a former salesman in Northeast Philadelphia, said he made 1.5 percent in interest the first year for one annuity, then about 1 percent for a while, and 1.75 percent last year. He said Cannella’s firm added some of the bonus to come up with the 6.2 percent figure. “It’s really not all earnings,” he said.

“I just pray I made the right decision.”

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3 responses

  1. Greencalc493

    Please look into the Golden Age Foundation. This needs to be told.

    March 27, 2017 at 8:12 pm

  2. S day

    Summary
    The Golden Age Foundation is a non-profit entity formed by Phillip J Cannella III and Erich Radtke. The information contained has been gathered from publicly available sources, primarily IRS Form 990, required by the IRS. Form 990 is an annual reporting return that certain federally tax-exempt organizations must file with the IRS. It provides information on the filing organization’s mission, programs, and finances. Shortly after beginning to collect donations for this nonprofit foundation in 2001, Cannella founded an insurance agency called “First Senior Financial Group” in Pennsylvania and Radtke founded a for-profit gymnasium called Aspiring Champions, Inc. which opened in 2005 per their website http://www.aspiringchampions.com. Cannella also during this period has purchased infomercial time with local media outlets positioning himself and his organization as “educator”, “Financial Advisor”, “Master Elite IRA Advisor”, and “financial expert” among other titles and not an insurance agency or insurance agent. Cannella and Radtke collected donations and subsequently directed and utilized these donations for purposes other than the charity’s stated operational purpose as the documentation will show below. In addition, Cannella and Radtke took significant compensation as Directors. Furthermore, Cannella and Radtke invested the donations collected in high risk investments and subsequently lost hundreds of thousands of donated funds despite their fiduciary responsibilities and despite Cannella’s discouraging the public to invest in these very type of vehicles in the public media forum of radio and television. In light of Cannella’s position in the financial services industry and in the media, and his directing of foundation contacts to his for-profit insurance agency, a conflict of interest is at issue as well. Likewise, Radtke used foundation funds to pay staff members at Aspiring Champions giving rise to a conflict of interest with the foundation for him as well. A cursory review of the IRS Form 990 filings reveals numerous issues that may warrant further investigation and are detailed below:

    1. DIRECTOR COMPENSATION: Per the Commonwealth of Pennsylvania Office of Attorney General Handbook for Charitable Nonprofit Organizations (Attorney General Handbook): “Board members and senior managers of nonprofit organizations are not always paid for their services and the bylaws should state whether any individual will be compensated. Individuals are not entitled to compensation unless a clear compensation agreement has been reached. The determination of whether or not to compensate individuals for their services is generally made by the board unless the bylaws provide otherwise.” The Foundation was started in 2001 when $151,171 in cash was received from Donor Laura Toy. Immediately in 2001 8% of that amount was used to pay Directors Cannella and Radtke, which could be considered excessive. In 2002, Cannella and Radtke were paid a combined $30,000 which was 13% of the donations received in 2002, also potentially excessive. In 2003, Board Member Cannella was compensated $39,925, 13% of the donations received. Also in 2003, additional “Salaries” are noted of $63,765, $10,496 in benefits, which is an additional 24% of donations bringing all compensation for 2003 to 37% of donations received which could be considered excessive. It is not known if the Golden Age Foundation (“The Foundation”) were compliant with the requirement above to state compensation agreements in its bylaws.

    2. FIDUCIARY BREACH : Per the Attorney General Handbook: “Board members, trustees and senior management have a fiduciary responsibility when handling finances and investments. That simply means, they must exercise the degree of care, caution and diligence that prudent persons would exercise in handling their own personal investments and finances. Individuals who have or claim to have special knowledge or skills in the area of investment will be held to a higher standard. Fiduciaries who carelessly or negligently invest funds may be personally liable for any losses sustained.” Donations were held invested in risky individual company stocks, high risk mutual funds and even high risk options contracts despite Board Member Cannella advising the general public (not just retirees) not to invest in the stock market or mutual funds (reference You Tube video with description stating “Phil Cannella educates retirees every week about the dangers of the stock market and gives them crucial remedies…”) – Indicating that the operating motivation was not education as stated. Furthermore, Director Cannella is listed in the SEC N-SAR form for 2003 for the Scudder European Equity Fund as owning over 35% of the entire mutual fund despite advising that mutual funds should be avoided not just by seniors but by potentially all investors (reference example of Cannella Blog Article saying “the average investor should avoid these (mutual funds) investment traps like the plague.” Statements of this nature in similar content and message are made regularly in their infomercial).
    Losses sustained by the fiduciary directors on these risky investments include:
    • $26,671 in losses on individual company stocks in December 2002;
    • $12,066 in losses on individual company stocks in 2003 including a 43% loss in one investment (Honeywell Co);
    • $18,902 in losses on individual company stocks in 2004;
    • $2,716 in losses on high risk option contracts and individual company stocks in 2005;
    • $21,931.38 in losses in high risk option contracts and individual stocks in 2006 (the option contract loss was a loss of 85% of the invested amount);
    • $880 in losses in high risk option contracts in 2007;
    • $51,651 in losses in exchange traded mutual funds in 2008;
    • $172,228 in losses in exchange traded mutual funds in 2009;
    • 2010 is not known and unavailable at this time;
    • $4,237 in losses in emerging markets mutual funds in 2011;
    • at least $9,754 in losses in unknown vehicles in 2012 (Form 990 shows these losses on line 2 Part IV with “see attached” where the securities detail is required but there is no such attachment;
    • $7,765 in losses in emerging market mutual funds in 2013.

    Losses incurred by the directors of the Foundation on risky investments totaled more than $327,921 which is more than 36% of their reported donations to “educate the elderly”. The actual numbers could be significantly greater with the absence of the detailed losses for 2010 and 2012 due to the unavailability of the 2010 filing and the missing detail information in the 2012 filing.

    Throughout 2005 and 2006 the Foundation traded very actively in one risky stock mutual fund (The Nasdaq 100 Trust)moving in and out of the fund with regularity, creating commission expenses while also realizing significant losses. This would appear to potentially be in conflict with the fiduciary responsibilities cited in the Attorney General Handbook noted above.

    3. CONFLICT OF INTEREST: Per the Attorney General Handbook on Conflict of Interest:
    “Board members and senior management have a duty to avoid potential or
    apparent conflicts of interest. To avoid the appearance of impropriety, it is
    important for individuals to be open and honest with their fellow managers
    and board members at all times. It is particularly important for board members to disclose the following facts:
    • whether they have a potential conflict of interest with respect to any transaction, business decision or other matter in which the
    organization is involved;
    • whether they have a financial, business or personal interest in an
    entity with which the nonprofit organization is or will be doing
    business;
    • whether individuals related to them have a financial, business or
    personal interest in an entity with which the nonprofit organization is or will be doing business; or
    • whether they serve as a director, member or employee of either a competitor of the corporation or a corporation with which the nonprofit organization is or will be doing business.
    The board should proceed with caution when any of the above facts are present because there may be a conflict of interest. An individual who has a potential conflict with respect to a particular transaction should disclose it to fellow managers and board members and abstain from participating in the negotiations and decisions surrounding that transaction. To avoid the appearance of impropriety, the individual who has the conflict of interest should not be present in the room during any discussions that relate to the transaction.

    Board Member Cannella owned and operated an insurance agency that recipients of the Foundation’s “education” were encouraged to meet with as part of the “education” process with many purchasing insurance products of the agency creating a conflict of interest that should have precluded his involvement in the workings of the Foundation. Board Member Cannella incorporated his insurance agency, First Senior Financial Group (FSFG) January 1, 2002 coinciding with the timing the Foundation had received funding and began operations. In 2005 the Foundation stopped taking donations and Board Member Cannella was no longer compensated, once the insurance agency, FSFG, was firmly established . An additional potential conflict of interest lies in Director Cannella’s reference promoting the appearance of Director Radtke on his radio infomercials while promoting FSFG “educational events” . It is believed to have aired sometime during 2009-2012 on 1210am WPHT in Philadelphia. The inference was that Director Radtke was an employee of FSFG or somehow affiliated with Cannella and his for-profit organization.

    Furthermore, Radtke used Foundation funds to make large payments to Aspiring Champions staff members and fund “health classes” at the establishment he owned and operated, creating conflict of interest.

    4. NON-COMPLIANCE WITH REPORTING RULES: Per the Attorney General Handbook, charitable organizations are regulated by the Solicitation of Funds for Charitable Purposes Act (Charities Act). According to the Charities Act, —“The financial report of every charitable organization which receives annual contributions of $300,000 or more shall be audited by an independent certified public accountant or public accountant. Every charitable organization which receives annual contributions of at least $100,000, but less than $300,000, shall be required to have a review or audit of their financial statements performed by an independent certified public accountant or public accountant. Every charitable organization which receives annual contributions of at least $50,000, but less than $100,000, shall be required to have a compilation, review or audit of their financial statements performed by an independent certified public accountant or public accountant.”
    • In 2001, a review by an Independent CPA was required as a result of the reported donations of $151,171. No evidence of a review is in form 990. Additionally, donated stock sold in 2001 and identified on the sale transaction as having been donated on Form 990 for that year (see page 3 Part IV 2001 Form 990) is not identified or disclosed in 2001 or any year as a donation. The value of this donated stock (per the additional schedule filed with the 2001 Form 990) if reported properly as a donation in 2001 would have put the Foundation above the threshold for requiring audited financial statements. Reported donations were only cash donations of $151,171 (per page 1 line 1 of 2001 Form 990) however total assets included cash of $127,212 AND Investments of $184,652 (per page 2 lines 1 & 10b of 2001 Form 990) for a total of $311,864, well in excess of the $300,000 limitation requiring audited financials. It appears the donated stocks were not accounted for as donations on Line 1 of form 990 in 2001 which avoided the audit requirement.
    • In 2002, a review by an independent CPA was required as a result of the donations reported of $223,999(See page 1, line 1 2002 Form 990) . No evidence of a review is in Form 990.
    • In 2004, a review by an independent CPA was required as a result of the donations reported of $233,553 (See page 1, line 1 2004 Form 990). No evidence of a review is in Form 990.

    5. DIVERTING DONATED FUNDS FOR PURPOSES OTHER THAN THE PURPOSES FOR WHICH THEY WERE DONATED: According to the Attorney General Handbook: “ In Pennsylvania, the Orphans’ Court has jurisdiction over property committed to charitable purposes under Rule 2156 of the Pennsylvania Rules of Judicial Administration, Pa. R.J.A. No. 2156, and under Section 711(21) of the Probate, Estates, and Fiduciaries Code, Act of July 1, 1972, as amended, 20 Pa. C.S.A. § 101-8815 (PEF Code), 20 Pa. C.S.A. § 711(21). The Nonprofit Law provides that charitable assets may not be diverted from the purposes for which they were donated, granted or devised without obtaining an order from the Orphans’ Court specifying the disposition of the assets, 15 Pa. C.S.A. § 5547(b). Under Rule 5.5 of the Supreme Court Orphans’ Court Rules, the Attorney General must receive notice of any Orphans’ Court proceeding involving or affecting charitable assets.”
    The audited financial statements that are part of the 2003 Form 990 filing states the Nature of Operations for The Foundation as: “The Golden Age Foundation (the Foundation), is a Pennsylvania private foundation, Non-Profit Charitable Trust, dedicated to providing factual, unbiased educational information to senior citizens on vital issues that affect their everyday lives.”
    The Foundation cited later in Form 990 that it had “discontinued programs for seniors because of the decrease in interest by seniors in the educational seminars”, yet the same style programs with the same individual presenting them (Cannella) continued indicating interest had not waned and actually may have been increasing as the insurance agency (FSFG)continued to offer these same programs with increasing regularity throughout the year, often citing being “sold out” in their radio advertising. While FSFG’s “educational” programs appeared to be increasing dramatically, The non-profit foundation (Golden Age) abandoned their operation of “providing educational information” and began instead funding the establishing of a for-profit gymnasium for training amateur athletes using the donations collected under the premise of “educating the elderly”. It is unknown if The Golden Age received an order from the Orphan’s Court to divert assets for purposes other than that they were donated as is required by Pennsylvania law. Of the total amount of money ($917,701) reported as donated to the Golden Age Foundation from 2001 through 2004 on Form 990 for the purpose of “educating the elderly”, approximately 75% of that amount was used to fund athletic endeavors including paying an individual trainer from the Aspiring Champions gymnasium owned by Radtke more than $100,000 in a single year (note payment of $101,295 to Stuart Miller in 2013) according to the Form 990 filings of the Foundation. Diversions include not only the athletic endeavors mentioned but the following grants made for purposes appearing to be outside its nature of operations as stated by the Foundation itself:

    1. Philabundance donation of $12,000 in 2001 for “Hunger Relief”
    2. Habitat for Humanity donation of $10,000 in 2002 for “Social Justice”
    3. National Heritage Foundation of $1,200 in 2003 for “Social Justice”
    4. Epiphany of Our Lord Home and School $3,200 for “unrestricted donation”
    5. St. Francis $3,200 for “Unrestricted donation”
    6. St. Mary’s Villa for Children and Families $3,200 for “Unrestricted donation”
    7. Salvation Army of Norristown $2,400 for “Unrestricted Donation”
    8. Laura’s House $2,400 for “Unrestricted Donation”
    9. Bethesda Project of Phila $2,400 for “Unrestricted Donation”
    10. Epiphany of Our Lord Home and School $2,400 for “Unrestricted Donation”

    6. Additional Irregularities possibly warranting further investigation observed:
    • Donations amounting to $50,000 were received from one financial institution which Cannella is believed to have conducted transactions with through his for-profit insurance agency at the time. In addition, the insurance company who is one of the largest issuers of fixed index annuities, a product Cannella has publicly claimed to utilize in his “system”, was subject to a class action lawsuit regarding their sales practices during this time period, settling for $570 Million. The donations made were $30,000 in 2002 and $20,000 in 2003 from Amerus Annuity Group (name subsequently changed to Aviva USA and now known as Athene USA) of Topeka Kansas.
    • In 2001 there is a significant amount of expense noted as “outside Labor/Marketing” of $49,230 representing 71% of the total operating expenses . It is unclear if these payments were made in support of the Foundation’s marketing or the for-profit insurance agency. A similar amount appears in the 2002 Form 990 of $49,917 which was 44% of total operating expenses. In that same year, the bulk of the remainder of operating expenses is represented by compensation and wages totaling $53,850 which was 24% of donations. The total of these two items makes up 91% of the year’s operating expenses.
    • 2003 Audited financials state that Advertising costs are related to “advertising its services in various local newspapers” which amounted to $69,436. It is not clear if the advertising paid for was for the Foundation or for Cannella’s for-profit insurance agency.
    • 2003 Audited financials cite $7,030 in “Commission Income”, referred to in the Form 990 supplemental schedule filing prepared by the Foundation as “royalty income”. Collecting commission income would in most instances present a conflict of interest per the Attorney General Handbook. No such information is disclosed in Form 990 or the audited financials or footnotes.
    • 2003 audited financials cite a “referral fee” of $20,000 (6% of donations). No details are disclosed about the transaction on the financials or in the footnotes. This may qualify as a related party transaction worthy of disclosure and may warrant further investigation.
    • 2003 audited financials cite “Educational program expenses” of only $929 despite their Nature of Operations in the footnotes declaring this to be their primary function.

    April 5, 2017 at 2:57 pm

    • thanks for the insight. you would need to contact me directly

      April 7, 2017 at 4:46 pm

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