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

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This entry was posted on March 8, 2017 by erin3870. It was filed under Uncategorized .

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7 responses

Greencalc493

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

March 27, 2017 at 8:12 pm

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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

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- erin3870
  
  thanks for the insight. you would need to contact me directly
  
  April 7, 2017 at 4:46 pm
  
  Reply
G

what a fraud….

March 22, 2018 at 12:28 pm

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Hawk

What do I care how much the agent makes if it serves my purpose?

June 2, 2019 at 12:06 am

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- Eagle
  
  wow that’s a dumb statement Hawk. Where do you think they get the money to pay the agent Einstein?
  
  June 9, 2020 at 3:58 pm
  
  Reply
Teresa Scheerer

So sad that canella and his wife scare seniors into believing them. Glad I had my son talk to him to see what he’s really about, he almost had me convinced.

March 30, 2020 at 4:39 pm

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