by Nancy McCarthy
     Staff Writer
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     ... Continued from frontpage

A lawsuit filed last July charged that the Orange County-based AMA used unfair business practices, including high pressure tactics, to peddle living trust and annuities to thousands of senior citizens.

The complaint also accused the company of engaging in the unauthorized practice of law because sales agents who were not lawyers provided legal advice in the course of selling and preparing the living trusts.

Under the settlement approved by Los Angeles Superior Court Judge Ronald M. Sohigian, AMA and its owners, Stephan and Victoria Adams, can no longer prepare living trusts or provide any advice about probate or estate planning.

Although the company is not prohibited from selling insurance- related products or annuities, it can only do so under stringent restrictions.

The settlement was reached after several months of litigation and mediation conducted by former attorney general John Van De Kamp.

Although the complaint against AMA's three current in-house counsel was dismissed, the bar is conducting a disciplinary investigation of the three. Two other defendants, attorney Herbert Rhodes and the Fremont Life Insurance Co., did not settle and remain in the lawsuit. Under the terms of the judgment, the AMA did not admit any wrongdoing.

According to the complaint, AMA pitched its product through door-to-door sales, television, radio, telemarketing, and presentations at senior centers. Sales representatives set up a living trust and then used confidential information to sell annuities.

The company sold more than 10,000 living trust packages and more than $200 million in annuities.

Bar officials said it is unclear how many wills and trusts were prepared improperly and are invalid. But Attorney General Dan Lungren used the settlement as a warning to the public about living trusts. "They are complex documents that must be properly prepared to meet an individual's needs," he said. "Any decision regarding living trusts should not be taken lightly and the proper legal advice is necessary."

Because the company's sales agents provided legal advice, the bar had charged that AMA engaged in the unlawful practice of law. Its non-lawyers were trained to promote themselves as "certified trust advisors" or estate planning experts. Company representatives discouraged seniors from consulting with their children or attorneys before signing up.

The price of a living trust package varied from $1,000 to more than $2,000, according to the suit. Sales agents typically earned a 30 percent commission on each package, with vacation bonuses for high sales volume and an additional 10 percent commission for an annuity sale.

Agents also allegedly used confidential information provided for the living trust to persuade the senior citizen to cash in IRAs, stocks, mutual funds and other savings accounts in favor of "safer annuities."

Some agents did not explain that cashing-in might trigger early withdrawal penalties or have adverse tax consequences. They also claimed that the annuities were "100 percent safe" and that no one had lost their principal with an annuity, although one company whose annuities AMA sold was placed in liquidation.

Individuals concerned about any business with AMA can write to the attorney general's office. Letters should include the individual's name, address and copies of any pertinent documents relating to the company.

Inquiries should be sent to: Betty Mason, Department of Justice, Office of the Attorney General, 300 S. Spring St., Suite 5212, Los Angeles 90013.

The State Bar also maintains a hotline -- 1-800/445-4LAW -- for information about how to select an estate planning attorney.