News & Information

Iowa Insurance Division

Contact: Tom Alger, Communications Director

330 Maple Street

PH 515.242.5179            FX 515.281.3059

Des Moines, Iowa  50319

www.iid.state.ia.us

Friday, April 2, 2004

Tom.alger@iid.state.ia.us

 

                                                       For Immediate Release

 

Iowa Supreme Court Upholds Iowa Attorney General

and Insurance Division Action  in COCOTs Matter

 

The Iowa Insurance Division and the Iowa Attorney General scored a major victory as the Iowa Supreme Court upheld the favorable judgment in their joint civil action against an insurance producer and salesperson of unregistered securities. The agent, Edwin Pace, one of several the Division pursued for their roles in a case involving Customer Owned Coin Operated Telephones (COCOTs), had appealed the decision of Iowa District Court Judge Gary Kimes. In recognition of the case made by the Attorney General’s office, the Court rejected Pace’s contention that the Division’s actions exceeded its authority.

 

This decision, available on the IID web site, has positive implications for the IID in administering the Uniform Securities Act and the Attorney General’s Office in administering the Consumer Fraud Act in future cases.  It clearly establishes that certain investment sales fall under the regulatory scope of the Division. Further, it confirms that a sales agent’s lack of knowledge is not a defense, and that the Division’s procedures complied with due process.

 

“We couldn’t be more pleased.” said Craig Goettsch, Superintendent of Securities for the IID.  “This establishes sure footing for the position of the Division as we pursue actions against any future violations of the Iowa Uniform Securities Act. Our operational principles for the prosecution of cases have stood the test of the highest court in the state. It’s a red-letter day for consumers!”

 

In a statement, the Attorney General's Office said:

 

“We are very pleased with the decision. It is very important for this case, and for protecting consumers in the future. In this case, the Supreme Court affirmed that Mr. Pace's sales practices were unfair and deceptive and targeted older Iowans. For the future, the Supreme Court made it very clear that sales agents can't just claim that they themselves were misinformed or misled. Our laws place the consequences of consumer fraud on the agent, not the investors.”

 

“The decision also means insurance agents must not abuse a position of trust they earn with their clients. For example, if they are considering selling investments they must be careful to comply with registration and all securities and consumer protection laws.”

 

In the COCOT scheme, consumers--predominantly elderly Iowans--were sold unregistered securities in the form of coin-operated telephones, with an expectation that they would be receiving generous returns on their investments. Many of these were sold by licensed Iowa insurance agents.  Because securities laws were violated, agents such as Pace had licenses revoked and fines imposed as consequences for engaging in this scheme. 

 

The Iowa Securities Bureau is one bureau in the Iowa Insurance Division  The IID has general control, supervision and direction over all insurance and securities business transacted in the state and enforces Iowa’s laws and regulations. The IID investigates consumer complaints and prosecutes companies, agents, and brokers engaging in unfair trade practices. Consumers with insurance or securities-related questions or complaints may contact the IID toll free at 877-955-1212, or visit the division at www.iid.state.ia.us.

The Attorney General's Consumer Protection Division protects consumers from fraud and ensures fair competition in the marketplace. The Division enforces a number of laws that protect the buying public from false or misleading advertisements or sales practices. It also enforces laws that make sure consumers get information to help them make important decisions, like credit disclosure laws that help consumers compare loan offers.  Iowans may contact the Consumer Protection Division at 515-281-5926. They also can go to the web site at www.IowaAttorneyGeneral.org (click on "protecting consumers.").