Policy Buyer Says Brokers Dead Wrong on Mortality


Dennis Gilbert has been one of the most powerful agents in baseball history, a top insurance salesman to Hollywood stars and a bidder for the Los Angeles Dodgers and Texas Rangers. But now a much more arcane venture, selling current life insurance policies to third-party investors, has a former client saying he’s responsible for millions in losses.

The conflict arises from Gilbert and former partner Michael Krupin’s alleged sale of insurance policies on the secondary market to Mark Kress, a marketing wizard who made millions selling jewelry on QVC and cosmetic products for thinning hair.

Like many other transactions in the multibillion-dollar industry known as life settlements, the deals involved an investor buying other people’s life insurance policies in order to collect money upon their death.

But Kress claims that he bought policies of people who turned out to be much healthier than Gilbert represented, costing him millions of dollars.

Gilbert isn’t known for his involvement in life settlements; most of the major players in the industry are in New York state and Florida. But he is among a wave of local insurance agents who have stepped up involvement in the secondary life insurance market, and he’s certainly among the highest-profile agents in Los Angeles to be linked to it.

“Most any successful insurance agent in town is doing this,” said Alan Kaye, a Beverly Hills agent with expertise in life settlements. “We have a book of clients who may have had a change in need regarding insurance. If you’re one of the top in the field of selling life insurance, by circumstance you also would be at the top in helping people sell them.”

Gilbert and Krupin, through their attorneys, called the accusations “meritless” and “specious,” respectively, but would not comment further.

Kress declined to comment.

Big name

Gilbert is one of the biggest names in life insurance in Los Angeles, both because of his work in the industry and his success outside of it.

A former minor league baseball player, he began selling insurance in 1971, pitching doctors at hospital cafeterias and newlyweds outside the Hall of Records.

“I ended up best man at a couple hundred marriages,” he told the Business Journal in a 2011 interview.

He moved his way up the ladder to pick up celebrity clients, including Nicolas Cage, Madonna and Rod Stewart.

He then got involved in the business side of baseball in the 1980s through a friendship with Bobby Brett, the brother of Major League Baseball star George Brett, his first baseball client. Gilbert became known for his glitzy Hollywood style and soon attracted the biggest names in the game. During the 1990s, he set then-major league salary records on behalf of clients three times in three years, negotiating multiyear deals for Jose Canseco ($23.5 million), Bobby Bonilla ($29 million) and Barry Bonds ($44 million).

“Dennis is smooth. While he’s taking your money, he makes you very happy,” Chicago White Sox owner Jerry Reinsdorf said in a 1993 Sports Illustrated profile.

Gilbert retired as an agent in 1999 but stayed involved in the game, hired as a special assistant to Reinsdorf in 2000. He has twice tried to buy baseball teams, putting together an unsuccessful $525 million bid for the Rangers in 2009 as well as a bid for the Dodgers with friend Larry King and Imperial Capital Chairman Jason Reese in 2012. His annual fundraising dinner for his Professional Baseball Scouts Foundation is one of the biggest banquets in baseball.

But his main business remains insurance. He teamed up with another agent, Krupin, in 1996 to form Gilbert-Krupin in Beverly Hills. It continued selling large policies, including one with a face value of $72 million in 2003, to a roster of elite clients.

Gilbert was refocusing on insurance just as the life settlement market was expanding quickly, growing through the 2000s before peaking in 2007, when policies with a total face value of $12 billion were sold.

The industry is fueled by investors, including large financial institutions such as AIG and Credit Suisse, which purchase a portfolio of life insurance policies through a network of brokers and providers. The investor buys a person’s policy for an upfront cash payment and then pays the premiums until the person dies, at which point the investor collects the death benefits. The individual seller, usually more than 65 years old, benefits by getting quick access to cash. The investment is partly a bet on life expectancy – the sooner an insured person dies, the fewer the premium payments and the higher the return on investment.

As this secondary market for insurance policies exploded, Gilbert resisted getting involved, said Michael Meyer, who was an agent at Gilbert-Krupin until 2009.

Occasionally, the firm would connect those clients who wanted to sell their policies to large buyers, and the company would take a cut of about 10 percent, Meyer said. But Gilbert did not want to become involved in life settlement organizations or package his own products.

“Dennis was very negative on anything like that,” he said. “He was much more of a traditional guy.”

Recent product

About five years ago, however, the firm began shopping around its own life settlement packages, according to a lawsuit filed by Kress’ company in Los Angeles Superior Court this month. Gilbert also received a life settlement brokering license from the state in 2010, after the passage of a new California law that required such licenses. Krupin also registered.

“I do know they were packaging a small group (of policies) to individual investors,” said Kaye, the insurance agent. “I always recommend against something like that. The secret of the insurance industry is spread of risk. When you’re buying a group of four or five policies, it seems to me that the spread of risk is such that the chances of you losing are too great.”

He said that he advised against investing in the Gilbert-Krupin packages to a friend who was pitched by that firm, and that they were not a common way to sell policies on the secondary market.

One person who said he did take the risk is Kress, whose wealth was built on selling jewelry products with Joan Rivers on QVC and his ownership of L.A. company Spencer Forrest Inc., which sells topical hair products. Kress is also a member of Tiger 21, an exclusive club of wealthy businessmen with at least $10 million who meet to discuss financial matters.

Kress alleges in his complaint that Gilbert, whom he called one of his “best and closest friends,” helped him form a company, Bedtow Group II, to buy others’ life insurance policies. Then Gilbert-Krupin represented Bedtow in the purchase of nine policies on the lives of seven U.S. residents. Kress further alleges that Gilbert and Krupin told him that they were personally aware of the medical history of each of the insured, and that they had been “handpicked” because they were “more sickly” than medical records reflected.

Bedtow spent $1.8 million to buy the policies, then paid an additional $3.3 million in premium payments. But, he claims, it turned out that the insureds were healthier than they were made out to be, and that their life expectancies were longer than represented. Premiums were also higher than he had been told, the complaint alleges. Bedtow has been able to resell only six of the nine policies for $1.2 million. He is seeking damages of at least $3.9 million.

“If they bought into representations that the people were not going to live as long as the data actually said, then they’re definitely left holding bad policies,” said Howard Shernoff, an attorney who reviewed the case for the Business Journal. “No one’s going to buy policies of a healthy insured.”

Gilbert and Krupin split off to form their own shops in 2012, partly because of a clash of cultures between the more conservative Gilbert and the more aggressive Krupin, Meyer said.

(Meyer has also been sued by a group of local investors for his alleged role in starting up a fund to buy life insurance policies while he was at Gilbert-Krupin. The investors claim that the fund failed to disclose it was undercapitalized. The case is pending; Meyer denies the claims.)

Shernoff said the case would come down to breach of contract laws rather than any regulations of life settlement transactions in California, which are scarce.

“Compared to (Securities and Exchange Commission) dealings, the life settlement market is the Wild West,” Shernoff said. “If some seller wants to say something and the buyer wants to believe it and it’s false, the recourse is a civil suit, to say, ‘Hey, you lied to me,’ and see how sympathetic the jury will feel for the person who believed it.”

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