Confidence Man How an Insurance Salesman’s `Secrets’ Unraveled in Court BY JO CLIFTON A’ RE YOU TIRED of paying taxes?” asked the newspaper advertisement. -The headline caught the eye of a retired schoolteacher living in a small town in the Panhandle. “Well, I had just retired and I was paying taxes over my ears,” she said. Speaking to the Observer on the condition that we not use her name, the woman said she responded to the ad in her local newspaper sometime in 1985. Within two months she met Norman Cowart, 46, of Arlington. Cowart’s talk of higher interest rates and lower taxes lured her into investing with Nassau Life Insurance Co., she said. The salesman “just came by with all of these big stories about how much interest I was losing if I didn’t invest in all of this,” she said. He came to her home or called five or six times, and each time she gave him more of the money she had saved for retirement. Finally, she had invested $42,000 with the salesman, whom the former teacher describes as “your next-door neighbor kind of person.” All she ever got from Nassau Life was some stock certificates and notes of thanks. She doesn’t expect to get any of her $42,000 back. The former teacher is just one of at least 90 Texans, mostly retired, as well as a number of persons from adjoining states, who were persuaded by Cowart to make what sounded like appealing investments, according to the Texas Attorney General’s Office. State Securities Board investigator Jay Oman estimates that Southwestern residents entrusted Cowart with $2.5 million for investments in Nassau Life and related businesses. And Nassau Life is just “the tip of the iceberg,” says Assistant Attorney General Edna Ramon Butts. She says insurance fraud “is an ever-increasing problem” in Texas. And the people involved “are becoming more sophisticated about their schemes.” The now-defunct Nassau Life \(a company brainchild of one Robert Chappell, who is also the author of the book Secrets of Offshore Tax Havens. Chappell’s technique was to use people’s resentment over paying taxes as part of his sales pitch; his book Jo Clifton is a freelance writer living in Austin. begins with a tirade against the IRS. In the first chapter, Chappell declares that the U.S. income tax is “perhaps the greatest form of torture the greatest plague, the greatest burden, the greatest source of high blood pressure, heart attack, depression and mental anguish ever imposed upon a nation.” Then Chappell lays out a plan for the reader to avoid taxes through use of a trust formed in the Turks and Caicos Islands, which the author terms “the best tax haven jurisdiction in the world. ” \(The Turks and Caicos Islands are a British colony about Secrets then describes how the reader can make money and avoid taxes by relinquishing control of his or her funds to Nassau Life Insurance Co., as trustee. Ramon Butts sued Cowart and Chappell on behalf of the State Commissioner of Insurance. In her petition, the Assistant Attorney General labeled the Nassau Life investment schemes as “an elaborate system for the illegal and fraudulent marketing and sale of unauthorized insurance.” Shortly after the filing of the original suit, in August 1987, the State Securities Commissioner intervened, complaining that Cowart, Chappell, and others had violated the State’s securities laws, as well. In court documents, the Securities chief alleged the following: The prospective investor [in Nassau Life] is led to believe that by forming a personal or business trust under a foreign country’s laws, he or she can: Eliminate or drastically reduce federal and estate income taxes; Reduce taxes on investment income; Enjoy tax free dollars on capital gains; Protect assets from court action; Avoid costly probate against one’s estate; and Avoid transfer, estate, death and inheritance taxes. The Securities Commissioner argued that the actual investment possibilities with companies such as Nassau Life proved to be not quite so rosy. According to the State’s lawsuit, Cowart got names of elderly persons from the National Association of Retired Persons. He then made appointments with those on the list who appeared to be “likely candidates” for his scheme. For those, he set up the International Society of Senior Citizens or the International Societe’ [sic] of Independent Business Administrators. As new members of these fine-sounding societies, the investors were entitled to request that their organization create a sole proprietorship or partnership offshore. According to the lawsuit, it was to be owned by the investor but controlled by a “trustee” Nassau Life Insurance Company. The money transferred to the sole proprietorship or partnership was in some cases supposed to be invested in an “annuity contract” with Nassau Life; that is, an agreement in which purchasers of the annuity were making a one-time investment and then were to receive their money back, plus a large amount of interest, over a term of years. Besides the annuities, Cowart sold stock in Nassau Life and other entities not approved by the State Securities Board. For example, one Lake Jackson couple put $14,000 into what they thought was a “trust fund.” What they got back from the company was a certificate for an annuity from Nassau Life. WHEN THE CASE went to trial this summer, several investors told the 126th District Court in Austin about their experiences with Nassau Life and the company’s super-salesman, Norman Cowart. Margaret Pasztor testified that she made the investment after Cowart assured her that her money would be insured by Lloyds of London. Pasztor said that the salesman told her that she and her husband would receive 13 percent interest on their money. That was in June of 1985. In August of the same year, Pasztor said, Cowart sold the couple stock in Nassau Life. In December, they purchased more of the Bahamian company’s stock, this time for exploration of a gold mine, she said. Then in early 1987, according to Pasztor’s testimony, she purchased 500 shares of a company called Caribbean Express Airlines. Pasztor said Cowart told her that she would not receive a regular stock certificate for that purchase because he would be holding the stock for her under the name of his management company, Dunhill Management Corp. Pasztor testified that Cowart told her that “they were starting up this new airline and that they were going to go between several 14 DECEMBER 9, 1988
You May Also Like
The documentary in Falfurrias is sinister and spiritual.