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September 9, 2004
[Have an opinion about the issues discussed in this article?
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By Sandra Jontz,
Stars and Stripes European Edition
WASHINGTON — The Pentagon shares the blame for companies swindling
servicemembers, two lawmakers said Thursday during a congressional
hearing on a bill aimed at banning the sale of certain types of
mutual funds and life insurance on military bases.
“The [Department of Defense] needs to be called on the carpet for
this,” said Rep. Ginny Brown-Waite, R-Fla. “Why are they not abiding
by their own rule, that being 1344.7? What I think they’re doing
is a wink-and-a-nod approach to this, and that’s just wrong. The
DOD let them down by letting [servicemembers] be captive audiences.
… The DOD has a lot of answering to do. It’s absolutely shameful.”
The cited regulation states, in part, that solicitors are permitted
to pitch products so long as they are licensed and are allowed on
bases by installation commanders.
Commanders are prohibited from “solicitation of recruits, trainees,
and transient personnel in a ‘mass’ or ‘captive’ audience, making
appointments with or soliciting military personnel who are in an
‘on-duty’ status, [and] soliciting without appointment in areas
utilized for the housing or processing of transient personnel, in
barracks areas used as quarters, in unit areas, in family quarters
areas, and in areas provided by installation commanders for interviews
by appointment.”
These provisions are regularly violated, Brown-Waite said.
The DOD could not provide comment by press time.
Army Spc. Brandon Conger, 20, testified that he lost $2,000 when
he invested in a mutual fund through American Amicable Life Insurance
of Texas.
In his third week of basic training at Fort Benning, Ga., Conger
said his drill sergeants assembled his platoon to meet with “financial
advisers,” and those drill sergeants even encouraged the young solders
to make “the good investment” and that they’d “make lots of money,”
he said.
“The experience was a disappointing ordeal for me and my fellow
soldiers. Not because I lost money, but because of the misrepresentation
of a former soldier who used his contact to gain the trust of young
soldiers,” said Conger, now with 2nd Battalion, 325th Aviation Regiment
of the 82nd
Airborne Division.
Some companies hire military retirees who then pass themselves
off as financial advisers — as opposed to salespeople — and convince
young members to buy services they can’t afford, don’t need or offer
such little value for the high premiums that they no longer are
sold on the commercial market, witnesses and lawmakers said.
The Subcommittee on Capital Markets, Insurance and Government Sponsored
Enterprises of the House Financial Services Committee held a hearing
Thursday to address a bill introduced by Rep. Max Burns, R-Ga.,
that would ban the sale of questionable financial products such
as life insurance and mutual funds on military bases, both in the
United States and overseas.
Beyond laying blame on the insurance companies, which lawmakers
and witness labeled as “a few bad apples” in the business, Rep.
David Scott, D-Ga., joined Brown-Waite in blaming the military for
failing to protect the typical victim, the young, unassuming servicemember
with a median age of 24 years and earning less than $30,000 a year.
“There’s an apparent collusion going on within the military itself,”
Scott said. “It’s shameful that these unscrupulous, shall we say
insurance agents, are allowed to go into barracks [to speak] to
confused soldiers under pressure, training and preparing to go overseas
to risk their lives, and they are swamped with very complex financial
details, life insurance and contractual plans. … What is so disturbing
is that these are veterans taking advantage of young enlisted men.”
Industry representatives also testified in support of Burns’ bill
to an extent, but warned that language that is too broad could hurt
companies who do provide legitimate and appropriate services.
Lawmakers and industry representatives said the military should
provide better financial education to troops, letting them know
that a young member with no dependents doesn’t need long-term life
insurance, for example.
Commanders keep lists of solicitors banned from their bases, but
rarely share those with other base commanders, officials added.
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