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Former Palm Harbor insurance agent arrested in grand theft probe

State investigators have arrested a former insurance agent from Palm Harbor on grand theft charges in connection with a $4.6 million investment scheme that targeted seniors.

The Florida Department of Financial Services alleges that Neal Seth Smalbach, 49, misrepresented details of financial products to multiple senior clients for personal gain. The clients lost almost half of the $4.6 million they invested through Smalbach.

"Florida's seniors have worked hard for many years to earn their money and prepare for retirement," Chief Financial Officer Jeff Atwater said in a statement Wednesday. "Criminals who choose to prey on the elderly for their own financial gain will be caught and they will be brought to justice."

The Division of Agent and Agency Services also conducted an investigation of Smalbach and alleges that he falsified two applications for insurance. On March 22, Smalbach agreed to a settlement with the division that takes away his license and permanently bans him from the insurance industry.

Smalbach was booked into Pinellas County jail Tuesday. If convicted, he faces up to 54 years in prison.

Tuesday's arrest was Smalbach's second in less than a month. He was first arrested April 29 on insurance fraud charges.

Smalbach's clients say they're glad to finally see that the justice system is taking action against the man who took their money.

"We've been waiting for this news for a long time," said Marjorie Passehl, who invested with Smalbach.

In 2008, Passehl and her husband, Clarence, of Port Richey agreed to sell two annuities at a loss and invest $152,000 in a company Smalbach worked for, called TTI. Among the documents they initialed for Smalbach during a flurry of paperwork was a form saying they were worth more than $1 million, even though they were not.

The Passehls, both in their eighties, did not receive a dime on their TTI investment and efforts to cash it in proved fruitless.

"I hope he gets all 54 years," Marjorie Passehl said.

Bob Ferreira of New Port Richey prepared taxes for 60 of Smalbach's clients and found many of those who bought investments in TTI from Smalbach were retirees on limited incomes.

In one case, a 94-year-old man who put $300,000 into TTI, but became so strapped for cash, his stepdaughter said, he began washing and reusing his disposable adult diapers.

"I'm happy that this has happened to him," Ferreira said. "As cruel as that sounds, I'm happy.

"Everybody seems to be ecstatic," he said. "Maybe some of these people can finally get some closure before they pass on. Some of them have already passed."

Ivan Penn can be reached at ipenn@tampabay.com or (727) 892-2332.

Do you have a tip?

Anyone with information about these or any other incidents of suspected insurance fraud was asked to call toll-free, 1-800-378-0445. Tipsters can remain anonymous. The program rewards individuals up to $25,000 for information that directly leads to an arrest and conviction in an insurance fraud scheme.

For tips and resources to help seniors with financial difficulties and troubles with scams, visit www.MyFloridaCFO.com or call the department's toll-free consumer help line at 1-877-693-5236.

Former Palm Harbor insurance agent arrested in grand theft probe 05/16/12 [Last modified: Wednesday, May 16, 2012 10:40pm]
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