A Los Angeles jury late Wednesday said MetLife and two of its affiliates should pay $15.6 million to a woman who said she was swindled in a reported Ponzi scheme that had links to a MetLife insurance agent.
Christine Ramirez, a retiree, invested nearly $280,000 in the scheme, which lost $200 million for investors when it collapsed nearly a decade ago. Several of those investors sued MetLife, saying the insurer had ignored or failed to notice signs that agents and brokers were peddling the investment to retirees and others.
After an eight-week trial, the jury awarded Ramirez $10 million in punitive damages from MetLife Inc., $2.5 million in punitive damages from a MetLife subsidiary, New England Securities, and $2.5 million in punitive damages from a second subsidiary, the New England Life Insurance Co., along with $330,000 in punitive damages to be paid by a former managing partner. It awarded compensatory damages of more than $230,000 on Tuesday.
The decision raises fresh questions about whether the country's largest financial institutions have the controls needed to manage the assets and workers under their purview.
"It tells MetLife that no matter how big you are, you have to manage your operations so that real people don't get hurt," said Richard Donahoo of Donahoo & Associates, a lawyer for the plaintiff, Ramirez.
Christopher Stern, a spokesman for MetLife, said, "We are disappointed with the outcome and we anticipate appealing this decision."
Lawyers for Ramirez argued that the insurance company failed to intervene when salesmen affiliated with it, along with independent contractors approved to sell its products, sold promissory notes with "guaranteed" returns as high as 12 percent. The notes were backed by an unrelated real estate fund called the Diversified Lending Group run by an outside money manager named Bruce Friedman. Potential investors were told they could use the proceeds from their investments in the notes to cover the premium payments on a new life or long-term-care insurance policy with MetLife.
DLG collapsed months after Ramirez was approached in 2008, when regulators accused Friedman of dipping into investor funds for his own gain. By then, Ramirez had invested a total of $279,769 in the DLG notes, including her personal savings, a retirement account and proceeds from a line of credit on her home in Simi Valley, Calif. She was not a customer of MetLife and did not buy its insurance in connection with the deal, but she testified that she had believed that the DLG notes were approved by the insurer.
MetLife argued in court documents before the trial that it had no relationship with DLG and was not liable for any damages because Ramirez was not its client.
Ramirez's lawyers represent 98 people in seven cases, and hers was the first of the group to move forward. Her case was given preference because she is battling late-stage breast cancer.
"Large corporations are going to be reminded that they can be held accountable," said Thomas Foley, a founding partner at Foley Bezek Behle & Curtis, another lawyer for Ramirez.