By Hal M. Bundrick
NEW YORK (MainStreet) ¿ What do you buy when you win the lottery? An exotic new car? Likely. A sprawling luxury home? Sure.
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Life insurance? Not so much.
A young, unmarried grocery store worker, with no children, won half of a $336 million Mega Millions jackpot and did just that: bought a $100 million life insurance policy. Now he is suing the financial advisors who sold him the policy, along with other investments that encouraged him to "assume tens of millions of dollars in debt," according to the Courthouse News Service.
Kevyn Ogawa won the lottery back in 2009, taking a lump-sum cash payout and netting $70 million, after taxes.
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Shortly thereafter he began investing with two financial advisors, who were also attorneys and insurance agents. They convinced Ogawa to buy four policies from four companies, telling him he could "earn $50 million by the time he was 50 years old," the complaint states. Ogawa says the agents made $1million in commissions from the sales, exploiting the fact that he "knew nothing about life insurance."
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The complaint adds: "Kevyn, a young unmarried man with no children, no siblings and only one living parent, had no need for so much life insurance. Kevyn stood no chance to benefit from the insurance financially since he was not named as a beneficiary of the trust that owned the policies."
But the alleged bad investments didn't end there, according to the lawsuit.
"The duo additionally encouraged Kevin to open a line of credit and borrow the money necessary to purchase several expensive pieces of real estate, including a $10 million beachfront property in Malibu. This strategy saddled Kevyn with $27 million in debt."
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Two years later, Ogawa says, the defendants attempted to persuade him to exchange his existing life insurance policies for a single $600 million policy. That's when, after conferring with another advisor, Ogawa learned that his existing policies were "highly unsuitable for him and [were] funded in a way that would provide him no potential benefit and would leave the trust liable for large amounts of gift tax."
The claim says Ogawa finally surrendered the policies after paying nearly $2 million in premiums. He is seeking damages for breach of fiduciary duty and professional negligence.
--Written by Hal M. Bundrick for MainStreet