The Hard Sell

Tom Lipscomb is a god, at least as salesmen go.

Lipscomb’s name is synonymous with almost-magical sales techniques. “My training was to listen to his tapes, read his handouts and go sell like Tom Lipscomb,” says one salesman who used to work for the Northwestern Mutual life insurance company. “He was kind of touted as the second coming of Jesus.”

Lipscomb started selling life insurance while he was a music student in college. Within a decade, he had forsaken his saxophone to make millions selling expensive policies to rich people.

Jeff Sanders was a disciple’s disciple.

Sanders was a natural salesman. Part wiseacre and part smooth talker, the twenty-year-old college student had a talent for getting along with people and making them feel he was telling it to them straight. That charisma, along with his financial acumen, grabbed the attention of a business department administrator at the small liberal-arts school Sanders attended north of the river in Kansas City.

When a recruiter from the Milwaukee-based Northwestern Mutual called the college looking for interns in the spring of 1998, the administrator recommended Sanders. He went in for an interview at a Northwestern Mutual office on the corner of 31st and Broadway, where he was wowed by the man who ran the agency, Dan Ertz.

“I saw the Jaguar [that Ertz drove], and the guy dresses in suits that are pretty damned expensive,” says Sanders, now 25. “His ties cost more than my watch. And he lives in some house in Mission Hills. It’s pretty impressive to a young person.”

And Sanders had always dreamed big. He fantasized about owning a spacious home and driving a sporty car. It seemed that his summer job selling insurance just might be the ticket to the lifestyle he coveted.

At the time, Sanders was excited to be working just a fifteen-minute drive from the insurance agency in Mission, Kansas, where one of the company’s nationally known star salesmen was based. Sanders knew that Tom Lipscomb traveled the country teaching young recruits and veteran salesmen who were earning modest incomes how to mimic his spectacular success. Sanders looked up to Lipscomb.

To salesmen coming up, Lipscomb’s life must sound enviable. In seminars, he has been known to talk about how “balance in life” is more important to him than sales. “A few years ago, I made a decision that I was going to work only about fourteen days out of the month. … I take off an average of a week a month,” Lipscomb said at a 1998 seminar. (The Pitch has obtained a videotape.) “Most days I get home at 4:30 — most days,” he told them.

“Occasionally, I mean, I am really ticked off if I get home at 5:30. That’s too long a day for me,” Lipscomb explained, adding that, with a wife and two children, family time was important to him.

“That’s the sales pitch they used to get you to sign on — the ability to have all your hopes and dreams come true,” Sanders says.

Some ex-salesmen say the pursuit of that dream comes at consumers’ expense, when gung-ho agents are driven by greed to misrepresent what they’re selling.

Sanders quickly learned that his new internship wasn’t exactly a plum job. But it would be several years before he realized that, for him, it had been a financial and emotional disaster.

Northwestern Mutual’s home office in Wisconsin oversees hundreds of insurance offices around the country, run by “managing partners” like Ertz. These agents own or rent their office buildings and sometimes charge the salesmen (and a few saleswomen) exorbitant fees for rent and office supplies. New salesmen are not employees of Northwestern Mutual but rather independent contractors running their own businesses.

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For some, especially those who are new to town and don’t know anyone who might want to buy life insurance, this is the beginning of a cycle of oppressive debt. Insurance can be hard to sell, but from day one the young salesmen pay rent and other costs. Northwestern Mutual even offers loans to college interns and new recruits to get them started, in case they don’t have cash or credit to cover their growing expenses.

Sanders, who is so embarrassed by his current financial problems that he asked the Pitch not to use his real name, worked for the company that first year from May through September. He didn’t get much help from anyone else at the agency, so he called family and friends and even looked through the Yellow Pages for people who might need life insurance. But he sold few policies. The policies he did sell were of the basic, fairly cheap variety and didn’t bring in much commission.

Sanders started charging his living expenses to his credit card and used plastic to take potential clients to lunch. He dropped hundreds of dollars on suits so he could look like the high roller he wanted to be. Meanwhile, he was racking up debts to the agency for rent and office supplies. After his first three months, he owed about $3,000.

He hadn’t expected an internship to be so hard.

“Ninety percent of the recruits they bring in are young,” Sanders says. “They bring you in, and they just promise you the moon and they make it look easy.”

Sanders stayed with Northwestern Mutual for three more months. He finally started selling some policies, and it looked like maybe he could succeed there. He went back for another summer internship the next year, convinced that he could make the big money it seemed others were bringing in. He did better. Then, after graduating, hoping to pay off his debts, he signed on full time.

He stayed, he says, because he felt trapped. Being mired in debt was an incentive to keep trying to succeed in a company that keeps young people in its grip by convincing them they won’t make it elsewhere. Northwestern Mutual is “like a cult,” Sanders says.

Young ex-salesmen and saleswomen from across the country have similar horror stories. Jessica Fellows, an Ohio University graduate, was just 21 when she worked for three months at an agency in Columbus, Ohio. Recruiters told her that her gregarious personality was perfect for sales and promised her she could earn six-figure commissions in her first year. Like Sanders, she also learned about Leawood’s legendary Tom Lipscomb and other big sellers in the company. Her recruiter promised to help her get started.

But Fellows says the only help she got was a phone book and a suggestion that she write down the names of her 100 closest friends and family members, then try to sell them policies. Young salesmen and saleswomen, most of whom were single and childless — and therefore not in need of life insurance — were nonetheless encouraged to take out policies on themselves. Selling a policy to yourself, the general agent would tell interns and new recruits, was a way to earn a commission check to cover initial expenses and provide some income during the lean early months. Some of Fellows’ colleagues took out policies on themselves. Others borrowed money directly from Northwestern Mutual, ending up thousands of dollars in debt to the company. Her mom had to take her to Sam’s Club to buy groceries.

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Fellows quit and got a job waiting tables, where she made a lot more money than she had at Northwestern Mutual. Soon after leaving, Fellows received a $600 bill from the company because a small policy she’d sold had been canceled. She refuses to pay. And she’s trying to contact colleges nationwide to warn them about Northwestern Mutual.

Matt Dicken, a former salesman who started as an intern and then served as director of the college internship program at a general agency in Louisville, Kentucky, says he saw forty interns come and go over three years. None was successful. Many left owing the company thousands of dollars.

“One of the main reasons I left is the way they’re recruiting these college kids,” Dicken says. “Their attitude is basically bring in as many people as you can, throw ’em up against a wall and see what sticks. I don’t mean to brag, but I was a good catch. I was a good find. I was successful for them. But most aren’t. It’s very difficult.”

Dicken says it’s almost as if Northwestern Mutual “brainwashes” its recruits. “It’s pounded into your head over and over that Northwestern is the best, and if you leave you’ll fail miserably and you won’t make any money. When you’re young you believe it,” he says.

Finally, Sanders stopped believing it. Although he had been lucky enough to work with Lipscomb on a few sales, the older salesman’s success eluded him. In June of this year, Sanders quit his job.

“I’ve been dodging creditors since I joined Northwestern,” Sanders says. “You go into so much debt it’s ridiculous. I went in with perfect credit. Perfect. Now I can’t buy a car. I can’t get a credit card. Sometimes I can’t even open checking accounts because I’ve bounced so many checks.”

Thomas Garland Lipscomb III is proof that all the things Northwestern promises are possible.

Lipscomb is so good at selling life insurance policies as “retirement plans” that broke young salesmen from Maine to California are willing to pay $1,400 to sit in his seminars and learn his sales method — known throughout the company as Lipscomb Language.

“Tom revolutionized the way we sell life insurance — well, that’s the perception,” says Sanders, who worked with Lipscomb on a few sales, even though Lipscomb worked for another company, the Hames General Agency, in Mission. “People respect and fear Tom. Because Tom has power. He carries weight.”

“At every turn, someone was talking about the Lipscomb Language, the Lipscomb seminars, the Lipscomb tapes. They said you’ve got to use this to catapult your business,” says one ex-salesman. He left Northwestern Mutual after three months because he disapproved of the slick sales practices intended to coerce consumers into wasting money on policies that weren’t right for their needs, when they could have been building a retirement nest egg instead.

Sanders worked with Lipscomb but never got to know him. If the two men were going on a sales call together and had a few minutes to spare, Lipscomb used the time to make phone calls, Sanders recalls.

“He’s a very introverted person. He hardly makes small talk at all. If you were in an elevator with him, he’d probably look down.” But, Sanders says, “He can really turn the salesman personality off and on at will. The guy is very intelligent, and everything he says has a purpose. You can always see the wheels turning in his mind.”

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Most people buy life insurance to provide for a surviving spouse or children. Policies fall into two categories — term life or whole life insurance.

Term life insurance is almost always cheaper; the customer pays to be covered for a specified amount of time, and if he dies during that time, the insurance company pays the survivors a prearranged amount — the death benefit.

“Cash value” life insurance pays a death benefit, too — but the policy also accumulates a “cash value” that the customer can borrow against. When the policyholder dies, the amount of any loan, along with interest, is subtracted from the amount paid to survivors. (But after a cash value policy is paid off, the owner no longer has to pay into it, and survivors will get the death benefit no matter how old the deceased person was.)

Insurance salesmen like Lipscomb can earn enormous commissions by selling cash value policies to unsuspecting consumers. The more a person agrees to pay into such a policy, the bigger the commission. Northwestern Mutual’s cash value life insurance products include “variable comp life,” which is tied to the stock market; “adjustable comp life,” which is not; and its own 65 Life, in which a policyholder pays premiums until age 65.

Lipscomb’s shtick — and that of his protégés — is to sell cash value life insurance as a retirement plan, playing up its “cash value accumulation” feature and portraying the life insurance as a technicality. After all, most people want to buy more life insurance about as much as they want to pick out their own cemetery plots.

But retirement — leaving the daily grind and having money to play with — now that’s something people want to think about. To get potential buyers even more excited, Lipscomb talks about growing their “fun fund” and building up “piles of money.”

For the past few years, Lipscomb has been Northwestern Mutual’s number-two seller among more than 7,000 agents. For years, he was second only to Dan Brunette of Indianapolis, who spent fifteen years as the company’s top seller. Brunette is no longer with the company, but he is or has been a defendant in more than thirty lawsuits against it.

Lipscomb has often been the invited speaker at Northwestern Mutual’s annual meetings. Managing partners are so eager to have their salesmen attend his seminars that they’ll withhold the cost of his seminars from salesmen’s future commission checks in $100 monthly installments over a year.

Lipscomb, a native of Houston with a bit of a residual accent, is a musician. As a saxophone player, he majored in music at the University of Kansas, earning a bachelor’s as well as a master’s degree. He started working for Northwestern Mutual when he was a student in 1985. Four years later, he married his girlfriend, Kari Larson, according to Johnson County, Kansas, marriage-license records.

Lipscomb wouldn’t talk to the Pitch on the record. But a June 1999 Kansas City Star profile headlined “Sales Agent Lauded; Saxophonist Saw Better Opportunity Selling Insurance” praised Lipscomb’s success. After finishing his master’s degree, Lipscomb stayed on at Northwestern Mutual, struggling at first. He cold-called prospective clients out of the Yellow Pages, but in just seven years he was among the company’s top twenty salesmen. “I just started to catch on, and grow out of my shell and introvertedness,” Lipscomb told the Star. “I have persevered through a lot of obstacles and carried a big vision for the opportunities out there.”

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He continued to play saxophone as a hobby. Professionally, Lipscomb appears to have made the right career choice. His palatial home on an exclusive Leawood hilltop is worth $1,118,900, according to Johnson County appraisal records. It was that kind of material wealth that awed other young salesmen trying to follow in his footsteps.

Lipscomb’s financial success comes from selling lots of cash value life insurance policies.

Many salesmen say that, in the past five years, Northwestern Mutual has made a heavy push toward Lipscomb’s sales methods. And records show that, over that same period of time, Northwestern Mutual has seen a huge increase — more than 40 percent — in sales of cash value life insurance. (Other life insurance companies have remained relatively steady in their sales of similar products.)

Salesmen who join the company’s top sales ranks inevitably sell a lot of it — plain old term life insurance doesn’t pay, they say — and they are inducted into the prestigious Forum Club. Forum salesmen, sometimes with their spouses, go on a yearly Club Med-style retreat to a warm locale each November, where they play golf, swim and attend lavish dinners. Salesmen who aren’t of that caliber say they feel major pressure to perform.

One agent in the Midwest who calls himself a “soon-to-be former salesman” says he sells only according to a client’s insurance and investment needs. He sells “barely any” cash value life insurance because few of his clients need it. “The people who need that are really rich people who have a big net worth and/or a lot of debt,” he says. But it’s the unglamorous term life insurance that most people need.

“They want to know that if they take a dirt nap at an unexpected time in their lives, that their families will be OK,” he says. “And my reward comes when I have a forty-year-old widow sitting across from me and I get to hand her a check for half a million dollars. That’s my reward. In the past, [Northwestern Mutual] used to encourage us to do what was right by the client. Now I’m an outcast because I don’t go along with their philosophy.”

In the videotaped 1998 seminar, Lipscomb tells a room full of salesmen how to make buying permanent life insurance policies sound more exciting than winning the lottery.

In front of the salesmen, Lipscomb mimics his own successful sales techniques — the soft tone of voice, the inviting body language and the artful language that convince consumers to buy policies from him.

Salesmen just have to emphasize the investment part of the policy and play down the life insurance part of it, telling consumers they can withdraw money “tax-free,” he says. He never tells sellers to mention that the money withdrawn would be a loan and that big tax bills could come due later.

With careful wording, Lipscomb tells the salesmen that they could get people excited enough about cash value insurance to not only buy policies but also give a salesman the names of their wealthiest friends, thinking that they’re doing their friends a favor.

Lipscomb tells eager salesmen that when he meets with prospective clients, he asks them lots of personal questions: “Do you have a 401(k)? Investments? How much money do you want to live on each year in today’s dollars?” Then he calculates how much money they’ll receive from their 401(k) and how much they’ll need in tomorrow’s dollars to finance the kind of retirement they want. Inevitably, they fall short. By millions.

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“This person perhaps thought, before I walked in the door, ‘I’ve got a 401(k) plan. I need nothing,'” Lipscomb tells the salesmen. “Now we’ve just told this person that it is going to take $4.6 million for [her] to have $50,000 a year in retirement income. So, during this interview I have disturbed the prospect.

“Think about what I have done emotionally to this person by telling her they are a couple of million dollars short and they have already maxed out their 401(k) plan,” Lipscomb continues. “But mostly what I have done, I have probably brought to mind, they’re thinking about all the things at home that are pulling financially. They are saving for a down payment on a new home, they have a kid who needs braces, they’ve just had a baby, they are having to spend money on diapers, they want to remodel the kitchen, they need a new car.”

With a prospect now in this frame of mind, Lipscomb feigns empathy. “You thought you were in great shape,” he says. “I probably just told you something that blows your mind.”

But, he tells the potential client, he has the answer. It is a life insurance policy, just “not the type of insurance you may have seen before that’s death-benefit oriented.” No, “this is something that Northwestern has designed specifically for this purpose that is very cash-rich, very accumulation-oriented.”

Lipscomb knows the prospect might be thinking that now is not the time. He has an answer for that, too.

“I told you that you need to save more money. You’ve got all these things pulling at you. Here’s what I suggest a person in your situation do. I suggest you get started with a plan like I’m describing at some modest level … even four or five hundred dollars a month.”

Lipscomb looks out at the salesmen with an earnest expression.

“I promise you, walking through this approach, with this kind of language, you could absolutely sell three of these a week.” Later, he says, “It’s that type of analysis, then practicing the language so that the language is so flawless it can overcome every objection, and then that gives you the power to be able to sell in every single instance.”

In his seminars, Lipscomb seems to be telling the salesmen in his audience to push a client to buy life insurance as a retirement fund — regardless of the client’s needs.

Several of Lipscomb’s sales practices may be questionable by industry standards, according to the National Association of Securities Dealers, which enforces securities regulations in the United States. The NASD’s prohibited practices include “recommending to the customer the purchase or sale of a security that is unsuitable for the customer’s age, financial situation or investment objective” and “misrepresenting or failing to disclose material facts concerning an investment.”

“Tom Lipscomb is a master salesperson,” says Tom Taber, a former salesman who worked in Cedar Rapids, Iowa, and Omaha, Nebraska. Taber quit Northwestern Mutual in 2001 after thirty years, in part because he felt the company was pressuring him to sell like Lipscomb.

Taber says cash value life insurance policies are not inherently bad — as long as they’re sold to people who really need life insurance and not pawned off on customers as “retirement plans with a free physical exam” (a phrase that has become a joke among Northwestern Mutual salesmen).

Taber attended Lipscomb’s seminar in 2000. “It was all about how you could control people and get them caught up in how great all this would be for them, all the tax advantages,” he says. “It was not about a need-based sale. It was about a greed-based sale.”

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When he’s speaking at seminars, Lipscomb, who is in his early forties, usually sports a short-sleeved polo shirt and khakis. His wire-rimmed glasses give him a conservative, intelligent look. His dark hair is slicked back. His voice is quietly persuasive.

Salesmen say Lipscomb enthralls audiences of salespeople much the same as he does customers.

“He’s quite charming, in a humble, soft-spoken sort of way,” says a saleswoman who’s still with Northwestern Mutual and doesn’t want her name used. “He talks about how everything he learned as a musician applies to what he does. He talks about how practice makes perfect and how he can play the saxophone without any crescendos, or he can play it very dramatically and the same thing applies to sales. He’s bigger than life. The women are all like, oh, he’s not even that good-looking but there’s something so sexy about him.”

Mike Woollen is the type of guy who’s almost always smiling. At 33, he’s making a six-figure salary. But Woollen is ambitious, a planner. A dental-equipment salesman who’s married to a doctor, he drives a minivan with two child-safety seats firmly secured in back. He, his wife and two toddlers live in a quiet neighborhood north of the river.

Woollen’s future, and his family’s future, are very important to him. When he was a twelve-year-old kid, while most of his cohorts were blowing their money on video games, Woollen, with the advice of his grandfather, was investing in the stock market. Today, he reads the business section of the newspaper first and checks out The Wall Street Journal online.

When Woollen and his wife married four years ago, they immediately took out life insurance. They bought their policies from Northwestern Mutual. She had learned about the company from a colleague whose husband, John Black, was a salesman there.

Woollen was dealing with Black and another salesman, Scott Penning, when he mentioned that he wanted to find an additional way to invest money for retirement. Together, he and his wife made more than $200,000 a year, and they dreamed of traveling in their later years.

“We had all the life insurance we needed,” Woollen says. “We were already doing 401(k)s, IRAs, and [Black] was like, ‘Well, we’ve got a great retirement plan for you — cash value life.'”

Woollen thought he knew about investing. But cash value life insurance is complicated, and even the financially savvy people he consulted for advice, including his accountant father, didn’t know much about it. Woollen says Black and Penning sold it to him as an investment — and failed to disclose big pitfalls.

“[Black] talked about all these great benefits — tax-free income, tax-free withdrawals. Didn’t go into any of the risks. He said, ‘This is specifically designed for people like you, high-income earners.’ He made a real big deal out of the tax-free component, how when you eliminate taxes, your retirement grows so much bigger and faster,” Woollen tells the Pitch.

In 1998, Woollen and his wife each bought a policy. The couple dumped hundreds of dollars a month into the policies so they could accumulate money faster for retirement. Within a few years, they had paid Northwestern Mutual more than $36,000.

Last year, Woollen saw a small newspaper article about the “surrender squeeze.” He did some online research and found that a surrender squeeze is what happens when the policyholder has taken so much money out of the policy to use as “retirement income” that the policy collapses, triggering Northwestern Mutual to report to the Internal Revenue Service the entire amount the policyholder has borrowed from the policy — as income. That means the now-retired policyholder is forced to start paying interest on the loan and possibly premiums on the policy — potentially hundreds or thousands of dollars a month. Otherwise the policyholder faces a whopper of a tax bill — possibly tens or hundreds of thousands of dollars due in a single year.

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After reading other information about the risks associated with cash value life insurance, Woollen felt that Northwestern Mutual had duped him. He was angry and wanted his money back.

In June 2002, Woollen wrote to Northwestern Mutual’s home office, outlining his complaints. He claimed that Northwestern salesmen had sold policies to him and his wife “based on [un]ethical misrepresentations.” He wrote that both Penning and Black urged him and his wife to consider cash value life as a retirement investment and said it would create “huge piles of cash” that would grow and compound.

In a complaint to the Missouri Department of Insurance, Woollen wrote that Black apologized when Woollen confronted him. Black said he had been trained by Lipscomb.

“These are fundamental issues that are part of a … scheme that created huge sales based on … not informing clients of the risks associated with the investment,” Woollen wrote. “I have read of the sales practices of Tom Lipscomb and Dan Brunette, and these exact practices were used on me.”

Ertz, Black and Penning did not speak to the Pitch about Sanders’ and Woollen’s allegations. Northwestern Mutual spokesman Mark Lucius tells the Pitch that the company doesn’t sell cash value insurance as a retirement plan. “The primary purpose of any life insurance product is to fill a need for death benefit,” he says. “Our agents are trained to sell according to a client’s needs.”

But Northwestern’s sales appear to have been propped up by Lipscomb’s methods. And the company teeters on the brink of major fallout — in the form of lawsuits and possibly heavy fines imposed by the NASD, which is investigating the company’s sales practices, according to a letter the agency sent Woollen. Several ex-salesmen say the NASD has interviewed them about their experiences.

In August 2002, Lipscomb paid $26,130 to settle a NASD complaint by a couple who claimed the variable joint life insurance policy he sold them was not suitable for their needs, according to a NASD document.

Customers nationwide have filed lawsuits and complaints against Northwestern Mutual for sales practices similar to Lipscomb’s.

Six policyholders who were part of a lawsuit in Indiana and together won a total of $2 million have set up a Web site (nmlcomplaints.com) to warn consumers about Northwestern Mutual’s techniques. Policyholders across the country have reported that salesmen did not inform them that the money they would be taking out of the policy as “tax-free income” would be accruing substantial interest costs, for which they would be liable.

Customers complained that salesmen didn’t tell them about major risks involved with life insurance as a “retirement plan,” including the surrender squeeze.

Richard Johns is one of the policyholders who sued Northwestern in a mass-action lawsuit (similar to a class-action lawsuit, but each suit retains its individual status) for fraudulent sales tactics. He settled with the company.

Johns and a business partner owned a clothing manufacturing company in Evansville, Indiana, and they both bought cash value life insurance policies. Between them, they were paying about $60,000 a year into their policies, which had been sold to them as a retirement plan. When Johns and his partner sold their company in 1991 and began withdrawing cash as retirement income, they realized the money was coming to them as a loan from Northwestern — with interest.

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When they learned of all the facts that had not been disclosed to them about their policies, they both sued the company in 1996, along with more than 100 other policyholders across the country. Johns settled in 1998. He is not allowed to disclose the amount of his settlement, but he says his partner, who had a similar policy, received $330,000.

Johns and a few others set up the Web site and founded Policyowner Protection Services Inc. “We knew that Northwestern had not dealt honestly and fairly with a lot of the policyholders in our group,” Johns says. “We wanted to make other people aware of what’s going on. I think it’s dishonest to present this type of life insurance in any way, shape or form as a retirement program. They’re good for life insurance — if you need life insurance.”

Sidney Jackson, an attorney who represents a couple suing Northwestern Mutual in Mobile, Alabama, says his clients, an elderly couple, bought life insurance as a retirement plan from Northwestern Mutual. When the husband turned 65, “they tried to get into their retirement fund, and there was pretty much nothing there,” Jackson says.

“The numbers shown to them in 1992 were based on erroneous information such as inflated interest rates and inflated investment portfolios,” Jackson explains. “Based on the documents I’ve seen and the people I’ve talked to, the customers don’t know what they’re actually buying. And it’s something that just doesn’t work. Northwestern sells you a package which seems very, very appealing, like a peanut butter and jelly sandwich — the peanut butter being the insurance and the jelly being the retirement. The problem is, unless you make some astronomical rate of return, the cash value is eaten up by the cost of the insurance. So it’s not as appealing as it seems.”

Joseph Belth, an insurance watchdog and Indiana University professor who publishes an industry newsletter called The Insurance Forum, predicts many more lawsuits to come.

In a December 2000 article titled “Variable Life, the Surrender Squeeze, and the Coming Bonanza for the Lawyers,” Belth criticizes remarks Lipscomb made in a talk at the June 2000 Million Dollar Round Table, a yearly gathering of the country’s top insurance salesmen.

Belth quotes Lipscomb: “A well-designed variable life policy has the potential to allow the prospect to grow a larger pile of money than taxable alternatives.”

Belth writes that he asked Lipscomb for a copy of the written warning Lipscomb gives to clients telling them about the surrender squeeze. He says Lipscomb referred him to a sentence that appears on page 17 of Northwestern’s 102-page customer handbook, explaining its variable life insurance product. The sentence reads: “Loans received under the policies … will not constitute income to the owner until the loan is extinguished by surrender or lapse.”

Even if it had been on page one in bold type, Belth writes, this sentence wouldn’t be enough. Belth warns that “the sales practices associated with variable life will lead to serious consequences for life insurance companies.

“Emphasizing tax advantages without disclosing potential disadvantages is a grave disservice to potential buyers of variable life,” he writes. “We believe that the failure to disclose potential problems at the point of sale will produce a bonanza for lawyers and major problems for life insurance companies.”

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Mike Woollen is among the customers who will likely be suing. Northwestern Mutual still hasn’t returned Woollen’s $36,000. The company not only kept his money but also still charges him every month, taking money from the cash value of his policy because he refuses to pay.

For his part, Jeff Sanders — who had such high hopes for his stint as a life insurance salesman — has moved on to a job in finance. A few months after he left the company, he got a notice in the mail from the Ertz agency.

It was a bill — for $28,000. A letter explained that one of Sanders’ wealthiest former clients had canceled his policy. The commission Sanders had already been paid was being reversed. Sanders, already struggling to repair his credit and start over in a new job, was mad. He dug out his contract with Northwestern Mutual. He couldn’t find a reference to that specific scenario, but he still worried. It was unsettling to be told he owed such a huge amount of money. He decided to ignore the company’s bill.

“I don’t owe them dick,” he says.

Meanwhile, Lipscomb can sometimes be found on sunny afternoons in front of his beige stucco mansion, perhaps playing ball with his kid, enjoying balance in life.