Tuesday, February 5, 2008

Invoices come rolling in.

In the fall of 2006, investors started receiving invoices to pay VSI’s administration fees on all policies. The information provided on this payment notice was both simple and threatening. Investors were told with underlined certainly that if these payments were not made, their policy interest would be forfeited and reallocated among the remaining investors pro-rata. My parents sent in all of their administration fees (a total of $3,983.60). In fact, they even sent an extra payment on one policy because they did not receive a cancelled check back before the time deadline. They later received both cancelled checks, but no refund of the extra money was ever paid! Also, seven of our policies have not been billed beyond the administration round. I have not taken the time to check the percentage of policies where it appears that the only administrative service done on these policies was to collect an administration fee, but when I scan through the thirty-three pages of policies I would estimate that around 15% of them fall into this category.

The next round of billing was the premium payments. The investors had no clue of what to expect. While they may have been able to estimate what their percentage of the premium would be, they had no information (and of course none could be obtained) of the amount of money owed to the receivership for back premium payments.

The premium invoice form itself was very similar to the one used for administrative fees. The investor could determine the total amount the receiver was billing on each policy by multiplying their percentage interest in the policy by 0.01 and dividing the payment due by that number. The receiver did not disclose what part of the payment was applied to premiums due and what part was reimbursing the receiver. While I am not an accountant, I feel that combining two separate accounting items into one tends to create accounting problems and gives at least the appearance of incomplete disclosure.

The shortfall premium notice was the best source of information the investor ever received from the receiver. The investor’s general policy information was completely updated with the type of insurance and the current number of remaining partners listed. The numerical information shown in the remittance tables allowed investors to re-check the amounts previously given in the premium notices. The shortfall amounts allowed investors to measure both the staying power and opinions of their partners. The information also allowed the investors to compute a relationship of present expenses to future earnings and to choose their course of action without any penalty. During this time period, communication with VSI personnel improved significantly. The VSI personnel I contacted were very polite and helpful on general information. On matters pertaining to accounting, disbursements, and refunds of monies not used, their standard answer was that it was being worked on and that we needed to be patient.

In 2007, my parents paid $46,307.71 first round premium payments on 15 policies. They paid $14,329.62 of pro-rata shortfall payments on 11 policies. They also paid an additional $31,596.78 on 6 policies of Option B shortfall funds. In total, my parents have paid a total of $96,217.71 into VSI.

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