The Broke Leading the Broke

The promise that radio hosts John Labunski and Cathy DeWitt hold out for listeners is alluring: "Grow your retirement assets free from losses!" Together, the husband-and-wife team call themselves the Senior Advisory Group of Texas, and their show, "Money and Mortgage Talk With John and Cathy," airs every weekend on at least three local radio stations, including AM stations KRLD and KLIF. DeWitt and Labunski alternate speaking, occasionally interrupting each other in their eagerness to share stories of clients and friends who are enjoying retirement free of financial worries thanks to their advice. "We are the experts, and we started doing this years and years ago," Labunski reassures the audience.

But Labunski and DeWitt aren't certified financial planners. They're not even accountants; they're insurance agents. They don't take any callers on their show or answer questions from anybody. Instead, they are paying for airtime to broadcast what amounts to an hour-long sales pitch for "equity indexed annuities," a product to which Dow Jones' MarketWatch.com recently awarded the title of "Stupid Investment of the Week." Even if Labunski and DeWitt did hand out financial advice, listeners might want to take it with a grain of salt; though the husband-and-wife team live in a million-dollar home and own another worth a half-million, court records show they have a history of ducking out on their debts and suing at least two people who tried to collect. And as of October 3, Labunski, who reportedly drives a Porsche 911 Carrera, is bankrupt. (Repeated attempts to contact Labunski and DeWitt were unsuccessful. Labunski's attorney blamed his client's bankruptcy on previous business debts.)

Irving chiropractor Serge Francois is a former investor in Power Construction, a company run by John Labunski until it collapsed under a mass of debt and litigation in 1999. Francois, who just finished a term on the State Board of Chiropractic Examiners, didn't know that Labunski had set up shop as a financial expert. His reaction: "Oh my God!" In 1996, Francois invested $100,000 in what he thought was an auto-leasing business run by an acquaintance, only to find out that the money had gone instead to Power Construction. After he threatened legal action, Francois says he was offered a stake in the construction business, reassured by evidence of abundant contracts with the U.S. Army Corps of Engineers.

Frequent, enthusiastic updates from Labunski led Francois to invest more money, nearly $500,000 in all. "This is a person that took a company, totally mismanaged it and put it into the ground," Francois claims. The company folded in 1999, and last year the company's bond agent, itself beset by unpaid creditors, sued Francois for $4.4 million. "They see the doctor after my name, so they come after me and leave them alone," Francois says. He chuckles bitterly as he tells the story. "I would love for him to give me some financial advice that would get me out of this situation."

Few of Labunski and DeWitt's critics are so outspoken, leery of the couple's penchant for litigation. Financial advisor Dan Levin is a prime example of the gun-shy group. Levin has 20 years of financial experience, including as a senior vice president of Paine Webber. He has also hosted a radio show, "Investment Talk," on KLIF for more than a decade. Levin prides himself on pulling no punches on his show, so it was with typical gusto that he attacked what he saw as Labunski and DeWitt's questionable marketing practices in July 2004. "I was opposed to the product, and I kind of went off on it," he now admits, without naming any names. Back then he was less circumspect, allegedly calling Labunski and DeWitt "wolves in sheep's clothing" on the air. The defamation lawsuit they filed two months later has softened his rhetoric. "I just urge people to read the fine print," Levin says.

At first glance, equity indexed annuities have a powerful appeal to seniors unwilling to risk their source of retirement income. They are guaranteed never to lose money--when the market drops, the annuity simply freezes. In return for this guarantee, however, earnings are capped, typically between 2 and 3 percent per month--and the associated fees are often far higher than other products.

Levin's reservations about the annuities that Labunski and DeWitt so enthusiastically promote are backed by other analysts. Chicago Sun-Times financial columnist Terry Savage advised his readers to steer clear last year. "Believe me, I spent some time trying to find a deal that favors the investor. I couldn't," Savage wrote. This year, the SEC began examining overaggressive marketing practices for the annuities. And on October 7, MarketWatch awarded the Allianz MasterDex 5, an annuity "fairly typical of the entire genre," the title of "Stupid Investment of the Week."

That "stupid investment," the Allianz annuity, is Labunski and Dewitt's prime moneymaker. "I don't know that they sell any other product," says Norm Lorentz, only half-jokingly. Lorentz is suing Labunski and DeWitt in U.S. District Court for $50,000 he says he's owed in commissions. Lorentz, a 20-year insurance veteran, worked for four months at Lakeside Equity Partners, the legal name of the Senior Advisory Group. True to form, the couple quickly filed a countersuit for defamation and breach of contract, among other allegations.

In a sense, Labunski and DeWitt really are the financial wizards they claim to be. Labunski escaped more than $100,000 worth of debt, much of it credit card debt, by declaring bankruptcy in June. In the documents he filed in federal bankruptcy court, he states that his income is $2,500 a month and says DeWitt makes only $1,500 a month. Lorentz's lawsuit, however, alleges the couple's annual income is $500,000 or more.

The duo's living conditions would seem to back up Lorentz's assertion. Their home, a 6,000-square-foot palace in Plano purchased in DeWitt's name in January, is valued at more than $1 million. A second home owned by DeWitt is worth another $400,000. Texas is a community property state, meaning property acquired during a marriage belongs equally to both partners. Yet the $1 million house in the prestigious Lakeside neighborhood of Plano doesn't appear in Labunski's bankruptcy filing. Nor does DeWitt's 2001 Mercedes CLK coupe.

Tom Cawthon knows just how nice Labunski and DeWitt's home is. After all, in March his company, Natural Selections, provided all the stone pavers for it, including the pool deck, the exercise room and four bathrooms. But the bills went unpaid. "We took our eye off the ball," Cawthon says. "Next time we knew, he was into us for $25,000." When Cawthon began to push Labunski to pay, Labunski pushed back. "He came up with a whole litany of reasons why he wasn't going to pay," Cawthon says. In August, Natural Selections sued to recover the money. Labunski and DeWitt countersued, claiming the stone was "unsuitable." On October 11, the suit was finally settled. Natural Selections came away with most of the bill paid but none of its legal fees. Nevertheless, Cawthon was relieved. "We felt like we'd lost it all," he says.

DeWitt and Labunski's litigation has left a massive and complex paper trail, a fact that perhaps explains their attitude toward financial paperwork. "If you've got a 700-page contract, there's got to be something bad in there," Labunski tells his listeners over the air. He confidently contradicts all the experts who exhort consumers to carefully sift through the terms of their annuities. "We're going to give you a two-page contract--one page, two sides--and you're going to understand every word on it." Those truly interested in understanding a Senior Advisory Group contract, however, may want to indulge in a little outside reading as well. --Rick Kennedy

Back To China

Toting five extra suitcases stuffed with baby formula, Ralph and Nicole Isenberg and baby Niraya left Dallas for China on Sunday. After a two-year fight with Immigration and Customs Enforcement (ICE), Ralph Isenberg, a former City Plan Commission member and political associate of Mayor Laura Miller, ended his high-profile battle to keep his wife in America.

"I'm going to become a commuter," Isenberg said in a phone interview.

A Chinese citizen who first applied for political asylum in 1999, Nicole Isenberg was under a deportation order after a misdemeanor conviction for prostitution and allegations of immigration fraud by ICE. In August, the Isenbergs retreated to New York City and filed numerous lawsuits against government officials rather than voluntarily leave the country and face uncertainty about when Nicole could return. (See "Pretty Woman," September 29.)

The details were finalized in a hearing last week. "Immigration and Customs Enforcment is pleased that Mrs. Isenberg has chosen to leave, as previously agreed, by October 30," says Carl Rusnok, spokesman for ICE. "It's my understanding she would leave, and the government would drop its case and she could re-apply [for U.S. residency]."

Ralph took down his incendiary Web site (www.meltICE.com) and dropped the lawsuits. In Guangzhou, Nicole will file a new application for residency through the U.S. Consulate. "It's basically starting over again," Ralph says. They hope that the support of three American citizens--Ralph, baby Niraya and their teenage daughter (Nicole's child from a previous marriage)--will tip the scales in Nicole's favor.

Ted Cox, the Isenbergs' New York attorney, doesn't anticipate problems. "I talked to an attorney who does prostitution waivers in Bangkok, and they are not normally difficult to handle," Cox says. "There is a humanitarian waiver when you have a genuine marriage."

Though immigration law could have prohibited Nicole from re-applying for up to 10 years, Ralph hopes that the "tremendous assistance" the Isenbergs have gotten from the office of Republican Congressman Pete Sessions will expedite matters. "We do not expect to stay very long," Ralph says. --Glenna Whitley