Avoiding Potential Bonus Manipulation

1. Avoiding Potential Bonus Manipulation

2. Avoid Bonus Manipulation LOOK FOR ANY SIGNS IN YOUR OFFICE! -BAD BANK ACCOUNT INFORMATION - SAME FAMILY NAME - UPLOADS OF DIFFERENT HOUSHOLDS’ APPS IN RAPID SUCCESSION, ESPECIALLY ON LAST DAY FOR SUBMISSION - BAD BIRTH DATES - BAD PHONE #S OR NO PHONE # - BAD ADDRESSES OR AGENT’S ADDRESS - NO SOCIAL SECURITY # OR BAD SOCIAL SECURITY # - AGENTS AS BENEFICIARIES OR OWNERS - LARGER SUBMISSIONS THAN OBVIOUS ABILITY, ESPECIALLY ON 40% BONUS WEEKS

3. Avoiding Potential Bonus Manipulation: Bad Swab Processing Time In a sample of branch swab results, we found a strange set of circumstances regarding some branches: • Agents waited an inordinate amount of time from the app date to take a swab sample • Agents did not submit swab samples to the lab on a timely manner after collecting them • Nearly all involve e-apps Results of the sample: Avg Days: App-to-oralAvg days: Oral to labTotal Delay 2 days 8 days 10 days

4. Avoiding Potential Bonus Manipulation: Bad Swab Processing Time Range of Days Swabs were Delayed Branch# AgentsApp-to-completed oralOral-to-LabSubmit-to-LabDirector 2 50-5 days 6-8 days 1-12 days NIZAM 80 2 0-2 days 5-6 days 5-6 days NIZAM 108 6 0-6 days 6-13 days 5-13 days NIZAM 132 2 9-15 days 5-6 days 11-18 days NIZAM 140 2 0 days 5-6 days 6-12 days NIZAM 17 2 0-7 days 8-13 days 13 days GRINSTEAD 48 2 0-12 days 5-7 days 4-18 days GRINSTEAD 135 2 1-5 days 5-6 days 4-10 days GRINSTEAD 10 5 0-12 days 5-13 days 4-18 days HARRIS 38 5 0-3 days 5-13 days 4-12 days HARRIS 144 2 0-8 days 5-6 days 4-13 days HARRIS 15 3 0-1 days 5-7 days 4-6 days SMITH 106 2 0 days 12 days 11 days SMITH 168 1 1-5 days 6-11 days 11 days SMITH 67 3 0-6 days 5-12 days 8-11 days WOODRUFF 158 1 4-5 days 6-7 days 11 days WOODRUFF 128 2 0-5 days 6 days 4-11 days BLASSINGAME 37 2 2-4 days 6-8 days 4 days ELLIS 87 2 1-2 days 12-17 days 11-18 days GOINS 53 1 0 days 5 days 4 days HIGGINS 151 3 0-6 days 4-12 days 4-18 days RICH 139 3 1-8 days 5-7 days 6-12 days SHEARS Those not submitting Underwriting Requirements on a timely basis may be removed from all bonus programs or may be terminated

5. Avoiding Potential Bonus Manipulation: Invalid Telephone Numbers • Agents, Unit Managers and Branch Managers are responsible for submitting correct customer telephone numbers on applications so that QAC calls can be made. • Agents who consistently submit invalid or incorrect telephone numbers will lose submit advance direct payment and may be subject to termination. • All of their submit advance commissions and production bonuses will be deposited into their commission account and the same rule will apply to UM and BM commissions and bonuses for that Agent’s sales.

6. Avoiding Potential Bonus Manipulation: Checking Accounts • Agents are responsible for submitting the accurate checking account number and bank routing number with Bank Draft apps. • The Agent must get the bank routing number and the checking account number from the customer’s check and enter these numbers in the e-App. Then the Agent should verify that the routing number and account number entered in the e-App match the numbers on the customer’s check.

7. Avoiding Potential Bonus Manipulation: Checking Accounts 3. Agents cannot pay premiums for coverage on anyone other than an immediate family member (husband, wife, mother, father, child).  4. Bank Budget premiums can only be deducted from the checking account of the Insured, Applicant or their immediate family member.

8. Avoiding Potential Bonus Manipulation: Checking Accounts • Agents, Unit Managers and Branch Managers who enable customers to have premiums deducted from checking accounts, other than the customer’s or the customer’s immediate family member, are subject to termination. 6. Agents, Unit Managers or Branch Managers who use their checking accounts (or the checking accounts of their friends or family members) to pay customer premiums, will be terminated. • Production bonuses of Unit Managers and Branch Managers will be charged back if Bank Draft policies lapse due to violation of a Company rule.

9. Avoiding Potential Bonus Manipulation: EFT Returns Due to Invalid Bank Account Information Upon receipt of each EFT return, an email will be sent to each Branch Manager with the following attachments: • A copy of the original Bank Draft Authorization form showing the Invalid bank draft information. • A copy of the Initial Premium Redraft Procedure memo.

10. Avoiding Potential Bonus Manipulation: Initial Premium Re-draft Procedure Memo From: Francis Neelley Second Vice President, Issue/Reissue Attn: Branch Manager Re: Initial Premium Redraft Procedure The attached Form R-3616 had either an incorrect routing / transit number or incorrect account information; therefore, the bank draft was returned by the bank unpaid. It is imperative that you immediately provide us with correct bank draft information so that we may attempt to draft again. Please reply to this email within 3 days from the date of this email. We must receive correct bank draft information to prevent policy cancellation. Corrected bank draft information must be obtained and submitted to Liberty National Issue Department as soon as possible to avoid cancellation of the policy.

11. Avoiding Potential Bonus Manipulation: EFT Returns Due to Invalid Bank Account Information If an Agent has two or more EFT returns due to invalid bank information, a warning email will be sent to the Branch Manager, listing all of that Agent’s policies.

12. Avoiding Errors & Manipulation WARNING!! WARNING!! WARNING!! TO: Branch Manager, Branch # _____ FROM: Francis Neelley The following agent(s) has submitted applications with invalid banking information: (List of Agents) Please meet with this agent immediately to review the procedures outlined in the March 3, 2008 memo from Hubert Morrison, "Revised Memo to Field Regarding Return Drafts," to make sure that he/she understands where to locate the bank account and transit/routing numbers and the name on the account. Remember, if this agent continues to submit applications with invalid banking information, he/she will be in danger of losing the privilege to receive commission advances when an application is submitted. Continued improper submission of banking information can lead to disciplinary action, up to and including termination. Managers who do not take immediate action will be investigated and may be re-assigned.

13. Avoiding Potential Bonus Manipulation: EFT Returns Due to Invalid Bank Account Information If an Agent continues to submit applications with Invalid bank information, after receiving the Warning Memo, the Branch Manager will receive a phone call from the Home Office to discuss the problem. The Branch Manager & Unit Manager are responsible for researching each case to determine why the account numbers are invalid, and how the errors will be corrected. These cases will be referred to Susan Huff for the final decision regarding Advancing.

14. Avoiding Potential Bonus Manipulation: EFT Returns Due to Invalid Bank Account Information If Submit Advances are turned off for the Agent, the Branch Manager will receive the following notification:

15. Avoiding Bonus Manipulation *** SUBMIT ADVANCING REVOKED *** TO: Branch Manager, Branch #_____ FROM: Francis Neelley The following agent(s) continues to submit applications with invalid banking information: (List of Agents)  In accordance with the procedures outlined in the March 3, 2008 memo from Hubert Morrison, "Revised Memo to Field Regarding Return Drafts," the privilege of receiving commission advances when an application is submitted is being revoked. Remember, continued improper submission of banking information can lead to disciplinary action, up to and including termination. Managers who do not take immediate action will be investigated and may be re-assigned.

16. Avoid Bonus Manipulation Solutions: • All unjust commission and bonus compensation will be charged back to all managers. b) Agents involved: TERMINATION AND/OR PROSECUTION. c) Unit Managers involved: TERMINATION AND/OR PROSECUTION. d) Branch Managers involved: TERMINATION AND/OR PROSECUTION. e) Legal has been instructed to file criminal charges and/or civil charges with all local, state, Federal and Postal authorities f) Legal has been instructed to continue ongoing investigations of all supervising managers to ensure they were not complicit in any bonus manipulation g) BMs and UMs who do not properly investigate any and all signs of Bonus Manipulation may be re-assigned or terminated for a lack of management oversight

17. Agent’s Instruction Guide • Signature Rules • The applicant must sign the completed application in the presence of the soliciting Agent or member of management who must then sign his or her own name as a witness. No blank of partially completed application may be signed by the applicant. No application may be left behind to be signed in the Agent’s absence. • The rules apply to all application forms, amendments, supplements, certificates of good health, reinstatement applications, policy delivery acknowledgments, etc.

18. Agent’s Instruction Guide • Signature Rules (continued) • If the proposed insured is Under Age 16: • The parent must sign his/her own name using his/her regular signature. • A grandparent may apply and sign for life coverage through $50,000 on a natural born grandchild through age 20 provided the grandchild is single and resides in the parent’s or grandparents’ household.

19. Agent’s Instruction Guide • Signature Rules (continued) • If the proposed insured is Over Age 16: • The parent may sign an application for insurance on the life of a child through age 20 if the child is single and lives in the household of the applicant or is single and attends college. • For amounts through $50,000, a spouse may sign an application on the life of the other, but no application is to be written without the knowledge and consent of the proposed insured.

20. Witnessing Signatures Page A-7 in the Agent’s Instruction Guide

21. Agent’s Instruction Guide • Amount Paid with App • The amount must be at least one full mode premium. The Agent should not accept partial premiums. An Agent cannot pay premiums for coverage on anyone other than an immediate family member. • An Agent should never accept CASH for payment of any premium, including initial application and subsequent periodic premiums.