Don’t let the patriotic name fool you. At least three states have issued cease and desist orders to the NFOA and its “president,” Richard Olive. This outfit apparently is more about ripping off consumers than charity - and its doing it all accross the country, from sea to shining sea.

According to press releases from the Missouri and Iowa Insurance Commissioners, NFOA is posing as a chartible organization, when it is nothing of the sort. The company pushes an annuity product to consumer by convincing them to replace existing annuities or cash value life insurance policies with something it calls a “tax-deductible installment plan.”

“What’s that?” you ask. Good question.

According to NFOA’s website, “the Installment Plan is a contract that pays out for a guaranteed number of years regardless of age, can have an unlimited number of beneficiaries on a single contract, and is defined in general in § 453 of the Internal Revenue Code.” NFOA promises that the plan will produce guaranteed income each year while lowering taxable income by up to 50 percent.

Just a few problems with this:

– According to the IRS, the NFOA is NOT a tax exempt charitable organization under IRS Code § 501(c)(3).
– NFOA is NOT an insurance company licensed in the states where it does business.
– § 453 of the IRS Code has NOTHING to do with NFOA’s “installment plans” - this section deals solely with the installment method of accounting for income tax purposes.

Based on the cease and desist orders issued against NFOA, the scam works like this: NFOA agents somehow convince consumers to transfer ownership of their annuity or cash value life policy to NFOA. On the change of ownership form, the consumer must designate that the transfer is a “gift” to NFOA.

In exchange for the annuity, NFOA issues their “installment contract,” which promises a safe stream of payouts and a generous tax deduction that supposedly can be used to reduce the consumer’s adjusted gross income by up to 50%. NFOA then cashes out all or party of the policy and starts making payments under the installment contract. Things probably seem okay to consumers at first, but there’s a huge problem.

When you cash out an annuity, there are going to be surrender charges - often 10% or more of the value of the policy. Add to that the commissions Olive and NFOA must be paying to agents to push this crap, and they’re going to in the hole by 15-20% or more before the first payment is made. Unless Olive is some sort of investment genius, there’s no way he can earn enough to pay off the full policy values as promised. The whole thing amounts to one big kiting scheme, but using annuities, rather than checks.

When something sounds too good to be true, it usually is. And NFOA is no exception. Watch out for this scam and others like it, and keep your eye on this site for more infomation as it develops.

In you’re interested in reading more, the cease and desist order from the Iowa Insurance Commissioner is here.