updated 8/3/2006 6:58:55 PM ET 2006-08-03T22:58:55

The Securities and Exchange Commission and a group of state insurance regulators on Thursday announced that a Texas insurance company will pay up to $70 million to settle allegations that it targeted American military personnel with a deceptive sales program.

Since 2000, about 57,000 U.S. military service members purchased the Horizon Life product from American-Amicable Life Insurance Company and its affiliates, and most earned little or nothing on their investment.

The SEC complaint, filed in the United States District Court for the Southern District of California, said the company’s sales agents claimed the investment would make the service men and women millionaires.

SEC Chairman Christopher Cox said the military personnel, who already were provided access to low-cost insurance sponsored by the government, were “scammed intentionally through a deceptive marketing pitch tailored exclusively to prey upon the armed services.”

The company neither acknowledged nor denied the SEC allegations, but will discontinue sales of Horizon Life. It also agreed to stop soliciting or selling any insurance product on military installations for five years.

Georgia Insurance Commissioner John W. Oxendine, who led the investigation, said Thursday that his office was not aware of the deceptive sales pitch and had not received any complaints about American-Amicable until a July 2004 New York Times article included information about affected soldiers at Fort Benning.

Oxendine said his office opened its investigation a week after the newspaper’s story came out, and was later joined in the effort by other states and the federal agencies.

American-Amicable worked with federal and state authorities for two years and “resolving this is in the best interests of our customers, our agents and our employees,” said company spokesman Mark Palmer.

According to the SEC complaint, American-Amicable sales agents were trained to present themselves as “financial advisers” or “financial coaches,” rather than insurance agents selling a particular product.

“Sales agents misled military personnel to believe they could earn $1 million in 20 years if they put their money into the investment fund,” according to the complaint. “At the same time, agents denigrated other investments, saying that mutual funds, bank savings accounts and government bonds did not make sense.”

The SEC complaint charged American-Amicable Life Insurance Co., Pioneer American Insurance Co., and Pioneer Security Life Insurance Co. — all based in Waco, Texas— with securities law violations for recasting an insurance product as an investment.

“What it is and what it was marketed as are two different things,” Cox said.

American-Amicable agreed to a $10 million cash settlement with the SEC distributed among the 57,000 service members who bought Horizon Life between Jan. 1, 2000, and July 15 of this year.

The company also agreed to provide financial relief to an additional 13,000 service members and 22,000 civilians who purchased services, but the total figure depends on the number of policies held to maturity. State insurance regulators led by Oxendine, the Texas Department of Insurance, and the U.S. Attorney’s Office for the Eastern District of Pennsylvania, estimate that will be up to $60 million.

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