Our armed forces are being shot at and ambushed in Iraq, and may soon be quelling genocidal warfare in Liberia. The last thing they need is to be sold overpriced investments by the financial-services industry back home. Just ask Air Force Sgt. Michael Proulx. He attended a First Command financial-planning seminar two years ago near Ramstein Air Base in Germany. After a steak-and-schnitzel buffet, the 35-year-old noncom signed up to invest $166 monthly in a Roth IRA with Templeton Capital Accumulator fund. The first year's sales charge: 50%.
Little-known outside the military, First Command sells a class of mutual funds that levy huge upfront commissions. Some in the military are susceptible to First Command's pitch, says Richard Ferri, a money manager and retired marine major, because they have "zero experience" with funds. "What they're doing is totally legal," says Ferri. "Is it ethical? No." Replies Ivy McLemore of AIM Investments, whose products are sold by First Command: "It's a highly principled product."
These "highly principled products" are foisted upon inexperienced soldiers who have already been tricked into believing they are defending something other than the ability of their leaders to steal not only their lives but also their pittance of a salary from them.
Think about it: First Command keeps $83 out of Sgt. Michael Proulx's $166 monthly savings for the first year. He thinks he socking away money for his retirement, but half of it is eaten up in commissions.
Fifty percent of Proulx's retirement savings — after taxes, because it's a Roth IRA — is simply too much to skim off the top. Proulx already paid all the taxes on the half of his money that First Command confiscated as a sales charge. The government gets, then First Command gets, and if there's anything left in thirty years, maybe Proulx gets to retire. But that's a very big if.
First Command's practices are well beyond the expected boundaries of the inclination of businesses to invoke the letter of the law above the common sense ethical demands of the situation. These are our soldiers they are bilking. The words "unfair," "severely tilted playing field," and "lying, scheming scoundrels" come to mind.
When the soldiers in Iraq need his advocacy, where is that guy who put on a flight suit and "flew" onto an aircraft carrier not so long ago?
It's August, so he's off vacationing and fundraising.
Meanwhile, the privatization of retirement saving, a cherished conservative goal, is once again deployed to screw the little guy. This situation is an echo of the Enron scenario, in which employees' 401(k) accounts were drained while, two years later, the corporate vampire and former CEO Ken Lay is still flying first class and undoubtedly devising new politico-commercial strategies to suck the money out of his next victims.
The word "unfair," though, turns out to be a word that has fallen from the president's lips in specific circumstances. Unfortunately, his sense of moral priority is completely upside down.
Unscrupulous crony capitalism is so much worse than the "unfair" taxation of dividends, wouldn't you agree?
