MYRTLE BEACH — The Internal Revenue Service has obtained a $1.6 million default judgment against Rick McDavid, a Myrtle Beach life insurance salesman accused in civil lawsuits of scamming elderly and disabled residents by talking them into mortgaging their homes to buy excessive whole-life policies they didn’t need or understand.
The judgment is for federal income taxes that McDavid failed to pay from 2002-09, according to court documents. The IRS filed a civil lawsuit against McDavid in January and McDavid never filed an answer to the allegations, leading Judge Mary Lewis to enter the default judgment this week.
The IRS plans to foreclose on McDavid’s property in the gated Pottery Landing community in Conway to help recover some of the debt. McDavid’s 2/3-acre parcel sits along the Waccamaw River and is valued at $137,800 according to the Horry County assessor’s office. McDavid purchased the property in 2007 and then put it into his then-girlfriend’s name in an attempt to stop the IRS from seizing the land.
One of the reasons the IRS took this tax case to federal court was to have a judge determine that the property belongs to McDavid and not the ex-girlfriend.
McDavid could not be reached for comment Wednesday.
Meanwhile, nearly two dozen civil lawsuits are pending in state court accusing McDavid of fraud and misrepresentation. Those lawsuits claim McDavid used high-pressure sales tactics to convince elderly, low-income clients to mortgage their homes – in some cases numerous times – so they could afford to make payments on whole-life insurance policies he sold as investments.
McDavid collected commissions on the policy sales and his clients’ homes went into foreclosure when they could no longer afford to keep up with their mortgage payments, according to the lawsuits.
Surfside Beach lawyer Sid Connor, who filed the lawsuits against McDavid, also has filed counterclaims in the foreclosure cases to help the elderly clients stay in their homes. Connor is hoping a state law that forbids home lenders from financing – either directly or indirectly – life insurance premiums will cancel the mortgages.
McDavid was making about $60,000 a year from insurance sales through his Old South Financial Services company until the real estate boom hit and he developed a program in which clients used the equity in their homes to purchase policies, court documents show. McDavid’s income soared to $1.1 million by 2007 and he purchased several cars, homes and luxury items with the commissions from policy sales, according to court records and depositions.
The policies McDavid sold far exceeded the needs of the purchasers, according to court documents, with several instances of multi-million dollar policies being sold to retirees with meager incomes from Social Security or pensions. Some of those purchasers already had life insurance policies in addition to the ones McDavid sold to them. Some of the purchasers who have filed lawsuits against McDavid said they did not know they were purchasing life insurance.
In addition federal tax bill, the S.C. Department of Revenue has filed nearly $240,000 in state tax liens against McDavid.
Contact DAVID WREN at 626-0281.