Guarantee Security Life Insurance Company

Guarantee Security Life Insurance Company, or GSLIC, represented one of the most severe cases of insurance fraud in Florida history. According to the Florida Insurance Commissioner:

The allegations by Florida insurance regulators against accounting firm Coopers & Lybrand ultimately led to a $4.5 million settlement. The Securities Exchange Commission found that Merrill Lynch "failed to properly record the terms and conditions of certain transactions which involved the sale and repurchase of certain securities" and ordered that Merrill adopt procedures and controls to ensure compliance with the SEC's book's and record provisions and "cease and desist" from committing future violations. A $100 million settlement was reached between the Florida Department of Insurance and firms associated with the 1991 collapse of GSLIC.

In 1978, Mark Sanford and William Blackburn were working as stockbrokers in Louisville, Kentucky when they decided to form their own company, Transmark USA, Inc. In 1984, Transmark purchased Guarantee Security Life Insurance Company (GSLIC) of Jacksonville, Florida. The two men moved to the Sunshine State, Blackburn taking charge of daily operations, while Sanford managed the investment portfolio.

GSLIC's primary products were deferred annuities and life insurance policies. The firm marketed these products through a national sales force of over 16,000 highly commissioned insurance agents. However, customers were attracted to the products by the promised 8 percent interest rate (at a time when the going rate was 8 percent), which was guaranteed for the first year. According a sales brochure, customers were also protected against loss of their investment: "The principal is fully guaranteed. It is not subject to losses created by market fluctuations."

Customers soon found there were drawbacks to the policies. The interest rates paid after the first year dropped dramatically. However, annuitants were discouraged from withdrawing their money by high cancellation penalties ($1,000 for a $10,000 investment).

Between 1984 and 1991, the company grew from less than $100 million to almost $1 billion in assets and had about 57,000 policyholders in 42 states. In December 1986, Transmark raised $50 million through a private placement of 13% senior notes arranged by Drexel Burnham. Abraham J. Briloff notes, "The purchasers included institutions with close ties to now imprisoned junkmeister Michael Milken -- notably Columbia Savings & Loan, CenTrust and Imperial Savings & Loan." The Milken brothers' involvement in the GSLIC transactions eventually led to their being sued by the state of Florida for $225 million.

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Wikipedia