My Famous Irish-Australian Rebel Ancestor – Michael Dwyer

My famous Irish-Australian rebel ancestor was on my mum’s side. The Ford side comes from a bloke who stole a coat in 18th Century England and his Royal Majesty was so concerned about this guy’s health that the thief was sent to the temperate climes of Australia for his crime. I understand that Protestants spell it “Ford” and Catholics spell it “Forde” so my ancestors are Protestant Australians for at least six generations (not sure about the religious leanings of my great-grandfather on my dad’s side who was Chinese, he got buried with the Jews and other unbelievers in Townsville).

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Predisposed: Liberals, Conservatives, and the Biology of Political Differences

On Oct. 23, 2013, Dennis Prager said to his guest, John Alford, associate professor of political science at Rice University, is one of three authors of this new book, Predisposed: Liberals, Conservatives, and the Biology of Political Differences: “Isn’t that a risky thing that you undertook to argue that there biological bases for political positions?”

John says: “One of the nicest examples of the physiological finding is dealing with perception of threat. Conservatives physiologically respond much more quickly and much more dramatically to threat, even if the threat is as abstract as a burst of white noise, a startle. The startle response of conservatives is much stronger. Conservatives are much more responsive to and attentive to threatening pictures. Liberals don’t physiologically respond much more to a picture of a snake than a picture of a rabbit while conservatives attend much more quickly to the picture of the snake and respond to it.”

“It fits with a stereotype that conservatives have of liberals, that they just don’t get it. It’s like Obama saying we’re going to Cuba because we don’t know that Castro is an enemy.”

Here are some excerpts from this book:

* In this book we aim to explain why people experience and interpret the political world so very differently. We want to provide liberals with a better appreciation for the conservative mindset;conservatives with a better appreciation for the liberal mindset; and moderates with a better appreciation for why those closer to the extremes make such a big fuss.

* A few years ago, we published a study showing that liberals and conservatives experience the world differently and suggested that it might be unproductive and slightly inaccurate to view either side as irredeemably malevolent—or unremittingly beneficent. Media coverage of this study led to us to receive numerous emails. Some of these were decidedly caustic, but the most memorable was more plaintive than judgmental. Its key linewas “don’t do this to me: I NEED to hate conservatives.” Clearly, for some it is deeply rewarding to denounce political adversaries, preferably at high volume.

* “If you’re not outraged, you’re not paying attention,” goes the old saying. We disagree. Outrage does not solve challenging issues of governance and it is possible for people to pay close attention to politics without losing emotional control. A more productive, if less viscerally satisfying, response to political difference is to try to understand the source of the views of those who disagree with us so fundamentally.

* To illustrate the value of entering the mindset of the other side, consider the following. One of our children was given to horrible nightmares. He would cry and shout as monsters circled in his sleep. Words from the awake world (“there is no monster under your bed”) could not disabuse him of the fears that were so real to him. Weeks into this unpleasant pattern, due more to desperation than inspiration, his parents’ strategy changed. Instead of telling him how silly and outrageous he was being, they entered his dream world. “Yes, there is a monster. Oh, he’s an ugly one—mean, too—and he’s coming this way. But wait, he just spotted some monster friends of his and he’s moving off in another direction— way off.” By imagining the world he was in and by letting him know that others understood the nature of that world, it became possible to work through the attending issues. Blissful sleep—for parents and child alike—soon descended where monsters had lurked only moments before.

* In this book we make the case that political variations are part of an incredible range of differences in the way people respond to the world. Just to give you a brief teaser, it turns out that liberals and conservatives have different tastes not just in politics, but in art, humor, food, life accoutrements, and leisure pursuits; they differ in how they collect information, how they think, and how they view other people and events; they have different neural architecture and display distinct brain waves in certain circumstances; they have different personalities and psychological tendencies; they differ in what their autonomic nervous systems are attuned to; they are aroused by and pay attention to different stimuli; and they might even be different genetically. At least at the far ends of the ideological spectrum, liberals and conservatives are emotionally, preferentially, psychologically, and biologically distinct. This account is not just based on casual observation or armchair analysis. Science—both social and biological—is our co-pilot.

Liberals and conservatives often are reluctant to accept that their differences are rooted in psychology, let alone biology. Their own political beliefs seem so sensible, rational, and correct that they have difficulty believing that other people, if given full information and protected from nefarious and artificial influences, would arrive at different beliefs. Liberals are convinced the existence of conservatives can be written off to Karl Rove’s treachery, the Koch brothers’ fortune, the bromides of Fox News, and a puzzling proclivity to think simplistically. Conservatives are equally convinced the existence of liberals is attributable to the “lamestream” media, indoctrination by socialist university professors, the sway of Hollywood, and a maddening tendency to disengage from the real world. Yet political differences are grounded not in a duplicitous conspiracy or an irrational disregard of logic and truth but rather in variations in our core beings. Conservatives are not duped liberals and liberals are not lazily uninformed conservatives.

* Compared to people (not just judges) with full stomachs, those who have not eaten for several hours are more sympathetic to the plight of welfare recipients. Americans whose polling place happens to be a church are more likely to vote for right-of-center candidates and ideas than those whose polling place is a public school. People are more likely to accept the realities of global warming if their air conditioning is broken. Italians insisting they were neutral in the lead-up to a referendum on expanding a U.S. military base, but who implicitly associated pictures of the base with negative terms, were more likely to vote against the referendum; in other words, people who genuinely believed themselves to be undecided were not. People shown a cartoon happy face for just a few milliseconds (too quick to register consciously) list fewer arguments against immigration than those individuals who were shown a frowning cartoon face. Political views are influenced not only by forces believed to be irrelevant but by forces that have not entered into conscious awareness.

* The fact that extraneous forces that may not have crossed the threshold of awareness (sometimes called sub-threshold) shape political orientations and actions makes it possible for individual variation in nonpolitical variables to affect politics. If hotter ambient temperatures in a room increase acceptance of global warming, maybe people whose internal thermostats incline them to feeling hot are also more likely to be accepting of global warming. Likewise, sensitivity to clutter and disorder, to smell, to disgust, and to threats becomes potentially relevant to political views. Since elements of these sensitivities often are outside of conscious awareness, it becomes possible that political views are shaped by psychological and physiological patterns.

It is important to recognize that predispositions are not fixed at birth. We cannot emphasize enough that we are not making a nature versus nurture argument. Innate forces combine with early development and later powerful environmental events to create attitudinal and behavioral tendencies. These predispositions are physically grounded in the circuitry of the nervous system, so once instantiated they can be very difficult, but far from impossible, to change. Altering a predisposition is like turning a supertanker; it usually takes concerted force for an extended period of time, but it can be done. Just like those heavy clipboards, a variety of predispositions nudge us in one direction or another, often without our knowledge, increasing the odds that we will behave in a certain way but leaving plenty of room for predispositions to be contravened and also for the predispositions themselves to be modified.

* Psychologists frequently refer to a “happiness set point.” Events throughout a lifetime make people happier or sadder for a time but most individuals are generally oriented toward being upbeat or not and the effects of various events typically lead to modest and temporary deviations from the set point. Several months after experiencing even major life events such as an amputation or winning the lottery it appears that most people have returned to a degree of happiness with their lives surprisingly similar to that present before the major event.

Politically relevant predispositions are similar: malleable but also resistant to change. This conclusion squares with a growing body of evidence documenting the long-term stability of people’s political orientations. Most people know someone who has done a political 180-degree turn, but these individuals stand out because they are relatively rare and do not pose a challenge to the core idea of predispositions as physically instantiated inclinations (remember, think probabilistically). We believe the reason for this relative stability is the existence of an ingrained emotional and therefore physiological response to stimuli that ends up being relevant to politics. It takes quite a bit for such habituated emotional responses to be eliminated, let alone reversed. Once they are there, they tend to be there for the long haul. As one study concludes, “[W]hen it comes to politics you’ve either got it or you don’t.”

Predispositions, then, can be thought of as biologically and psychologically instantiated defaults that, absent new information or conscious overriding, govern response to given stimuli.

* Just as the content of the predisposition varies from person to person, so too does the degree to which a predisposition is present at all. Being politically predisposed is not a requirement for membership in the human race. Like most everything else, the presence of predispositions should be thought of as operating along a continuum. Certain people are in possession of powerful political predispositions and politically relevant stimuli set off easily measurable psychological, cognitive, and physiological responses. Perhaps the nature of the political predisposition points in a liberal direction, perhaps in a conservative direction, or perhaps in different directions depending upon the particular issue. Other people have much weaker political predispositions. For them, politics is mostly irrelevant and they do not have much in the way of a preexisting, physiocognitive basis for their political behavior and attitudes. These individuals are often puzzled by all the fuss about politics.

* The central thesis of this book is that many people have broad predispositions relevant to their behaviors and inclinations in the realm of politics. These predispositions can be measured with psychologically oriented survey items, with cognitive tests that do not rely on self-reports, with brain imaging, or with traditional physiological and endocrinological indicators. Due to perceptual, psychological, processing, and physiological differences, liberals and conservatives, for all intents and purposes, perceive and thus experience different worlds. Given this, it is not surprising to find they approach politics as though they were somewhat distinct species.

* Social scientists of various stripes have spent a good deal of time examining who tends to form mate pairs with whom in order to obey a biological imperative to have kids, get a mortgage, and buy a minivan. What is crystal clear from this research is that people do not generally pair off with those who are similar to them in terms of personality traits—good news for us scholarly introverts. Some matching occurs on the basis of shared physical traits (height, weight, attractiveness) but even here the correlations are weak. If not personality and physicality, on what variables are mate pairs the most likely to be matches? Easy. The top three variables on the “what traits do mate pairs most match up on” list are drinking, religion, and … drum roll … politics. (Education level is fourth.)

* A comparison of the political similarity of couples married a short time and those married a long time indicates virtually no increased political similarity for longer marriages.

* While the deep and fundamental nature of politics brings us together, it also splits us apart. Political beliefs lead to astonishing acts of collective action for the sole purpose of punishing people with different political beliefs. It turns out that the primal urge driving William Buckley’s publicly announced desire to sock Gore Vidal in the kisser is illustrative of an extremely powerful motivator of human social behavior. In Aristotle’s day, for example, a polis would periodically band together with another polis or two to beat the bejeezus out of the next polis over. We humans are really big on trying to exterminate, or at least seriously annoy, another group because its members have different ideas about politics.

* Politics does not divide us only on the mass-scale, but also on a much more personal level. Politics and its running mate, religion, tend to get people worked up to about the same pitch—which, to say the least, is high. This is why politics and not the pros and cons of extroversion is a taboo subject at many social gatherings. We can get sideways with people we love over things that may not have any meaningful relevance to either of our lives. Uncle Crusty might not know any gay couples but that does not stop him from ruining Aunt Sally’s family reunion by denouncing them, veins bulging, at full volume.

Politics is deep and fundamental to humans; it defines us as a species and is likely, quite literally, in our DNA. Accepting that we are political animals, though, does not necessarily mean that politics is universal and stable across time and space. As Aristotle pointed out, a polis is not a natural form of social organization. It is a cultural construct, and while all polities are political, the particular issues and ideologies that animate alliances and divide families often seem to have little in common. The political beliefs that separated Athens from Sparta, Alcove No. 1 from Alcove No. 2, and Aunt Sally from Uncle Crusty are clearly very different. What could possibly connect these different political beliefs over the eons and around the globe?

* Job applicant resumes reviewed on heavy clipboards are judged more worthy than identical resumes on lighter clipboards; holding a warm or hot drink can influence whether opinions of other people are positive or negative; when people reach out to pick up an orange while smelling strawberries they unwittingly spread their fingers less widely—as if they were picking up a strawberry rather than an orange.17 People sitting in a messy, smelly room tend to make harsher moral judgments than those who are in a neutral room; disgusting ambient odors also increase expressed dislike of gay men.18 Judges’ sentencing practices are measurably more lenient when they are fresh and haven’t just dealt with a string of prior cases.19 Sitting on a hard, uncomfortable chair leads people to be less flexible in their stances than if they are seated on a soft, comfortable chair, and people reminded of physical cleansing, perhaps by being located near a hand sanitizer, are more likely to render stern judgments than those who were not given such a reminder.

* Across a range of topics, the mean responses of liberals consistently favored the new experience, the abstract and the nonconforming. Conservatives just as consistently favored traditional experiences that were closer to reality and predictable patterns. Conservatives, for example, preferred their poems to rhyme and fiction that ended with a clear resolution. Liberals were more likely to write fiction or attend a music concert. Experimental, arrhythmic verse, amorphous story lines, and ambiguous endings just do not trip the triggers of many conservatives and, perhaps relatedly, they are less likely to be performers…

People who score high on openness [liberals], for example, tend to like envelope-pushing music and abstract art. People who score high on conscientiousness are more likely to be organized, faithful and loyal…

A liberal likely sees a moral wrong when an individual is being, say, socially ostracized. A conservative is more likely to take into account communal considerations in formulating a moral judgment. Is that guy being ostracized because he is not one of us? Because he was disloyal? Because he broke the rules or thumbed his nose at the accepted way of doing things? If the answer to these sorts of questions is yes, maybe he had it coming.

Liberals wanted dogs that were gentle and related to their owners as equals. Conservatives wanted dogs that were loyal and obedient…

The left is characterized more by a desire for the new and novel, a commitment to individual expression, and a tolerance of difference; the right by a desire for order and security, a commitment to tradition and group loyalty.

* Labels and issues are just waves on the surface; they can be whipped up and blown every which way by the winds of history and culture. What they are all created from, though, is the same basic set of underlying currents. These dilemmas have been tacitly recognized as the basis of politics in mass scale societies for at least two thousand years. In Politics, Aristotle tackles a wide-ranging set of preferences for the structure and organization of the polity; he specifically undertakes an analysis not just of Athenian but of Spartan, Cretan, and Carthaginian approaches to running a polity and notes big differences in preferences for the structure and organization of mass-scale social life. Athens was run through a direct democracy where citizens, or at least well-off men, voted directly on issues. Sparta was more authoritarian, with hereditary monarchs and an elected-for-life council. Differences also appeared in resource distribution, social structure, and expected and enforced social behavior, as well as in differing sets of institutions. Viewed from the perspective of bedrock political dilemma, Sparta is to conservative as Athens is to liberal.

* If our argument for the universality of politics is correct, we should, at least in theory, be able to measure preferences on bedrock dilemmas and these preferences should line up with political attitudes and beliefs in any given historical or cultural context. Historically speaking, we can certainly dig up some anecdotal evidence to support our argument. Aristotle was kind enough to provide some of this sort of thing, pointing out that city states like Sparta and Athens differed crucially in their preferences for leadership styles and collective decision-making, resulting in differing institutions (a monarchy, the assembly), that in turn perpetuated advocacy for those preferences. Such differences did not just show up between ancient polities, but also within them. The late Roman Republic (circa the century before the birth of Christ) was marked by an ideological divide over bedrock dilemmas. The sides were not called conservatives or liberals, but optimates and populares. The optimates (“best men”) wanted to preserve the republic’s traditional values and way of doing things, which for practical purposes meant keeping power concentrated in the hands of a wealthy elite and avoiding rule by noisome Julius Caesar dictator types and, especially, rule by even more noisome commoners. The populares (“favoring the people”) came from the same aristocratic class as the optimates but were basically populists, supporting welfare programs (subsidized grain for the poor), limitations on slavery, and expanded citizenship rights.21 Sound familiar? Teddy Kennedy would have looked good in a populare toga. For all intents and purposes, we probably could call optimates conservatives and populares liberals.

Ultimately, what divides Athenian and Spartan, Imperialist and Republican, Roundhead and Cavalier, Federalist and anti-Federalist, monarchist and revolutionary, Bolshevik and Menshevik, partisan and Fascist, Alcove No. 1 and Alcove No. 2, Buckley and Vidal, Sarah Palin and Hillary Clinton, Jean-Marie Le Pen and François Hollande, Western democrats and Islamists seeking a new Caliphate are different perspectives on the proper way to design, structure, and maintain society. The underlying tectonic plates may go by different names, but the fault lines between them are uncannily similar.

* Even without a tumor pressing on their orbitfrontal cortex, individuals have varying densities of chemical receptors at key areas in the brain, differently shaped neural organs, and neurotransmitter levels in synapses that are highly variable. The effectiveness of drugs such as Ritalin and Prozac makes it clear that decisions and behaviors are biological. If artificially adjusting chemical levels in the brain affects attitudes and actions, naturally occurring variations would have the same effect…

The only way for society to function may be with a legal system that, except in the most egregious of cases, denies it is biologically more challenging for some people “to do good” and that asserts that all nonclinical people are the same in terms of their ability to know right from wrong.

* Even the spatial metaphor—left and right—runs deeper than typical accounts aver. Most humans are right handed and lefties were viewed with suspicion for a very long time. As a result, the left-right opposites metaphor was readily available as an organizing device for social relations. For millennia and in most cultures, the right has been associated with religious and social orthodoxy, the just, and the good, while the left has been associated with the opposite. There is a reason we seek to be righteous and not lefteous. The seating arrangements at the Estates-General were not arbitrary after all, and it is no big mystery why the upper crust was on the king’s right.

* Humans have always brought order to their world by thinking in terms of opposites—light and dark, hot and cold, good and bad, tall and short. All known human societies have used these sorts of classifications and even the most primitive cultures have structured their social relations by thinking in terms of opposites.29 Sometimes this duality is contrived, but in the case of politics it is not. The division is real and it is unavoidable, and it centers on distinct orientations to mass-scale social life that are typically called ideologies. Ideology is not, as the “end of ideology” school asserted, a concept that just popped out fresh and new from Renaissance thought, only to fade from sight with the end of the Cold War.30 Ideology is not, as Converse and his many followers claimed, merely the ability to describe currently popular labels or to endorse clusters of positions that meet with the approval of political scientists. Ideology is us. It could no more “end” than could personality. It could no more be restricted to societal elites than could interpersonal communication. Context-specific issues and labels often consume attention and energies to the point that we are blinded to the underlying bedrock principles involved. Debates about capital punishment are context specific; debates about the appropriate treatment of in-group members who have violated social norms are as enduring as bedrock.

* The tradition of dismissing meaningful individual-level human variation is not restricted to philosophers, Communists, and devotees of the noble savage concept. It can also be found on modern best-seller lists. Take, for instance, the work of Malcolm Gladwell.28 In one book, Gladwell says he wants to go “beyond the individual” in explaining why some people are successful and some are not. He writes of “hidden advantages,” “extraordinary opportunities,” “cultural legacies,” and “hard work,” and says the keys to success are luck and diligence. Want to be the next dominant hockey player on the planet? Then your best strategy is to have a birthday just after the age cutoff used to classify youth teams. That way you are more likely to be the oldest and most physically mature specimen on the squad, thus increasing your chances of developing confidence, being selected for the traveling squad, getting to refine your skills even more, and going on to be the next Wayne Gretzky. Hockey not your thing? Never fear, the basic principle applies to doing sums, playing soccer, and strumming a guitar.

Gladwell does offer hope for those whose birthdays do not fall at the right time of the year but it has little to do with natural aptitudes and core individual differences. If you want to succeed, all you need to do is practice. Not just practice a little but practice a lot—a minimum of 10,000 hours. TheBeatles, Gladwell claims, made it big not because of any particular musical talent but because when they were fledgling musicians they packed themselves off to perform in Hamburg dives where they refined their skills by playing extended shows in front of tough crowds night after night. But so did Tony Sheridan and Rory Storm and the Hurricanes, and not many people have heard of them, though they have probably heard of the Hurricanes’ drummer. His name is Ringo and the Beatles poached him after they gave Pete Best the boot. Perhaps Pete slacked off and only practiced 9,999 hours. Importantly, Gladwell treats the capacity to dedicate yourself to a punishing practice regimen as something that is purely a matter of individual will. The assumption seems to be that any one of us could be the next Paul, John, George, or Ringo because we all possess the willpower to put in 9 to 10 hours every single day for three years on our Stratocasters. That’s a pretty big assumption, since the required dedication to practicing a craft simply is not something everyone has. People who do not put in 10,000 hours mastering a single skill, we want to emphasize, are not slackers. Spending all that time in the gym, at the library, or practicing chord progressions to a Merseyside beat means you have to sacrifice a lot. Not everyone has an inner drive so strong they are willing to live potentially unbalanced lives to nurture it. Gladwell’s message seems to be, “You too can be great if you just work at it.” Our message is that most people are not predisposed to work at it to the degree required to become great. They are not necessarily lazy but physiologically, cognitively, psychologically, and perhaps genetically different from those who are willing to dedicate themselves in this fashion.

* The effectiveness of drugs such as Ritalin and Prozac makes it clear that decisions and behaviors are biological. If artificially adjusting chemical levels in the brain affects attitudes and actions, naturally occurring variations would have the same effect. Still, the courts do not recognize such variations. Just as laziness must be the cause of not working hard, a criminal lack of discipline must be the reason someone who is mentally capable of discerning right from wrong would not do right. Such thinking ignores the growing neurological evidence that some people, for reasons not fully under their control, have to struggle very hard to do what is right or what is sensible even though they do not qualify for the label “intellectually disabled.”

* The only way for society to function may be with a legal system that, except in the most egregious cases, denies it is biologically more challenging for some people “to do good” and that asserts that all nonclinical people are the same in terms of their ability to know right from wrong. This, however, does not mean we need to convince ourselves that they actually are. Pretending that all people have identical behaviorally relevant biological dispositions is intellectually dishonest and contradicts much empirical evidence.

* Is sexual orientation a biological predisposition or is it just a choice that is made, rather like choosing which car to buy? People have predispositions in all areas of life, from personality to occupation and from politics to leisure pursuits. Given this, it should not be surprising to find predispositions regarding sexual partners. Such predispositions make it difficult to casually trade one sexual orientation for another. As with all the other areas we have been discussing, however, one of the major barriers to rational thought is the desire to dichotomize. The truth is not everyone is either gay or straight. Some only lean gay; some only lean straight; some are bisexual; some are asexual; and some have preferences that cannot be described in a PG-13 popular science book. People not as deeply predisposed in one sexual direction or the other probably could be influenced by their environment, but just because some people’s orientations are plastic does not mean everyone’s are. Efforts at conversion via boot camp have resulted in formerly gay people operating as heterosexuals, but these occasional “conversions” should not be taken as evidence that everyone is equally convertible. For many, no amount of environmental manipulation is going to change their sexual orientation.

* Accepting such dispositional differences calls into question the assumption that down deep people are really all the same, except for those who suffered some trauma or malady that has left them abnormal, disordered, or unable to tell right from wrong. Dispositional differences suggest that the standard academic practice of exposing two groups of randomly assigned people to different stimuli, computing the average difference in behavior between the groups, and then declaring that the situation causes people to be generous or subservient to authority figures misses a critically important part of the story: the remarkable variation that exists around those averages. Dispositional differences suggest that behaviorists, evolutionary psychologists, classical microeconomists, experimental social psychologists, political theorists, Communists, social engineers, popular commentators, standard social scientists, legal authorities, diagnosticians, and fans of the noble savage theory all miss the same important part of the story.

* When it comes to food, liberals are more likely to seek out the new, the novel, and the exotic while conservatives are more likely to stick with the tried and true.

* Across a range of topics, the mean responses of liberals consistently favored the new experience, the abstract, and the nonconforming. Conservatives just as consistently favored traditional experiences that were closer to reality and predictable patterns. Conservatives, for example, preferred their poems to rhyme and fiction that ended with a clear resolution. Liberals were more likely to write fiction and paint, or attend a music concert. Experimental, arrhythmic verse, amorphous story lines, and ambiguous endings just do not trip the triggers of many conservatives and, perhaps relatedly, they are less likely to be performers, a fact that is all too apparent from the announced political affiliations of comedians, rock stars, and Hollywood actors. Differences in art preference also are clear, with conservatives more likely than liberals to avert their eyes from colorful, abstract work in order to look at realistic landscapes.

* They found that tastes and preferences not only correlated with political orientation, but were manifested in people’s personal living spaces. For example, conservatives were more likely to have items associated with organization and neatness, such as laundry baskets, postage stamps, and event calendars, while liberals were more likely to have art supplies, stationary, and a broad variety of music CDs. Carney’s wide-ranging study concluded that political orientation seems to reflect everything from behavioral patterns to travel choices to the way we “decorate our walls, clean our bodies and our homes, and … choose to spend our free time.”9 Other studies show that particular leisure pursuits (soccer vs. NASCAR) and career paths are more attractive to liberals than conservatives and vice versa. Academics, for example, are well known to be a left-leaning lot.

* A partisan divide is clearly evident in car ownership.11 At the high end, Republicans tend to favor Porsches (nearly 60 percent of Porsche owners identify as Republicans), while Democrats favor Volvos. At the lower end, Republicans tend to like American-made cars; Democrats prefer Hyundais. Republicans tend to show more loyalty to a particular car brand while Democrats shop around more. In other words, Republicans seem to favor established, traditional automobile manufacturers and stick with them. Democrats have weaker brand loyalty and are more willing to check out alternatives.

* The traits correlating with political attitudes tend to be those that involve attraction to the new, the novel, and the abstract or those involving a sense of duty, order, and loyalty.

* two of the Big Five dimensions consistently correlate with political orientations: openness and conscientiousness. Openness means openness to experience and information and refers to people who are curious, creative, and arty, those who enjoy and seek out novel experiences and are more likely to adopt unconventional beliefs. Conscientiousness means a tendency to be dependable, dutiful, and self-disciplined. On standard Big Five personality tests, openness is assessed by asking people to rate themselves on things like their interest in abstract ideas and whether they have vivid imaginations. Conscientiousness is assessed with ratings on things like paying attention to details and getting chores done.

* The connection between conservatism and conscientiousness is consistent with a substantial body of research indicating that people with a great desire for what is known as “cognitive closure” are more likely to be politically conservative. For two decades, scholars have employed a collection of survey items such as “I think that having clear rules and order at work is essential to success,” “I do not like situations that are uncertain,” “I like to have friends who are unpredictable,” and “Even after I’ve made up my mind about something, I am always eager to consider a different opinion.”27 Higher values indicate a stronger preference for closure (a dislike of uncertain situations and less interest in entertaining alternative viewpoints, for example). Comparing political orientation to scores on these items reveals that in a variety of countries, individuals who are fond of closure also tend to self-identify as conservative, vote for traditional parties, and favor conservative positions on both social and economic issues.28 Perhaps not surprisingly, a fondness for closure also correlates with religious fundamentalism.

* Moral foundations theory, developed primarily by psychologists Jonathan Haidt and Jesse Graham, argues that moral universals are rooted in “intuitive ethics.” This is the notion that all humans come equipped with a set of innate psychological mechanisms that automatically trigger emotionally based moral responses to the situations we encounter in our physical, psychological, and social environments.

* liberals tend to place their emphasis on the foundations relating to the unjust treatment of individuals (harm and fairness) while conservatives are likely to rely more heavily than liberals on concerns for loyalty, authority, and purity. In other words, when it comes to deciding what is the morally correct course of action, liberals are particularly sensitive to the way in which an individual is being treated, while conservatives are more likely to factor in group considerations.

* Liberals wanted dogs that were gentle and related to their owners as equals. Conservatives wanted dogs that were loyal and obedient.

* conservatives are more likely than liberals to perceive the country as having policies that tolerate new lifestyles, do little to protect against outside threats, mollycoddle criminals, and benefit the poor even if they are not making the effort. In particular, the difference with regard to the perceived treatment of the rich and the poor in the current United States was huge. In other words, it is not just that liberals and conservatives prefer different policies; they see different policies currently in place. Liberals see current policies benefiting the undeserving rich. Conservatives look at those same policies and situations and see the undeserving poor with their snouts in the public trough.

* Faces are the visual Twitter accounts of our nervous systems, able to distribute information about psychological states quickly and succinctly, and to many people at the same time.

* Perhaps people are able to discern personality traits and therefore political orientations from images (most of the studies use pictures of males) because stoic, less expressive faces (think Clint Eastwood) signal traits associated with conservatism and sensitive, more expressive faces (think Alan Alda) signal traits associated with liberalism.

* People who support greater military spending, harsher punishment for criminals, and restrictive immigration are not doing so just to infuriate liberals but because they are more physiologically and psychologically attuned to negative eventualities.

* [Jim] Weaver sees these underlying differences in political temperament as products of “different sets of emotion” that are visible throughout human history and fiction and that are readily apparent to any “political novitiate.”9 As a politician Weaver felt so “knocked around” by these “antagonistic creatures” that he became “bound and determined to find out who they were and how they came to be.” Weaver theorizes that the core distinction between ethnocentric hawks (conservatives) and empathic doves (liberals) is attitudes toward out-groups.

* Conservatives, argues [George] Lakoff, frame their arguments in the language of the “strict father,” a metaphor for their preferred relationship between government and the governed. Liberals, on the other hand, use the language of the “nurturing parent.” Lakoff contends that their different languages make it difficult for conservatives and liberals to comprehend each other. He also argues that the conservative strict father approach resonates more with the broad electorate, which is why conservatives (at the time he was writing) were doing a better job capturing the support of middle-of-the-road voters.

* Given the recentness of mass-scale society, the core traits would have to apply to small-group,
hunter-gatherer life because people have not been able to meaningfully express their political views
for very long. Since the establishment of mass scale polities maybe 10,000–15,000 years ago, democracies have been rare and recent. The brief fling in Athens was an aberration, and as late as 1945 only 20 democracies existed; many of the largest countries from a population point of view (e.g., China) were not democratic then or now. In the history of the world, only a fairly small number of people have ever lived within a mass-scale democracy, so we as a species simply have not had much practice living in this sort of social environment. Even if Cochran and Harpending are correct, and they are, that natural selection can occur much more rapidly than previously thought, selection pressures for a mix of liberals and conservatives in mass polities simply have not had enough time to work.54 The pressures we describe must have been for diverse social predispositions in small-scale bands, predispositions that later manifested themselves as liberals and conservatives or progressives
and traditionalists when mass-scale democracies came on the scene.

We believe that traits such as orientation toward out-groups, openness to new experiences, and a heightened negativity bias fit more naturally with social than economic issues, and we tend to agree with Congressman Weaver that economic positions are typically secondary. He points out that “ethnocentrics do not give a fig for individual rights” and sees the connection between conservatism and free market principles as a relatively recent development. Similarly, he does not view Marxism as connecting to the deeper forces shaping empathics and believes that accounts that do make this connection “totally ignore our biological origins.”55 The deep forces that shape political predispositions likely do not act directly on controversies over the role of government in society (after all, for how long in evolutionary time has the size of government been an issue?) or, relatedly,
on controversies over the glories of the free market relative to the social welfare state. But if the issue
becomes whether or not to open up a country’s social welfare system to recent or future out-group members (that is, immigrants), deeper forces quickly come into play. Economic issues are certainly crucial in modern politics—sometimes the most crucial—but this does not mean fault lines on these issues are as biologically rooted as social issues.

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I Don’t Want To Seem Racist, But…

I have a black acquaintance who I often see leaving a certain establishment with items that I do not believe are his. When I question him in my jocular tone about why he’s carrying away these goods, he betrays no conscience and no concern. Instead, he makes excellent jokes. I don’t want to say anything to anyone else in case that would seem racist. And none of these items are mine.

A liberal Jewish friend says: “You should be ashamed of yourself.”

I should be ashamed for not speaking up about the theft or I should be ashamed for noticing the theft?

* My black rapper friend met a white girl at karaoke with great pipes. She wanted to get into the music industry. He had connections. He invited her to a party. He went out on the porch and smoked some herb. “There’s something you should know about me,” she said. “Oh no,” he said, “you’re a man.” “No,” she said, “I’m NYPD.” “The po-lice?” he said. “Oh no. I can’t take you around the music industry. Nobody will feel comfortable.”

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Jewish Intelligence

Psychologist Byron M. Roth reviewed Richard Lynn’s 2011 book The Chosen People: A Study of Jewish Intelligence and Achievement:

The most notable difference among Jewish groups is average IQ. While the Ashkenazi average is 110, the Sephardic average is about 99, close to that of Europeans. The Mizrahim score about 91, markedly lower than Europeans, but higher than the Arabs with whom they have lived, whose average is about 84. The genetically distinct Falashas have IQs of about 70, typical of sub-Saharan people.
These IQ differences have had an important impact on the achievement of each group. This is especially clear in Israel, where they live side by side. The Israeli population of about 6 million people (in 2000) is about 40 percent Mizrahim, about 40 percent “European,” and about 20 percent Arab Muslims. Comparisons are complicated, however, because the 2.4 million characterized as European include 110,000 Sephardim. Furthermore, many in the group classified as European Jews are immigrants from Russia, a large number of whom—some Israeli demographers estimate as many as 900,000—are not Jews at all. They are ethnic Russians “who pretended to be Jews in order to obtain permission to leave the Soviet Union.” For these reasons the average IQ of those classified as European Jews is estimated to be about 106, lower than would be the case if all were Ashkenazim.

Nevertheless, on all measures of social and educational success, the Europeans do better than the Mizrahim, who in turn do better than the Arab citizens, a ranking perfectly consistent with IQ estimates. Of particular interest are the Ethiopians, who do very poorly, and behave like American blacks. According to an Israeli researcher, many “identify with an ‘aggressive and semi-criminal African-American youth culture’ and have become a ‘kind of ethnic underclass.’”

…In general, Jews do not differ in any appreciable way from Gentiles in the things they value, with one exception: They have a greater desire to achieve economic and social success, that is to say, they are high in “achievement motivation.” Professor Lynn suggests that, like many personality variables, this may have a partly genetic basis “brought about through having been selected by eugenic customs, persecution, and discrimination.”

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Do You Really Want Change In Your Life?

Kathy Henry, LCSW, says: Most of us want the easy way out.

We have to quit believing that our way is working. We have to find a source who can help us find another way.

Einstein said that it is difficult to remove by logic something that was not put there by logic. A lot of the times, we operate off of beliefs that are not logical, but they are solid beliefs inside of us. We’ve had them since we were children. We don’t know how to live any other way and so we just keep doing the same thing over and over again, and expect life to be better. Things such as being a victim, fear of abandonment, I should be able to control everything, everyone and my feelings, perfectionism, co-dependency, if I will love you enough you will love me back at the same level… Many people waste their lives stuck in these places. We have to face these deep beliefs and question them.

We have to be able to face our pain. It’s too terrifying. Therapy is going to hurt. Many people spend their lives running from pain.

We have to be willing to do the hard work. I see people all the time who find the way to do the work because they want true change. People come in to my office and I’ll say, you could learn by reading this book and they won’t read the book. They want me to feed it to them during the 50-minute session and then they complain about how many sessions it’s taking.

There is no substitute for humility in recovery.

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How The Alexander Technique Can Help People With Chronic Pain

Alexander teacher Dan Cayer tells Robert Rickover: “I developed a repetitive stress injury in my mid twenties. I went from being a healthy young man within a few months to not being able to type at all on my computer because of severe pain. I couldn’t hold a book for a year and a half or carry a bag. I was using my toes to dial my phone. I was disabled and unable to work. I tried a lot of different treatments and therapies and the Alexander Technique was a consistent thread throughout those years helping support my recovery.”

“I slumped. I didn’t have good posture while I typed. I was under a lot of stress. I was applying to graduate school to be a writer and was unable to type or read for two years afterwards.”

“I would rise up early in the morning and write for an hour and a half before work. At work, I used a computer. Then I’d come home and either write or do more reading. I was at the computer a lot and there was a lot of intensity there. I had a stressful time at work.”

“I didn’t know how to do the things in my life any differently than the way I had been taught. I didn’t know how to sit differently, how to use my phone differently or carry my backpack differently. So I either had to not do those things at all or I was having to do them and be in incredible pain. The Alexander Technique was an inroads to learn how to be different. It was calming. My nervous system was constantly elevated from stress. I had a worker’s compensation case. It was hard being in my mid-twenties and not know whether or not I’d be able to use my hands again.”

Dan writes on his blog: “Powered by self-flagellation, I pinball back and forth between slumping and overarching. This is physically exhausting and disappointing since I never arrive at the ideal of ease uprightness brandished on the cover of yoga magazines.”

Robert: “Whatever our habits have been, no matter how bizarre or distorting, they do tend to feel right to us.”

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The New Reform Judaism: Challenges and Reflections By Rabbi Dana Evan Kaplan

This new book contains a foreword by Rabbi Eric Yoffie and an Afterword by Rabbi Rick Jacobs.

In light of profound demographic, social, and technological developments, it has become increasingly clear that the Reform movement will need to make major changes to meet the needs of a quickly evolving American Jewish population. Younger Americans in particular differ from previous generations in how they relate to organized religion, often preferring to network through virtual groups or gather in informal settings of their own choosing.

Dana Evan Kaplan, an American Reform Jew and pulpit rabbi, argues that rather than focusing on the importance of loyalty to community, Reform Judaism must determine how to engage the individual in a search for existential meaning. It should move us toward a critical scholarly understanding of the Hebrew Bible, that we may emerge with the perspectives required by a postmodern world. Such a Reform Judaism can at once help us understand how the ancient world molded our most cherished religious traditions and guide us in addressing the increasingly complex social problems of our day.

I talk to Dana this morning via Skype and asked him if there was any meaningful difference between Reform and Conservative Judaism. Dana said that in his mind there was. “We clarify and intensify what makes Reform Judaism unique and vital rather than further blur any such theological differences in the interests of merging in and saving money.”

Dana admitted that only a small minority of Reform Jews are interested in reading books on Reform Judaism.

Most blogging on Judaism is done by Orthodox Jews and Reform Jews have made only a small imprint online.

Dana: “That is one of the dilemmas of liberal religion. As much as it may make logical rational sense to someone like myself, it lacks the compelling power of fundamentalist religion.”

“I wrote an article for Modern Judaism a few years ago saying that you have to have a strict theology to compel people to sacrifice for their religion and when religion is too liberal, too open, it may seem very pleasant, but it doesn’t motivate people emotionally to sacrifice.”

Luke: “When I went to a Reform temple on Shabbat, everyone would drive there and half the parking lot would be filled with Mercedes and BMWs. When I go to an Orthodox shul on Shabbat, everyone walks there and you don’t have these glaring differences. There may be millionaires and everyone is invited to their home. There’s more of a sense that we’re all in it together.”

Dana: “That’s created by the high barriers to entrance. That’s counter-intuitive. You’d think that higher barriers would chase people away, and they do to an extent.”

“When people choose [fundamentalist religion], they have a high buy-in. I remember at one of my [Reform] synagogues, this one woman would do everything. Over the course of years, she began to be disheartened because she saw that most people didn’t care much. She was really sacrificing of her money and time and slowly slowly slowly she began to feel taken advantage of, while in a more fundamentalist environment, if you’re missing and in the hospital, people will figure it out quickly and will be at your bedside. This is a sociological construct. The beliefs don’t matter.”

“How does Reform Judaism build on its liberal edifice? I argue that we need to define our beliefs more clearly and raise those barriers, not up to Orthodoxy, but in significant ways.”

“What do you do with people who won’t help row? You try nurturing but eventually you have to throw them overboard. You end up with a smaller movement but with more dedication and commitment and clear vision.”

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Finally Getting The Help I Need

It is supposed to help with insomnia, anxiety and depression.

It is supposed to help with insomnia, anxiety and depression.

FisherWallace.com.

I’m seeing flashing lights. Glory, hallelujah. Moshiach is coming!

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FBI Drops ADL, SPLCC As Hate Resources

VDARE comments. The Washington Examiner reports:

The Southern Poverty Law Center, which has labeled several Washington, D.C.-based family organizations as “hate groups” for favoring traditional marriage, has been dumped as a “resource” on the FBI’s Hate Crime Web page, a significant rejection of the influential legal group.

The Web page scrubbing, which also included eliminating the Anti-Defamation League, was not announced and came in the last month after 15 family groups pressed Attorney General Eric Holder and FBI Director James Comey to stop endorsing a group — SPLC — that inspired a recent case of domestic terrorism at the Family Research Council.

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The SEC VS Richard Horowitz, Marc Firestone

Here is the SEC report. Here is the SEC case against Richard’s son Michael Horowitz and Moshe Marc Cohen.

First case:

1. Between mid-November and mid-December 2007, Firestone signed as the registered representative in the sale of twelve deferred variable annuities. Firestone so acted with the knowledge of Horowitz, to whom he reported. With respect to each sale, new account forms of the affiliated broker-dealer, NFP Securities, Inc. (“NFP”) included a question regarding the customer’s investment “time horizon,” which was NFP’s term in this context for how soon the customer intended to access the investment. As submitted to NFP, this question was answered on the forms with long-term time periods. Instead, it should have been answered with substantially
shorter periods. The incorrect time horizons provided on these forms led to NFP supervisory principals’ approval of the sales, which, in turn, allowed the variable annuities to be issued. By
negligently allowing new account forms containing the aforementioned incorrect information to be submitted to NFP, Respondents caused NFP to violate Section 17(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 17a-3 thereunder, and each realized commissions deriving therefrom.

B. RESPONDENTS AND ASSOCIATED BROKER-DEALER
2. Marc Steven Firestone, age 57, is an insurance agent residing in Los Angeles, California. From January 2004 through May 2008, Firestone was a registered representative with NFP, but has not been associated with a registered entity since then. An employee of Management Brokers, Inc. (“MBI”)—a wholly-owned subsidiary and independent affiliate of NFP that sells insurance products—he formerly held Series 6 and 63 securities licenses.

3. Richard Mark Horowitz, age 72, is an insurance broker residing in Los Angeles, California and President of MBI where, at all relevant times, Firestone reported to him. He was a registered representative with NFP between January 2004 and May 2008, but has not been associated with a registered entity since then. He formerly held Series 6 and 63 securities licenses.

4. NFP Securities, Inc. (“NFP”) is a broker-dealer and an investment adviser, registered as both with the Commission, and headquartered in New York, New York.

C. FACTS
5. Between mid-November and mid-December 2007, Respondent Firestone signed as the registered representative on the sale of twelve deferred variable annuities, each of which was sold through NFP. The customers purchasing these twelve variable annuities included natural persons.
6. In so signing, Respondent Firestone acted with the knowledge of Respondent Horowitz, the President of MBI, to whom Firestone reported, and who shared in commissions generated by Firestone. As Respondents knew contemporaneously, in all twelve of these sales,
customers intended for their variable annuity purchases to be short-term investments.
7. Each of the aforementioned variable annuity sales was subject to supervisory principal review by NFP, and could be submitted to the issuer for consummation only after NFP principal approval of each proposed sale. That review, in turn, required Respondents to furnish a completed new account form, for each annuity sale, containing information that included the customer’s investment “time horizon,” which was NFP’s term in this context for how soon the customer intended to access his or her investment. As Respondents should have known, NFP’s reviewing principals scrutinized each customer’s investment “time horizon” to ensure that it exceeded the multi-year “surrender charge” period for the deferred variable annuity being purchased.2

8. Without reviewing the new account forms (which neither Respondent had prepared), Firestone signed and submitted them to NFP. As submitted, all twelve answered the time horizon question with long-term periods, each exceeding the relevant surrender-charge period.

These answers were incorrect because the customers purchasing the annuities intended to hold their investments for much shorter periods.

9. All twelve annuities sales subsequently withstood NFP’s principal review. This, in turn, led to issuance of the annuities. Had accurate time horizons been provided on the new account forms, however, none of these annuities would have withstood NFP’s principal review.

10. Of the total commissions paid by the annuity issuers on the twelve annuities referenced above, Respondent Horowitz received $292,767.89, and Respondent Firestone received $127,853.20.
D. VIOLATIONS
11. Section 17(a) of the Exchange Act [15 U.S.C. § 78q(a)] and the rules thereunder require a registered broker or dealer to make and keep current specific books and records relating to its business. Exchange Act Rule 17a-3(a)(17) [17 C.F.R. §§ 240.17a-3(a)(17)] requires, in pertinent part, that every registered broker or dealer make and keep an account record for each account with a natural person as a customer or owner, that includes, among other things, the account’s investment objectives. Implicit in these provisions is the requirement that information contained in a required record or report be accurate, In re Merrill Lynch, Pierce, Fenner & Smith,
Inc., Exchange Act Rel. No. 33367, 55 SEC Docket 1970 (Jan. 11, 1994), regardless of whether the information entered itself is mandated. See Sinclair v. SEC, 444 F.2d 399, 401 (2nd Cir. 1971);
In re James F. Novak, Exchange Act Release No. 19660 (Apr. 8, 1983).
12. Firestone and Horowitz should have known that the time horizon entries in the new account forms submitted to NFP for the twelve sales described above were incorrect. The NFP new account forms that Firestone signed, and which were submitted to NFP, constituted required books and records under Exchange Act Rule 17a-3(a)(17), and were relied on by NFP’s supervisory principals in approving these annuity sales.
E. FINDINGS
13. As a result of the conduct describe above, the Commission finds that Respondents caused NFP to violate Section 17(a) of the Exchange Act and Rule 17a-3 thereunder.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondents’ Offers.
Accordingly, it is hereby ORDERED that:

A. Pursuant to Section 21C of the Exchange Act, Respondents Firestone and Horowitz, and each of them, cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder.
B. Respondent Firestone shall, within ten (10) days of the entry of this Order, pay (i) disgorgement of $127,853.20 plus prejudgment interest of $17,140.89; and (ii) a civil money penalty in the amount of $40,800, to the United States Treasury. If timely payment of disgorgement is not made, additional interest shall accrue pursuant to SEC Rule of Practice 600. If payment of a civil penalty is not timely made, additional interest shall accrue pursuant to 31 U.S.C. § 3717. Payment shall be made in conformity with the payment procedures detailed in paragraph V.D. below.
C. Respondent Horowitz shall, within ten (10) days of the entry of this Order, pay: (i) disgorgement of $292,767.89 plus prejudgment interest of $36,512.20; and (ii) a civil money penalty in the amount of $40,800, to the United States Treasury. If timely payment of disgorgement is not made, additional interest shall accrue pursuant to SEC Rule of Practice 600. If payment of a civil penalty is not timely made, additional interest shall accrue pursuant to 31 U.S.C. § 3717. Payment shall be made in conformity with the payment procedures detailed in paragraph V.D. below.

Second case:

1. These proceedings arise from a fraudulent scheme to profit from the imminent deaths of terminally ill hospice and nursing home patients through the purchase and sale of more than $80 million in deferred variable annuities (“variable annuities”) between July 2007 and at least February 2008.
2. The scheme was orchestrated by Respondent Horowitz, then a registered representative of a large broker-dealer firm (“Broker-Dealer 1”). Horowitz, together with others, made material misrepresentations and used deceptive devices to obtain the personal health and identifying information (“ID and Health Data”) of terminally ill hospice and nursing home patients in order to designate them as annuitants on variable annuity contracts that Horowitz marketed to wealthy investors. Horowitz marketed these variable annuities – which are designed by their issuers to be long-term investment vehicles – as opportunities for short-term gains with a hedge against market losses. Horowitz recruited
Respondent Cohen to facilitate the sale of additional “stranger-owned” annuities and they each obtained their firms’ approval of variable annuity sales by making material misrepresentations and omissions on trade tickets, customer account forms and/or point-of sale forms, which the broker-dealer principals used to conduct investment suitability and related reviews. As a result of the Respondents’ fraudulent acts and practices, certain insurance companies unwittingly issued variable annuities that they would not otherwise have sold. The annuities sold during the scheme – which included five annuities sold to Horowitz’s close relatives for profits in excess of $900,000 – generated lucrative upfront
sales commissions for the Respondents, with Horowitz receiving more than $300,000 and Cohen receiving more than $700,000 in commissions.
3. By virtue of the foregoing conduct and as alleged further herein, Respondents, directly or indirectly, singly or in concert, have engaged in acts, practices, schemes and courses of business that violated Section 10(b) of the Exchange Act and Rule
10b-5 thereunder. Respondents Horowitz and Cohen also violated Sections 17(a)(1) and (2) of the Securities Act, and aided and abetted and caused violations of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder. In addition, Respondent Horowitz violated Section 15(a) of the Exchange Act.
RESPONDENTS
4. Michael A. Horowitz, age 39, the scheme architect, resides in Los Angeles, California. Horowitz is currently a registered representative of an SEC-registered brokerdealer.
Horowitz also manages Monarch Capital, Inc., an investment adviser formerly registered with the SEC. Between June 2000 and August 2008, Horowitz was a registered representative at Broker-Dealer 1. He resigned during Broker-Dealer 1’s investigation into his sale of the variable annuities at issue. Horowitz holds Series 7 and 66 licenses.
5. Moshe Marc Cohen, age 38, was a registered representative recruited to the scheme by Horowitz, and resides in Brooklyn, New York. He is not currently associated with any SEC-registered entity. From 2003 to February 2008, Cohen was a registered representative at Broker-Dealer 3. Broker-Dealer 3 terminated Cohen’s employment on February 25, 2008 after he refused to cooperate with Broker-Dealer 3’s internal review of Cohen’s variable annuity sales at issue. Cohen held Series 6, 7, 24 and
63 licenses.
OTHER RELEVANT ENTITIES
6. Broker-Dealer 1 is a broker-dealer and investment adviser registered with the Commission and headquartered in New York, New York.
7. Broker-Dealer 2 is a broker-dealer and investment adviser registered with the Commission and headquartered in New York, New York.
8. Broker-Dealer 3 is a broker-dealer and investment adviser registered with the Commission and headquartered in Oakdale, Minnesota.
9. Charity 2 was established by “Annuitant Finder 1” in or about June 2007, as a registered d/b/a of an existing non-profit 501(c)(3) organization. Also in or about June 2007, Annuitant Finder 1 set up a web page for Charity 2, which described Charity 2 as an
organization “dedicated to helping patients with a life limiting illness to live their remainder days in comfort and dignity.” In fact, the purpose of Charity 2 was to obtain ID and Health Data of terminally ill patients for use in the purchase and sale of variable annuities.

THE RESPONDENTS’ SCHEME
Variable Annuities
10. Variable annuities are designed to serve as long-term investment vehicles, typically to provide income at retirement. Although variable annuities offer investment features similar in many respects to mutual funds, a typical variable annuity offers certain features not commonly found in mutual funds, including death benefits1 and/or bonus credits.2 Horowitz solicited wealthy individual and institutional investors to make large
investments in variable annuities that offered these benefits.
Horowitz’s “Stranger-Owned” Variable Annuities Investment Strategy
11. In or about May 2007, Respondent Horowitz devised the scheme that is the subject of this proceeding after learning about the features of certain variable annuity contracts offered by an annuity issuer (“VA Issuer”).
12. In particular, Horowitz learned that, unlike traditional life insurance, these variable annuity contracts—as long as they were purchased under a certain dollar threshold—required neither a physical examination of, nor proof of an “insurable interest”
in, the “annuitant,” i.e., the person whose death would trigger the products’ payout provisions. Horowitz further determined that with respect to certain of the VA Issuer’s deferred variable annuity products: (i) the VA Issuer provided an immediate “bonus credit”
of up to 5% of the amount invested, which was credited to the contract owner’s investment account; (ii) the contract owner could invest his or her premiums in mutual funds available under the contract; (iii) the annuities contained death benefit options; (iv) although substantial “surrender charges” were ordinarily assessed if the annuities were liquidated within the first 7-10 years, such charges were typically not incurred in the event of a death
benefit payout; and (v) even if the annuitant died before the “surrender charge” period had run, the VA Issuer would not “claw back” any of the sales commissions it paid to the selling representative.
13. Horowitz developed a strategy to exploit these benefits by using terminally ill hospice and nursing home patients as the contract annuitants and soliciting wealthy individual and institutional investors to make large investments in variable
annuities that offered these benefits.
14. In each of these contracts, a terminally ill hospice or nursing home patient was designated as the contract annuitant. At least 16 terminally ill hospice patients were designated as annuitants in more than 50 variable annuities sold by Horowitz, Cohen, or
other registered representatives recruited to the scheme. All of the hospice patients were residents of southern California or Chicago, Illinois.
15. The hospice patients designated as annuitants had no familial or business relationship with the investors who purchased the annuities. Instead, they were selected based on their terminal illnesses and the likelihood that they would die soon, and thereby
trigger death benefit payouts in variable annuity contracts in the very near term. As part of his pitch to investors, Horowitz told them that he would supply the annuitants, with investors needing to furnish only their funds.

16. These “stranger annuitants” likewise had no contractual right to any portion of the death benefits paid out under the terms of the variable annuities sold during the scheme. Instead, each of the contracts directed these benefits be paid to one of the investor’s family members or relatives, or to a family trust created by the investor.
17. Anticipating that the annuitants would soon die, triggering death benefit payouts in the annuity contracts, Horowitz advised his customers to invest their premiums aggressively because if the value of their portfolio increased, they would receive the portfolio value as the death benefit payout. If the value of their portfolio decreased, the death benefit nonetheless guaranteed them a payout equal to the value of their premiums paid minus any withdrawals. Horowitz also advised his customers to invest large sums of money in each annuity they purchased to maximize their “bonus credit.”
18. Horowitz employed at least two varieties of fraud in carrying out his sale of “stranger-owned” annuities. First, Horowitz and others fraudulently obtained and used the ID and Health Data of certain unwitting terminally ill hospice and nursing home patients who were designated as annuitants. Second, Horowitz and Cohen falsified broker-dealer trade tickets, customer account forms and/or point-of-sale forms (including suitability questionnaires) to obtain supervisory approval of the annuities that were sold
pursuant to the scheme. As a result of these fraudulent acts and practices, certain insurance companies, including VA Issuer, unwittingly issued variable annuities that they would not otherwise have sold.
Horowitz Obtains Confidential ID and Health Data through Deceptive
Practices
19. To implement his plan, Horowitz needed a ready supply of terminally ill persons, unrelated to the investors, to use as annuitants in variable annuity sales. Horowitz recruited certain individuals (“Annuitant Finders”) to identify the terminally ill persons to be used as annuitants. Working with Horowitz, these Annuitant Finders engaged in a scheme to obtain the patients’ confidential ID and Health Data, which they then fraudulently misused. Horowitz needed patients’ Health Data to confirm that the
individuals he designated as annuitants had a terminal medical diagnosis. He needed their ID Data (including social security number and date of birth) to designate them as annuitants
and to submit death benefit claims to the issuers whose annuities he sold.
The California Annuitants
20. In May 2007, Horowitz approached Annuitant Finder 1and described his stranger-owned annuities scheme to him. Because Annuitant Finder 1 worked at a nonprofit 501(c)(3) organization (“Charity”), Horowitz asked Annuitant Finder 1 to assist him
with identifying terminally ill patients and obtaining their confidential ID Data.
21. After a series of closed-door meetings between Horowitz and Annuitant Finder 1 at Charity’s offices in May 2007, Annuitant Finder 1 told his assistant that he was going to start a new charity, Charity 2. Charity 2 was purportedly going to focus on
providing charitable assistance exclusively to hospice care patients.
22. Charity 2 was used in the scheme to obtain patient ID and Health Data. On June 1, 2007, Annuitant Finder 1 filed a fictitious name certificate with the State of California, allowing one of his existing charities to do business under Charity 2’s name.
23. Annuitant Finder 1 created a website for Charity 2 and set up Charity 2 email accounts. The Charity 2 webpage stated that Charity 2 was: an organization dedicated to helping patients with a life limiting illness to live their remainder days in comfort and dignity….
Through the generosity of private and corporate philanthropists
[Charity 2] helps patients who[] have chosen hospice care and are at home or in a facility….
24. In reality, Charity 2 had no private or corporate donors, and its true purpose was to obtain patient ID and Health Data for Horowitz’s use in selling stranger-owned annuities. Charity 2’s website failed to disclose these facts.
25. In July 2007, Annuitant Finder 1 opened a bank account in the name of Charity 2, and funded it with several thousand dollars from his personal bank account.
These funds were to be used for the charitable donations Annuitant Finder 1 planned to offer hospice patients as part of the plan to obtain their ID and Health Data.
26. Beginning in June 2007, Annuitant Finder 1 held Charity 2 out as a charity devoted to providing assistance to hospice patients. Annuitant Finder 1 solicited hospice care providers in Los Angeles, San Francisco and New Orleans by touting Charity 2’s purported charitable services. In contemporaneous emails to those hospice care providers, Annuitant Finder 1 and his assistant described Charity 2 as a “non-profit 501(c)(3) organization.”
27. In June 2007, Annuitant Finder 1 met with the Director of Development of a southern California hospice care provider (“HCP”). During the June 2007 meeting, Annuitant Finder 1 told HCP’s Director of Development that Charity 2 was an organization of some large, very high profile donors, the type of donors whose names are often on the sides of buildings at Universities, that sort of donor, Universities, hospitals. And that in this instance, they wanted to give and remain anonymous in that gift so that they had established [Charity 2]….[Annuitant Finder 1] indicated that they would like to see the patient, they would like to meet the patient. He, specifically. [sic] And the purpose for that was that they could tell – he could tell their donors or his donors who those individuals were that they were actually meeting – so he would be able to tell a story to help receive other donations to continue those donations to come into the individual patient requests
that they were filling.
28. Annuitant Finder 1’s statements to HCP’s Director of Development were false because, among other reasons, Charity 2 had no donors other than Annuitant Finder 1.
29. Annuitant Finder 1 implied that there were conditions on the purported aid to be offered. First, only HCP hospice patients (i.e., those who had been diagnosed with terminal illnesses and were receiving only palliative care in their home), as opposed to
other HCP patients receiving in-home curative care or treatment, were eligible for Charity 2’s donations. Second, Annuitant Finder 1 capped the amount to be donated per patient at between $250-$500. Third, Charity 2 required that HCP provide it with the following
information concerning any candidate for a donation: (i) the patient’s name and address;
(ii) the patient’s date of birth; (iii) the patient’s social security number; (iv) the patient’s medical diagnosis; and (v) confirmation that the patient was receiving hospice care. This
was the information that Respondent Horowitz needed to designate the hospice patients as annuitants. Finally, Annuitant Finder 1 conditioned the donations on his right to visit the HCP patient in question. Annuitant Finder 1 told HCP that he wanted to be able to tell his donors each patient’s “story” to help raise additional donations for other patients. After visiting Charity 2’s website to confirm the legitimacy of the charity, the HCP administrator—grateful for what he understood to be Charity 2’s purely charitable
donations to HCP’s hospice patients—agreed to Annuitant Finder 1’s conditions.
30. Annuitant Finder 1 never told HCP that he planned to forward patient personal identifying information to Horowitz, or that Horowitz intended to sell annuity contracts to third parties who would profit when HCP patients died.
31. Between late July 2007 and at least December 2007, Annuitant Finder 1 met with multiple HCP hospice patients and with certain patients receiving care from other hospice providers. These meetings took place at the patients’ homes. Horowitz attended
many of these meetings.
32. Social workers from HCP also attended the meetings with HCP hospice patients. Annuitant Finder 1 told HCP social workers that he wanted to meet with the patients who were receiving charitable assistance from Charity 2 so he could tell their story to Charity 2’s “donors.” According to one HCP social worker When – at the meeting when we met with the patient in their home, before we met, they, [Annuitant Finder 1] and [Horowitz], met me and stated that the patients – the donors for this money did not want to give to hospitals. They didn’t want to give to big organizations, that they would just receive a nameplate. They wanted to see where their money was being spent; so therefore, [Annuitant Finder 1] and [Horowitz] showed up. They had a box of candy for the patient.
Horowitz was present when Annuitant Finder 1 made these statements to the HCP social worker and knew them to be false. Horowitz did not, however, clarify or correct them in any way.
33. The patients, their families and their HCP health care providers all believed that the purpose of the visits was charitable. However, Horowitz’s true purpose in visiting patients was to confirm that they were in fact dying, and, therefore, that they were suitable annuitants. Horowitz actively concealed his true purpose for attending from HCP and the hospice patients they visited, telling one HCP social worker that he represented persons
“who were going to be making donations.” This statement was materially false because Horowitz did not represent any donors and in fact there were never any donors to Charity 2, other than Annuitant Finder 1. Horowitz’s statement was also materially misleading because he omitted the true purpose for his visit.
34. Unbeknownst to HCP and its patients, after each patient meeting, Annuitant Finder 1 provided Horowitz with the ID and Health Data that he obtained from HCP under false pretenses. Horowitz arranged for Annuitant Finder 1 to send the patient ID and Health Data to Horowitz’s personal email account. Horowitz then used the patient ID and Health Data to sell variable annuities in which the hospice patients were designated as the contract annuitants.
35. Between July 2007 and at least December 2007, Annuitant Finder 1 provided Horowitz with the ID and Health Data of hospice patients in southern California. At least six of these patients were designated as annuitants in at least 18 variable annuities
sold by Horowitz and a second representative whom Horowitz recruited to the scheme, with some of the patients designated as annuitants in multiple policies. Horowitz paid Annuitant Finder 1 at least $130,000 for his services to the scheme.
36. As part of the ruse, Annuitant Finder 1 asked HCP to keep him informed of the health status of each patient whom he had visited, falsely telling HCP that Charity 2’s “donors” wanted to remain apprised of each patient’s story. In reality, Horowitz and Annuitant Finder 1 wanted this information so they would know when each patient died so that Horowitz could timely file annuity death benefit claims for his customers, who then stood to receive payouts on their variable annuity investments. As part of the scheme,
Annuitant Finder 1 obtained death certificates for each of the patients who had been designated as an annuitant and provided the death certificates to Horowitz for his use in filing death benefit claims.
37. HCP, its hospice patients, and their families were completely unaware that Horowitz had sold variable annuities on the lives of HCP hospice patients and that third parties stood to profit from their deaths.
38. HCP would not have released patient ID and Health Data to Annuitant Finder 1 or allowed Horowitz and Annuitant Finder 1 to meet with its patients if it had been aware of the true purpose of Charity 2 and of Horowitz’s scheme. Similarly, the patients and their caregivers would not have allowed Horowitz and Annuitant Finder 1 to meet with them had they known the true purpose of Charity 2 and of Horowitz’s scheme.
Horowitz Travels to Chicago to Recruit Additional Annuitant Finders
39. In Fall 2007, Horowitz decided to grow his variable annuity business by expanding the pool of terminally ill individuals available to be designated as annuitants. He travelled to Chicago, Illinois in October 2007, and met with Annuitant Finder 2, an
executive officer of a privately held company that owned and operated nursing homes in the Chicago area.
40. Horowitz agreed to pay Annuitant Finder 2 in exchange for his
identification of hospice patients and in exchange for supplying Horowitz with the ID & Health Data of terminally ill individuals in the Chicago area. Annuitant Finder 2 recruited an associate, Annuitant Finder 3, to assist him in identifying terminally ill
patients. As part of their arrangement, Annuitant Finders 2 and 3 agreed to keep Horowitz and his associates apprised of the health status of the patient-annuitants, and Annuitant Finder 2 provided Horowitz and his associates with death certificates when the
patients died.
41. Between November 2007 and February 2008, Annuitant Finders 2 and 3 supplied Horowitz, or his associates, with the names and ID and Health Data of at least 10 terminally ill patients in Chicago. These patients were designated as annuitants in at least 7 variable annuities sold through Broker-Dealer 2, and in at least 28 variable
annuities sold by Respondent Cohen. Horowitz paid Annuitant Finder 2 at least $150,000 for his and Annuitant Finder 3’s services to the scheme.
Fraud in the Execution of Broker-Dealer Trade Tickets and Point-of-Sale Forms
Horowitz Falsifies his Broker-Dealer 1 Trade Tickets
42. Between July 2007 and October 2007, Horowitz sold at least 14 deferred bonus variable annuities to his customers through his registration with Broker-Dealer 1.
43. For each of these 14 annuities, Horowitz designated a terminally ill hospice patient as the contract annuitant and used the patient ID and Health Data that he and Annuitant Finder 1 had fraudulently obtained from hospice care providers, through Charity
2 or directly from patients or their family caregivers. By designating patients with terminal medical diagnoses as the contract annuitants, Horowitz sought to guarantee that his customers would receive death benefit payouts within months of the annuities sales. For his part, Horowitz stood to receive lucrative upfront commissions on each stranger-owned annuity he sold.
44. Horowitz marketed his stranger-owned annuities investment strategy to customers as an opportunity for obtaining short-term investment gains with a hedge against investment losses, and Horowitz’s customers intended to use the variable annuities as short-term investment vehicles. However, Horowitz also knew that, in the event the “stranger annuitants” did not die within a matter of months, his customers would be locked into unsuitable, highly illiquid long-term investment vehicles that they would be unable to
exit without paying substantial surrender charges.
45. To ensure that its registered representatives were selling suitable investments to their customers, and to ensure that the investment was being used for its intended purpose, Broker-Dealer 1 required its principals to review and approve each proposed sale of an annuity. As part of this process, Broker-Dealer 1 mandated that
Horowitz complete an electronic trade ticket, including a suitability questionnaire, for every variable annuity that he sold. A Broker-Dealer 1 principal reviewed each trade ticket. Variable annuity applications could be submitted to the issuing insurance company only after principal approval of the ticket.
46. Each trade ticket required Horowitz to state how long the customer intended to hold the variable annuity being purchased. As part of the review process, Broker-Dealer 1’s principals closely scrutinized the response to this question to ensure, among other
things, that the customer intended to hold the investment for a period of time exceeding the surrender charge period in the deferred variable annuity contract being purchased. The 14
annuities that Horowitz sold through Broker-Dealer 1 had a nine year surrender charge period.
47. Knowing that his stranger-owned annuities sales would be rejected by Broker-Dealer 1’s reviewing principals if he provided truthful timing information concerning his customers’ intention to use the annuities as short-term investment vehicles, Horowitz submitted trade tickets falsely stating that his customers intended to hold their annuities from anywhere between 20 and 40 years. Horowitz submitted at least 14 trade tickets containing these materially false statements.
48. The same trade tickets also required Horowitz to state the relationship between the owner of the annuity and the annuitant. With respect to each trade ticket that Horowitz submitted for principal review, he falsely stated that there was a “partner”
relationship between the owner and the annuitant.
49. In fact, there was no relationship, either familial or business, between the customers purchasing the annuities from Horowitz and the terminally ill hospice patients designated as annuitants. Indeed, the hospice patients had no idea that they had been designated as annuitants or that investors stood to profit from their deaths. Broker-Dealer 1’s principals would not have approved Horowitz’s annuities sales if they had known that
there was no relationship between the annuity purchaser and the annuitant.
50. By providing false information about his customers, Horowitz fraudulently obtained principal approval of his stranger-owned annuities sales, which were then submitted to the variable annuity issuer. As a result of Horowitz’s fraudulent acts and practices, the issuer then unwittingly issued stranger-owned variable annuities to Horowitz’s customers and paid out substantial upfront sales commissions to Horowitz.
Jane Doe 1: An Illustration of How Horowitz Carried Out the Scheme at Broker-Dealer 1
51. By way of example, Annuitant Finder 1 was approached by John Doe 1, who requested assistance for his wife, Jane Doe 1, who was dying of colon cancer.
52. John and Jane Doe 1 had a young son, and John Doe 1 had a full-time job.
Jane Doe 1’s condition had reached the point where she required 24-hour nursing, and John Doe 1 was requesting Annuitant Finder 1’s help with half of the nursing costs.
53. Annuitant Finder 1 told Horowitz about Jane Doe 1’s condition and Horowitz decided to designate Jane Doe 1 as the annuitant in a variable annuity contract that he sold.
54. To that end, in late July 2007, Annuitant Finder 1 and Horowitz met with John and Jane Doe 1 at their home in Los Angeles, under the pretense of providing charitable assistance. Horowitz noted the meeting in his day-timer.
55. During their brief meeting, Annuitant Finder 1 discussed the aid that Jane Doe 1 would need, but neither Annuitant Finder 1 nor Horowitz ever mentioned variable annuities, or proposed designating Jane Doe 1 as an annuitant in variable annuities to be sold to third parties.
56. Shortly after this meeting—and unbeknownst to Jane and John Doe 1—Annuitant Finder 1 emailed Jane Doe 1’s name and ID Data (including her social security number and date of birth) to Horowitz’s personal email account.
57. On July 31, 2007, Horowitz sold a $1.7 million variable annuity contract to a close family member in which Jane Doe 1 was designated as the annuitant.
58. In order to process this annuity sale, Horowitz completed an electronic trade ticket on which he identified Jane Doe 1 as the investor’s “partner.” This statement was false because there was no business, familial or other relationship between Jane Doe 1 and
the investor.
59. In response to the investment access question on the trade ticket, Horowitz stated that the investor intended to hold the annuity for “25 years.” In fact, as Horowitz knew, the investor intended to hold the investment only until Jane Doe 1 died, and
Horowitz had selected Jane Doe 1 to be the annuitant because he understood her death to be imminent.
60. Based on these false representations, a Broker-Dealer 1 principal approved the trade ticket and Broker-Dealer 1 electronically submitted the investor’s variable annuity application to the variable annuity issuer, which thereafter unwittingly issued a strangerowned annuity contract.
61. The variable annuity issuer subsequently paid out a commission to Broker-Dealer 1, with Horowitz netting over $28,500 in commissions on the sale of the annuity.
62. On August 5, 2007, four days after the annuity contract became effective, Jane Doe 1 died. John Doe 1 notified Annuitant Finder 1 of Jane Doe 1’s death via email on August 14, 2007. John Doe 1 requested approximately $1,200, representing half the cost of the 24-hour nursing coverage for Jane Doe 1.
63. Annuitant Finder 1 never responded to John Doe 1’s August 14 email.
Having received no aid or assistance, and no response from Annuitant Finder 1, John Doe 1 wrote to Annuitant Finder 1 again on August 21 and told him to “use the money for someone else that is more in need.”
64. Unbeknownst to John Doe 1, Annuitant Finder 1 thereafter obtained a copy of Jane Doe 1’s death certificate and provided it to Horowitz. Horowitz used the death certificate to prepare a death benefit claim on the investor’s annuity, which was then submitted to the issuer.
65. On October 19, 2007, the investor received a death benefit payout on the “Jane Doe 1” annuity of $2,002,073.85. The investor realized a net profit on his initial $1.7 million investment of $302,073.85—representing a 17.7% rate of return over a period of
two and a half months.
Horowitz Falsifies Broker-Dealer 2 Point-of-Sale Forms
66. In mid-November 2007, Horowitz’s supervisors at Broker-Dealer 1
discovered that he was selling stranger-owned annuities and instructed him to immediately stop doing so.
67. At the time, Horowitz had over $24 million in variable annuities business pending at Broker-Dealer 1.
68. Unable to sell additional stranger-owned annuities through Broker-Dealer 1, Horowitz sought assistance from a senior associated person of Broker-Dealer 2 (“Senior Rep”) in completing the sale of stranger-owned annuities through an affiliate of Broker-Dealer 2.
69. Working with the office staff of the Broker-Dealer 2 affiliate, Respondent Horowitz completed the Broker-Dealer 2 new account forms and deferred variable annuity applications for the deferred variable annuities he had initially intended to sell to his
customers through Broker-Dealer 1.
70. In each of those annuities, Horowitz designated a hospice patient as the contract annuitant, utilizing patient ID and Health Data that the Annuitant Finders had obtained and supplied to him. Horowitz did this in an effort to structure the annuities as
short-term investment vehicles.
71. As was the case at Broker-Dealer 1, variable annuity sales at Broker-Dealer 2 were subject to principal review and approval to ensure that the proposed sale was suitable and that the investment was being used for its intended purpose. Broker-Dealer 2 representatives were required to complete a new account form that required the representative to state the customer’s investment time horizon (i.e., when the customer anticipated accessing their investment) and to disclose certain financial profile information.
72. Broker-Dealer 2 also required its brokers to complete a “Variable Annuity Acknowledgement” form, specifically identifying the surrender charge period associated with the annuity being purchased. As part of the review process, a Broker-Dealer 2
principal closely scrutinized each customer’s investment time horizon to ensure that it exceeded the surrender charge period in the deferred variable annuity contract being purchased.
73. Knowing that these stranger-owned annuity sales would be rejected by Broker-Dealer 2’s reviewing principals if he provided truthful investment time horizons, Horowitz prepared new account forms falsely stating that the customers intended to hold
their annuities from anywhere between 9 to 45 years.
74. The Senior Rep then recruited his subordinate business partner (“Signing Rep”) to sign the new account forms and variable annuity applications as the selling registered representative. The Signing Rep agreed to do so in exchange for a percentage of the commissions to be earned on these annuities sales. The Signing Rep did not complete any variable annuity application paperwork or Broker-Dealer 2 new account forms, and he did not consider the purchasers of the annuities to be his customers.
75. By providing false customer information on the Broker-Dealer 2 new account forms, and by using a nominee broker to sign off on the required Broker-Dealer 2 point-of-sale paperwork, Horowitz fraudulently obtained principal approval of strangerowned
annuities sold through Broker-Dealer 2.
76. Working in this manner, between late November 2007 and mid-December 2007, Horowitz was able to effect the sale of at least 12 additional stranger-owned variable annuities – 2 of which were sold to a close Horowitz family member – through Broker-Dealer 2. During the same time period, Horowitz was not an associated person of Broker-Dealer 2, nor was he separately registered with the Commission as a broker or dealer.
Jane Doe 2: An Illustration of how Horowitz Continued the Scheme through Broker-Dealer 2
77. On November 19, 2007—after Horowitz had been instructed by Broker-Dealer 1 to stop selling stranger-owned annuities—Annuitant Finder 1 met with Jane Doe 2, a terminally ill HCP hospice patient, under the pretense of providing charitable assistance through Charity 2. Horowitz travelled with Annuitant Finder 1 to Jane Doe 2’s home.
78. Jane Doe 2, dying of stomach cancer, had previously told her HCP social worker about her desire to take her children to Disneyland before she passed away. HCP notified Charity 2 about Jane Doe 2’s request for assistance, after first determining that she likely would not live long enough to have her request processed through another wellknown charitable foundation.
79. Charity 2 paid $405 towards the cost of the trip to Disneyland, which Jane Doe 2 was able to take with her children. As a condition of the donation, Annuitant Finder 1 required HCP to provide him with Jane Doe 2’s ID and Health Data prior to the visit and,
thereafter, met with Jane Doe 2 at her home. During the brief meeting, neither Annuitant Finder 1 nor Horowitz mentioned variable annuities or proposed designating Jane Doe 2 as an annuitant in variable annuities to be sold to third parties.
80. On the drive back from Jane Doe 2’s home, Horowitz asked Annuitant Finder 1 if he wanted to purchase an annuity on Jane Doe 2’s life. Annuitant Finder 1 agreed to do so.
81. On the same day, Horowitz arranged for Annuitant Finder 1 to purchase a deferred variable annuity through Broker-Dealer 2, in which Jane Doe 2 was designated as the contract annuitant. Annuitant Finder 1 provided Horowitz with Jane Doe 2’s ID
and Health Data (including date of birth, address and social security number) that Horowitz needed in order to designate her as the annuitant in Annuitant Finder 1’s annuity. Annuitant Finder 1 invested $1 million in the annuity.
82. To ensure that Annuitant Finder 1’s variable annuity application was approved by Broker-Dealer 2, Horowitz made several material false statements on Annuitant Finder 1’s Broker-Dealer 2 new account form. First, Horowitz falsely stated that Annuitant Finder 1 had a “27” year investment “time horizon” on his annuity. In fact, Annuitant Finder 1 intended to utilize the annuity as a short-term investment vehicle of no more than several months.
83. Second, Horowitz falsely stated that Annuitant Finder 1’s net worth was “$15,000,000” and that Annuitant Finder 1 had liquid assets of “$7,500,000.” In fact, Annuitant Finder 1’s total net worth was no more than $2 million; he had liquid assets of
no more than $750,000 to $1 million; and he had margined his brokerage account to obtain the funds to purchase the annuity.
84. Horowitz falsely inflated Annuitant Finder 1’s financials because he knew that Broker-Dealer 2’s principals were unlikely to approve a $1 million investment in an illiquid, long-term investment vehicle by a customer with liquid assets equal to or less than that amount.
85. Finally, Horowitz had the Signing Rep sign off as the selling representative on Annuitant Finder 1’s new account form and variable annuity application while knowing that Annuitant Finder 1 had never spoken with the Signing Rep concerning the annuity and
that the Signing Rep did not consider Annuitant Finder 1 his customer.
86. Based on Horowitz’s and the Signing Rep’s false representations, a Broker-Dealer 2 principal approved Annuitant Finder 1’s variable annuity purchase, and the variable annuity application was submitted to the issuer.
87. On or about November 26, 2007, the issuer unwittingly issued a strangerowned deferred variable annuity contract to Annuitant Finder 1 in which Jane Doe 2 was the designated annuitant. Because he invested his $1 million in a “bonus” annuity, Annuitant Finder 1’s account was credited with $50,000.
88. On December 20, 2007, Jane Doe 2 died. Annuitant Finder 1 obtained a copy of her death certificate and provided it to Horowitz. Horowitz used the death certificate to prepare a death benefit claim on Annuitant Finder 1’s “Jane Doe 2” annuity,
which was then submitted to the issuer.
89. Annuitant Finder 1 subsequently received death claim payouts from the issuer totaling $1,050,322.60, realizing a net profit of over $50,000 on his initial $1 million investment.
Cohen’s Role
90. By early Fall 2007, Horowitz had sold over $20 million of the strangerowned variable annuities to individual investors but desired to pump greater capital into the scheme. Searching for a large source of financing, Horowitz began pitching his scheme to
institutional investors.
91. On or about October 25, 2007, Horowitz met with the principals of two affiliated hedge funds in New York City. As a result of the meeting, the principals decided to establish an affiliated entity, Institutional Investor 1, to facilitate the funds’ joint investment in Horowitz’s annuity scheme.
92. In December 2007, a certain variable annuity issuer terminated Horowitz’s and the Signing Rep’s appointments to sell its variable annuity products after determining that Horowitz and the Signing Rep had been selling stranger-owned annuities. Another variable annuity issuer subsequently terminated Horowitz’s appointment to sell its annuities as well.
93. Unable to sell annuities through Broker-Dealer 1 or through the Signing Rep, Horowitz sought out a new broker through whom he could perpetuate his scheme.
94. In December 2007, Horowitz met with Cohen in Las Vegas and described his stranger-owned annuities investment strategy to him. At the time, Cohen was a registered representative with Broker-Dealer 3.
95. Horowitz told Cohen that he had a “hedge fund” client, who wanted to invest in stranger-owned variable annuities on a short-term basis. Horowitz told Cohen that Horowitz or his associates would supply Cohen with the customers and the hospice
patient annuitants, while Cohen would serve as the registered representative on the additional tranche of stranger-owned variable annuities sales. In exchange, Cohen would pay Horowitz’s associates a “consulting fee.” Cohen agreed to the arrangement.
96. Between January and February 2008, Cohen, while an associated person of Broker-Dealer 3, sold at least 28 deferred variable annuities contracts to nominees of Institutional Investor 1, utilizing the deferred variable annuity products of at least 7
different insurance companies. Collectively, these nominees purchased approximately $40 million in variable annuities.
97. In each of the annuities he sold, Cohen designated a hospice or nursing home patient as the contract annuitant, utilizing patient ID and Health Data supplied to Cohen by Horowitz’s associates (who, in turn, had received the data from Annuitant Finders 2 and 3). Accordingly, Cohen knew that the annuities were being purchased with the intention of using them as vehicles for short-term investment.
98. As was the case at Broker-Dealers 1 and 2, variable annuities sales at Broker-Dealer 3 were subject to principal review to ensure that the proposed sale was suitable and that the investment was being used for its intended purpose. With respect to each annuity contract that he sold, Cohen was required to complete a “variable annuity point of sale” form. Among other information, Cohen was required to state when his customers intended to begin accessing their annuity investment, and whether they intended to do so during the surrender charge period.
99. As part of the principal review, Broker-Dealer 3 principals scrutinized the investment access information that Cohen provided on behalf of his customers to ensure that that each customer would not need access to their investment during the surrender charge period in the annuity being purchased. Each of the variable annuity products that Cohen sold had a surrender charge period of at least 7 years.
100. Knowing that Broker-Dealer 3 would not approve his variable annuity sales if he provided truthful investment access information for his customers, Cohen provided false information regarding how soon the customers intended to access the investment (i.e., not before “11 to 15 years”) on each of the 28 Broker-Dealer 3 Annuity-Point of Sale” forms that he completed.
101. By providing false investment access information for the nominees of Institutional Investor 1, and by failing to disclose that they intended to access their annuities well within the surrender charge period, Cohen was able to fraudulently obtain
principal approval of his stranger-owned annuities sales. As a result of Cohen’s fraudulent acts and practices, the insurance companies whose variable annuities Cohen sold unwittingly issued stranger-owned variable annuities to Cohen’s customers, and paid out substantial upfront sales commissions to Cohen.
Ill-Gotten Gains
102. Horowitz and Cohen earned lucrative upfront commissions on each stranger-owned variable annuity they sold. These commissions were paid by the insurance companies that unwittingly issued the stranger-owned annuities to the representatives’ customers. The Signing Rep was also paid commissions on the stranger-owned variable annuities he purported to sell through Broker-Dealer 2. As alleged above, those sales were, in fact, facilitated by Horowitz. The Signing Rep kept only 10% of those commissions and paid the balance over to Broker-Dealer 2’s affiliate, which was managed by the Senior Rep, who received more than 20% of the aforementioned commissions.
103. The table below shows the total number of annuities sold by each representative, the total value of the annuities each representative sold, and the total commissions they received on their stranger-owned variable annuity sales.
Registered Representative
Total # of Variable
Annuities Sold
Collective Initial
Investment Value of
Contracts Sold
Total Commissions
Realized
Horowitz 14 over $20,000,000 over $300,000
Signing Rep 12 $28,000,000 over $127,000
Cohen 28 over $35,000,000 over $700,000
104. The registered representatives collectively received in excess of $1 million in upfront commissions on more than $80 million in stranger-owned annuity contracts they sold.
105. These commissions were obtained only through the fraudulent and deceptive conduct described herein.
VIOLATIONS
106. As a result of the conduct described above, Horowitz and Cohen each willfully violated Sections 17(a)(1) and 17(a)(2) of the Securities Act, which make it unlawful for any person, in the offer or sale of any securities, directly or indirectly, (1) to employ devices, schemes or artifices to defraud, or (2) to obtain money or property by means of any materially false statement or materially misleading omission.
107. As a result of the conduct described above, Horowitz and Cohen each willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, which make it unlawful for any person, directly or indirectly, in connection with the purchase or sale of a security, to (a) employ devices, schemes, or artifices to defraud, (b) make untrue statements of material fact or omit to state a material fact necessary in order to make statements made, in light of the circumstances under which they were made, not misleading, or (c) engage in acts, practices or courses of business which operate or would operate as a fraud or deceit upon persons.
108. As a result of the conduct described above, Horowitz willfully violated Section 15(a) of the Exchange Act, which makes it unlawful for any person, directly or indirectly, while acting as a broker or dealer, to effect transactions in, or to induce or attempt to induce the purchase or sale of, securities when they are not registered with the Commission as a broker or dealer or associated with any entity registered with the Commission as a broker or dealer.
109. As a result of the conduct described above, Horowitz willfully aided and abetted and caused Broker-Dealer 1’s violations of Section 17(a) of the Exchange Act and Rule 17a-3(a)(6) thereunder, and Cohen willfully aided and abetted and caused Broker-Dealer 3’s violations of the same provisions. Section 17(a) of the Exchange Act and Rule 17a-3(a)(6) thereunder require that every registered broker or dealer make and keep a memorandum of each brokerage order, and of any other instruction, given or received for the purchase or sale of securities. Implicit in these provisions is the requirement that information contained in a required record or report be accurate.
110. As a result of the conduct described above, Horowitz willfully aided and abetted and caused Broker-Dealer 1’s and Broker-Dealer 2’s violations of Section 17(a) of the Exchange Act and Rule 17a-3(a)(17) thereunder. Section 17(a) of the Exchange Act and Rule 17a-3(a)(17) thereunder require that every registered broker or dealer, and for each account with a natural person as a customer or owner, make and keep an account record, including, among other required information, the account owner’s name, tax identification number, address, annual income, net worth, and the account’s investment objectives. Implicit in these provisions is the requirement that information contained in a required record or report be accurate.
III.
In view of the allegations made by the Division of Enforcement, the Commission deems it necessary and appropriate in the public interest that public administrative and cease-and-desist proceedings be instituted to determine:
A. Whether the allegations set forth in Section II hereof are true and, in connection therewith, to afford Respondents an opportunity to establish any defenses to such allegations;
B. What, if any, remedial action is appropriate in the public interest against Respondents pursuant to Section 15(b) of the Exchange Act including, but not limited to, disgorgement and civil penalties pursuant to Section 21B of the Exchange Act;
C. What, if any, remedial action is appropriate in the public interest against
Respondents pursuant to Section 203(f) of the Advisers Act including, but not limited to, disgorgement and civil penalties pursuant to Section 203 of the Advisers Act;
D. What, if any, remedial action is appropriate in the public interest against Respondents pursuant to Section 9(b) of the Investment Company Act including, but not limited to, disgorgement and civil penalties pursuant to Section 9 of the Investment
Company Act;
E. Whether, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act Respondent Horowitz should be ordered to cease and desist from committing or causing violations of and any future violations of Section 17(a) of the Securities Act and Sections 10(b), 15(a) and 17(a) of the Exchange Act and Rules 10b-5 and 17a-3 thereunder; whether Horowitz should be ordered to pay a civil penalty pursuant to Section 8A(g) of the Securities Act, Section 21B(a) of the Exchange Act, Section 203(i) of the Advisers Act, and Section 9(d) of the Investment Company Act; and whether Horowitz should be ordered to pay disgorgement pursuant to Section 8A(e) of the Securities Act, Sections 21B(e) and 21C(e) of the Exchange Act, Section 203 of the Advisers Act, and Section 9 of the Investment Company Act; and F. Whether, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act Respondent Cohen should be ordered to cease and desist from committing or causing violations of and any future violations of Section 17(a) of the Securities Act and Sections 10(b) and 17(a) of the Exchange Act and Rules 10b-5 and 17a-3 thereunder; whether Cohen should be ordered to pay a civil penalty pursuant to Section 8A(g) of the Securities Act, Section 21B(a) of the Exchange Act, and Section 9(d) of the Investment Company Act; and whether Cohen should be ordered to pay disgorgement pursuant to Section 8A(e) of the Securities Act, Sections 21B(e) and 21C(e) of the Exchange Act and Section 9 of the Investment Company Act.
IV.
IT IS ORDERED that a public hearing for the purpose of taking evidence on the questions set forth in Section III hereof shall be convened not earlier than 30 days and not later than 60 days from service of this Order at a time and place to be fixed, and before an Administrative Law Judge to be designated by further order as provided by Rule 110 of the Commission’s Rules of Practice, 17 C.F.R. § 201.110.

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