The AARP: Exposing Leonard Davis

 Until the early 1980s, the official "co-founder" of AARP was Leonard Davis, a young insurance agent that figured out how to create an insurance policy for NRTA members.  Davis financed the creation of AARP, and for much of its existence, 

Charles Morris
LInk: Charles Morris

 AARP was almost completely under Davis's control, operating as a sales network to hawk very high-priced insurance and a host of other Davis-created products to old people. Davis was forced to break his ties to AARP in the early 1980s, and now seems to be something of a non-person in the official organizational history.  For the past decade, AARP has been trying hard to live down its early history." [page 10]

"Leonard Davis is a Palm Springs multi-millionaire who doesn't like talking to journalists or even having his picture taken. Davis has a somewhat checkered past. He was once indicted for perjury although he was acquitted at trial. (The judge in the non-jury trial said that the indictment was entirely justified but found that the prosecutor had fallen short of a "reasonable doubt" standard).  And after the New York State Insurance Commission brought a charge of "untrustworthiness" in 1968, Davis agreed to surrender his insurance license without admitting the charge." [page 23]

"One expert on marketing to the aged called the AARP/Colonial Penn setup "the slickest marketing scheme I've ever seen.

Although the Colonial Penn companies were theoretically separate from AARP, Davis, to protect his marketing bonanza, wrapped Colonial Penn tentacles firmly around every aspect of the operation. According to a 1977 lawsuit by former executive director, Harriet Miller, Davis had carefully insulated the board from AARP's financial operations, and at the same time he had made them almost utterly dependent on Colonial Penn.  Contracts drafted for AARP by lawyers close to Davis, for example, delegated the right to select insurance carriers for AARP and NRTA members to a private company called National Association Plans Inc - a subsidiary of Colonial Penn.

In the early 1970s, Davis shored up his control by introducing a new law firm as AARP's outside counsel. The firm, which went through several name changes, maintained offices in the same Madison Avenue building that house Colonial Penn's New York offices, ARRP's local offices, and Davis's personal offices and those of the Davis Family Foundation." [page 27]

"A 1974 United States Senate subcommittee investigation into mail-order life insurance policies found that, of the 119 policies analyzed, Colonial Penns ranked close to the bottom of the list. Pennsylvania insurance commissioner Herbert Denenberg said that life insurance was a waste of money for most older people with limited incomes and few obligations. Other large senior organizations either stop their life insurance programs or recommended that their members not buy any. Money magazine analyze the ARRP Medicare supplement or "Medigap" policy in 1975 and found it we was so it was the worst but one in the universe that it sampled." [page 30]

"A scathing report in the January 1976 issue of Consumer Reports reviewed, in much greater detail than Money had, 16 different "Medigap" policies, including Colonial Penn's glagship health insurance product, and found that "taken as a whole, the AARP policies offer the least protection." Even worse, CR included a full-page insert that blasted the relationship between AARP and Colonial Penn, detailing all of Davis' AARP dependent businesses." [page 32]

"The public relations problems would have been more manageable if Colonial Penn had not been making so much money. AARP, which to all appearances was a dowdy nonprofit organization serving the elderly, had been turned into a money-minting machine - it was the alchemists trick, said one reporter, converting base metal into gold.  From 1967 to 1976, Colonial Penn's revenue had grown a stunning tenfold, from $46 million to $445 million. Pretax income had grown from almost nothing in 1967 to more than $50 million. Almost all of its revenues - 92% of its health insurance revenues - came from AARP members. An analysis by Forbes magazine in 1976 showed that Colonial Penn, measured by average 5-year return-on-capital, was the most profitable company in the country." [page 33]

"Davis, with about 19.5% of the company, was the controlling shareholder. The market value of his shares, depending on the ups and downs of the stock market, fluctuated between $90 million and $125 million in 1975 and 1976. And that did not count the large blocks of stock Davis had already unloaded. In 1970-72 alone, the Davis family realized more than $80 million from the sale of Colonial Penn stock." [page 34]

"The Hawaii chapter of the NRTA passed a resolution to investigate the Colonial Penn relationship... Lawsuits stirred the pot further. A 1977 class action suit and an antitrust suit failed on technical grounds. A much more serious legal action was the one by Harriet Miller, who was ousted from her executive directorship in 1977...Miller contended that she gradually became aware that the Colonial Penn relationship was not in the best interest of AARP's members. She thought the representations being made to postal inspectors about the non-commercial nature of AARP mailings we're simply not true. When she tried to carve out a course of action independent of Davis's representatives, she was harassed, overloaded with petty assignments, and eventually ousted from her job." [pages 36-37]

"As often as not, it is the random events that turn out to be decisive. In 1977, Andy Rooney, of CBS's 60 Minutes, was one of the most trusted journalist in the country, with an audience many times bigger than that of narrowly focused, semi-technical journals like Consumer Reports. Rooney, whose face still reddens with anger when he recalls his investigation into AARP, was taping some typical Washington bureaucratic story in 1977, and needed an outside shot. His crew picked a bland marble Washington office building on K Street that had the kind of broad, open entrance expanse to frame the shot they wanted. They did not know it was the AARP office building and Rooney himself had never heard of the organization. "But when we started shooting," Rooney says, "all kinds of people came running out of the building saying we couldn't shoot there, which was ridiculous, because we were on the sidewalk. They acted like they had something to cover up. I decided right there that I was going to find out more about them. "

The 60 Minutes expose of AARP which aired on May 14, 1978, at the seven o'clock prime time news hour under the title "Super Salesman," was devastating.  A former Colonial Penn executive remembers it was a turning point in the company's fortunes. AARP and Colonial Penn made all the wrong tactical moves. They tried stonewalling Rooney, refusing to let officers and directors speak with him and making him and his crew crew cool their heels for 3 days at the officers convention without an interview."  [page 39]

"In any case, AARP national officers, fed up with the Colonial Penn domination, were quietly feeding Rooney information and rumors. An AARP official who finally granted an interview to deny influenced by Davis insisted on holding it in his own office, which was dominated by a framed oil painting of Leonard Davis. The AARP volunteers and members Rooney did manage to talk to clearly had no idea of the role Colonial Penn played in their organization. Most tellingly, AARP members had no idea that editorial like articles in the health insurance on health insurance in modern maturity were actually Colonial Penn advertisements." [page 40]

"The Rooney show marked the beginning of the end of the Colonial Penn/AARP relationship.  In a related development,  the postal service at begun a serious investigation into the Colonial Penn/AARP abuse of the nonprofit mailing privilege. AARP insisted that the investigation was just a routine thing, but a postal investigator stressed on Rooney's show that "it's not a routine check.  It's an in-depth study that's been going on for 2 years."  In fact, the investigation continued until 1981 and resulted in the recommendation to the US District Attorney for a criminal fraud action against AARP and Colonial Penn." [page 41]

"Davis officially retired from involvement with Colonial Penn in 1983, and a Florida utility bought out the company shortly thereafter, while Davis settled in Florida to concentrate on his extensive philanthropic activities.  Shorn of its profitable AARP connection, Colonial Penn quickly fell into serious financial difficulties and for a while its survival was in question.

Although Colonial Penn's fingerprints stayed on the organization for a long time...[AARP] began a serious redirection in the 1980s...While Andrus's picture is everywhere and she is quoted frequently, I could not find a single mention of Davis anywhere. The former honorary president, whom the official histories once billed as Andrus's is closest collaborator is now a non-person." [page 42]

The AARP, by Charles R. Morris, on Amazon.

"In The AARP, Charles Morris explains why. The culprit? The American Association of Retired People (AARP). According to Morris, until the television program "60 Minutes" blew the lid off of AARP in 1978, the organization was basically a front for selling overpriced insurance to the elderly--its political activism on behalf of retired people largely a cynical effort to establish credibility. "