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Because she cashed out longstanding holdings such as stocks and certificates of deposit to buy the annuities, Whittington was left without enough cash to pay the resulting taxes and fees, court records show.

"Who needs to have everything they have flushed into a 10-year annuity when they're 80?" Splawn asked.

Family dispute or not

Reinheimer, 47, contends the issue centers on a family dispute. The agent, whose clients have had premiums from companies returned at least five times after complaints to the state, said he met Whittington at a sales seminar at the Raleigh restaurant Casa Carbone in July 2006.

"She never showed any signs of incompetency," Reinheimer said of his client. "One of the nieces wanted to get control of the estate, and that's why all this came about."

Splawn hotly denies this charge, and family members back her up. In a meeting earlier this year, Reinheimer convinced state insurance regulators that his version of events was accurate.

"The Agent Services Division met with the agent and his administrative assistant on March 3, 2008, and determined that the Splawn complaint was based on a family dispute," insurance department official Etta Maynard wrote in a memo last month. "Additionally, concerns associated with the annuities involved a question of fact. ASD found Mr. Reinheimer and his assistant to be very credible."

Federal regulators and consumer groups are calling for stricter regulation of complicated annuity products, which have drawn increasing investments in the billions of dollars.

"This growth has, unfortunately, been accompanied by growth in complaints of abusive sales practices," the Security and Exchange Commission's proposal for increased regulation says. "These include claims that the often-complex features of these annuities have not been adequately disclosed to purchasers, as well as claims that rapid sales growth has been fueled by the payment of outsize commissions."

Without additional regulation, seniors and others who venture into complicated retirement investments do so at their own risk.

"Because this is such a complex product, a lot of times the people who purchase these types of products hear what they want to hear," said Pearson, with the state Department of Insurance. "We try to caution them and their family members about making these decisions. What may be right for one person at one age and situation might not be right for someone else."

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