Two executives of an Iowa life insurance company will pay a combined $1 million in penalties as part of civil settlements with the U.S. Securities and Exchange Commission regarding misleading proxy disclosures to investors.

David Noble

The settlement, announced March 3, ended the case involving allegations that Wes Des Moines, Iowa-based American Equity Investment Life Holding Co. and company executives David Noble and Wendy Waugaman inadequately disclosed details about the acquisition of another company resulting in a “financial boon” for Noble.

Noble is American Equity’s founder, current chairman and former chief executive officer and Waugaman is the company’s current CEO and former chief financial officer.

American Equity is an underwriter of index and fixed-rate annuities that sells its products in 50 states and Washington, D.C., through two life insurance subsidiaries, American Equity Investment Life Insurance Co. and American Equity Investment Life Insurance Co. of New York.

According to the SEC’s complaint, American Equity did not disclose that immediately prior to its $1 million acquisition of a financing company wholly-owned by Noble in September 2005 that he received a $2.5 million distribution from the acquired company. The SEC alleges that American Equity did not disclose that the acquired company had a large deficit at the time of the distribution and that the acquisition of Noble’s company effectively relieved him of substantial potential personal liability for the acquired company’s debts.

Merri Jo Gillette, director of the SEC’s Chicago office, said in a statement that the actions of Noble, Waugaman and the company “denied shareholders their right to complete and accurate information about related party transactions.

“Companies cannot make misleading and incomplete disclosures about transactions that financially benefit their top executives,” she said.

‘Modestly compensated’ claim disputed

The SEC alleged that American Equity’s 2006 proxy statement disclosure about the acquisition was materially misleading because it failed to fully disclose the financial benefits to Noble from the acquisition. It also alleged that the company’s proxy statement disclosure relating to Noble’s compensation, described as “modestly compensated and unwilling to accept additional salary or bonus,” was materially misleading in light of the benefits he received from the acquisition.

American Equity, Noble, and Waugaman agreed to settle the charges against them without admitting or denying the allegations in the SEC’s complaint.

All three agreed to be permanently enjoined from committing future violations of the provisions of the federal securities law prohibiting materially false or misleading statements or omissions in proxy statements. In addition, Noble will pay a $900,000 civil penalty and Waugaman will pay $130,000, according to the SEC.

“This settlement concludes the SEC’s review of this matter,” said Robert L. Howe, American Equity’s lead independent board member, in a statement. “The inquiry concerned issues that occurred more than four years ago. We are pleased that this resolution puts this matter behind us. The company is focused on its ongoing success and we look forward to continuing to serve our investors, independent agents, policyholders and employees.”