Imagine waking up to $180 million. For Paul and Sue Rosenau, a down-to-earth couple from Waseca, Minnesota, this wasn't just a fantasy in May 2008. It was a reality that felt like a message from above.
They won the Powerball on the exact fifth anniversary of their granddaughter Makayla’s death. She was only two when Krabbe disease, a brutal neurological disorder, took her away. Paul, a heavy equipment operator who spent his days smelling diesel fuel and moving dirt, suddenly held a ticket worth a fortune. They didn't go buy a fleet of Ferraris. Honestly, they did the opposite.
The paul and sue rosenau investment strategy was supposed to be a legacy of healing. They took the lump sum—about $59.6 million after the taxman took his cut—and immediately moved to put $26.4 million into a foundation. They wanted to find a cure for the disease that killed Makayla. But while their hearts were in the right place, the financial world they stepped into was far more predatory than they ever imagined.
The Handshake That Cost Millions
Paul and Sue were "handshake people." They trusted the folks in their community. So, they turned to a local financial advisor in Waseca who was affiliated with Principal Financial Group. It seemed safe. Principal is a huge name, right?
They wanted to be good stewards. They told their advisor they didn't want to lose money. They wanted to fund research. Instead of a diversified, safe portfolio, the advisor steered nearly all of the foundation’s $26 million into variable annuities and life insurance policies.
If you aren't a finance nerd, here is the short version: variable annuities are often high-commission products. For a tax-exempt non-profit foundation, they make almost zero sense. Why? Because annuities offer tax-deferral benefits that a foundation—which already doesn't pay taxes—doesn't need. You're basically paying for a "benefit" you can't use, while the advisor rakes in massive commissions.
A Foundation Built on Grief and Hope
The Rosenaus founded the Legacy of Angels Foundation (now the Rosenau Family Research Foundation). They weren't just writing checks; they were traveling the country, meeting scientists, and pushing for newborn screenings.
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Basically, if a baby is diagnosed with Krabbe at birth, there’s a chance for treatment. If you wait for symptoms? It’s usually too late.
- They gave away almost everything.
- The couple kept only about $10 million for themselves.
- The rest went to the church, the local hospital, and the quest for a cure.
- By 2016, they had granted over $10 million to researchers.
But behind the scenes, their "investment" was bleeding. The advisor was allegedly churning the account—swapping one annuity for another in as little as 30 days—just to generate more fees. It was a mess.
The Legal Battle and the $7.3 Million Wake-Up Call
Sue Rosenau passed away in 2018 after her own battle with cancer. Paul was left to pick up the pieces, and he eventually realized things weren't right. The foundation's assets were being wasted on "unsuitable" insurance products.
In 2022, Paul filed a complaint with FINRA (the Financial Industry Regulatory Authority). He argued that Principal Securities failed to supervise the advisor, who had been named "Agent of the Year" while he was supposedly draining the foundation's potential returns.
The result? In June 2024, an arbitration panel ordered Principal to pay the foundation $7.3 million. It was a win, sure, but the foundation’s lawyers argued they had actually lost out on closer to $20 million in potential growth because of the bad advice.
Why the Paul and Sue Rosenau Investment Story Matters
You've gotta realize that this isn't just about a lottery win gone wrong. It’s a cautionary tale about the "fiduciary" gap. Just because someone has a nice office and a big brand behind them doesn't mean they are looking out for you.
The Rosenaus were targeted because they were "lotto winners," but their story happens to regular retirees every day. They were sold products they didn't understand by a person they trusted like a neighbor.
Today, the Rosenau Family Research Foundation is still going strong. It’s no longer just a family-run operation; they brought in professional leadership to ensure the mission outlasts Paul. They are currently funding gene therapy trials and pushing for federal changes to newborn screening.
Lessons for the Rest of Us
If you ever find yourself coming into a windfall—whether it’s $180 million or a $50k inheritance—keep these points in mind:
- Tax-exempt entities don't need tax-deferred products. If an advisor tries to sell an annuity to a non-profit or inside an IRA, ask why. Usually, the answer is "commissions."
- Trust, but verify. Paul regrets not questioning the "experts" more. No matter how much you like someone, look at the fee disclosure.
- Complexity is a red flag. If the investment structure requires a 50-page manual to explain, it’s probably designed to hide costs.
- Fiduciary status is non-negotiable. Only work with advisors who are legally obligated to put your interests first 100% of the time.
Paul is still at it, though he's stepping back from the daily grind. He’s seen the foundation help launch clinical trials that are actually saving kids' lives. That was always the goal. The legal fight was just a necessary detour to protect the money meant for those "little angels."
To protect your own assets, start by auditing any high-commission products in your portfolio, specifically variable annuities or whole-life policies that seem "too good to be true." Check the FINRA BrokerCheck website to see the history of your own financial advisor before signing any new contracts.