The agent involved was a family member, and either he was unaware of where all the funds were coming from, or he didn't understand how this works. He was fairly new to this kind of work. I believe the contributions were not directly transfered to the insurance company,  she got the checks and gave them to the agent. I don't know exactly how that process works or what responsibility the agent had to verify the sources of the funds. But either way I don't think she is going to sue her family.

I've been talking to the family member/agent's boss, and she is the one who told me yesterday it is just too complicated to undue. But I will call her today and tell her she better figure out a way to do it. 

Thanks for your help!