CHICAGO (CN) – An asset recovery service claims it discovered a “massive fraud” by Metropolitan Life Insurance and Prudential Financial, which kept more than $524 million in unclaimed life insurance money that should have been turned over to Illinois.
In a qui tam complaint in Cook County Court, Total Asset Recovery Services claims that Metlife and Prudential “filed false records omitting these unclaimed funds.” It says the insurers should be fined more than $1.5 billion under the Illinois False Claims Whistleblower Reward and Protection Act.
Total Asset sued the insurers in January 2011, on behalf of Illinois. The complaint was not unsealed until this month.
Total Asset, of Auburn Hills, Mich., describes itself in the complaint as “an investigative group of professional tasked with locating lost or unrecoverable assets on behalf of rightful owners and creditors.”
The complaint continues: “Through its efforts, TARS has uncovered a massive fraud upon the State of Illinois (‘the State’) by the defendant life insurance companies named herein who have not escheated requisite funds to the state. Under Illinois law, any moneys held or owing by any life insurance corporation are deemed abandoned if they remained unclaimed and unpaid for more than five years after the moneys became due and payable as established from the records of the corporation under any life insurance policy which has matured or terminated. A life insurance policy not matured by actual proof of death of the insured is deemed to be matured and the proceeds payable if such policy was in force when the insured attained the limiting age under the mortality table on which the reserve is based, exclusive of certain narrowly tailored exceptions. Once these funds are deemed abandoned, they are subject to the custody of the State. However, through their massive fraud, the life insurance companies named herein have filed false records omitting these unclaimed funds in their reporting requirement to the State in the aim of controlling and avoiding their obligation to deliver these unclaimed funds to the State.”
After Metlife and Prudential demutualized in 1999 and 2000, they provided policyholders with “cash, stock and policy credits,” according to the complaint. “However, in many instances, these amounts were undeliverable and were therefore returned to the defendants,” it adds.
Total Asset says that Metlife and Prudential were required to submit an accurate annual report to the state treasurer listing all unclaimed funds worth $25 or more, which were to be paid to the state.
In researching unclaimed funds through state treasurers, Total Asset says, it “detected a pattern of questionable activity with regards to the proper escheatment of life insurance proceeds for deceased individuals.”
It claims that the defendants “knew or should have known” that certain policyholders had died, and that the insurers “were obligated to escheat the value of these unclaimed life insurance policies to the State of Illinois and properly report such escheatment. They failed to do so.”
Total Asset says Metlife and Prudential did not report 4,766 unclaimed policies between April 30, 1988 and April 30, 2010, and “have failed to escheat approximately $524,260,000 to the State of Illinois.”
Total Asset claims that Metlife and Prudential may be subject to more than $1.5 billion in civil penalties and damages under the Illinois False Claims Whistleblower Reward and Protection Act, and hopes to be awarded up to 30 percent of proceeds from this action or a settlement.
Total Asset is represented by Gregory Lynam with the Ferraro Law Firm, in Washington, D.C.