NEWARK, N.J. (CN) – As Wells Fargo closes out a year stained by a $185 million fine, the resignation of its CEO and the firing of thousands of employees, fallout from the bank’s unauthorized-accounts scandal has spread this month to Prudential Insurance.
Two new lawsuits against Prudential in New Jersey cite internal reports that say Prudential intentionally targeted poor people and those with Hispanic-sounding names to sell bogus life-insurance policies. Premiums were often directly wired from dormant Wells Fargo savings accounts, according to the complaints.
Alex Perea brought one of the lawsuits on Dec. 12 in U.S. District Court, taking aim at MyTerm policies that Prudential partnered with Wells Fargo to sell in 2014, seven years after launching the product.
Hoping to represent a class, Perea says Prudential, through its subsidiary Pruco Life Insurance Co., opened fraudulent MyTerm policies, often without customer consent.
“Because the policy premiums were automatically deducted from the financial accounts of the existing Wells Fargo customers, many, if not most customers, were unaware that they were enrolled in the MyTerm policies,” the complaint states.
Perea says Wells Fargo employees received kickbacks from the sale of the insurance policies, and that Prudential axed employees when a customer survey raised questions.
“Prudential sought to silence concerns raised by members of its internal investigation teams and engaged in a series of retaliatory firings to mute all mentions of the fraudulent conspiracy occurring with the help of Wells Fargo,” the 26-page complaint states.
Perea alleges that he opened a Wells Fargo savings account in 2010 while living in Arizona. In October he claims he received a past-due letter from Prudential stating he owed money on the insurance policy and threatening to garnish his savings account.
Perea says he contacted the Prudential’s compliance department when its customer-service center ignored him. Though three high-level Prudential investigators were looking into the MyTerm life insurance policies, according to the complaint, Prudential ultimately fired all three to cover up the fraud.
These three investigators, led by Julie Broderick, brought a suit of their own last week in Essex County Superior Court, saying that the high lapse rate is what tipped them off to the fraud.
A January 2015 survey cited in both lawsuits says more than 700 customer emails sent to MyTerm customers were returned as undeliverable, and that a dozen customers claimed they didn’t understand the polices that had been sold to them.
Prudential’s corporate investigation’s division “was and is aware that dormant bank accounts are targeted for fraud because bank statements are rarely reviewed, leaving accounts unmanaged,” the lawsuit states, noting that in 2014 MyTerm policies had a 70 percent lapse rate.
Broderick was the co-head of Prudential’s investigative division. Her co-plaintiffs are Darron Smith and Thomas Schreck.
They say most of the MyTerm customers who complained could not speak English and needed a Spanish interpreter on their customer-service calls.
Broderick says she was reprimanded in November 2016 for challenging Prudential’s chief regulatory officer about the MyTerm policies and breaking “the cardinal rule of not making waves during the black-out period when bonuses and ratings are decided.”
Broderick claims she was warned once more in November to “get in line” with Prudential’s business interests, but she later forwarded documents showing that Wells Fargo bank employees were actively involved in selling MyTerm policies to Prudential upper management.
Within minutes, she was called into her supervisor’s office and placed on unpaid administrative leave, according to the lawsuit. Smith and Schreck were allegedly placed on leave as well.
Prudential spokesman Scott Hoffman has been quoted as saying the three employees were fired for “appropriate and legitimate reasons that were entirely unrelated to Prudential’s business with Wells Fargo and Prudential’s decision to examine sales of the MyTerm product.”
Hoffman did not immediately respond to email and phone requests for comment on the lawsuits.
The insurer announced on Dec. 12 that it would suspend MyTerm policies. In a statement, Prudential Executive Vice President Steve Pelletier said the company stands by the MyTerm product, but that it would suspend sales “until we have all the facts about whether it is being distributed properly and in the best interest of customers.”
Wells Fargo, which is not a defendant in either MyTerm lawsuit, claims it has eliminated product-sales goals for retail bankers in October. The beleaguered bank was fined $185 million in September for the fake bank accounts and credit cards.
Regulators in California and New Jersey are investigating Prudential and Wells Fargo regarding the MyTerm policies.