Advertisement

Prudential Offers to Rehire Executive Who Cited Fraud

Share via
From Bloomberg Business News

Prudential Insurance Co. of America today offered to reinstate a fired executive who claimed the company defrauded investors by overstating the value of real estate.

The nation’s biggest insurer also said it asked two executives in its real estate division--Charles Lightner and Mark Clarke--to resign and that it has changed its appraisal process for $3 billion worth of real estate assets in investment funds.

“The appraisal procedures clearly do not reflect the way the Prudential should do business with our customers,” Chairman and Chief Executive Robert Winters said in a letter to employees.

Advertisement

The whistle-blower, Mark Jorgenson, told superiors that Prudential defrauded investors in the $2.3-billion Prudential Investment Separate Account, or Prisa. The company fired the 15-year employee in February.

Winters commended Jorgenson in his letter. “He took a risk and he stood up for what he believed in,” the letter says. “That sort of courage and conviction is welcome at the Prudential.”

Jorgenson was managing director in charge of Prisa until he was demoted late last year, before he was fired. He declined Prudential’s invitation to return to the company. In a statement, he said he has decided to relocate in California for “personal reasons not involved with this matter.”

Advertisement

Prudential reached a cash settlement with Jorgenson, a Prudential official said, but he would not disclose the amount. The company also expects to pay Prisa investors about $50 million for overcharging them as a result of the overstated values.

Claude Zinngrabe will replace Lightner as chief executive of Prudential Real Estate Investors, Prudential said. Clarke had succeeded Jorgenson at Prisa.

The company appointed a panel headed by Gerald Corrigan, the former chief executive and president of the Federal Reserve Bank of New York, to recommend additional steps “needed to bring the Prudential Asset Management Group up to the highest standards of fiduciary duty.”

Advertisement

In addition, Prudential agreed to form a Prisa advisory council to be made up of Prisa clients.

The changes follow a review of Prudential’s investment plans for institutional investors by Kenneth Leventhal & Co. Jorgenson prompted the review last November by filing a lawsuit against the company in which he protested that he was demoted after he complained to superiors about the alleged fraud.

“When these issues came to our attention, we commissioned an aggressive, independent review to determine the facts,” Winters said in the letter. “I firmly believe our response to this issue underscores our fundamental commitments to our clients and to meeting the highest ethical standard.”

The Leventhal report is another embarrassment for Prudential, which prides itself on adhering to high ethical standards and service to its 50 million customers.

Last October, its Prudential Securities Inc. subsidiary agreed to pay $371 million to settle charges that it used fraudulent sales tactics in selling $8 billion of limited partnerships in the 1980s.

Advertisement