2 States Begin Inquiry Into Prudential
The New Jersey and Florida insurance departments said Wednesday that they are launching investigations into the possible destruction of documents by Prudential Insurance Co. in 1994 as several states were preparing to open inquiries into alleged wrongdoing in the sale of its life insurance policies.
The Times reported Wednesday that an internal Prudential memo showed that an employee in Prudential’s Jacksonville, Fla., regional office had ordered company managers in 14 states to destroy documents related to Prudential’s “private pension” program. The documents, sales material, may not have made clear to customers that investing in the program involved the purchase of life insurance policies.
A Prudential spokesman said he wasn’t aware that the states had decided to launch investigations, but he said the company will cooperate fully. He said the order to destroy documents wasn’t intended to thwart any investigation but rather to prevent improper sales material from being used.
Don Pride, a spokesman for the Florida insurance department, said the department will begin an inquiry into possible destruction of documents as part of an ongoing formal investigation into alleged “churning” by the company. Churning involves inducing customers to replace or borrow against older policies to buy new ones to generate higher commissions, even though such purchases often result in financial harm to customers.
New Jersey, home state of the Newark-based insurance company, also said it is opening an inquiry into possible destruction of documents. The department reversed itself after stating Tuesday that it would leave any such investigation to Florida, where the memo ordering the destruction originated.
Kathleen Bird, a spokeswoman for the New Jersey insurance department, said the decision to investigate was made after internal department meetings Wednesday. In a statement, however, she said the Prudential memo “alone does not provide sufficient information to conclude” whether documents were wrongfully destroyed, and she said that “until the inquiry is completed, it would be highly speculative to reach any conclusions about the memo.”
Bird said New Jersey’s inquiry will be conducted on its own and will not involve a 28-state task force led by New Jersey that has been looking into alleged churning by Prudential. The multi-state task force has already drafted a confidential report that is expected to be made public in July.
Bird said the issue of document destruction is outside the scope of the task force’s inquiry. “The task force had a very specific mission and [has already] completed its work,” she said in an interview.
Prudential is hoping to reach a global settlement with the states over charges of wrongdoing related to the sale of life insurance, based on the task force’s report.
