Prudential Confirms It Destroyed Files on Complaints
Prudential Insurance Co. confirmed Tuesday that it destroyed large numbers of files on customer complaints from California and 13 other Western states, adding a new dimension to a mushrooming investigation by Florida of alleged document destruction by the nation’s largest insurer.
The confirmation came after the Los Angeles Times and the Florida Insurance Department independently obtained copies of an internal Sept. 23 Prudential memo stating that customer complaint files handled by Prudential’s Western regional headquarters in Woodland Hills from 1992 and earlier “have been destroyed.”
The Florida Insurance Department late Tuesday issued a subpoena to Prudential based on the memo, demanding detailed information about the destruction and why it occurred.
Prudential spokesman Robert DeFillippo said that despite the destruction, “critical” information from the files had been retained on computer disks. He said he could not estimate the number of documents that had been destroyed, but said the actual destruction occurred over an extended period that probably ended sometime in 1994. He contended the destruction was simply part of a routine purging of outdated files by the Woodland Hills office.
Richard Wiebe, spokesman for the California Insurance Department, said the department had not seen the memo before being given a copy by The Times. “We will certainly look into it,” he said.
Prudential has been under investigation for more than a year by state insurance regulators throughout the country for fraud in the sale of life insurance policies to millions of customers, including an estimated 750,000 in California.
Florida, which has been conducting the most aggressive investigation, has a rapidly expanding inquiry into the alleged destruction of documents that may be relevant to the state investigations, public documents show.
The new information offers the first indication of destruction of customer complaint records and of files from California. Earlier subpoenas from Florida centered on destruction of allegedly deceptive sales material used by the company.
Regulators from several states and lawyers for customers said the destruction of complaint files may have an impact on a pending class-action settlement between Prudential and its customers, because the amount of compensation would in part be based on information from complaint files.
In an interview, Prudential’s DeFillippo confirmed that the destruction may have violated National Assn. of Securities Dealers regulations requiring companies to keep paper files on complaints made against life insurance agents licensed by the NASD.
But he said any violation would have been unintentional. He denied that the destruction violated any state regulations. NASD officials had no immediate comment late Tuesday.
DeFillippo said that under a policy adopted by the Western region in 1994, the company now permanently keeps all paper files of complaints. He said he could not immediately determine whether complaint files from other regions had been destroyed.
The Sept. 23 memo was from Linda Conklin, associate manager of Prudential’s central compliance office in Jacksonville, Fla. It was addressed to 21 Prudential employees whom DeFillippo identified as staff members who handle the licensing of agents with the NASD.
It stated that all complaint files handled by the Woodland Hills office from 1992 and earlier had been destroyed. “Do not request these cases any longer, just document your file that they have been destroyed and we are unable to obtain them,” the memo said.
Conklin declined to answer any questions when reached by phone this week.
The files would have contained written complaints received from customers, any memos and other information related to the company’s evaluation of the complaints, and records of how the complaints were resolved. DeFillippo said after the paper files were destroyed, the computer summaries would retain a summary of the complaints and their resolution. He said the computerized record would therefore be adequate for purposes of the settlement of the class-action lawsuit.
Under the settlement, how much compensation each customer would get would depend in part on how many formal complaints the company had received against the agent who sold the policy.
But Ronald R. Parry, a lawyer representing customers in the class action, said the destruction of the paper files would make it impossible for lawyers or regulators to verify if the company’s computer records were accurate or complete.
Kathleen Bird, spokeswoman for the New Jersey Insurance Department, which led a multi-state task force that investigated Prudential, said, “We have repeatedly said that we would be concerned if there is destruction of customer files.” But she added that New Jersey regulators would be satisfied if the company had kept adequate summaries of the complaint files on computer.
As reported, Prudential in August fired a senior executive it said had been responsible for improperly destroying documents that might be the subject of state investigations. The executive denied wrongdoing and is suing the company.
But subpoenas obtained from Florida show that the state also is investigating a separate incident of alleged document destruction this year by another executive in the same office. DeFillippo said the company had brought both incidents to Florida’s attention.
Although the company has admitted that some documents were improperly destroyed, DeFillippo denies that the intent was to thwart investigations. .
