Prudential Says Some Documents Were Destroyed
In a development that could lead to court sanctions and penalties from state regulators, Prudential Insurance Co. disclosed Monday that one of its offices recently destroyed documents relevant to investigations of charges that its agents defrauded millions of life insurance buyers.
The disclosure comes at a particularly bad time for the nation’s largest insurance company. Newark, N.J.-based Prudential is facing mounting objections to a settlement it recently reached in a massive class-action lawsuit, and also a threat by Florida authorities to suspend its license to do business in that state.
Documents made public in federal court Monday allege that the destruction involved material from 10,000 customer files in the company’s large branch office in Cambridge, Mass. The Massachusetts attorney general’s office said the destroyed material included handwritten notes from the files and copies of allegedly misleading sales literature that could theoretically be used in court against the company.
For its part, Prudential said that so far an internal audit has only verified destruction of 80 documents. The destruction began in February and continued until November, a Prudential spokesman said.
In a memo to employees the company made public Monday, Prudential stated that John W. Breedlove, managing director in charge of the Cambridge office, “has been dismissed” for allowing the destruction. The memo called the destruction a clear violation of company policy and said: “The actions that took place in this field office are deplorable.”
Breedlove, reached by phone, declined to comment.
Prudential’s admission prompted the judge overseeing the class-action case to threaten the company with sanctions. Acting at the request of the lead lawyer representing customers in the lawsuit, U.S. District Judge Alfred M. Wolin in Newark ordered Prudential to appear at a hearing on Wednesday to discuss its disclosure. At that point, Wolin could impose sanctions that include contempt of court charges and a fine.
Prudential’s admission roiled the ongoing investigation Massachusetts authorities are conducting of the company.
“We’re shocked and horrified,” said Ed Cafasso, spokesman for the Massachusetts attorney general’s office.
Joanna Connolly, assistant attorney general in charge of the inquiry, said the state had been negotiating a settlement of possible civil charges with the company but that the disclosure would make Massachusetts “relook at our entire dealings with Prudential.” She said it was too early to tell whether criminal laws might have been violated by the company’s actions.
State investigators said the Cambridge office apparently systematically went through all of its customer files to purge information that might indicate that customers had been defrauded. One state law enforcement source said the purging “could mean that essentially all company documents that would have helped consumers prove their case against Prudential have been destroyed.”
Prudential spokesman Robert DeFillippo contended, however, that the document destruction wouldn’t adversely affect customers’ claims under the proposed class-action settlement, because the settlement provides for a higher level of compensation to customers whose records were destroyed.
Spokesmen for state insurance regulators from across the country meeting at a conference in Atlanta said the regulators were so angry they summoned Prudential representatives to the meeting to brief them about the destruction.
Prudential has been facing a mounting tide of lawsuits and investigations by various states in connection with allegations of fraud in the sale of life insurance over more than a decade. The allegations of wrongdoing focus on the practice of “churning,” which involves persuading customers to pull money out of existing life insurance policies to buy bigger ones. The transactions are often financially harmful to the customers but generate big sales commissions for agents.
Throughout the investigations the company has been plagued by charges that it destroyed key documents.
The Times in June reported that the company in 1994 ordered managers in 14 southern states to destroy sales brochures that might be wanted by state investigators. In August, the company said it fired the former head of its regional headquarters in Jacksonville, Fla., for allowing the destruction of large numbers of documents more recently. And in October, the company confirmed that its Western regional headquarters in Woodland Hills had destroyed large numbers of files of customer complaints.
Massachusetts’ Connolly said Prudential’s admission that document destruction continued in the Cambridge office well after allegations of document destruction had surfaced show that “Prudential and their agents just don’t get it.”
