Lawyers Ask for Probe on Destroyed Documents : PROBE

Lawyers for Prudential Insurance Co. clients on Wednesday asked a judge to order a criminal investigation into the company’s destruction of documents relevant to allegations of fraud by Prudential sales agents.

Prudential “has engaged in criminal obstruction of justice,” said the lawyers from the Pittsburgh law firm of Malakoff Doyle & Finberg. They made the charge in a motion before U.S. District Judge Alfred M. Wolin, who is presiding over a class-action lawsuit against the company.

But Wolin, saying the motion was filed too late for him to consider it, did not immediately call on the Justice Department to open the probe.

Instead, he instructed Melvyn I. Weiss, the lead lawyer for life insurance customers in the class action, to formally investigate the document destruction. He also ordered Prudential to make all employees with any knowledge of the affair, including top management, immediately available for depositions.

The judge asked Weiss to report on his investigation by Dec. 27. Although Weiss himself has asked Wolin to impose legal sanctions against Prudential, the judge said he will wait for the report before ruling.

Prudential admitted Monday that employees in its Cambridge, Mass., office destroyed documents from as many as 10,000 customer files. It said an internal audit found that 80 documents had been destroyed, and that as a result it fired the executive in charge of the branch.

Prudential denied that any criminal laws were violated. But it did acknowledge that the destroyed documents, which included sales material and handwritten notes by sales agents, were relevant to investigations of claims that Prudential agents systematically defrauded life insurance customers for more than a decade.

In court papers filed since its original disclosure, Prudential made clear that it doesn’t know how many documents were destroyed. In a brief interview at the courthouse, Prudential general counsel James R. Gillen confirmed that the number could be significantly higher than 80.

Massachusetts authorities have said they are extremely upset with Prudential about the document destruction. On Wednesday, the state made public a letter from Insurance Commissioner Linda L. Ruthardt to the state attorney general, stating that the destroyed documents “are of critical importance” to efforts to get restitution to wronged customers, and recommending “appropriate civil and/or criminal prosecution.” The attorney general’s office hasn’t yet said what action it will take.

Prudential spokesman Robert DeFillippo denied lawyer Michael P. Malakoff’s allegation that Prudential has engaged in a pattern of document destruction extending well beyond the Cambridge incident.

“We believe that Mr. Malakoff’s papers are factually inaccurate and the allegations he made completely unsupported,” DeFillippo said.

Malakoff said he was dissatisfied with Judge Wolin’s decision to place Weiss in charge of the investigation. Because Weiss would share in a $90-million fee if a proposed class-action settlement with Prudential goes through, he has too great an interest in overlooking information that might jeopardize the deal, Malakoff said.

Wolin “put the fox in charge of the henhouse,” he said.

Weiss refused to comment. During Wednesday’s court hearing, he strongly condemned Prudential for failing to make all of its employees aware of an earlier court order banning document destruction.