The taint of scandal surrounding the Wells Fargo fake account fiasco has spread to Prudential, with three employees of the insurance giant claiming they were retaliated against — and ultimately fired — for trying to blow the whistle on possible insurance fraud being perpetrated by Wells Fargo employees.
The latest Wells Fargo controversy involves Prudential’s MyTerm life insurance policies — low-cost plans with no need for a background medical check. This product is sold under the Wells brand but operated by Prudential. Since the bankers weren’t licensed to sell life insurance, it was intended to be bought through bank kiosks or online.
Prudential created MyTerm about a decade ago, and licensed the product to Wells Fargo in 2014. However, according to a lawsuit [PDF] recently filed by three supervisors in the Investigative Division of Prudential’s legal department, within months of the start of that new relationship there were indications that something was amiss with the way Wells Fargo was selling this product.
The complaint states that by Jan. 2015, investigators at Prudential noticed that many Wells Fargo MyTerm customers were letting their policies lapse. An attempt to survey these customers resulted in bounce-backs from hundreds of undeliverable emails, and at least a dozen customers claiming they didn’t even know they had a MyTerm policy, or didn’t understand what they were being sold.
Then in Sept. 2016 — just as the Wells Fargo bogus account scandal was making national news with the bank’s $185 million settlement — Prudential allegedly took another look at MyTerm and found even more troubling details.
Not only had the policies sold in 2014 had a high lapse rate of 70%, but sales of these policies spiked near the end of each financial quarter, and the customers buying these policies had predominantly Hispanic-sounding last names, and were concentrated in areas with large Spanish-speaking populations: Southern California, southern Texas, southern Arizona and southern Florida.
Then a man from Arizona contacted Prudential’s Investigative Division, saying he’d received a lapse notice for a MyTerm policy but claiming that he’d never purchased one.
Investigators then found a recording of a phone call from someone claiming to be this customer, calling to inquire about canceling his MyTerm policy before the next payment was due. Not only did the Arizona man deny being the voice in that phone call, but a review of the policy showed it had been created online by someone using a Wells Fargo computer.
The Arizona man confirmed that he did have a small Wells savings account, but that it was never really used. The Prudential employees say they knew that these sort of accounts were ripe for fraud at Wells Fargo because they could often be manipulated with very little risk of the customer noticing. They concluded that someone at Wells Fargo had used this man’s account to fraudulently open a MyTerm policy in his name, and then tried to cancel it before a second payment was due.
The plaintiffs claim that Prudential’s Chief Regulatory Officer — a defendant in the case — expressed concern that the Arizona customer would go to the police before Prudential had the chance to warn Wells Fargo.
Meanwhile, investigators say they turned up numerous other instances of MyTerm customers making only a single payment. They claim that many of these customers spoke no English and were not aware of what they were purchasing or that they were buying a life insurance policy that required monthly payments.
The investigators claim to have also found several instances of Wells Fargo employees calling to cancel these one-and-done policies, even though bank employees were supposed to have nothing to do MyTerm insurance.
Further investigation turned up accounts registered with names that did not match the associated email, and even some instances where @wellsfargo.com email addresses were used to register MyTerm policies.
Some policies listed addresses of Wells Fargo banks on the account, and some were registered using cellphone number emails (i.e. firstname.lastname@example.org). This, note the plaintiffs, was a practice also used by Wells Fargo employees when opening up unauthorized financial accounts in customers’ names.
“Overall, there were a large number of similarities between how Wells Fargo Bank opened fraudulent bank accounts and how the MyTerm Policies were being sold through Wells Fargo Bank,” explains the complaint.
The plaintiffs say they then set about figuring out how to contact affected MyTerm customers, and were ready to begin this outreach in mid-October when — according to the complaint — the insurer’s Chief Regulatory Officer directed that no further action be taken.
This executive then took over control of the outreach effort. According to the lawsuit, she halted efforts to contact customers “because she wanted to give Wells Fargo Bank the first opportunity to respond in order to maintain that business relationship.”
One plaintiff says she voiced concerns with this tactic, from both an ethical and regulatory perspective, but that the Chief Regulatory Officer repeatedly silenced her attempts to explain the problem, advising that Prudential’s upper management had already approved the let-Wells-handle-it approach. Additionally, the Regulatory Officer allegedly scolded the defendant for not calling the Arizona customer and instructing him to not call the police.
This plaintiff claims to have subsequently asked why Wells Fargo was not comparing the email addresses on the MyTerm policies against known email addresses of Wells Fargo employees, but that the bank and Prudential scolded her for suggesting “too aggressive an approach” and for making waves that could harm Prudential’s business relationship with the bank.
On Nov. 21, this plaintiff learned that — in spite of all the evidence her team had gathered — Prudential had still not taken any action regarding MyTerm.
“In particular, there was an email between Wells Fargo Bank and Defendant Prudential indicating that Wells Fargo Bank employees were actively involved in selling the MyTerm Policies, a violation of State and Federal law,” notes the complaint.
She forwarded these documents to Prudential upper management, requesting further investigation. Instead — according to the suit — only minutes after sending that email, she was placed on administrative leave, as were the two other plaintiffs. All three have since had their jobs terminated by Prudential.
The dismissed employees accused Prudential of violating the New Jersey Conscientious Employee Protection Act, a state law intended to shield whistleblowers from retaliation.
While Prudential does not appear to be commenting directly on the accusations of wrongful termination, the insurance company has confirmed it is now investigating the allegations of fraud.
This morning, Prudential announced that it is suspending the MyTerm product “pending the results of Prudential’s review of how the product is sold by Wells Fargo.”
“We stand behind the MyTerm product but have decided to suspend sales of that product through Wells Fargo’s retail banking franchise until we have all the facts about whether it is being distributed properly and in the best interest of customers,” said Steve Pelletier, Chief Operating Officer of Prudential’s U.S. operations. “If any Wells Fargo MyTerm customers have concerns about the way in which the product was purchased, we will reimburse the full amount of the premiums they paid and cancel the policy. We have also set up a toll-free hotline for these customers.”
Wells Fargo customers with questions regarding MyTerm can call 1-877-291-7193. between 8 a.m. and 8 p.m. ET.