According to the plaintiffs in the Prudential action – Julie Han Broderick, Darron Smith, and Thomas Schreck – the MyTerm life insurance program fraudulently targeted unsophisticated, low income individuals who otherwise were unable to obtain insurance policies through conventional means. The plaintiffs alleged that applicants for MyTerm policies, who were Wells Fargo customers, were not required to submit “any meaningful medical information about themselves” as part of the application process.

As alleged by the plaintiffs, the MyTerm policies had low premiums and were designed to be self-service and purchased only at kiosks located at Wells Fargo or on home computers using Wells Fargo credit cards or Wells Fargo checking or savings accounts because Wells Fargo representatives were not licensed to sell insurance.

According to the plaintiffs, after learning as early as January 2015 of an extraordinarily high “lapse rate” in these policies, Prudential sent a survey to MyTerm policy clients to determine the cause of the high lapse rate. Those surveyed, the plaintiffs asserted, ultimately showed that:

- More than 700 emails were returned as undeliverable;

- Twelve clients cited as the reasons for the cancellations that they did not understand the policy or even know about the policy premiums; and

- At least one client in Arizona complained of high pressure tactics from a Wells Fargo representative who was trying to sell insurance to a college student who did not need coverage.

Prudential took no action in response to the survey results, the plaintiffs asserted, until August or September 2016, when it conducted an inquiry into whether a fraud scheme similar to the fraud relating to Wells Fargo bank accounts had occurred at Prudential. The plaintiffs asserted that Prudential's review found, among other things:

- A 70 percent lapse rate among the MyTerm policies sold in 2014;

- Spikes in sales near the end of each quarter for MyTerm policies; and

- MyTerm policies had been sold predominately to individuals with Hispanic sounding last names concentrated in southern California, southern Texas, southern Arizona, and southern Florida.

The plaintiffs alleged that in or about late September, the CID received a call on its fraud hotline from a client located in Arizona stating that he had not purchased a MyTerm policy and wanting to know why he had received a lapse notice. The plaintiffs said that the CID determined that the MyTerm policy had been opened using a Wells Fargo bank IP address and that the funds had come from a Wells Fargo bank savings account that the Arizona client said had contained a small balance and that he had never used.

The plaintiffs said that they concluded that someone had fraudulently purchased a MyTerm policy using the Arizona client's name; had used his savings account for the first low premium payment; and then had tried to cancel it before another withdrawal was made.

Moreover, they alleged in their complaint, the CID identified “numerous other clients with experiences similar” to that of the Arizona client, where a MyTerm policy was opened, one premium paid, and the policy cancelled before the next payment was due.

The plaintiffs asserted that, under their supervision, the CID listened to all calls associated with the MyTerm policies and learned that most of the clients did not speak English and needed a Spanish interpreter on the call to assist; that many of these clients did not know what they purchased regarding the MyTerm policies and many did not know how much they owed each month in premiums; and that, on several occasions, a Wells Fargo representative called Prudential, sometimes with a client and sometimes without, asking about the MyTerm policy and how to cancel it, even though no Wells Fargo representatives were supposed to be involved in the sales of MyTerm policies.

According to the plaintiffs' complaint, Ms. Smith conducted an investigation that found that:

- Eighteen clients who purchased the MyTerm policies allowed them to lapse or they were cancelled and then repurchased them two more times;

- Ninety-nine clients who had purchased MyTerm policies allowed them to lapse or they were cancelled and then repurchased them at least one more time;

- There were unusual email addresses listed on the MyTerm policy applications, such as [email protected];

- Wells Fargo email addresses were listed on the MyTerm policy applications – for example, where the MyTerm policy holder was Jason Smith, the email address might be for [email protected];

- Names listed on the email address did not match the name of the MyTerm policy holder;

- There were unusual street addresses listed on the MyTerm policies, such as Wells Fargo Drive;

- Cell phone numbers were listed as emails, such as [email protected], which was very similar to how fraudulent bank accounts were opened at Wells Fargo;

- There were high lapse/cancellation rates in 45 days or less from the MyTerm policy placement; and

- Overall, there were a large number of similarities between how Wells Fargo opened fraudulent bank accounts and how the MyTerm policies were being sold through Wells Fargo.

According to the plaintiffs, Prudential did not want CID to conduct client outreach, preferring instead to give Wells Fargo the first opportunity to respond in order to maintain that business relationship. They alleged that Prudential's upper management “has engaged in and continues to engage in a concerted effort to prevent and cover-up these facts from regulatory and law enforcement authorities and the general public.”

The plaintiffs said that they had refused to participate in the cover-up, suffering “ongoing retaliatory conduct . . . in an attempt to silence them,” resulting in their termination.

The New York Times reported that, according to Prudential, the plaintiffs were fired for “appropriate and legitimate reasons” not related to the MyTerm program.

On December 12, Prudential issued a statement announcing that it was suspending distribution of MyTerm policies through all Wells Fargo bank branches and its website, “pending the results of Prudential's review of how the product is sold by Wells Fargo.”

Insurance regulators in California and New Jersey are investigating the allegations that Wells Fargo employees signed up consumers for Prudential life insurance policies without the consumers' authorization.

California Department of Insurance Commissioner Dave Jones asked department investigators to investigate all aspects of these allegations, including possible violations of California laws requiring persons transacting insurance to have an insurance license issued by the department.

“Investigators with the California Department of Insurance will investigate new allegations of fraud and misconduct made by former Prudential employees regarding Wells Fargo and its employees,” said Commissioner Jones. “Former Prudential employees who filed a whistleblower lawsuit allege that Wells Fargo signed up consumers for Prudential insurance policies without consumer permission much as Wells Fargo admitted its employees illegally signed up consumers for bank products without permission. We will also examine Prudential Insurance company's practices in this regard.”

Moreover, Representative Elijah E. Cummings (D-MD), Ranking Member of the House Committee on Oversight and Government Reform, and Senator Elizabeth Warren (D-MA) have asked the chief executive officer of Prudential Financial, Inc., for a briefing and documents relating to reports indicating that Wells Fargo bankers signed up customers for insurance without their knowledge or consent.

The Form 10-K Filing

In the February 17 Form 10-K filing, Prudential explained that, in December 2016, it “announced that it suspended sales of its MyTerm life insurance product through Wells Fargo pending completion of a [Prudential]-initiated review of how the product was being sold through Wells Fargo.”

Prudential noted that it “has offered to reimburse the full amount of premium with interest, to any Wells Fargo customers with concerns about the way in which the product was purchased.”

Prudential also pointed out in its filing that the “total annualized new business premiums associated with sales through Wells Fargo were approximately $4 million.”

Prudential acknowledged that it “has received inquiries, requests for information, a subpoena and a civil investigative demand” related to sales of the MyTerm life insurance product from state and federal regulators, including its lead state insurance regulator, the New Jersey Department of Banking and Insurance (“NJDOBI”), state attorneys general, and federal legislators; it said that it “is responding to these requests.”

Additionally, Prudential said that it “has also received a shareholder demand for certain books and records under New Jersey law” and it acknowledged that it may become subject to additional regulatory inquiries and other investigations and actions, shareholder demands, and litigation related to this matter.

Then, the company revealed, it had provided notice to Wells Fargo that it “may seek indemnification under the MyTerm distribution agreement between the parties.”

The case is Broderick v. Prudential Ins. Co. of America, No. ___ (N.J. Super. Ct. Dec. 6, 2016).

Learn more:

2 Members of Congress Seek Documents from Prudential About Insurance Policies Allegedly Sold by Wells Fargo Without Authorization

Prudential Fraud Case Grows, Whistleblower Attorneys Speak Out

California and New Jersey Insurance Regulators Investigating Allegations Wells Fargo Signed Up Consumers for Life Insurance Without Their Permission

Wells Fargo Fraud Extended to Prudential Life Insurance Policies, Whistleblowers Allege