UPDATED: Wells Fargo Fraud Scandal Now Extends to Unauthorized Insurance Policies
Three former Prudential employees claim that bank employees signed customers up for life insurance without consent
Updated: December 19, 2016
Wells Fargo is once again in the news due to unauthorized actions by its employees, but this time the case involves life insurance.
"This definitely was the same kind of conduct"
According to Reuters, insurance company Prudential is conducting an investigation to determine whether or not Wells Fargo employees signed up customers for life insurance policies without their knowledge or consent.
Prudential partners with the banking giant to sell a low-cost life insurance policy called MyTerm to Wells's retail customers. However, because bankers are not licensed to sell insurance, Wells employees were supposed to direct interested customers either to self-service kiosks located in the bank branch or online to purchase the policy. They were not supposed to go into particulars regarding the policies.
Wells is still reeling from a scandal over thousands of low-level employees illegally opening unauthorized accounts for customers in order to meet unreasonable sales goals. Now, a wrongful termination suit filed by three former managers in the corporate investigation division of Prudential claims that Wells employees did the exact same thing with Prudential insurance policies.
Evidence in suit indicates that policies in some cases were opened and then closed after one or two months, then were opened again. Sometimes monthly fees were withdrawn from the accounts.
The New York Times (NYT)reports that when the investigators listened to tapes of calls made to Prudential's customer service line, they discovered complaints from Wells customers regarding policies that they had no memory of buying. Many of the customers, claim the plaintiffs, needed a Spanish interpreter because they did not speak English.
"This definitely was the same kind of conduct that Wells was committing, but through Prudential," said one of the three whistle-blowers, Julie Han Broderick. Broderick is an attorney and a former co-head of the insurance company's corporate investigations division.
"Appropriate and legitimate reasons"
Together with two of her colleagues, Darron Smith and Thomas Schreck, Broderick has filed a wrongful termination suit against Prudential. The three plaintiffs claim that they were fired in November because they attempted to escalate attention internally to the discoveries they had made regarding conduct at Wells. Prudential claims that they had been fired for "appropriate and legitimate reasons" unrelated to Wells.
Prudential spokesman Scot Hoffman says that the insurer is still investigating the policies that were sold through Wells. Once this is done, the company plans on "reviewing this matter with our regulators," he said.
Wells bankers who sold the policies received credit that went toward their high quarterly sales quotas.
The bank stated that it is investigating any alleged misconduct brought to its attention.
"As we have consistently reinforced, if we identify any instances where a customer received a product they didn't ask for, we will make it right," said Wells spokeswoman Mary Eshet.
The plaintiffs all belonged to a Prudential investigations unit that was requested to go through the 15,000 MyTerm accounts sold through Wells and look for any irregularities.
Unit members discovered that some customers who had supposedly signed up for the policy listed an address such as "Wells Fargo Drive" on their applications, alleges the complaint. Some applications listed suspicious customer email addresses, and the name that was listed on the policy sometimes did not match that in the email address, said the complaint, "for example, where the MyTerm policy holder was Jason Smith, the email address might be for firstname.lastname@example.org."
In addition, the suit claims, "Cellphone numbers were listed as emails, such as email@example.com, which was very similar to how fraudulent bank accounts were opened at Wells Fargo Bank."
The policies were "sold predominantly to individuals with Hispanic-sounding last names concentrated in Southern California, southern Texas, southern Arizona and southern Florida," states the suit. The bank's disclosures indicate that the majority of the fraudulent accounts created by Wells employees were also in these four states.
"When we started peeling back the onion, everywhere we looked, it stunk," said Smith, one of the plaintiffs.
An oddly high number of Prudential policies sold by Wells in its first year—70 percent of them—had lapsed and many were dropped after just one or two months. There were some cases in which the customer never made even one premium payment.
A suspicious pattern of policies being closed then reopened also suggested that bank employees might be trying to pad their sales numbers. One example given by the suit is of "18 clients who purchased the MyTerm policies allowed them to lapse, or they were canceled and then repurchased them two more times."
Former Wells banker Michael Barborek claims that Wells made it clear to employees that they were supposed to push such insurance products.
"We were like insurance salespeople without the license," he said. "They wanted us to offer it to everybody who came in."
Some Wells employees in his branch would sometimes by low-cost policies for their friends and family in order to meet their sales quota, pay the premium for the first month, then cancel, he claims. This is a clear violation of both regulatory rules and the bank's own policies. He said that managers looked the other way because they were also under pressure to meet sales numbers.
A Quick and Easy Purchase Process
The process for purchasing the insurance policy is fast and easy. Customers can finish the application in just 15 minutes by answering some basic medical questions online and never have to speak to a licensed insurance sales agent. With the applicant's permission, Prudential then checks databases like pharmaceutical records in order to evaluate the applicant's health before deciding whether or not to issue a policy to them. The average annual premium for a policy sold through Wells—which still offers MyTerm—comes to $288.71.
The lawsuit claims that at least one person who reached out to Prudential seemed to have experienced the removal of funds from his Wells Fargo savings account by a Wells employee in order to pay for an insurance policy that the customer said he had not authorized. Others who contacted the insurer were confused about how much they had to pay every month in premiums and why they had to pay it.
The plaintiffs did not have 100 percent clean records at the insurance company, a common situation in whistleblower cases. They claim that they were informed by Prudential that they were being place on unpaid leave after another employee had provided a series of text messages—most of which were more than a year old—in which they complained about other employees in the corporate investigations division.
The plaintiffs claim that Prudential is using the messages as a pretext to dismiss them as retaliation for complaining about how the MyTerm investigation was handled. Prudential denies this.
According to Hoffman, the company started to examine issues regarding MyTerm sales after receiving complaints from customers in 2015 and then expanded its review after news of the settlement between Wells Fargo and regulators became public.
"Sweep this under the rug"
Broderick claims that, before they were dismissed, she and the other two plaintiffs hit obstacles when pressing other Prudential employees to investigate their findings in a more aggressive manner and to inform regulators. She said that the three of them were forced to leave the insurer's Newark office and placed on unpaid leave only days before Thanksgiving.
"We were totally shocked," Ms. Broderick said. "The game plan was to sweep this under the rug."
Christopher Chang, one of the lawyers representing the three plaintiffs, said that they also intend to file a Dodd-Frank whistleblower compliant with the Securities and Exchange Commission.
Update: Prudential has suspended sales of MyTerm policies through Wells Fargo while it conducts its investigation, and Wells has also temporarily stopped selling renters' insurance from Assurant.