Prudential whistleblower rocks the boat on Wells Fargo scandal
(Bloomberg) -- Julie Broderick had 15 years of experience as a securities regulator and a propensity for speaking her mind before joining Prudential Financial as an investigative supervisor in 2012. When she sought this year to learn more about possible sales abuses by one of the insurer’s business partners, she said, the message from her company was clear: “Don’t rock the boat, don’t speak up, toe the party line and your job will be safe.”
Then she was fired along with two colleagues. They responded with a whistleblower lawsuit containing allegations that led to state probes about whether Wells Fargo signed up people for Prudential’s MyTerm insurance without their permission. And even after the insurer halted sales through the bank last week, Broderick is calling out her former employer and saying the company let down customers.
Prudential had evidence of irregularities as early as January 2015 and should have acted more forcefully as evidence mounted this year, the Dec. 6 complaint claims. The lawsuit also raises questions about whether the insurer’s controls were adequate. Broderick said that her proposal to expand a probe was met by resistance from an executive who didn’t want to alienate Wells Fargo or draw attention to possible misdeeds.
“They wanted to preserve their image and stay out of the public limelight,” Broderick said of Newark, New Jersey-based Prudential in a Dec. 14 interview, amplifying claims in the lawsuit. “They did not want to be associated with the conduct by Wells Fargo. They did not want to have to report anything to the regulators so there would be additional inquiries of the company.”
The insurer disputed her account.
“The three former employees were terminated in response to an ethics complaint that was unrelated to the Wells Fargo review,” Scot Hoffman, a spokesman, said in an e-mail. “Prudential’s decision to examine sales of the MyTerm product was initiated by our individual life insurance business and our compliance department, not by the plaintiffs.”
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Prudential has promised to reimburse Wells Fargo customers for unwanted insurance and said it expanded its review in September as the San Francisco-based bank agreed to pay $185 million in fines after regulators investigated whether employees secretly opened unauthorized bank accounts to hit sales targets, saddling customers with fees.
Wells Fargo is “deeply concerned” about the allegations and is working with Prudential to investigate any unauthorized or inappropriate referrals, the bank said in an e-mailed statement. The lender didn’t admit wrongdoing in the settlement with federal regulators.
Broderick, 48, served as an assistant district attorney in Philadelphia after graduating from Boston College Law School. She then became a regulator, working for watchdogs including the Financial Industry Regulatory Authority. At Prudential, she was named a vice president of the legal department and co-head of the corporate investigations division.
What ended her career at Prudential, she said, was her concerns over sales of MyTerm coverage, which was launched in 2007 to appeal to people who might not otherwise buy life insurance. The low-premium offerings don’t require a physical, and the company began distributing them in 2014 through Wells Fargo, which made the policies available at kiosks in branches or on home computers using the bank’s accounts. Prudential said last week that annualized new business premiums on the sales through Wells Fargo were just $4 million.
The insurer found early last year that an unusually high number of customers let their coverage lapse in policies sold through Wells Fargo, according to the complaint from Broderick and her former colleagues Darron Smith and Thomas Schreck. An attempt to survey customers found troubling signals, like more than 700 e-mails returned as undeliverable, but Prudential took no action at the time, the plaintiffs alleged.
The insurer’s review resumed this year and found a 70% lapse rate on policies sold in 2014, according to the complaint, with sales spiking at the end of quarters. Broderick said the timing suggested a desire to fill quotas. The policies were sold predominately to people with Hispanic-sounding names, the whistleblowers claim. California Insurance Commissioner Dave Jones said last week that his office will examine whether Wells Fargo staff sold insurance without the required licenses.
“Unfortunately, there were no supervisory controls in place at Pru to make sure that these low-income, unsophisticated individuals knew what they were purchasing,” Broderick said. “We did not monitor to ensure that bank reps were not involved in the sales.”
Broderick said she proposed calling dozens of MyTerm clients to ask if they knew they had policies and understood the terms, but faced resistance from Deborah Bello, Prudential’s chief regulatory officer and a defendant in the lawsuit. Bello didn’t respond to messages seeking comment.
On a Nov. 1 conference call, according to the complaint, Bello said that Wells Fargo should be given a chance to investigate first. Bello described the bank as an important business partner and said, “We don’t want to alienate them,” according to Broderick.
“Deborah Bello was not involved in the decision to terminate these employees,” Prudential’s Hoffman said in the statement. “We believe that the court will agree when the true facts are revealed during the litigation.”
Broderick said that after the conference call she was reprimanded by a senior colleague, who said it was “not my role or place to challenge the chief regulatory officer” in front of other managers and that such actions could affect her year-end bonus and rating.
Broderick said that on Nov. 3, Prudential sent a letter to Wells Fargo outlining the anomalies, and two weeks later the insurer sent data developed in the investigation to the bank.
“I felt like our first obligation is to our clients,” Broderick said. “Why would we rely on Wells Fargo, since they were already under investigation and would have no incentive to find any wrongdoing?”
On Nov. 21, Broderick reviewed an e-mail between Wells Fargo and Prudential indicating that bank employees were “actively involved in selling the MyTerm policies,” according to the complaint. She said she forwarded the documents to her supervisors and suggested further investigation, but was placed on leave minutes later along with Smith and Schreck. They were later fired.
The lawsuit, filed under the New Jersey Conscientious Employee Protection Act, says they faced illegal retaliation. The plaintiffs are seeking unspecified compensatory and punitive damages.
“We loved our jobs,” Broderick said in the interview. “No one should be terminated for speaking up. If that’s how they wanted to treat us, we’re living with the circumstances. But we won’t be silent.