Bloomberg Markets magazine has discovered a secret deal between the U.S. Department of Veterans Affairs and Prudential Financial allowing the company to withhold lump-sum payments of life-insurance benefits for survivors of fallen soldiers. The department failed to inform 6 million service members and their families of an amendment to the contract made last year, which allows Prudential to use a retained-asset system, even when the survivors checked the lump-sum payment box after their loved one’s death. This means that families received “checkbooks instead of checks,” as the magazine explains in its November issue. The checkbooks aren’t FDIC-insured and are made up of drafts, or IOUs. This allows Prudential to invest the money in its general corporate account, where it earns the company eight times as much as Prudential currently pays in interest to the families.
Here’s where it gets even more maddening. The amendment essentially ratifies an unpublicized verbal agreement between Prudential and the VA from 1999, which enabled Prudential to disobey survivors’ requests. Documents obtained by Bloomberg Markets through the Freedom of Information Act show that at the time, the deal “provoked concern among top insurance officials of the agency.” According to Brendan Bridgeland, an insurance lawyer who heads the nonprofit Center for Insurance Research, this means that until the amendment was added, Prudential was not fulfilling its obligations to soldiers’ families.
“Every veteran I’ve spoken with is appalled at the brazen war profiteering by Prudential,” says Paul Sullivan, executive director of Veterans for Common Sense, who worked as a project manager and analyst for the VA from 2000 to 2006, adding that it’s “more evidence that the VA was asleep at the wheel for a decade.”
Since Bloomberg Markets’ first story in July, the VA, as well as federal and state authorities including New York attorney general Andrew Cuomo launched fraud investigations into Prudential and other insurance companies.
Veterans Agency Made Secret Deal With Prudential Over Benefits [Bloomberg Markets]