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Dead Vets’ Families Accuse Insurer of $100 Million Scam
Prudential cheated the families of dead American soldiers and Marines out of more than $100 million in interest on their life-insurance policies, according to a lawsuit filed Thursday in a Massachusetts federal court.
The suit, brought by the parents of two veterans who committed suicide after returning home from Iraq, came as the Pentagon, the Department of Veterans Affairs and New York Attorney General Andrew Cuomo all announced investigations into the allegations, first disclosed by Bloomberg Markets magazine this week.
"We want the government and the business world to understand that they need to stop the policy of profiting off the deaths of our loved ones," said one of the plaintiffs, Kevin Lucey, whose son, former Lance Cpl. Jeffrey Lucey, hanged himself on June 22, 2004, after returning home from his first tour.
"They sacrificed their lives," Lucey said. "No one should profit from that."
The lawsuit cites VA reports showing that Prudential, as the administrator of government-backed veterans' policies, earned interest of more than 5.69 percent on life-insurance funds that it held for beneficiaries.
Meanwhile, Prudential paid beneficiaries just 1 percent interest, the suit said.
That means, on an average death benefit of $400,000, Prudential stood to earn $22,760 in interest over the course of a year, while paying survivors just $4,000.
Lucey's attorney, Cristobal Bonifaz, said the interest "doesn't belong to Prudential."
"It belongs to the families," he said.
According to the lawsuit, Prudential paid more than $1.2 billion in death and traumatic injury claims in 2009 alone, earning interest income on nearly every claim. The plaintiffs say Prudential has kept more than $100 million that should have gone to veterans' families.
This practice is made possible because rather than paying a lump sum to survivors when a policyholder dies, Prudential keeps the money in its own accounts and issues checks to the beneficiaries that draw on those funds.
According to Bloomberg, which also made similar charges against MetLife, the practice is now widespread in the insurance industry, affecting military and non-military families alike. But what's unique about the veterans' life insurance program, Bonifaz said, is that Prudential is administering a program of the federal government.
"Every government contract requires fair dealing," he said.
The VA did not respond to repeated requests for comment. But in a statement, Mike Walcoff, acting undersecretary for the Veterans Benefit Administration, said, "The possibility that life insurance companies are profiting inappropriately from these service members' sacrifice is completely unacceptable."
Prudential spokesperson Bob DeFillippo refused to comment on the lawsuit, but said there's nothing wrong, or illegal, about Prudential keeping the death benefits of the bereaved in its portfolio or holding onto a portion of the interest.
"It's like a checking account with a bank," he said. "You deposit your money, and the bank pays you a fixed rate of interest. The bank is then free to make money on your deposit by investing it somewhere else."
But families of the fallen say there's a big difference between opening a checking account at a bank and receiving a life insurance payment when your loved one dies.
When his son, Jeffrey, died, "money was the last thing I was thinking of," Kevin Lucey said.
"Families assume that these people are protecting us and would never take advantage of us," he added. "That's where a lot of the anger comes from."
Lucey said he is not seeking to enrich himself by the lawsuit and said he hopes any settlement money goes to charities and organizations that help other families of other dead soldiers and Marines.
12 Comments so far
Show All"'They sacrificed their lives,' Lucey said. 'No one should profit from that.'"
If he understood that that's the whole point of war, he might have had reservations about allowing his son to join the military in the first place.
herbert r chersonsky said in a post subsequent to yours, "As Dick Cheney once said, 'They volunteered didn't they!' Dick considered those volunteers sheep to be sacrificed for the good of "American Capitalism"........So, Prudential saw a chance to increase its profits and its CEO's could have a few million extra bonus dollars."
You and Dick seem to have the same philosphy.
I think Nobody's criticising that point of view, not defending it.
Once you deposit your money into your bank; it's no longer YOUR money, it's theirs to do with as they please! The video below will blow you away!
http://www.youtube.com/watch?v=_doYllBk5No
You get what's called "checkbook money" to spend.
I imagine insurance companies work this scam the same way as the banks!
Insurance Companies are just another corporation draining us dry. Companies often take out life insurance policies on their employees without the employees knowledge, and when they die, the Insurance company profits. Our dead soldiers don't matter to anyone except their families, and their war buddies, and a few caring citizens. This whole Era of War in this Country is so complaicent, young people that don't join (the rich) have no clue what's going on, and I don't think they really care, We have kept them in the background, and that is because the Crooks running this Country want us to stay out of the way, of them using our children to make them all rich. The Insurance companies are no different than our leaders, and most of America, "oh the war yeah...."
Very odd
why would bloomberg do a story on this
what's in this story that could benefit Wall Street
doesn't suicide invalidate life insurance?
I knew that eventually Met Life would corrupt Snoopy!
It"s shocking that US companies profit from war (translation, the death and injury of soldiers and innocent civilians)- sarcasm
I don't recall Halliburton returning obscene profits from no-bid contracts to the families of fallen soldiers or to destroyed Iraqi and Afghan communities.
War sucks. Most US Corporations suck. Bloomberg sucks. Capitalism sucks
But... show me an alternative system that works
And, Prudential has a long history of exploiting policy holders and shareholders. They were a good mutual company; then they went public (a stock company) and profits became more important than people.
Most of the old mutual companies were good. Most stock companies suck (Met Life, John Hancock, Principal, Aetna ....)
Most Americans would do well to get out of banks and move to credit unions. It's the same with insurance. Avoid the stock companies and use mutual companies to minimize this kind of profiteering (Although NYLife - a mutual company - has teamed up with the always questionable AARP).
Sine most people need insurance, mutual is better (I.e. Mass Mutual, Northwest Mutual.... better yet life insurance through credit unions (CUNA).
And if you have any choice with company provided life insurance, have them go mutual.
This is nothing new with Prudential ...they have always sucked
As Dick Cheney once said, "They volunteered didn't they!" Dick considered those volunteers sheep to be sacrificed for the good of "American Capitalism"........So, Prudential saw a chance to increase its profits and its CEO's could have a few million extra bonus dollars.
The money "The Power Elite" are accumulating goes for 7 million dollar yachts bought in New Zealand (John Kerry's new toy!)
Imagine a President with an "Assassination List" (Now known as a "Black List"), now turning to target killing any insurgents.....Of course, he will bribe Afghan Citizens with $3,000 to give his CIA/Ze the names of those insurgents.....Which sounds like the same plan used to fill up Guantanamo except now he wants the insurgents murdered instead of captured.
What type of country enjoys murdering unarmed civilians and people defending themselves against an invasion force as they watch their gladiators perform games on baseball fields and football fields??????
This is yet another example of the contempt that Amerikkka's fascist government and it's thieving corporate cronies have for the young men and women who join the military. The miltary, that chews them and their families up and spits them out when these kids are maimed and killed, is the last resort for young people who can't find jobs in an economy that benefits only heartless plutocrats.
Prudential gives a new meaning to the ad nauseum mantra: thank you for your sons service!