(Bloomberg) — Julie Broderick had 15 years of experience as a securities regulator, and a propensity for speaking her mind before joining Prudential Financial Inc. as an investigative supervisor in 2012.
Then, when she sought 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."
She was still fired along with two colleagues. They have since responded with a whistleblower lawsuit containing allegations that led to state probes about whether Wells Fargo & Co. signed up people for Prudential's MyTerm insurance without their permission.
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 inquires of the company,"
Prudential's Response
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."
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.
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. (Photo: Thinkstock)
Deeply concerned
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.
Lapse rates
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 percent 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 whistle-blowers 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."
