When Wells Fargo admitted a few months ago that thousands of its employees had created as many as two million unauthorized accounts for its customers, alarm bells went off at Prudential, one of the nation's biggest insurance firms.
Wells Fargo has a partnership with Prudential to sell a low-cost life insurance policy to the bank's retail customers. After news of
the Wells Fargo settlement in September
, Prudential ordered an internal review of its dealings with the bank, to make sure nothing was amiss with the joint endeavor.
A lot was amiss. According to three former managers in Prudential's corporate investigation division, Wells Fargo employees appeared to have signed up bank customers for Prudential insurance without the customers' knowledge or permission. In some cases, they even arranged for monthly premium fees to be withdrawn from their customers' accounts.
When investigators reviewed tapes of calls to Prudential's customer service line, they found complaints from Wells Fargo customers about policies they did not remember buying. Many of the customers
did not speak English
and needed a Spanish interpreter, the three plaintiffs said.
"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, an attorney and former co-head of Prudential's corporate investigations division, which has about 30 employees.
Ms. Broderick and two of her colleagues, Darron Smith and Thomas Schreck, filed a wrongful termination suit against Prudential on Tuesday. They say they were fired in November for trying to escalate attention internally to their discoveries about conduct at Wells Fargo. Prudential said on Friday that the three were fired for "appropriate and legitimate reasons" that had nothing to do with Wells Fargo.
A Prudential spokesman, Scot Hoffman, says the company continues to investigate the policies sold through Wells Fargo. Once it is finished, Prudential anticipates "reviewing this matter with our regulators," he said.
Since bankers are not licensed to sell insurance, Wells Fargo employees were encouraged, without discussing specific terms, to steer customers to either a self-service kiosk in bank branches or a website on which they could sign up for MyTerm, a policy that does not require applicants to take a medical exam. Bankers who sold the product got credit toward their steep quarterly sales quotas.
Some Wells Fargo bankers appear to have signed people up for MyTerm without telling them, according to the three whistle-blowers from Prudential. In some cases, bankers opened MyTerm policies, closed them after a month or two and then promptly reopened them to bolster their sales numbers, the evidence in the lawsuit suggests.
Wells Fargo said in a statement on Friday that it was investigating any alleged improprieties that were 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 Mary Eshet, a Wells Fargo spokeswoman.
"This definitely was the same kind of conduct that Wells was committing, but through Prudential," said Julie Han Broderick, a former co-head of Prudential's corporate investigations division and a plaintiff in the lawsuit.
intense pressure to meet sales goals
, which have since been eliminated, thousands of Wells Fargo's workers used customers' personal information to create sham accounts in the customers' names; some incurred fees on those unwanted accounts, which included checking accounts and credit cards. More than 5,000 employees have been fired, and an internal investigation is underway.
The three people who filed the wrongful termination suit were part of an investigations unit at Prudential that was asked to comb for irregularities in the 15,000 MyTerm accounts that were sold through Wells Fargo.
Those in the unit found that some customers who signed up for MyTerm listed addresses like "Wells Fargo Drive" on their applications, according to the complaint. Some of the policy applications listed suspicious email addresses for customers, and the name listed on a policy sometimes did not match the name in the customer's email address - "for example, where the MyTerm policy holder was Jason Smith, the email address might be for email@example.com," the complaint said.
Additionally, the lawsuit said, "Cellphone numbers were listed as emails, such as firstname.lastname@example.org, which was very similar to how fraudulent bank accounts were opened at Wells Fargo Bank."
The MyTerm policies were "sold predominantly to individuals with Hispanic-sounding last names concentrated in Southern California, southern Texas, southern Arizona and southern Florida," the lawsuit states. Those four states also accounted for the bulk of the sham accounts created by Wells Fargo's employees, according to the bank's disclosures.
"When we started peeling back the onion, everywhere we looked, it stunk," said Mr. Smith, a plaintiff, who earlier this year was a featured speaker at a conference focusing on insurance fraud.
An unusually high rate of the Prudential policies that Wells Fargo sold in its first year had lapsed - 70 percent - and many were dropped after only one or two months. In some cases, customers never made a single premium payment.
There was also a suspicious pattern of MyTerm policies being closed and reopened, suggesting the unseen hand of a banker trying to buoy sales numbers. For example, "18 clients who purchased the MyTerm policies allowed them to lapse, or they were canceled and then repurchased them two more times," the lawsuit states.
A former Wells Fargo employee said the bank made no secret that it wanted
employees to push various insurance products.
"We were like insurance salespeople without the license," said Michael Barborek, a former Wells Fargo banker in Orange, Tex. "They wanted us to offer it to everybody who came in."
To meet their sales goals, some bankers in his branch would sometimes buy cheap policies for their friends and relatives, pay the first month's premium and then cancel, according to Mr. Barborek - a blatant violation of regulatory rules and Wells Fargo's own policies. Managers, facing their own pressure to make numbers, looked the other way, he said.
The life insurance product is quick and easy to buy: A customer can complete the application in 15 minutes by answering a few basic medical questions online, without ever speaking to a licensed insurance sales agent. Prudential then, with the permission of the applicant, checks databases, such as pharmaceutical records, to assess the health of an applicant before deciding to issue a policy. The average annual premium is $288.71 for a policy sold through Wells Fargo, which continues to offer MyTerm.
According to the Prudential employees' lawsuit, one person who contacted Prudential appeared to have had funds removed from his Wells Fargo savings account by a bank employee to pay for a policy he said he had not authorized. And others who called Prudential were confused about how much they owed each month in premiums, and why.
As is not uncommon with whistle-blower cases, the three employees did not have entirely clean slates at Prudential. They said Prudential told them it was putting them on unpaid leave after another employee had turned over a series of text messages, most more than a year old, in which they were complaining about others within the corporate investigations division.
They contend that the text messages are being used as a pretext by the company to dismiss them for complaining about the handling of the MyTerm investigation.
Mr. Hoffman, the Prudential spokesman, said that the termination of the three employees was "entirely unrelated to Prudential's business with Wells Fargo and Prudential's decision to examine the sale of the MyTerm product." He declined to elaborate on the reason for the firings, noting that Prudential does not comment on employment matters.
Mr. Hoffman said that Prudential began reviewing issues with MyTerm sales after complaints from customers in 2015, and expanded the review after news of the Wells Fargo settlement with regulators became public.
Before they were fired, Ms. Broderick said, she and her two colleagues ran into obstacles when they pressed others at the insurer, which is based in New Jersey, to investigate their findings more aggressively and to notify regulators. They were kicked out of Prudential's office in Newark, N.J., and put on unpaid leave just days before Thanksgiving, she said.
"We were totally shocked," Ms. Broderick said. "The game plan was to sweep this under the rug."
In addition to the suit they filed in State Superior Court in New Jersey's Essex County, the three intend to file a Dodd-Frank whistle-blower complaint next week with the Securities and Exchange Commission, said one of their lawyers, Christopher Chang, a former Manhattan prosecutor.