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The Spectacle Blog
Although the story is apparently not new (it seems to have been first reported by Bloomberg News in late July), I just heard about it on Bloomberg TV today and it bears mentioning:
The US Dept. of Veterans Affairs made a “verbal agreement” with Prudential Insurance company which has allowed Prudential not to pay lump sum benefits to the families of American soldiers killed in action. Instead, Prudential has been giving the families checkbooks, paying them a fraction of a percent on the balances sitting in a Prudential account, while Prudential then took the lump sum amount and invested it for their own account, earning over 4 percent returns for the firm.
Bloomberg has learned that the “verbal agreement” was directly contrary to Prudential’s 1965 contract with the VA which specified that the payments must be lump sum. Bloomberg is also reporting that the VA recently and very quietly added an amendment to the contract allowing the practice.
Prudential is holding about $62 million of survivors’ money which “under the contract is supposed to have been sent out to the beneficiaries.”
As if all that weren’t bad enough, it turns out that the accounts into which Prudential put the survivors’ benefits are not FDIC insured.
You can read the entire story on the Bloomberg site.
The VA responded with a press release today saying that they will make sure the lump sum option is more clearly stated to beneficiaries, along with the option to let Prudential keep doing what it’s been doing. If the VA and Prudential think this will or should end the discussion, they’re wrong. Or at least they’d better be wrong or we have a serious problem with our Congressional oversight of the VA and with its internal controls.
Heads need to roll at the Veterans Administration and at Prudential, perhaps with someone serving time in prison for this disgusting profiteering at the expense of grieving relatives of (mostly) young Americans who made the ultimate sacrifice for their nation.
View all comments (4) | Leave a comment
More Blog Posts by Ross Kaminsky
http://spectator.org/blog/2010/09/14/va-not-being-prudential-with-s
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CalMark| 9.14.10 @ 12:49PM
In my personal life, stories like this about Prudential--be it insurance or real estate--abound. Every single person I know who was involved with Prudential has an eyebr0w-raising story similar in spirit (if not actual fact) to this one.
David W| 9.14.10 @ 3:11PM
we know what will happen. there will be a congressional hearing. Congress will blow steam at the executives. They'll lie under oath. Nothing will be settled, and instead Congress will sentence some baseball player to prison for "lying" about using steroids.
Charles H. Green | 9.14.10 @ 8:22PM
Ross, you are being conned and hustled--not by the VA or an Insurance company, but by Big Media. In this case, Bloomberg News.
This is the worst non-story since Shirley Sherrod. Here's a comment from a veteran, on the CBS bulletin board, back when this story first arose:
by WillyRC July 30, 2010 12:22 PM EDT
"This is much ado about nothing. I served in the Marine Corps for 29 years and saw several sad, but predictable, situations prior to 1999, where a survivor received a lump sum check and burned through the money in a few months. That is why the Department of Defense agreed to the "checkbook" method currently in use. It it also used by the Office of Personnel Management for civilians.
"If you really think it's a good idea to hand a $400,000 insurance check (and a $100,000 death gratuity check) to an 18-year old survivor (or a 52-year old grieving mother as mentioned in the story), then go ahead and support the return to a lump sum check.
"I understand that the insurance company is investing the money it holds and turns a profit on it. I also know that the bank where a survivor deposits a check does the same thing. So long as the Prudential doesn't default on their obligations, they have every right to keep their administrative costs down by investing the money they hold.
"Come on people, look at the whole picture. Casualty Assistance Officers tell every survivor that as soon as they get the "checkbook" they can cash it in. The smart ones also tell the survivors to resist the temptation to spend the money quickly. The "checkbook" method puts a little bit of a brake on the urge to spend."
Now go back and read your own account, and ask yourself, just exactly what is it that you think merits prison terms for government and business officials?
Are you really complaining that a family gets a promissory note instead of a checkbook? Hardly anyone is confused by it. The few court cases brought have been rejected out of hand, since it's patently obvious the insurance company pays people in full when they ask for it. The verbal agreement which has been in place for years was an intelligent policy evolved to take into account grief.
What do you suggest: that Prudential send an agent to the funeral with a bag of cash? Hand a check to the bereaved and offer financial planning advice at the wake? Get real.
And if you insist in pursuing your demons further, first read what a few other people have to say about this pale excuse for a story:
http://online.wsj.com/article/.....s=comments
http://online.wsj.com/article/.....HomePage_2
I'd add more links, but your website cuts off links at two. Believe me there are more if you're willing to do the legwork and not allow yourself to be lulled by lazy reporters into sucker headlines.
Deltta| 10.15.10 @ 2:23AM
Sounds like you're trying to bully him into believing your view! When someone wins a lawsuit in court, does the court become the longterm payee? I don't think so. If you are entitled to a lump sum in any insurance matter, do they offer an installment plan? Hell no. So what the devil are you talking about you slickster, you?