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.
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