Motion to Dismiss Denied in Prudential
On February 6, 2014, the Honorable Susan D. Wigenton of the United States District Court for the District of New Jersey denied from the bench defendant Prudential Financial, Inc.’s motion to dismiss. The case charges Prudential and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Prudential is a financial services company that offers a wide array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services. Judge Wigenton held that lead plaintiffs National Shopmen Pension Fund, Heavy & General Laborers’ Locals 472 & 172 Pension and Annuity Funds and Roofers Local No. 149 Pension Funds’ claims under §§10(b) and 20(a) of the Securities Exchange Act of 1934 satisfy all applicable pleading standards and warrant full discovery. In doing so, Judge Wigenton commended lead plaintiffs’ well-pled complaint, stating, “I don’t think that anyone would disagree that the complaint is very specifically pled.”
Lead plaintiffs allege that between May 5, 2010 and November 4, 2011, Prudential materially understated expenses and overstated income and earnings per share by failing to account for hundreds of millions of dollars in death benefits owed to states pursuant to unclaimed property laws or to the beneficiaries of policyholders it knew or should have known had died. Prudential knew so because it used the Social Security Administration’s Death Master File, a government database of death records, but only when it benefited its bottom line instead of comprehensively to pay beneficiaries and escheat unclaimed property to states.
Prudential also concealed that state regulators had been investigating this misconduct since 2009. Ultimately, Prudential entered into regulatory settlements requiring changes to business practices and hundreds of millions of dollars in payments to beneficiaries and states. When California Controller John Chiang announced a settlement with Prudential, he stated: “For decades, the surviving families of policyholders have been cheated by life insurance companies who either knew or should have known that payout was due.” Chiang’s press release further stated that “[s]o far, more than 1,000 Prudential policies have been identified as being held for individuals in California who have been dead for more than 15 years.” Prudential’s Chief Communications Officer, in turn, stated that Prudential had entered into these settlements because it “didn’t want to become the poster-child for opposing getting money to people it belonged to.” After the true facts began to emerge in the fall of 2011, Prudential’s stock price declined significantly, resulting in hundreds of millions of dollars in losses to investors.
With Judge Wigenton’s ruling and discovery open, lead plaintiffs are aggressively pursuing evidence in support of their claims and working toward class certification, adjudication on the merits, and favorable recovery on behalf of aggrieved investors.
Order,City of Sterling Heights General Employees’ Retirement System v. Prudential Financial, Inc., et al., No. 2:12-cv-05275 (D.N.J. Feb. 6, 2014).