Stop Profiting from Our War Dead

September 15th, 2010 at 7:44 am | 7 Comments |

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Cindy Lohman’s son, Ryan, a 24-year-old Army sergeant, was killed by a bomb in Afghanistan.

Get this – the government insurance plan: they recruit you, train you, insure you, ship you around the world and when you get your head blown off, then they get that last inch of blood out of the stone by profiteering off of the blood money:

Bloomberg News reports:

Veterans Agency Made Secret Deal Over Benefits

The U.S. Department of Veterans Affairs failed to inform 6 million soldiers and their families of an agreement enabling Prudential Financial Inc. to withhold lump-sum payments of life insurance benefits for survivors of fallen service members, according to records made public through a Freedom of Information request.

Since 1999, Prudential has used so-called retained-asset accounts, which allow the company to withhold lump-sum payments due to survivors and earn investment income on the money for itself.

OOOPS! Oh H-E-E-E-Y-Y-Y-!-!-! We’re SORRY . . . we conveniently FORGOT TO TELL YOU we’re making millions in interest and investments off the money that belongs to your survivors!

Bloomberg’s report adds:

It’s very clear they violated the original terms of the contract,” says [Brendan] Bridgeland [an insurance lawyer], who is retained by the National Association of Insurance Commissioners to represent consumers. “Every veteran I’ve spoken with is appalled at the brazen war profiteering by Prudential,” says Paul Sullivan, who served in the 1991 Gulf War as an Army cavalry scout and is now executive director of Veterans for Common Sense.

The U.S. government mothballs ships and tanks, assorted small arms weaponry, equipment, even rucksacks and web gear, for cannibalization or sale to foreign militaries. Now we see a ghoulish angle on this kind of pragmatism:

Fallen Soldiers’ Families Denied Cash as Insurers Profit

The ‘checkbook’ system cheats the families of those who die, says Jeffrey Stempel, an insurance law professor at the William S. Boyd School of Law at the University of Nevada, Las Vegas.

‘It’s institutionalized bad faith,’ he says. ‘In my view, this is a scheme to defraud by inducing the policyholder’s beneficiary to let the life insurance company retain assets they’re not entitled to. It’s turning death claims into a profit center.’

A sample “check” for a Prudential retained asset account. Photographer: David Evans/Bloomberg

This thing stinks. This is absolutely disgraceful. In my view, this is only a few steps away from what the Nazis did: harvesting gold teeth, eyeglasses, wristwatches, jewelry, furs, clothing and shoes from gassed concentration camp inmates – their own citizenry. What’s even more mind-boggling is how on Earth are they going to sort this thing out?

Think about it; there’s the profits themselves to be divvy’d and distributed to fallen soldiers’ families. Then there’s the amounts that insurance company executives and managers realized in bonuses, and then there’s dividends to the stockholders; a significant percentage of these payouts should rightfully go to the survivors. But how to possibly calculate these amounts? Anybody out there still think the government is going to TAKE CARE OF YOU? Hmmm? HHHMMMMMMMMM ? ? ?

“If you expect the Government to take care of you, you’re gonna get what the American Indian got.” – Sergeant Major Loclomancil, US Army Special Forces and full-blooded Payute.

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7 Comments so far ↓

  • TerryF98

    This is a laugh coming from someone in the war for profit business!

  • balconesfault

    Well, at least this proves it is possible for a conservative to get upset about insurance companies gouging some segment of the public.

  • parsifal

    How dare Republicans try to meddle in “free enterprise” and interfere with making a profit! If Prudential disgorges their profits, then the costs will simply have to be made up by some other segment of the public. Enlightened self-interest can always be counted on to rein in bad behavior. To give back these profits would simply be socialism!!! Obama just wants to run the insurance businesses. NO!!!


  • Cashmoney

    This may be the worst article FF has ever run. Christ, David, don’t you ever do any editing? Actually, this piece didn’t needed editing — it needed spiking.

    I recently received payouts as a beneficiary from my dad’s two gov’t insurance policies (one from the VA, another from a federal employee policy) in which the insurer graciously offered the hold the funds in what looked like a checking account. But I’m sufficiently savvy with finance (former Wall Streeter) that I immediately moved the funds into FDIC-insured bank accounts.

    Why is the federal gov’t playing along when a private insurer gives beneficiaries the impression the funds carry FDIC insurance? Yes, insurance companies are long had much tougher regulatory oversight than banks. (Other than AIG, insurance companies were not at risk in fall 2008, as Wall Street approached total collapse. And AIG’s insurance operations were not what got it into trouble.) But funds held by an insurance company still bear risk that a bank account doesn’t.

    That insurers would want to hold the funds for as long as possible is clear. But they’re doing it in a deliberately deceptive way. What public interest is the federal govt serving by being an accomplice to their deception?

  • Madeline

    This is SOP for life insurance payouts. The fact that it is happening to the families of fallen soldiers is unfortunate, but it is no different from what happens to millions of beneficiaries; regardless of whether the insurance is provided by the government, a private sector employer, or purchased as an individual policy. I suppose we could regulate the insurance industry more stringently so that these things couldn’t happen. Or we could de-privatize military (and government employee) benefits to ensure that the government has no involvement in it.

    BTW, this:

    In my view, this is only a few steps away from what the Nazis did: harvesting gold teeth, eyeglasses, wristwatches, jewelry, furs, clothing and shoes from gassed concentration camp inmates – their own citizenry.

    is ludicrously over the top.

  • CO Independent

    Madeline is correct–this is SOP for life insurance payouts. There is nothing particularly nefarious going on here. Families can withdraw the funds at any time by simply writing a check for the balance of the account. They would be well-advised to do so, as Prudential is not FDIC insured.

    Thirty seconds on google would have confirmed this.

  • Sean Linnane

    I know the way life insurance policies work – I have two of them and I know how to read. I also know that – as explained in the links – what Prudential did here was not written up in the paperwork; the opposite in fact.

    What they did works like this: YOU give ME $400,000 of your money, let me invest it. I get to keep the profits off that investment, but don’t worry I’ll pay you 1.5% interest. Oh, and by the way your money is not insured.

    This is profiteering, and it is unconscionable.

    The deal is that when a soldier dies, the family gets paid. Point, blank and simple. Nowhere in the SGLI paperwork does it explain how Prudential gets to keep their hands on the survivor’s payoff money in an uninsured account, and make interest + profit off of it. That’s not part of the deal.

    If you clicked on all the links, you will see how insurance executives, commissioners and other experts all agree that this is at best a legal gray area, at worst a criminal liability.

    You guys might not have a problem with these kind of dealing, but I can assure you that if it WASN’T a big deal, the VA and the government wouldn’t be sweating bullets over it, and Prudential wouldn’t be doing cheetah flips right now to legalize the whole thing.