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Excerpts from Primetime broadcast on Prudential

Rock in a Hard Place

These are excerpts taken from a transcript of ABC News Primetime Live. This transcript has not yet been proofread against videotape and cannot, for that reason, be guaranteed as to accuracy of speakers and spelling. The transcript number is #485 and can be ordered by calling Journal Graphics at 1-800-831-9000 or 1-303-831-9000.

The show was broadcast Dec. 11, 1996

ANNOUNCER: PrimeTime. Now, from New York, Diane Sawyer.

DIANE SAWYER: Good evening.

Prudential-- the name is ingrained in American life, doing business with one in five of us. And so it was a shock just two days ago when Florida threatened to ban the Prudential from selling life insurance in the state, accusing it of deceiving customers to sell more life insurance. How many customers nationwide?

Thousands, perhaps even millions. And this comes on the heels of a multi-state task force this past summer which slapped the company with a record $35 million fine, again for misleading customers.

So over the past six months PrimeTime talked to dozens of current and former Prudential employees. We obtained documents and tapes the task force didn't get to see. And tonight we raise a serious question. Did senior management know more about the practices that they acknowledged, and for longer?

We begin with what no one disputes, that a lot of customers were hurt. [voice-over] It's a $200 billion financial empire with assets equalling the economy of many countries, like Sweden. The heart of Prudential's business is life insurance. More Americans buy it from Prudential than any other company. And as the ads say, ``the rock'' was built on trust.

IRENE SIDLOW: They don't have to cheat people to make money and we feel that we've been cheated. Definitely.

DIANE SAWYER: [voice-over] Joe [sp?] and Irene Sidlow are Florida retirees who say for them it began when their Prudential agent persuaded them to cash in their old Prudential policies and take out a mortgage on their home to buy a big new policy-- nothing more to pay. But after the first year, they got a jolt, a premium bill they couldn't afford. They asked their agent about it.

IRENE SIDLOW: It was $813 a month. And I said, ``What is this?'' and he said, ``Oh, it's just a computer error.'' He said, ``Don't worry about it. You're taken care of. Just throw them away.'' So I did.

DIANE SAWYER: [voice-over] The Sidlows say they didn't realize that their agent was using a blank withdrawal form they'd naively signed to raid the cash value of the new policy to pay the premiums on it and keep his commission. Eventually, the whole scheme collapsed and, faced with large bills, the Sidlows felt they had no choice but sell their home.

IRENE SIDLOW: He was our professional insurance man. You know, we trusted him. He -- I trusted him like I do my banker, my pastor.

 


PRISCILLA MYERS: We had abuses, abuses that we're-- that we're not proud of.

DIANE SAWYER: [voice-over] Priscilla Myers is a senior vice president and auditor at Prudential.

PRISCILLA MYERS: We recognize the mistakes that we've made and we want to fix those mistakes. We want to let our policy holders know that we're serious about that.

 


DIANE SAWYER: [voice-over] This is a Prudential training tape obtained by PrimeTime. In it a company sales manager encourages agents to go after the savings of retirees and, in their pitch, avoid using the word people associate with life insurance payments: ``premium.''

SALES MANAGER: [training tape] We would very seldom ever talk about a premium, you know, because it's painful writing that premium. That's why we went to the ``capital transfer.'' That's how we present it, transferring from one institution to another. No pain.

DIANE SAWYER: [voice-over] And take a look at these marketing materials, which agents used to sell life insurance. The problem? They make it sound like something it's not-- for instance, calling it a ``private pension plan,'' a ``retirement plan,'' a ``nursing home plan,'' an ``alternative to savings.''

 


DIANE SAWYER: [voice-over] Rick Martin was a district manager at Prudential, Mike Weaver a former agent. They were among dozens of whistle-blowers who say they saw deception daily. [interviewing] Are you saying that you were giving the illusion of being an investment counselor and, in fact, you're selling life insurance.

RICK MARTIN: Insurance. Absolutely.

MIKE WEAVER: The manager told me, he said, ``Just sell it. We'll worry about it later. Just sell something.'' These are some examples of how records were kept in--

DIANE SAWYER: [voice-over] And Weaver showed us how routine it was to get customers to sign blank transfer forms, like those that got Carol Nicholson and the Sidlows in trouble. He rummaged through the files from fellow agents in his old office.

MIKE WEAVER: This has five signed--

DIANE SAWYER: Wait a minute.

MIKE WEAVER: --forms.

DIANE SAWYER: There's nothing filled in on here.

MIKE WEAVER: Nothing.

DIANE SAWYER: Just signed.

MIKE WEAVER: These are signed. That's it.

DIANE SAWYER: Which means that they could put in--

MIKE WEAVER: Anything that they wanted. This is the same as giving someone blank checks out of your checking account.

 


DIANE SAWYER: [voice-over] Bill Nelson, Florida's insurance commissioner, who just this week threatened to suspend Prudential's license in that state.

[interviewing] So you're saying this is not just spinning it, in the marketing sense. This is not putting the most positive gloss on what you're doing. This is deception.

BILL NELSON: This is outright deception. It's selling life insurance either as another kind of product, an investment kind of product, when, in fact, they're not being told that it actually is life insurance, and that's against the law.

 


DIANE SAWYER: [voice-over] This is John Cressman, a former top auditor for Prudential, who is speaking out on television for the first time because he's concerned that even after the task force's blistering report, the company is still not telling the truth.

JOHN CRESSMAN: I have no doubt in my mind that senior management knew about this problem in 1986 and, to some degree, in 1983, also.

 


DIANE SAWYER: [voice-over] And Cressman wasn't the only one sounding the alarm. Here's a 1986 tape of district manager Tony Toscano [sp?] decrying troubling tactics he's seen.

TONY TOSCANO: Those clients are not getting what they deserve. They're getting screwed.

DIANE SAWYER: [voice-over] Rick Martin says starting in 1987:

RICK MARTIN: I complained to three vice presidents of marketing.

DIANE SAWYER: [voice-over] He also talked to his regional head of consumer affairs, who in 1992 wrote a memo and sent it directly to the president of Prudential, warning ``We are now truly struggling with the sins of the past'' because of tactics most new agents had been taught. But what did Prudential do?

RICK MARTIN: The mentality of the company was to kill the messenger. They didn't want to hear about these problems because management was benefiting financially from the things that were happening.

DIANE SAWYER: [voice-over] Martin now sells mobile homes in Kentucky. He was fired for insubordination. Mike Weaver was fired for low production. Tony Toscano told us he resigned out of frustration and despair. And that 1986 audit was John Cressman's last for Prudential. He was transferred and later resigned.

 


DIANE SAWYER: And now some important notes for you. Tonight we reported on Prudential, but you should know that agents in several other big insurance companies, including Metropolitan Life, John Hancock, Equitable and New York Life, have been accused of similar deceptive sales tactics.

And we're not saying that you shouldn't buy life insurance. The important thing is to know what you need and exactly what it is you're buying.

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