Prudential demutualization unaffected by lawsuits
It seems that Prudential has weathered the storm. For the past decade, the financial giant has been perennially plagued with lawsuits and employee dissension. Most of the problems stemmed from a class action lawsuit filed in November, 1996, which was settled for $2 billion.
During the process of claims payment, more problems arose, as disgruntled former employees began to accuse Prudential of slipshod and dishonest practices in reviewing claims. Policyholders who chose Alternative Dispute Resolution instead of Basic Claim Relief, and were therefore required to submit a written claim, allegedly got the short end of the stick. Prudential hired temp claims reviewers to deal with the extra workload, and allegedly goaded them to reckless haste with the promise of cash prizes. After leaving the company, some reviewers and managers brought lawsuits against their former employer, citing fraud, negligence, and unprofessionalism.
In the end the lawsuits were resolved in accordance with a new policyholder Remediation Plan, accepted in all 50 states, and the total of the settlement was paid off. Considering Prudential’s deep pockets, the penalty was hardly too grievous to manage—$2 billion out of a company whose annual revenue tops $130 billion.
In addition, Prudential dodged the biggest bullet of all. During the course of the lawsuits, some advisors worried that the company would not be able to demutualize as it had planned. Contrary to these forecasts, the schedule was accomplished without a hitch, and on December 15, 2000, Prudential officially became a publicly traded company.
Looking back after ten years, the lawsuit is little more than a memory, as profits continued to rise from 2005 to 2006.