No. 356: GEICO's "Patriot Penalty" Imposed on Automobile Insurance Premiums Paid by Soldiers Returning from Deployment

On February 11, 2020, the Consumer Federation of America (CFA) issued a press release entitled "Consumer Advocates Call for End to GEICO's 'Patriot Penalty' Revealed by Investigative Report." Here is the opening paragraph of the CFA press release:

Berkshire Hathaway subsidiary GEICO adds a surcharge to the auto insurance premiums of soldiers who dropped their coverage while they served abroad, according to a televised report by investigative reporter Lee Zurik. Consumer Federation of America (CFA), which has verified this "patriot penalty" through its own research, called on the nation's insurance commissioners to intervene, in a letter it sent today.

The letter to the state insurance commissioners is over the signatures of Douglas Heller and Robert Hunter of CFA. The letter is in the complimentary package offered at the end of this post, along with the CFA press release.

The Size and the States

According to the investigative news report, the surcharge on returning soldiers can be as large as $500 every six months, even where the service member has a clean driving record. According to the CFA press release, some states, including California and Florida, explicitly prohibit insurers from imposing such surcharges on safe drivers.

However, according to a preliminary review of GEICO's practices, such surcharges have been found in at least 21 states: Arizona, Arkansas, Delaware, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Minnesota, Nebraska, Nevada, New Jersey, New York, North Carolina, Tennessee, Washington, and West Virginia. In its letter, CFA says legislation should be sought immediately if the commissioner does not have authority to prevent such surcharges.

My Efforts to Contact GEICO and a Few Commissioners

I attempted to contact GEICO by telephone for comment, but I was not able to reach a human being. I then tried to contact by email a few of the 21 states mentioned in the CFA press release. One of the states replied immediately, but the others have not yet replied.

Indiana, where I live, sent Bulletin 126 dated June 7, 2004. It is entitled "Applications for Personal Lines Coverage by Returning Members of the Armed Services." It cites Indiana Code Sections 27-1-22-26, which say a violation is "an unfair and deceptive act or practice in the business of insurance." The 15-year-old Indiana bulletin is in the complimentary package offered at the end of this post.

General Observations

I was surprised by the CFA press release about the GEICO surcharge imposed on military personnel returning from deployment outside the country. Such surcharges are outrageous. It is unconscionable to impose surcharges on members of the military, who risk their lives to protect our nation. I agree with CFA that insurance regulators should take action to prohibit such surcharges, and should seek state legislation if the regulators do not already have such authority.

The Indiana bulletin and statute raise at least two questions. First, how many states (in addition to California and Florida, which are mentioned in the CFA material), have such rules and regulations? Second, how many states with such rules and regulations enforce them vigorously?

I hope and fully expect that Warren Buffett, the famous chairman of Berkshire Hathaway, will agree with the sentiments expressed by the CFA and in this post. I am attempting to get this post into his hands.

Available Material

I am offering a complimentary 5-page PDF consisting of the CFA press release (2 pages), the CFA letter to the commissioners (2 pages), and the Indiana bulletin (1 page). Email jmbelth@gmail.com and ask for the February 2020 package about GEICO's patriot penalty.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 355: Greg Lindberg—Another Update on the Federal Criminal Lawsuit in North Carolina

In No. 309 (April 17, 2019), I discussed the indictment of Greg E. Lindberg and three other individuals by a federal grand jury in North Carolina. In No. 320 (July 1, 2019), I reported on the placement of four Lindberg insurance companies into court-ordered rehabilitation at the request of the North Carolina insurance commissioner. In No. 338 (October 24, 2019), I discussed Lindberg's motion to dismiss the criminal lawsuit, and a recent article in The Wall Street Journal. Here I provide another update on the criminal lawsuit. (See U.S.A. v. Lindberg, U.S. District Court, Western District of North Carolina, Case No. 5-19-cr-22.)

Previous Developments

Lindberg is the founder and chairman of Eli Global, LLC, an investment company. He is also the owner of Global Bankers Insurance Group, a managing company for many insurers and reinsurers. The other defendants are John D. Gray, a Lindberg consultant; John W. Palermo, Jr., a vice president of Eli Global; and Robert C. Hayes, chairman of the state Republican party in North Carolina. All four defendants are North Carolina residents.

On March 18, 2019, the grand jury charged the defendants with one count of conspiracy to commit honest services wire fraud; and one count of bribery concerning programs receiving federal funding, and aiding and abetting. Hayes was also charged with three counts of false statements. The defendants pleaded not guilty on all counts, but Hayes later pleaded guilty to one count of false statements.

On September 18, Lindberg filed a motion to dismiss the indictment for failure to state an offense. On September 25, the U.S. Attorney filed an opposition to the motion to dismiss. On October 2, Lindberg filed a reply to the government's opposition to the motion to dismiss. On October 4, The Wall Street Journal carried a lengthy front-page article entitled "Indicted Executive Used Operatives To Spy on Women."

Recent Developments

On October 25, the judge issued an amended scheduling order. It is in the complimentary package offered at the end of this post.

On November 18, Gray filed a motion to dismiss the indictment for failure to state an offense. On December 2, Palermo filed a motion to dismiss the indictment for lack of specificity and for prosecutorial misconduct.

On January 31, 2020, the judge issued an order denying the Lindberg, Gray, and Palermo motions to dismiss the indictment. The order discusses "failure to state an offense," "lack of specificity," and "prosecutorial misconduct." The conclusion of the order reads:

For the foregoing reasons, the Court finds that there is a legally sufficient basis to support defendants' indictment for honest services fraud and federal funds bribery. Moreover, the indictment is sufficiently specific to give the defendants fair notice of the charged offenses. Finally, the defendants have failed to demonstrate prosecutorial misconduct warranting dismissal. Accordingly, the defendants' Motions to Dismiss the Indictment are denied.

The full order is in the complimentary package offered at the end of this post. On February 3, The Wall Street Journal carried another article about the Lindberg case. The article is entitled "Lindberg Trial Set to Proceed." The trial is set to begin on February 18.

General Observations

Lobbying of state insurance regulators by representatives of the insurance business is common. However, detailed allegations of attempted bribery are rare. For that reason, I think this case is important for persons interested in insurance regulation. I plan to report significant developments.

Available Material
The complimentary packages offered in Nos. 309, 320, and 338 are still available. Now I am offering another complimentary 22-page PDF consisting of the judge's amended scheduling order (6 pages) and the judge's order denying the defendants' motions to dismiss the indictment (16 pages). Email jmbelth@gmail.com and ask for the February 2020 package about Lindberg.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 354: Senior Health Insurance Company of Pennsylvania Enters Rehabilitation by Order of a State Court

In No. 352 (January 29, 2020), I reported that Jessica K. Altman, the Pennsylvania Insurance Commissioner and primary regulator of Senior Health Insurance Company of Pennsylvania (SHIP), filed in the Commonwealth Court of Pennsylvania on January 23 an application for an order placing SHIP in rehabilitation. On January 29, President Judge Mary Hannah Leavitt issued the order because "rehabilitation has been requested by and consented to by SHIP's board of directors and the trustees of the Senior Health Care Oversight Trust." (See IN RE: Senior Health Insurance Company of Pennsylvania In Rehabilitation, Commonwealth Court of Pennsylvania, No. 1 SHIP 2020.)

The Leavitt Order

Judge Leavitt appointed Commissioner Altman as rehabilitator of SHIP, and said the rehabilitator may appoint a special deputy rehabilitator. The judge ordered the rehabilitator to file a preliminary plan of rehabilitation on or before April 22, 2020, including a timeline for the preparation of a final plan of rehabilitation.

The 13-page order proposed by Commissioner Altman is in the complimentary package offered at the end of No. 352. The five-page order issued by Judge Leavitt is in the complimentary package offered at the end of this post.

The Department's Press Release

On February 3, 2020, the Pennsylvania Insurance Department (Department) issued a press release announcing the rehabilitation. It said the special deputy rehabilitator is Patrick H. Cantillo. It also said more information is available on the Department's website and on SHIP's website. The press release quoted Commissioner Altman as saying (the full press release is in the complimentary package offered at the end of this post):

At this time there will be no immediate changes to the company's insurance policies. But such changes may be part of any rehabilitation plan. Pending the rehabilitation plan, claims and benefits will continue to be paid as they were before the order. It is important that policyholders continue to pay their premiums to avoid cancellation of their policies and loss of valuable insurance coverage.

The SHIP Posting

SHIP, at www.shipltc.com/rehabilitation, posted information: a short statement from SHIP, general questions, policyholder questions, agent and broker questions, other creditor questions, and a modified version of the Department's press release. The modified version includes this paragraph (all the information SHIP posted is in the complimentary package offered at the end of this post):

As is typical with financially troubled insurers, there are many contributing causes to SHIP's difficulties, including poor performance of investments and other such matters the details of which are not yet fully known to the Rehabilitator. However, one key contributing factor that is common to many long-term care insurers is that the expected cost of benefits that will be due under the insurance policies in effect greatly exceeds the assets and expected revenues from which such benefits will have to be paid. Many issues contributed to this shortfall and it is too early for the Rehabilitator to be able to identify them with specificity. One that stands out, however, is that the premiums charged historically for many, if not most, of SHIP's long-term care insurance policies were inadequate for the benefits expected to be due under such policies. In this respect, SHIP is no different than much of the LTC industry.

The Judge

Judge Leavitt has extensive experience with rehabilitations and liquidations of long-term care (LTC) insurance companies. Currently she is President Judge of the Commonwealth Court of Pennsylvania, a position to which she was elected in 2016. My experience with her work dates back to May 2012, when she handed the then Pennsylvania commissioner and his predecessor a major defeat in the case of Penn Treaty Network America Insurance Company. Briefly, here is what happened.

Joel S. Ario was the Pennsylvania commissioner from 2007 to 2010, and Michael F. Consedine succeeded him. Penn Treaty and an affiliate, LTC insurance companies, were insolvent in January 2009. Ario petitioned the court to place them in rehabilitation. The court did so, and appointed Ario the rehabilitator. In April 2009, Ario submitted to the court a preliminary rehabilitation plan, and said he planned to submit a formal plan in October 2009. Instead he petitioned to convert the plan to a liquidation. Penn Treaty and its board chairman petitioned to allow them to intervene in opposition to the liquidation petition. The court granted the petition.

The parties tried unsuccessfully to reach a settlement. A bench trial before Judge Leavitt began in January 2011. The trial was suspended while the parties tried to reach a settlement. Again the effort failed and the trial resumed in October 2011. The trial lasted 30 days and ended in February 2012. Under Pennsylvania law, the rehabilitator (then Consedine) had to prove the rehabilitation would substantially increase the risk of loss to creditors, policyholders, or the public, or would be futile. In May 2012, Judge Leavitt issued a 162-page opinion and a brief order. She ruled Consedine had not met his burden of proof, and she denied the liquidation petition. She ordered Consedine to develop a rehabilitation plan in consultation with the intervenors, and ruled the intervenors were entitled to attorney fees and costs. Here are some extraordinary comments in Judge Leavitt's ruling:

The Insurance Commissioner, wearing his hat as a regulator of the Pennsylvania insurance industry, refused to approve the Companies' actuarially justified rate increase filings in the amount requested, both before and after rehabilitation. The Commissioner has even discouraged other state regulators from approving rate increases. Now the Commissioner seeks to liquidate the Companies because their premium rates are inadequate....

The Rehabilitator's evidence showed that rate regulation is governed by politics, not actuarial evidence or legal principles. The Rehabilitator has even included Pennsylvania in the list of problem states that have refused to approve [Penn Treaty's] actuarially justified rate increase filings for [certain] policies. This case presents a serious indictment of the existing system of rate regulation of long-term care insurance.

At the trial, the rehabilitator's actuarial expert was an actuary at Milliman, Inc., an actuarial consulting firm. There were major differences of opinion in 60-year projections by Milliman and the intervenors' actuary. Judge Leavitt found the testimony by the intervenors' actuary more compelling than Milliman's testimony.

I wrote about the Penn Treaty incident in the August 2012 issue of The Insurance Forum, the monthly newsletter I published from January 1974 until December 2013. The article is in the complimentary package offered at the end of this post. Judge Leavitt placed Penn Treaty in liquidation on March 1, 2017, as reported in No. 208 (March 13, 2017).

General Observations

I fear the proposed rehabilitation plan to be submitted to the court by April 22 will involve a devastating combination of premium increases and benefit reductions, including benefit reductions for policyholders currently receiving benefits. Furthermore, I consider it possible that Judge Leavitt will reject the plan, and that she will order liquidation of the company. That would lead to SHIP being placed in the hands of the National Organization of Life and Health Guaranty Associations, which would coordinate the response of the state guaranty associations.

Available Material

I am offering a complimentary 23-page PDF consisting of Judge Leavitt's order (5 pages), the Department's press release (1 page), the information posted on SHIP's website (15 pages), and the August 2012 Forum article (2 pages). Email jmbelth@gmail.com and ask for the February 2020 package about the SHIP rehabilitation.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 353: The Massachusetts Securities Division Files a Complaint Against the Promoter of Free Lunch Workshops

On December 17, 2019, the Enforcement Section of the Securities Division in the Office of the Massachusetts Secretary of the Commonwealth filed an administrative complaint against an insurance agent and two companies. The individual respondent is Ryan Patrick Skinner. The other respondents are Summit Financial Partners and Summit Financial Ptrs Inc. (collectively, "Summit"). (See In the Matter of Ryan Patrick Skinner, Massachusetts Securities Division, Docket No. E-2019-0055.)

The Complaint

The complaint alleges that Skinner "acted as an unregistered investment adviser and unregistered investor adviser representative," and that Summit "acted as an unregistered investment adviser that employed an unregistered investment adviser representative." Here is one paragraph in the "Summary" section of the complaint (the full compliant is in the complimentary package offered at the end of this post):

Respondents' modus operandi is to entice residents of the Commonwealth, especially seniors, to attend "free lunch" workshops where Skinner convinces the attendees that he can provide advice to help them maximize their Social Security and retirement income. He then holds individual meetings with the attendees, often at their homes, and uses these meetings as an opportunity to make his pitch. Skinner repeatedly recommends that prospective clients liquidate securities from their retirement investment accounts to purchase fixed indexed annuities. In many instances, Skinner recommends that prospective clients surrender existing annuities thereby incurring significant penalties. In some cases Skinner recommends that an investor's entire life savings consist of annuities sold through him.

The Answer

On January 7, 2020, the respondents' attorney filed an answer to the complaint. The answer includes the usual "admit," "deny," and "insufficient knowledge" responses. It also lists eight affirmative defenses, one of which reads as follows (the full answer is in the complimentary package offered at the end of this post):

The claims are barred because the Respondents lie within the exclusive jurisdiction of the Division of Insurance in accordance with Mass. Gen. Laws ch. 155 section 9 and Mass. Gen. Laws ch. 175 section 162G et. seq.

Further Filings

On January 16, the respondents' attorney filed a letter with the Securities Division. The letter consists of one paragraph:

As you know, Ryan Skinner ("Skinner") and Summit Financial Partners Inc. ("Summit") hold licenses in good standing with the Massachusetts Division of Insurance ("DOI"), and both remain subject to supervision and enforcement by DOI. It has come to my clients' attention that the Enforcement Section has contacted Athene Life and Annuity Co. and other carriers with whom Skinner and Summit hold appointments. If true, please identify the authority upon which the Enforcement Section relies in doing so. Please be advised that Skinner and Summit do hereby reserve all rights, including the right to seek injunctive relief in Superior Court, to protect its appointments and licenses, and to enjoin any unlawful interference with its contractual relations.

On the same day, the respondents' attorney filed a "Stipulation Relative to Scheduling" that suggested eleven deadlines ending with a hearing on October 16, 2020. He also filed a "Respondents' First Request for Production of Documents."

On January 23, the Enforcement Section filed a motion for a scheduling conference. The next day, the Presiding Officer, on behalf of William F. Galvin, Secretary of the Commonwealth, issued an order setting a pre-hearing conference for February 13, 2020.

FINRA

A report on Skinner (CRD# 4574898) may be viewed through Broker Check on the website of the Financial Industry Regulatory Authority (www.finra.org). He is currently not registered, but was registered with four firms from 2002 through 2008. The report reveals three "disclosure events," the details of which are shown in the report.

One of the disclosure events was initiated by the Massachusetts Division of Insurance (DOI) on February 5, 2016. The matter was resolved on March 17, 2016, when Skinner paid a civil and administrative penalty of $2,500. 

Division of Insurance

I have been in contact with the Massachusetts Division of Insurance (DOI). It is aware of the recent allegations by the Securities Division against Skinner, and has opened an investigation of its own. The spokesperson declined further comment on the matter.

On January 31, I requested from the DOI records access officer, pursuant to the Massachusetts statute governing access to public records, copies of the dockets relating to the 2016 investigation of Skinner and the current investigation of Skinner, as well as all documents listed on those dockets. I await a reply.

Insurance and Securities Regulation

I have long been interested in the relationship and overlap between insurance regulation and securities regulation. The reference in this post to Secretary of the Commonwealth Galvin, who has been in that position for many years, reminded me of an incident more than 20 years ago, when Boston-based John Hancock Mutual Life Insurance Company adopted a demutualization plan. Boston newspapers reported that a huge number of notification letters to Hancock policyholders were returned by the postal service as undeliverable. Galvin intervened because the Massachusetts unclaimed property agency was part of the office of the Secretary of the Commonwealth, and the amount of unclaimed funds was likely to be huge. Insurance regulators and other states' unclaimed property agencies tackled the issue of unpaid benefits later, but it was Galvin who led the way.

General Observations

Free-lunch seminars have been a serious problem for many years. I remember attending a couple of such seminars, and coming away from them appalled by the extent of the deceptive information presented to the attendees, most of whom were gullible seniors. I plan to report further on the Skinner case and other possible future developments.

Available Material

I am offering a complimentary 24-page PDF consisting of the complaint filed by the Securities Division (18 pages) and the answer filed by the respondents' attorney (6 pages). Send an email to jmbelth@gmail.com and ask for the February 2020 package about the Massachusetts complaint against Skinner.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 352: Pennsylvania Moves To Place Senior Health Insurance Company of Pennsylvania in Rehabilitation

Background

Senior Health Insurance Company of Pennsylvania (SHIP) has been running off the long-term care (LTC) insurance business of Conseco Senior Health Insurance Company (CSHI) since 2008. CSHI had been running off the business since 2003.

For many years, SHIP's financial condition has been worsening. In March 2019, SHIP filed with the Pennsylvania Insurance Department (Department), SHIP's primary regulator, the company's statutory financial statement for the year ended December 31, 2018. (The statement was signed on February 26, postmarked on March 1, and received by the Department on March 5.) The statement showed that SHIP's liabilities of $2.653 billion exceeded its assets of $2.206 billion by $447 million. The Department at that time took no action to place the company in rehabilitation. I wrote about the insolvency in No. 308 (April 11, 2019).

The insolvency grew to $462 million at the end of the first quarter of 2019, to $477 million at the end of the second quarter, and to $524 million at the end of the third quarter. I wrote about the expanding insolvency in No. 342 (November 25, 2019).

In the quarterly statements, SHIP said it is "actively working with the Pennsylvania Insurance Department to develop a corrective plan." During 2019, because of SHIP's failure to maintain sufficient capital, at least three states suspended the company's certificate of authority: Idaho on May 15, Iowa on July 8, and Alaska on November 6.

The Application

On January 23, 2020, Jessica E. Altman, the Pennsylvania Insurance Commissioner (Commissioner), filed with the Commonwealth Court of Pennsylvania an "Application for Order Placing Senior Health Insurance Company of Pennsylvania in Rehabilitation." The application contains numerous exhibits, one of which is a "Proposed Order of Rehabilitation." Here, without citations, is part of the introduction to the application:

SHIP has committed one or more acts which constitute grounds for rehabilitation. Specifically, SHIP's most recent annual statement demonstrates that the company is statutorily insolvent. Additionally, SHIP's most recent risk-based capital ("RBC") report indicates that the company's total adjusted capital is substantially below its mandatory control level RBC, therefore triggering a "mandatory control level event." Finally, the Trustees of the Senior Health Care Oversight Trust and SHIP's directors have consented in a signed writing to the company being placed in rehabilitation and have waived a hearing.

A section of the application discusses rehabilitation. That section includes comments such as these:

SHIP's financial condition is dire. The Commissioner's staff and consultants have spent some time working with the Trustees and SHIP management to obtain as accurate as possible a financial picture of SHIP's affairs. They have advised the Commissioner that it may be possible to devise and implement a plan for the rehabilitation of SHIP that would produce for policyholders a result no less beneficial than would be produced by a liquidation, and perhaps materially better than that.

Because of the gravity of SHIP's financial difficulties, there can be no assurance that the rehabilitation efforts will be successful....

It is probable that the plan, when implemented, will require modification of existing contracts, premium rate increases, and other measures that in combination will reduce or eliminate SHIP's deficit.

Attached to the application as an exhibit is SHIP's statutory financial statement for 2018. The application and the proposed rehabilitation order, but without the other exhibits, are in the complimentary package offered at the end of this post. (See Altman v. SHIP, Commonwealth Court of Pennsylvania, Docket No. 1 SHIP 2020.)

The Milliman Role

Milliman Inc., an actuarial consulting firm, played a pivotal role in the 2008 transfer from CSHI to the Senior Health Care Oversight Trust in Pennsylvania. In public documents filed at the time, Conseco said Milliman had concluded in a financial report that SHIP would have enough assets to run off the LTC insurance business. I did not believe it. I asked Conseco and the Department for the report, so that I could see what assumptions Milliman had made. Both denied my request. I hope the report becomes public some day so we can find out whether Milliman used assumptions that were inappropriate or Conseco characterized the report inaccurately.

General Observations

For all practical purposes, SHIP has been in rehabilitation under the supervision of the Department since the filing in early 2019 of its statutory financial statement for 2018, and probably for several years before that filing. The problem is that the rehabilitation, as far as SHIP's premium-paying policyholders and claimants are concerned, was in essence a secret. Thus they did not have the opportunity to take actions that might have provided them with some protection against the consequences of SHIP's "dire" financial condition. What form of disclosure will now be made to them, and when the disclosure will be made, remain to be seen.

I am indebted to Elizabeth "Liz" Festa. She is a long-time business and financial services reporter with a specialty in insurance regulatory and legislative coverage at the federal and state level. She is based in Washington, D.C. Her January 24 article in the Washington Insurance Rider was my first knowledge of the Commissioner's court application regarding SHIP.

Available Material

I am offering a complimentary 27-page PDF consisting of the Commissioner's application (without exhibits) for the rehabilitation of SHIP (14 pages) and the proposed rehabilitation order (13 pages). Email jmbelth@gmail.com and ask for the January 2020 package about the application for the rehabilitation of SHIP.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 351: Prudential is a Defendant in a Securities Class Action Lawsuit Related to Reserves for Individual Life Insurance

On November 27, 2019, the City of Warren (Michigan) Police and Fire Retirement System filed a class action lawsuit in federal court against Prudential Financial, Inc. (Prudential) and two of its top officers. The plaintiff alleges that the defendants understated the reserves for the company's individual life insurance segment, and thereby caused losses to shareholders. (See City of Warren v. Prudential, U.S.District Court, District of New Jersey, Case No. 2:19-cv-20839.)

The Judges

The case has been assigned to Senior U.S. District Judge Stanley R. Chesler. President George W. Bush nominated him in January 2002. The Senate confirmed him in November 2002. He assumed senior status in June 2015. U.S. Magistrate Judge Cathy L. Waldor has also been assigned to the case.

Nature of the Lawsuit

The opening paragraph of the complaint and the one-paragraph "Summary of the Action" section of the complaint describe the nature of the lawsuit. Here are those two paragraphs (the full complaint is in the complimentary package offered at the end of this post):

Plaintiff City of Warren Police and Fire Retirement System ("plaintiff"), maintaining its principal place of business at Warren, Michigan, individually and on behalf of all others similarly situated, by plaintiff's undersigned attorneys, for plaintiff's complaint against defendants, alleges the following based upon personal knowledge as to plaintiff and plaintiffs' own acts and upon information and belief as to all other matters based on the investigation conducted by and through plaintiff's attorneys, which included, among other things, a review of U.S. Securities and Exchange Commission ("SEC") filings by Prudential Financial, Inc. ("Prudential" or the "Company"), as well as media and analyst reports about the Company and Company press releases, and conference call transcripts. Plaintiff believes that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery.

This is a securities class action on behalf of all persons or entities who purchased the common stock of Prudential between February 15, 2019 and August 2, 2019, inclusive (the "Class Period"). The defendants are Prudential, the Company's President and Chief Executive Officer ("CEO"), Charles F. Lowrey, and its Chief Financial Officer ("CFO"), Kenneth Y. Tanji. Plaintiff seeks remedies for violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act").

Structure of the Complaint

The nine-page "Introduction and Background" section of the complaint cites numerous comments that appeared in Prudential's SEC filings, press releases, guidance calls for analysts, investor conferences, and analyst reports. The end of that section (on page 11 of the complaint) shows an interesting chart illustrating the performance of Prudential's common stock as compared to the S&P 500 index during the class period from February 15, 2019 to August 2, 2019.

Other major sections of the complaint are "Defendants' False and Misleading Statements Issued During the Class Period" (6 pages) and "The True Facts Begin To Be Revealed" (9 pages). There are two class action allegations: (1) violation of §10(b) of the Exchange Act and Rule 10b-5 against all defendants, and (2) violation of §20(a) of the Exchange Act against all defendants. The plaintiff seeks class certification, damages and interest, and attorneys' fees and costs.

General Observations

This case is in its early stages. I think it is an important case, and plan to report on significant developments.

Available Material

I am offering a complimentary 39-page PDF consisting of the complaint in the City of Warren case. Email jmbelth@gmail.com and ask for the January 2020 package about City of Warren v. Prudential.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 350: Bob Woodward's Aptly Named Book About Decision Making in the Trump White House

In 1972, Bob Woodward and Carl Bernstein, then young reporters at The Washington Post, began investigating a minor burglary at an office in the Watergate complex. Their investigation grew into a major story that led to the resignation of President Richard Nixon in 1974. In the process, "Woodstein" became arguably two of the most famous reporters in the history of journalism.

Woodward is now a top editor at the Post. Over the years he has written 19 books—all best sellers—and he has received a long list of awards, including Pulitzers. He has written several books about Nixon, and books about other presidents, including Reagan, Clinton, both Bushes, and Obama. He has also written about the Supreme Court, the Central Intelligence Agency, and the Federal Reserve Board.

Woodward's most recent book, published in September 2018, is entitled Fear: Trump in the White House. I read it when it was published. I concluded it was aptly titled, because I came away from it fearful about the future of our country. Because of everything that happened during the impeachment inquiry (following publication of Fear), I decided to reread the book.

I came away from the second reading even more fearful for our country. Just as I was finishing my second reading, Trump decided to assassinate Iran's top general. Iran retaliated with a missile attack against two military bases in Iraq. Also, apparently by mistake, Iran shot down a passenger jetliner that was taking off from the Tehran airport bound for the capital of Ukraine, tragically killing all those aboard.

Pages 300-302 of the book describe the relationship between Trump and Kim Jong Un, the dictator of North Korea, in early 2018. That was prior to their meetings, which occurred after the book was published. Here are three paragraphs of the description (italics are in the original):

Lingering after receiving his President's Daily Brief on January 2 [2018], President Trump said, "In this job I'm playing five hands of poker simultaneously, and right now we're winning most of the hands. Iran is busting up and the regime is under intense pressure. Pakistan is terrified of losing all of our security aid and reimbursements. And South Korea is going to capitulate to us on trade and talks with North Korea." He seemed on top of the world but he didn't mention the fifth poker hand.

Real power is fear.

The answer on North Korea was to scare Kim Jung Un. "He's a bully," Trump told [then staff secretary Rob] Porter. "He's a tough guy. The way to deal with those people is by being tough. And I'm going to intimidate him and I'm going to outfox him."

Page 302 of the book also describes some dangerous advice Trump received from U.S. Senator Lindsay Graham of South Carolina. Graham had suggested publicly that it was time to start withdrawing U.S. military dependents from South Korea, an action that "could provoke Kim." Fortunately, a month later "Graham seemed to have a change of heart."

At this writing (January 17), the Senators have been sworn in, and the impeachment trial is set to begin on January 21. I recommend that anyone who has not read Woodward's book do so.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com