Thursday, February 11, 2021

No. 409: COVID-19 and Life Insurance Underwriting

The Consumer Federation of America (CFA) recently announced it had written to the National Association of Insurance Commissioners (NAIC) about COVID-19 and the underwriting of life insurance. The CFA sent copies of the letter to chief executives of several large life insurance companies based in the United States. The letter grew out of developments reportedly occurring in Europe. A week later, I asked the CFA whether it had received any replies. The CFA said no replies have been received as yet.

The CFA Announcement
The CFA announcement, dated January 29, 2021, is entitled "Recovered COVID-19 Patients Facing New Life Insurance Hurdles in Europe, Protections Needed for American Consumers." Here are the first, third, and fifth paragraphs of the announcement:
CFA sent a letter to the NAIC urging them to adopt a model rule for life insurance underwriters that might want to delay or deny coverage to people who had COVID-19 and recovered or had symptoms but no diagnosis. The letter is in response to recent reporting that some life insurers in Europe are already taking steps to delay or deny people life insurance coverage based on having contracted COVID-19 or suspected of it. Over 25.4 million Americans have already tested positive for the virus, according to The New York Times.
In Europe, some underwriters are imposing waiting periods before COVID-19 patients, even those who have recovered, can apply for coverage. Further, some insurers are limiting coverage for certain age groups as part of their response to the pandemic. Still others are postponing applications for anyone who had COVID-19 or lived with someone who got the disease.
CFA also sent the letter to the CEOs of the leading life insurance companies in America and their trade organization [American Council of Life Insurers, or ACLI] asking them to consider voluntary action to use transparent and reasonable underwriting rules relating to COVID.
My Letters
I will write soon by regular mail to the NAIC, the ACLI, the CEOs of a few of the life insurance companies to which the CFA wrote, and a few other CEOs. I will ask for their comments on the subject. I plan to post a follow-up report on the responses to my letters.

General Observations
I think this is a very important subject. Instead of offering a complimentary package of relevant material, as I normally do, I am providing here a link to the CFA letter to the NAIC.

I would welcome comments from readers on the subject. Please send your comments by email to jmbelth@gmail.com. Should you write to me, please identify yourself and indicate whether your comments may be used with or without attribution. I will honor your request.

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Tuesday, February 2, 2021

No. 408: A Recent Change in the Federal Income Tax Law Designed to Benefit Wealthy Life Insurance Policyholders

On January 10, 2021, The Wall Street Journal posted online an article by reporter Leslie Scism entitled "A Small Tax Change Is a Boon for Permanent Life Insurance." The next day, the print edition of the Journal carried on page B8 a revised version entitled "Tax Change Aids Life Insurance." Here are the first few sentences of the latter article:
Federal lawmakers' big year-end spending package includes a little-noticed revision of the tax code that is likely to boost sales of life insurance, particularly for wealthy Americans. The law lowers a minimum interest rate used to determine whether combination savings and death benefit policies known as permanent life insurance are too much like investments to qualify for tax advantages granted to insurance. The interest-rate floor was put in place in 1984 to weed out policies that were mostly investment vehicles with a thin layer of life insurance. Lowering the rate allows owners to put more in the savings portion.
Here I discuss in more detail the federal income tax advantages of cash-value life insurance. I also provide further background on the history of the federal income tax definition of cash-value life insurance.

Federal Income Taxation of Life Insurance
To understand the implications of the recent change, it is necessary to understand the history of the 1984 change in the tax code. That was a time of high market interest rates, far different from today's low market interest rates. Also, it is necessary to understand two extremely important income tax advantages of cash-value life insurance: (1) the "inside interest" in a cash-value life insurance policy is income-tax deferred, and (2) upon the death of the insured person, the death benefit paid to the beneficiary is income-tax exempt.

The Minimum Deposit Plan
One of my early encounters with clever marketers of cash-value life insurance involved the "minimum deposit plan." It was also called "minnie dee" or "minnie dip." To illustrate, Jones bought a favorably priced $100,000 participating whole life policy in 1950 at age 35. He used the minimum deposit plan; that is, each year he paid as little as possible to keep the policy in force. He paid the annual premium, deducted any dividend, borrowed as much as possible under the automatic premium loan clause, paid interest on the policy loan, and on his income tax returns he took a deduction for the policy loan interest he paid. Thus he essentially converted the policy from a level premium, level death benefit, whole life policy with nondeductible premiums into a term policy with a decreasing death benefit and deductible premiums. Or so he thought.

At the end of 1972, after 22 years, Jones decided to end the policy by allowing it to lapse. At that point, the cash value and the amount of the loan were each around $40,000. His income tax return filed in 1973 for the 1972 tax year showed a large deduction for the policy loan interest he had paid in 1972 and had deducted on his tax return for 1972. However, his tax return for 1973 filed in 1974 showed no deduction for policy loan interest paid in 1973. That triggered an Internal Revenue Service audit, which resulted in a whopping tax bill with penalties, as though he had surrendered an old participating whole life policy, which was exactly what he had done.

The Emergence of Universal Life
During the 1960s and 1970s, I often wrote about the need for rigorous disclosure of the price of the life insurance protection component of cash-value life insurance policies, and the need for rigorous disclosure of the rate of return on the savings component of those policies. In my writings, I viewed cash-value life insurance as a combination of a protection component and a savings component. It is a major understatement to say that the life insurance industry was not happy with my writings.

In the late 1970s, market interest rates were high and rising, and universal life insurance—which was also referred to as flexible-premium life insurance—burst on the scene. I will never forget a letter I received in 1979 from an official of one of the companies promoting universal life. He said: "Joe, I hope you're satisfied." The reason for his comment was that one of the claimed advantages of universal life was so-called transparency; that is, the separation of the protection and savings components. Unfortunately, while transparency sounded good, it did not provide adequate disclosure of the price of the protection component and the rate of return on the savings component. Instead, it created a new family of deceptive sales practices.

An Example of Universal Life Deception
In the May 1984 issue of my monthly newsletter, The Insurance Forum, I wrote an article entitled "How Not to Advertise Universal Life." The article focused on a deceptive newspaper advertisement by Indianapolis-based Golden Rule Insurance Company. The article, including a replica of the advertisement, is in the complimentary package offered at the end of this post.

The 1984 Change in the Tax Law
I asked representatives of the American Council of Life Insurers (ACLI), which had lobbied for the 2021 change in the tax law, whether they could provide me with material about the 1984 change. They said they could not locate any such material. Therefore, I will describe what happened, based on my memory.

As market interest rose in the 1970s, clever promoters of life insurance often sold their wealthy clients on the idea of buying a small universal life policy and pouring a large amount of money into the policy in order to benefit from the income-tax deferred inside interest and the income-tax exempt death benefit. That abuse of the income tax system became too much for the Internal Revenue Service and Congress to tolerate. Thus a change was made in the tax code in 1984 to define life insurance in such a way as to prevent the abuse. The tax law was amended to make such an arrangement subject to taxation as an ordinary investment rather than as a life insurance policy.

The 2021 Change in the Tax Law
Today, however, low market interest rates have threatened the viability and the very survival of cash-value life insurance. Thus the life insurance industry, through the ACLI, lobbied Congress to change the definition of life insurance in the tax code in such a way as to preserve cash-value life insurance as a viable financial instrument.

The definition in the new tax provision requires a policy to pass at least one of two tests in order to qualify as life insurance for tax purposes: a cash-value accumulation test (CVAT), or a guideline-premium test (GPT). If a policy fails both tests, the policy is called a modified endowment contract (MEC), and is taxed as an investment vehicle rather than as a life insurance policy. A statement by the ACLI about the 2021 change is in the complimentary package at the end of this post, along with a statement by Bobby Samuelson, editor of The Life Product Review and a nationally-recognized expert on policy design.

General Observations
The January 2021 change in the income tax law, as lobbied for by the ACLI, is an important development in the history of the life insurance business. In this post, I do not attempt to explain the complex changes in the income tax law. However, I urge readers to request the complimentary 14-page package offered below.

Available Material
I am offering a complimentary 14-page PDF consisting of the May 1984 Forum article (2 pages), the ACLI statement on the 2021 tax changes (3 pages), and the Samuelson statement on those changes (9 pages). Email jmbelth@gmail.com and ask for the February 2021 package about the changes in the income tax law relating to cash-value life insurance. 

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Monday, January 25, 2021

No. 407: Security Life of Denver Is the Defendant in an Ongoing 2018 Cost-of-Insurance Class Action Lawsuit

The July 2018 Complaint
On July 26, 2018, Advance Trust & Life Escrow Services (Advance Trust) filed a cost-of-insurance class action lawsuit against Security Life of Denver Insurance Company (Security Life), a subsidiary of Voya Financial, Inc. (Voya). The complaint contains a single count of breach of contract. The complaint is in the complimentary package offered at the end of this post. On August 28, 2018, Security Life answered the complaint. (See Advance Trust v. Security Life, U.S. District Court, District of Colorado, Case No. 1-18-cv-1897.)

The Judge
The case is in the hands of U.S. District Court Judge Daniel D. Domenico. President Trump nominated him in January 2019. The Senate confirmed him in April 2019 by a vote of 55-42 along party lines.

Advance Trust's Motion to Certify a Class
On August 23, 2019, Advance Trust filed a motion to certify a class. On April 13, 2020, after extensive briefing, the judge denied without prejudice Advance Trust's motion to certify a class.

Security Life's Motion for Summary Judgment
On July 22, 2020, Security Life filed a motion for summary judgment. Interestingly, Security Life said in its motion that Advance Trust is a securities intermediary for Life Partners Position Holders Trust (Trust), which owns five universal life insurance policies originally issued by Security Life, and that the Trust is a successor owner, through bankruptcy, of a company that purchased the policies from the original policyholders in the secondary market. Brian Pardo's Life Partners Holdings, Inc. filed for bankruptcy protection on January 20, 2015. See, for example, No. 81 (January 22, 2015). Security Life's motion for summary judgment is in the complimentary package offered at the end of this post.

The Judge's Order
On January 6, 2021, after extensive briefing, the judge granted Security Life's motion for summary judgment in part, denied the motion in part, and preliminarily certified a class of policyholders. The judge's order, which prompted me to prepare this post, is in the complimentary package offered at the end of this post.

General Observations
Despite the fact that this case is in its 18th month, it still has a long way to go. Fairly soon we should learn what the members of the class will be told when they are notified of the existence of the lawsuit. Farther down the road, we will probably learn what type of settlement may be reached. I plan to follow developments in the case.

Available Material
I am offering a complimentary 71-page PDF consisting of the July 2018 complaint (26 pages), Security Life's motion for summary judgment (21 pages), and the judge's January 2021 order (24 pages). Email jmbelth@gmail.com and ask for the January 2021 package relating to the case of Advance Trust v. Security Life.

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Friday, January 8, 2021

No. 406: Genworth and Oceanwide—Recent Developments

The January 4 Genworth/Oceanwide Update
On October 21, 2016, Genworth Financial Inc, (Genworth) entered into a merger agreement with China Oceanwide (Oceanwide). Since then, the parties have entered into "waiver agreements," under which the parties extended the "end date" in the merger agreement. On October 1, 2020, Genworth said the parties had entered into a 16th waiver agreement under which they extended the end date to December 31, 2020. On January 4, 2021, Genworth and Oceanwide issued an update in which they said in part (the full update is in the complimentary package offered at the end of this post):
Given uncertainty around the completion and timing of the remaining steps required to close the transaction, Genworth and Oceanwide have not extended the current December 31, 2020 "end date" under the merger agreement. Oceanwide has indicated that the factors contributing to the delay since the parties agreed to their most recent extension of the merger agreement on November 30, 2020, were: (a) the finalization of the Hony Capital financing terms; and (b) the COVID-19 pandemic and associated restrictions. However, the merger agreement remains in effect, although either party is able to terminate the merger agreement at any time. Genworth has shared that it will continue to work towards closing the transaction, and Genworth remains open to completing the transaction if Oceanwide completes the remaining steps.
The January 4 Genworth News Release
On January 4, Genworth issued a news release announcing it will hold a special topics call with Genworth's CEO on January 5 at 8:00 a.m. to discuss the recent update relating to Oceanwide. Genworth said a replay of the call will be available until January 19 at (888) 203-1112 (U.S.) or (719) 457-0820 (outside the U.S.) The conference ID is # 3039080. The webcast will also be archived on the company's website for one year.

The January 4 Genworth 8-K Report
On January 4, Genworth filed an 8-K (significant event) report with the Securities and Exchange Commission. Among other things, the above mentioned January 4 Genworth/Oceanwide Update was included.

Available Material
I am offering a complimentary 8-page PDF consisting of the January 4 Genworth/Oceanwide Update (6 pages) and the January 4 Genworth News Release (2 pages). Email jmbelth@gmail.com and ask for the January 2021 package relating to Genworth and Oceanwide.

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Wednesday, January 6, 2021

No. 405: American National and Lincoln Benefit Are the Defendants in Two Similar Class Action Lawsuits

American National Insurance Company (ANIC) and Lincoln Benefit Life Company (LBL) are the defendants in two similar class action lawsuits. The cases were filed in December 2020 by the same plaintiffs' attorneys, and in the Central and Eastern federal district courts in California. The cases are discussed briefly in this post.

The Complaint Against ANIC
The complaint against ANIC was filed on December 10. The named plaintiffs are Myra Steen and Janet Williams. Here are portions of the "Nature of the Case" section of the complaint:
Since January 1, 2013, ANIC and other related entities have systematically and purposely failed to provide certain classes of policy owners, insureds, assignees and others, proper notices of pending lapse or termination. ANIC has failed to notify thousands of policy owners of their right to designate someone to receive critical notices and information regarding life insurance despite being required to do so on an annual basis. All of these important safeguards are required by, among other sources, California Insurance Code Sections 10113.71 and 10113.72. California law requires strict compliance with these safeguards and ANIC refuses to comply.
As a result, ANIC has failed to properly administer policies, evaluate the status of payments due under policies and pay claims to beneficiaries for policies improperly lapsed or terminated. Indeed, thousands of policy owners and beneficiaries have lost, and continue to lose, the benefit, value and security of their life insurance; have been, and continue to be, forced into unnecessary reinstatements; and in many instances have lost all reasonable access to any insurance at all.
The complaint against ANIC includes four counts: two counts seeking declaratory judgment relief, one count for breach of contract, and one count of unfair competition under California law. The full complaint against ANIC is in the complimentary package offered at the end of this post. (See Steen v. ANIC, U.S. District Court, Central District of California, Case No. 2:20-cv-11226.)

The Complaint Against LBL
The complaint against LBL was filed on December 16. The named plaintiff is Deana Farley. Much of the language in the complaint against LBL is similar or identical to the language in the complaint against ANIC. The full complaint against LBL is in the complimentary package offered at the end of this post. (See Farley v. LBL, U.S. District Court, Eastern District of California, Case No. 2:20-cv-2485.)

My Email to Craig Nicholas
Craig M. Nicholas of the San Diego firm of Nicholas & Tomasevic is one of the plaintiffs' attorneys who signed the complaints in the ANIC and LBL cases. On December 28, I sent Nicholas an email. After identifying myself, I asked two questions: first, whether he is aware of other similar lawsuits filed against insurance companies, and, if so, to identify them; and second, whether he anticipates further similar cases, and, if so, to identify them when they are filed. I gave him my telephone number if he wished to speak with me. I asked him to respond to my email by 5:00 pm Eastern time on January 4. I received no reply.

General Observations
The ANIC and LBL cases are similar or identical to one another in many respects. Also, the cases contain serious allegations of wrongdoing. Finally, it is interesting that the cases were filed only a few days apart in different federal district courts in California. I perused lists of cases in the other two California districts—the Northern and Southern districts—to see if I could spot any other similar cases. I did not see any other similar cases. I plan to write further about these cases.

Available Material
I am offering a complimentary 52-page PDF consisting of the complaint in the ANIC case (28 pages) and the complaint in the LBL case (24 pages). Email jmbelth@gmail.com and ask for the January 2021 package about the ANIC and LBL cases.

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Wednesday, December 23, 2020

No. 404: Executive Compensation in the Insurance Industry—2019 Data from the Nebraska Department of Insurance

Background
Beginning in 1975, in many issues of The Insurance Forum, I provided tabulations of executive compensation data in the insurance industry. The final tabulation was in the July 2013 issue, because the Forum ended with the December 2013 issue. From time to time since then, I have posted some executive compensation data on my blog. Recent tabulations include No. 335 (October 3, 2019), where I showed 2018 data from my three sources of information: the Securities and Exchange Commission (SEC), the New York State Department of Financial Services (DFS), and the Nebraska Department of Insurance (NDI). In No. 381 (July 13, 2020), I showed 2019 data from the SEC. In No. 385 (August 7, 2020), I showed 2019 data from the DFS. Here I show 2019 data from the NDI.

NDI Data for 2019
NDI data are in a "Supplemental Compensation Exhibit" (Exhibit) filed by each insurance company doing business in Nebraska. Each Exhibit normally shows figures for the ten top company officials. The figure I show for each individual is the "total." Components of the "total" are "salary," "bonus," "stock awards," "option awards," "sign-on payments," "severance payments," and "all other compensation." NDI provides all the Exhibits on a CD to any member of the public for $80.

In the tabulation below, I show data for individuals who received at least $5 million in 2019. Where two or more individuals in a company are shown, they are listed in descending order of compensation.

The Allocation Problem and a Modification
Where companies are members of a holding company group, some companies show the total amount received by each individual from all companies in the holding company group. Some companies, however, allocate each individual's compensation to each company in the holding company group.

For companies that allocate, the difficulty in locating all companies doing business in Nebraska that are part of a holding company group has become increasingly prohibitive. For that reason, I have modified the tabulation shown below from past years in that this year I did not attempt to assemble the group data. I have instead shown the figures for the company with the largest dollar amounts for each group.

For some individuals listed below, because of the modification, the compensation figure shown is smaller, and in some instances probably much smaller, than the individual's total compensation from all members of the holding company group. Also, because of the modification, some companies probably are not listed because no individual had at least $5 million of compensation from a single company in their group.

NDI Data for 2019
Acuity, A Mutual Ins Co
Benjamin M Salzmann
$16,347,333
Aetna Life Ins Co
Richard M Jelinek
9,658,380
Karen S Lynch
8,673,924
AFLAC Inc
Daniel P Amos
14,744,603
Frederick J Crawford
5,505,399
Allianz Life Ins North America
Walter R White
6,746,838
Allstate Ins Co
Thomas J Wilson
16,261,339
Steven E Shebik
5,915,393
AMBAC Assurance Corp
Claude LeBlanc
5,289,234
American Family Ins Co
Jack C Salzwedel
11,251,032
American General Life Ins Co
Kevin Hogan
9,411,779
American United Life Ins Co
James S Davison
6,064,438
Amguard Ins Co
Sy Foguel
5,299,791
Assured Guaranty Corp
Dominic Frederico
12,736,290
Assurity Life Ins Co
Thomas E Henning
7,814,132
Athene Annuity & Life Assur Co
James Belardi
5,007,098
Atlantic Specialty Ins
Timothy M Miller
5,036,019
AXA Equitable Life Ins Co
Mark Pearson
6,295,387
BCS Ins Co
Howard F Beacham III
21,435,850
Brighthouse Life Ins Co
Eric T Steigerwalt
8,229,713
Care Improvement Plus of Texas
Janice Clayton Zigler
5,428,024
Chicago Title Ins Co
Raymond Randall Quirk
14,579,836
Roger Scott Jewkes
8,729,398
Michael Joseph Nolan
7,157,620
Anthny John Park
5,344,120
Chubb Indemnity Ins Co
John J Lupica
6,030,000
Paul J Krump
5,003,500
Continental Casualty Co
Dina Robusto
9,135,270
Employers Assurance Co
Douglas Dean Dirks
5,315,872
Essent Guaranty Inc
Mark Casale
7,636,915
Everest Reinsurance Co
Dominic J Addesso
10,759,779
Juan C Andrade
10,481,729
Farmers Ins Exchange
Jeffrey J Dailey
7,853,208
First American Title Ins Co
Dennis Gilmore
8,588,389
GEICO Casualty Co
Olza Minor Nicely
15,452,510
William Evan Roberts
7,789,401
Genworth Life Ins Co
Thomas McInerney
9,115,260
Globe Life & Accident Ins Co
Frank M Svoboda
9,359,904
William M Pressley
6,474,615
Bill E Leavell
5,400,498
Great American Ins Co
Carl H Lindner III
10,284,610
Great-West Life Assur Co (US)
Robert Shaw
7,638,745
Andra S Bolotin
5,902,744
Edmund F Murphy
5,215,422
Guardian Life Ins Co of America
Deanna Mulligan
8,606,700
Tracy L Rich
6,418,359
Hartford Fire Ins Co
Christopher Swift
6,175,641
Health Care Service Corp
Paula Steiner
31,013,500
Eric Feldstein
7,471,886
David Lesar
6,038,111
Horace Mann Ins Co
Marita Zuraitis
7,429,404
Humana Ins Co
Bruce D Broussard
24,635,360
Illinois Ins Co
Steven Menzies
10,657,018
Insurance Co of the West
Kevin Prior
13,694,265
Ernest Rady
5,861,143
Jackson National Life Ins Co
Paul C Myers
7,008,073
John Hancock Life Ins Co USA
Daniel Janis III
6,692,374
Emory Sanders Jr
5,765,776
Christopher Conkey
5,264,701
Liberty Mutual Ins Co
David H Long
12,701,326
Timothy Sweeney
5,341,983
Lincoln National Life Ins Co
Dennis R Glass
28,328,586
Randal J Freitag
7,747,826
Wilford H Fuller
7,332,269
Ellen G Cooper
6,073,150
Lisa M Buckingham
5,169,731
Massachusetts Mutual Life Ins Co
Roger Crandall
17,808,738
Elizabeth Chicares
6,933,041
Michael Fanning
6,420,327
Melvin T Corbett
6,337,670
Metropolitan Life Ins Co
Michel Khalaf
6,505,805
Steven J Goulart
6,338,392
Mortgage Guaranty Ins Corp
Patrick Sinks
7,389,088
National Western Life Ins Co
Ross R Moody
6,831,982
National Life Ins Co
Mehran Assadi
7,788,000
New York Life Ins Co
Theodore A Mathas
24,007,290
Craig L DeSanto
5,452,283
Anthony R Malloy
5,246,200
Northwestern Mutual Life Ins Co
John E Schlifske
13,692,772
Ohio National Life Ins Co
Gary Thomas Huffman
8,955,246
Pacific Life Ins Co
James T Morris
8,290,370
Penn Mutual Life Ins Co
Eileen McDonnell
5,596,160
Philadelphia Indemnity Ins Co
Robert D O'Leary
5,146,147
Principal Life Ins Co
Karl W Nolin
7,113,249
Daniel J Houston
7,000,237
Mustafa Sagun
5,232,118
Protective Life Ins Co
John Johns
11,046,696
Richard Bielen
6,749,265
Prudential Ins Co of America
Mark Brown Grier
7,633,867
Charles F Lowrey
6,854,886
Robert Michael Falzon
5,296,179
Stephen Pelletier
5,220,842
QCC Ins Co
Daniel J Hilferty
5,718,026
Radian Guaranty Inc
Richard Thornberry
9,040,149
Sagicor Life Ins Co
Dodridge Miller
12,468,464
Scor Reinsurance Co
Mark Kociancic
6,918,899
Selective Ins Co of America
Gregory Murphy
5,330,094
Standard Ins Co
John Gregory Ness
9,161,498
Starr Indemnity & Liability Co
Maurice R Greenberg
10,802,945
State Farm Mutual
Michael Leon Tipsord
10,271,892
Teachers Ins & Annuity Assn
Ronald Pressman
8,546,026
Roger Ferguson
6,252,325
Thrivent Financial for Lutherans
Bradford L Hewitt
7,013,638
Transatlantic Reinsurance Co
Michael C Sapnar
6,884,413
Kenneth Apfel
5,607,047
Travelers Casualty Co
Alan D Schnitzer
15,303,458
Willaim H Heyman
6,389,000
Avrohom J Kess
6,067,301
Jay S Benet
5,023,442
United of Omaha Life Ins Co
James T Blackledge
5,093,821
United States Liability Ins Co
Thomas P Nemey
21,417,692
Voya Retirement Ins & Annuity
Charles Patrick Nelson
5,427,368
Western & Southern Life Ins Co
John Barrett
9,499,300

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Thursday, December 17, 2020

No. 403: General Electric Enters into a $200 Million Settlement with the Securities and Exchange Commission

In No. 395 (October 26, 2020), I said General Electric Company (GE) had received a Wells notice on September 30, 2020 from the staff of the Securities and Exchange Commission (SEC). The notice related to an SEC investigation of, among other things, GE's inadequate reserves for its legacy long-term care (LTC) insurance business. On December 9, 2020, GE filed an 8-K (significant event) report disclosing that GE and the SEC had entered into a $200 million settlement to end the previously disclosed SEC investigation.

The GE 8-K
In the 8-K, GE said it had reached a settlement in connection with the SEC investigation. GE went on to say (the relevant section of the 8-K is in the complimentary package offered at the end of this post):
Consistent with common SEC practice, GE neither admits nor denies the findings in the administrative order that the SEC issued today. Under the terms of the settlement, GE consented to the entry of an order requiring it to pay a civil penalty of $200 million and to cease and desist from violations of specified provisions of the federal securities laws and rules promulgated thereunder.
The SEC Order
A paragraph near the beginning of the SEC Order Instituting Cease-and-Desist Proceedings reads as follows (the full Order is in the complimentary package offered at the end of this post):
In anticipation of the institution of these proceedings, Respondent [GE] has submitted an Offer of Settlement which the Commission has determined to accept. Solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over it and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order, as set forth below.
No Admission of Wrongdoing
The "neither admits nor denies" language is an important part of the GE/SEC settlement. In No. 244 (December 11, 2017), I wrote about an SEC settlement in August 2013 with Philip A. Falcone and companies associated with him. There I quoted at some length from a January 2014 speech by then SEC Chair Mary Jo White. Here is a brief, edited description of what she said:
For many years, the SEC, like virtually every other civil law enforcement agency, typically did not require entities or individuals to admit wrongdoing in order to enter into a settlement. This no admit/no deny settlement protocol makes sense and has served the public interest well. She cited such things as more and quicker settlements and avoidance of litigation risk. So why modify the no admit/no deny protocol? She cited such things as a greater measure of public accountability and the need for public confidence in the strength and credibility of law enforcement. She said that, as a U.S. Attorney, she had required an admission of wrongdoing in a 1994 case, and she brought that mind set when she became SEC Chair in 2013.
General Observations
One knowledgeable reader with whom I spoke about the settlement thought the dollar amount of the settlement was a pittance. However, I am not in a position to express an opinion on that matter.

As for the no admit/no deny protocol, it will be interesting to see what happens when the SEC, the Department of Justice, and other federal law enforcement agencies become part of the Biden administration. I cannot predict what will happen, but I hope the no admit/no deny protocol will receive close attention.

Available Material
I am offering a complimentary 20-page PDF consisting of an excerpt from the GE 8-K (1 page) and the SEC Order (19 pages). Email jmbelth@gmail.com and ask for the December 2020 package about the GE/SEC settlement.

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