Friday, September 17, 2021

No. 438: The Texas Republicans' Abortion Law

The Texas Abortion Law
The Republican-controlled Texas legislature recently enacted, and the Republican governor of Texas signed, a frightening abortion law that took effect at midnight on September 1, 2021. Opponents immediately asked the U.S. Supreme Court to rule that the law is unconstitutional. In a shocking development, the Supreme Court denied the request in a 5 to 4 Court order, with Chief Justice Roberts joining with the three liberal justices.

The Sotomayor Dissent
Justice Sonia Sotomayor wrote a powerful dissenting opinion, with which liberal Justices Breyer and Kagan joined. The first paragraph and the last two paragraphs of the Sotomayor dissent read as follows:
The Court order is stunning. Presented with an application to enjoin a flagrantly unconstitutional law engineered to prohibit women from exercising their constitutional rights and evade judicial scrutiny, a majority of Justices have opted to bury their heads in the sand. Last night, the Court silently acquiesced in a state enactment of a law that flouts nearly 50 years of federal precedents. Today, the Court belatedly explains that it declined to grant relief because of procedural complexities of the State's own invention. Ante, at 1. Because the Court's failure to act rewards tactics designed to avoid judicial review and inflict significant harm on the applicants and on women seeking abortions in Texas, I dissent....
The Court should not be so content to ignore its constitutional obligations to protect not only the rights of women, but also the sanctity of its precedents and of the rule of law.
I dissent.
Dissenters normally say "I respectfully dissent." In this instance, Sotomayor said "I dissent." I recommend that you read the full Sotomayor dissent and the related filings (12 pages).

The Garland Statement
On September 6, the U.S. Department of Justice released a statement from U.S. Attorney General Merrick B. Garland about the Texas abortion law. Here is the full statement:
While the Justice Department urgently explores all options to challenge [the Texas abortion law] in order to protect the constitutional rights of women and other persons, including access to an abortion, we will continue to protect those seeking to obtain or provide reproductive health services pursuant to our criminal and civil enforcement of the FACE Act, 18 U.S.C. § 248.
The FACE Act prohibits the use or threat of force and physical obstruction that injures, intimidates, or interferes with a person seeking to obtain or provide reproductive health services. It also prohibits intentional property damage of a facility providing reproductive health services. The department has consistently obtained criminal and civil remedies for violations of the FACE Act since it was signed into law in 1994, and it will continue to do so now.
The department will provide support from federal law enforcement when an abortion clinic or reproductive health center is under attack. We have reached out to U.S. Attorneys' Offices and FBI field offices in Texas and across the country to discuss our enforcement authorities.
We will not tolerate violence against those seeking to obtain or provide reproductive health services, physical obstruction or property damage in violation of the FACE Act.
General Observations
My blog posts usually are devoted to insurance matters. However, the Texas abortion law is so outrageous that I decided to comment on it.

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Friday, September 10, 2021

No. 437: The Securities and Exchange Commission Files a Civil Lawsuit Against Several Investment Promoters

On August 20, 2021, the Securities and Exchange Commission (SEC) filed a civil lawsuit in federal court in San Antonio against Robert J. Mueller (Mueller) and several other investment promoters. The defendants allegedly persuaded investors, many of whom are retirees, to cash out annuities and individual retirement accounts they held with other investment companies and invest in funds promoted by the defendants. (See SEC v. Mueller et al., U.S. District Court, Western District of Texas, Case No. 5:21-cv-785.)

The SEC Complaint
The SEC complaint (24 pages) contains eight counts alleging violations of federal securities laws. The SEC seeks a permanent injunction, disgorgement of ill-gotten gains, and payment of a civil penalty.

The Judge
The case has been assigned to U.S. District Court Judge Xavier Rodriguez. President George W. Bush nominated him, and he assumed office on August 1, 2003.

General Observations
This case is in its very early stages. The defendants have not yet filed an answer to the complaint. I plan to report significant developments.

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Friday, September 3, 2021

No. 436: More on the $97 Million Regulatory Settlement Imposed on TIAA

In No. 434 (August 18, 2021), I reported on the $97 million regulatory settlement imposed on The Teachers Insurance and Annuity Association of America (TIAA) by the Securities and Exchange Commission (SEC) and the New York State Attorney General (NYAG). On August 20, I received an email from a former Wealth Management Advisor (WMA) at TIAA. In response to that email, I sent the former WMA links to three earlier blog posts about developments at TIAA. The purpose of this follow-up is to share those three earlier posts with other readers. In each of the posts, I offered a complimentary package of additional material; those packages remain available upon request.

The Earlier Blog Posts
The first of the earlier blog posts is No. 68 (September 22, 2014) entitled "TIAA, Moody's, and Surplus Notes." In it, I offered the September 2014 TIAA package.

The second of the earlier blog posts is No. 240 (November 9, 2017) entitled "TIAA-CREF Under the Microscope." In it, I offered the November 2017 TIAA package.

The third of the earlier blog posts is No. 321 (July 9, 2019) entitled "TIAA Is Exiting the Life Insurance Business." In it, I offered the July 2019 TIAA package.

More on Surplus Notes
Surplus notes have a long and interesting history in the insurance business in the United States. TIAA and The Northwestern Mutual Life Insurance Company (Milwaukee, WI) were the last two holdouts against what became the widespread use of these extraordinary financial instruments.

My 2015 book entitled The Insurance Forum: A Memoir contains a chapter devoted to the subject of surplus notes. For readers who might be interested, here is a link to Chapter 25.

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Friday, August 27, 2021

No. 435: Ohio National Is the Defendant in a Job Discrimination Lawsuit

The Modified Work Schedule
Jessica Walker (Walker), an Ohio resident, was employed by Ohio National Financial Services. Inc. (Ohio National) from July 7, 2012 to July 31, 2017. In 2017, Ohio National announced it would implement a modified full-time work schedule that would be available to some employees. It was Walker's understanding that the modified work schedule was to benefit female employees with young children. In July 2017, Walker expressed concerns about the modified work schedule not being offered to all similarly situated employees.

The Meeting
On Friday, July 28, 2017, Walker met with several Ohio National officials to discuss her concerns. During the meeting, Walker said that, if the company did not offer the same work schedule to all similarly situated employees, she would likely contact the Equal Employment Opportunity Commission (EEOC) to determine if the disparate treatment would be unlawful. On Monday, July 31, 2017, Ohio National terminated Walker's employment.

The Lawsuit
On April 13, 2021, Walker received a "right to sue" letter from the Indianapolis office of the EEOC. On July 1, Walker filed a job discrimination lawsuit against Ohio National in federal court in Ohio. The "right to sue" letter is attached to the complaint as an exhibit. The complaint and exhibits are here. In her complaint, Walker said she had exhausted her administrative remedies by filing a charge of retaliation with the EEOC alleging that the company had terminated her employment because she had indicated her intent to contact the EEOC. (See Walker v. Ohio National, U.S. District Court, Southern District of Ohio, Case No. 1:21-cv-448.)

The One Claim for Relief
Walker's complaint contains one claim for relief. She alleges that Ohio National's actions constitute retaliation in violation of Title VII of the Civil Rights Act of 1964. She seeks lost wages, fringe benefits, compensatory and punitive damages, and attorney fees and costs.

The Judge
The case has been assigned to U.S. District Judge Donald R. Cole. President Trump nominated him in May 2019. The Senate confirmed him in December 2019.

General Observations
This lawsuit is in its early stages. I think it is likely that the case will be settled. I plan to report significant developments.

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Wednesday, August 18, 2021

No. 434: Regulators Impose a $97 Million Settlement on TIAA

On July 13, 2021, the Securities and Exchange Commission (SEC) and the New York State Attorney General (NYAG) announced a $97 million enforcement action against Teachers Insurance and Annuity Association of America (TIAA). Here are the title and the subtitle of the SEC press release:
SEC Announces $97 Million Enforcement Action Against TIAA Subsidiary for Violations in Retirement Rollover Recommendations.
SEC and N.Y. Attorney General Secure Significant Relief for Investors and Reforms at TIAA.
The SEC Action
The SEC action took the form of a 17-page Order. Here are the first two paragraphs of the summary in the Order:
  1. This matter concerns TIAA's failure to disclose adequately conflicts of interest and dissemination of inaccurate and misleading statements in connection with recommendations that clients invested in TIAA employer-sponsored retirement plans (ESPs) roll over retirement assets into a managed account program called "Portfolio Advisor." TIAA had a conflict of interest because Portfolio Advisor generated greater revenue than other available alternatives.
  2. From January 1, 2013 through March 30, 2018, TIAA created positive incentives and negative pressures for its Wealth Management Advisors (WMAs) to prioritize the rollover of ESP assets into Portfolio Advisor over lower cost alternatives for rollover-eligible ESP participants who were receiving advisory services as part of the financial planning process TIAA offered. Those incentives and pressures included: (1) an incentive compensation plan that paid WMAs more in variable compensation when they signed clients up for the Portfolio Advisor program than for some alternatives, and (2) negative consequences for failure to meet related targets, including the placement of some WMAs on performance improvement plans and the threat of termination of employment. TIAA also trained WMAs to use the rollover process to discover areas of vulnerability for these clients, called "pain points," to "create pain" by helping clients "self-realize" the financial vulnerability, and then to recommend Portfolio Advisor as the solution to their problem.
The NYAG Action
The NYAG action took the form of a 24-page Assurance of Discontinuance. Here are the first two paragraphs of the NYAG's findings in the Assurance of Discontinuance:
  1. Beginning in or about 2012, TIAA and its salespeople used a false and misleading marketing pitch to convince investors to roll over assets from low-fee employer-sponsored retirement plans to individual managed accounts in TIAA's Portfolio Advisor program, on which TIAA charged lucrative management fees. TIA trained its salespeople to describe themselves as "objective, non-commissioned" advisors. In truth, TIAA's salespeople had a serious conflict of interest, since they were heavily incentivized—through financial compensation and supervisory and disciplinary pressures—to identify clients' "pain points" and recommend Portfolio Advisor as the preferred solution. In many cases, TIAA salespeople also presented clients with a misleading comparison of their investment options, promoting managed accounts as the only alternative to self-directed investment while downplaying or omitting advantages of employer-sponsored plans.
  2. TIAA has earned hundreds of millions of dollars in management fees on Portfolio Advisor accounts that clients opened with assets rolled over from employer-sponsored plans.
General Observations
I think the SEC/NYAG enforcement action against TIAA is an important development. For readers to understand it fully, I recommend you read in their entirety the SEC Order and the NYAG Assurance of Discontinuance. Those documents are available through links provided in this blog post.

Personal Observations
I joined the faculty of Indiana University (IU) in 1962. One year later, I was enrolled automatically in IU's faculty retirement plan with TIAA and its affiliated College Retirement Equities Fund (CREF). Since my retirement from IU, I have been receiving distributions from CREF. Thus I have had personal experience with TIAA and CREF for almost 60 years. Except for some minor administrative problems from time to time, my experience with TIAA and CREF has been satisfactory. Therefore, the news of the SEC/NYAG investigation came as a surprise and a disappointment. I knew personally some of the people (all now deceased) who were involved in the creation of IU's early relationship with TIAA. I think they would have been shocked by the findings of the SEC/NYAG investigation.

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Thursday, August 12, 2021

No. 433: Executive Compensation in the Insurance Industry—2020 Data from 2021 Filings with New York

Background
In No. 428 (July 7, 2021), I reminded readers that I started publishing insurance industry executive compensation data in 1975 in The Insurance Forum, my monthly newsletter. I continued doing so on my blog after ending the Forum in December 2013.

My three sources of data have been the Securities and Exchange Commission (SEC), the Nebraska Department of Insurance (NDI), and the New York State Department of Financial Services (NYDFS). In No. 428, I showed data for 2020 from 2021 filings with the SEC. In No. 431 (August 4, 2021), I showed data for 2020 from 2021 filings with the NDI. Here I show data for 2020 from 2021 filings with the NYDFS.

NYDFS Data
In the tabulation below, I show the NYDFS data for individuals who received at least $5 million in 2020. Where two or more individuals in a company are shown, they are listed in descending order of compensation.

NYDFS data are filed by life insurance companies doing business in New York State, and by health insurance companies doing business there. The data are from the 2020 "Schedule G," which is in the New York Supplement to the statutory annual statement. I obtained the Schedule Gs through a request pursuant to the New York State Freedom of Information Law. The Life Bureau of the NYDFS sent the Schedule Gs for life insurance companies, and the Health Bureau of the NYDFS sent the Schedule Gs for health insurance companies. Both bureaus provided the schedules without charge.

The Schedule G for life insurance companies differs significantly from the Schedule G for health insurance companies. The Schedule G for life insurance companies shows one figure for each individual. It is "the aggregate amount (any and all remuneration, including all wages, salaries, commissions, stock grants, gains from the exercise of stock options and other emoluments) received by the payee attributable to services performed for, or on behalf of, the reporting insurer, regardless of whether the payee is employed and paid by the insurer or a related or affiliated company."

The Schedule G for health insurance companies shows four figures for each individual: (1) "salary paid by company and all other companies in holding company system," (2) "bonus & all other compensation deferred or paid by company and all other companies in holding company system," (3) "total amount paid by company and all other companies in holding company system," and (4) "amount paid by or amount allocated to company." I show the third of those four figures, which is the sum of the first two figures.

Pursuant to changes made several years ago in the New York State executive compensation disclosure statute to curtail the amount of compensation data available to the public, the names of individuals are sometimes redacted, so that the Schedule G sometimes shows only the amounts of compensation and the titles of certain individuals. In those instances, I show the individual's title and the amount of compensation.

NYDFS Data for 2020
Life Insurance Companies
Aetna Life Ins Co
EVP, Integration $11,129,096
American National Life of NY
James E Pozzi 6,028,583
Equitable Financial Life Ins Co
Mark Pearson 6,958,433
First Health Life & Health Ins Co
Karen S Lynch 10,730,916
Alec R Cunningham 5,465,563
Globe Life Ins Co of NY
Frank Martin Svoboda 7,807,475
William M Pressley 6,746,829
Guardian Life Ins Co of America
Deanna Mulligan 10,300,764
Eric Dinallo 5,517,427
Lincoln Life Assur Co of Boston
Dennis R Glass 20,090,545
Randal J Freitag 5,878,200
Wilford H Fuller 5,753,626
Massachusetts Mutual Life Ins Co
Roger Crandall 21,875,488
Melvin Corbett 8,489,343
Michael Fanning 7,700,159
Metropolitan Life Ins Co
Michel Abbas Khalaf 7,624,215
EVP & Chief Investment Officer 5,239,381
New York Life Ins Co
Theodore A Mathas 24,238,639
Matthew M Grove 10,739,520
Anthony R Malloy 6,265,631
Yie-Hsin Hung 5,340,371
Northwestern Mutual Life Ins Co
John E Schlifske 18,018,703
Principal Life Ins Co
Karl W Nolin 9,434,249
Daniel Joseph Houston 6,240,643
Kelly D Rush 5,696,725
Prudential Ins Co of America
Charles Lowrey 6,347,293
Robert Michael Falzon 5,090,249
Stephen Pelletier 5,051,205
Securian Life Ins Co
Christopher Michael Hilger 6,479,342
Teachers Ins & Annuity Assn
Roger Ferguson 6,127,887
Health Insurance Companies
Anthem Ins Companies Inc
Gail A Koziara Boudreaux $16,306,318
Gloria M McCarthy 5,096,581
John E Gallina 5,091,054
Peter David Haytaian 5,091,054
Delta Dental Ins Co
Michael J Castro 9,523,333
Hallmark Life Ins Co
Michael F Neidorff 73,772,977
Jesse N Hunter 12,046,956
Health Ins Plan of Greater NY
Karen M Ignagni 5,342,500
Timothy Nolan 5,074,404
Humana Ins Co of NY
Brian Andrew Kane 18,738,968
Christopher Howal Hunter 6,157,542
Timothy Alan Wheatley 6,072,881
Mutual of Omaha Ins Co
James T Blackledge 6,648,722
Solstice Health Ins Co
Leonard Weiss DMD 5,486,569
UnitedHealthcare Ins Co of NY
Peter Marshall Gill 11,167,181
William John Golden 8,587,204
WellCare Prescription Ins Inc
Andrew Lynn Asher 16,259,880
Jeffrey Alan Schwaneke 15,136,733

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Wednesday, August 4, 2021

No. 432: Thomas Joseph Barrack—The Indictment Against Him and Two Others

On July 16, 2021, the U.S. Attorney's office in the Eastern District of New York filed in federal court a sealed 46-page indictment against Thomas Joseph Barrack (Barrack) and two other individuals. The indictment was unsealed the same day. The seven counts against Barrack are: (1) Acting as Agent of a Foreign Government Without Prior Notification to the Attorney General, (2) Conspiracy to Act as Unregistered Agent of a Foreign Government, (3) Obstruction of Justice, and four counts of Material False Statements. (See Barrack et al., U.S. District Court, Eastern District of New York, Case No. 1:21-cr-371.)

The Judge
The case was assigned to U.S. Senior District Court Judge Brian M. Cogan. President George W. Bush nominated him in January 2006. The Senate confirmed him in May 2006. He assumed senior status in June 2020.

Barrack
Barrack is a U.S. citizen residing primarily in California. He served as Executive Chairman of a global investment management firm headquartered in Los Angeles. From about April 2016 to about November 2016, he served as an informal advisor to the campaign of Presidential candidate Donald J. Trump. From about November 2016 to January 2017, he served as Chairman of the Presidential Inaugural Committee. Beginning in January 2017, he informally advised senior U.S. government officials on issues related to U.S. foreign policy in the Middle East. He also sought appointment to a senior role in the U.S. government, including the role of Special Envoy to the Middle East. Here is paragraph 13 of the indictment:
Government officials in the United Arab Emirates, including Emirati Official 1, Emirati Official 2, Emirati Official 3, and Emirati Official 4, tasked the defendants [including Barrack] with, variously and among other things, (a) influencing public opinion, the foreign policy positions of the Campaign and the foreign policy positions of the United States government; (b) obtaining information about foreign policy positions and related decision-making within the Campaign and, at times, the United States government; (c) developing a backchannel line of communication with the Campaign and, at times, officials of the United States government; and (d) developing plans to increase the United Arab Emirates' political influence and to promote its foreign policy preferences.
Following that paragraph are ten subsections of the indictment. They are: (1) Initial Meeting and the Energy Speech, (2) Media Appearances, (3) Preparation of Strategy to Promote Emirati Policy Interests and Meeting in Morocco, (4) The Encrypted Messaging Application, (5) The BARRACK Op-Ed, (6) Assistance to United Arab Emirates During the Presidential Transition, (7) Assistance to the United Arab Emirates in the New Presidential Administration, (8) Assistance to the United Arab Emirates with Appointments in the New Presidential Administration, (9) Emirati Official 1's White House Visit, and (10) The Qatari Blockade and Continuing Efforts to Assist the United Arab Emirates.

The Arraignment
On July 26, Barrack was arraigned in New York City. He entered a plea of not guilty on all counts. He was required to post a bond of $250 million, and was then released pending a conference to be held before Judge Cogan on September 2 at 10:00 a.m. He was required to surrender all his passports. He will be subject to severe travel restrictions and continuous electronic surveillance.

General Observations
According to recent news reports, the indictment was ready to go a long time ago. Two members of Congress have asked the inspector general of the Department of Justice to investigate the delay.

I think the indictment in this case is an amazing document. I strongly recommend that you read it in full. It is available through the link in the first sentence of this blog post.

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