Monday, January 27, 2020

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 and ask for the January 2020 package about City of Warren v. Prudential.