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Spitzer Probe Fallout Surfaces In Pru, Hartford Filings

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Prudential Financial Inc., Newark, N.J., says regulators are asking it for information about some of its business practices.[@@]

New York State Attorney General Eliot Spitzer, the U.S. Securities and Exchange Commission, the Connecticut attorney general’s office and the U.S. Department of Labor want to know about Prudential’s “payments to insurance intermediaries and certain other practices that may be viewed as anti-competitive,” Prudential says in a quarterly report filed with the U.S. Securities and Exchange Commission.

Prudential says it is just one of a “number of insurance companies” that are getting the requests for information, but it notes that it might receive additional requests for information about broker compensation and related topics. The company says it is cooperating fully with the regulators’ inquiries.

Mary Flowers, a Prudential spokesperson, declined to talk about whether individual Prudential executives had received requests for information or to discuss what Prudential meant when it referred to “certain other practices” in its quarterly report.

Separately, Hartford Financial Services Group Inc., Hartford, says in its quarterly SEC filing that it is the subject of several private actions arising from allegations of a civil complaint filed against Marsh Inc. and Marsh’s parent company, Marsh & McLennan Companies Inc., New York. The complaint alleges that certain insurance companies, including Hartford, participated with Marsh in arrangements to submit inflated bids for business insurance and paid contingent commissions to ensure that Marsh would direct business to them, Hartford says.

Hartford is not joined as a defendant in the action, Hartford says.

The private actions resulting from this complaint include 2 securities class actions filed in the U.S. District Court for the district of Connecticut alleging that the company and 5 of its executive officers violated securities laws, Hartford says. The suit alleges that “false and misleading financial statements” were disseminated by concealing that “the company was paying illegal and concealed ?contingent commissions’ pursuant to illegal ?contingent commission’ agreements.”

Additionally, Hartford says it is aware of 3 class-action suits filed in the same court on behalf of participants in its 401(k) plan asserting that the company and “other named defendants” breached their fiduciary duties to plan participants under the Employee Retirement Income Security Act of 1974 by failing to inform them of the risk associated with investing in the company’s stock. Hartford Financial said the allegations in the suit were related to the allegations in Spitzer’s complaint.

Lawyers have filed 2 corporate derivative actions in the same court, Hartford says.

These suits allege that the defendants “knew adverse non-public information about the activities alleged in [Spitzer's] complaint and concealed and misappropriated that information to make profitable stock trades, thereby breaching their fiduciary duties, abusing their control, committing gross mismanagement, wasting corporate assets and unjustly enriching themselves,” Hartford says.

Hartford will “defend these actions vigorously,” the company says.


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