A Massachusetts regulator accused MetLife Inc. of defrauding investors by wrongfully releasing reserves to boost its bottom line instead of making pension payments to hundreds of retirees in that state.
Massachusetts Secretary of the Commonwealth William Galvin claims MetLife’s public filings had “material misstatements” about the insurer’s finances because it didn’t properly administer those pension plans, according to an administrative complaint filed Monday. The regulator is seeking an order to force MetLife to locate all retirees in that state that are owed benefits, as well as possible sanctions, censure and fines.
A copy of the complaint is available here.
The complaint adds to the scrutiny MetLife has faced since disclosing in recent months that it failed to pay about 13,500 customers who were owed pension benefits. The New York-based insurer has said that the U.S. Securities and Exchange Commission was investigating the matter and that the company is searching for those customers.
“We self-identified and self-reported this issue to our regulator and to the public,” MetLife spokesman John Calagna said in an email. “We have taken aggressive steps to locate unresponsive annuitants who are due funds and already have or will commence payment, including interest, once the necessary paperwork is complete.”
MetLife acquired responsibility for the customers by selling group annuity contracts to the customers’ plan sponsors, according to the complaint.
MetLife sent two letters to the customers, according to the complaint.
If the customers didn’t respond, the insurer would presume they were dead, releasing reserves so they “became assets that increased MetLife’s bottom line,” Galvin said. Those efforts were “minimal” and “lackadaisical,” he said. Former nurses, salesmen, shipbuilders and grocery store clerks in Massachusetts were among people owed pension payments.
“MetLife has an obligation to provide truthful statements in its public filings. They did not,” Galvin said in the statement. “Shareholders and investors were denied the ability to rely on MetLife’s public statements.
Galvin said he will also be looking at how other financial services companies handle pension plan payments.
Chief Executive Officer Steven Kandarian has said the issue was not the company’s “finest hour” and that the insurer would work to find those individuals. Robin Lenna, who leads the company’s retirement and income-solutions business where the problem cropped up, stepped down from that job in March.
— Read GAO: PBGC Using Too Many Contractors, on ThinkAdvisor.