MetLife 2011 Annual Report Download - page 202

MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)
the MetLife Bank regulatory matters. Management believes that the Company’s consolidated financial statements as a whole will not be materially
affected by the MetLife Bank regulatory matters.
United States of America v. EME Homer City Generation, L.P., et al. (W.D. Pa., filed January 4, 2011). On January 4, 2011, the U.S. commenced
a civil action in United States District Court for the Western District of Pennsylvania against EME Homer City Generation L.P. (“EME Homer City”), Homer
City OL6 LLC, and other defendants regarding the operations of the Homer City Generating Station, an electricity generating facility. Homer City OL6
LLC, an entity owned by MLIC, is a passive investor with a noncontrolling interest in the electricity generating facility, which is solely operated by the
lessee, EME Homer City. The complaint sought injunctive relief and assessment of civil penalties for alleged violations of the federal Clean Air Act and
Pennsylvania’s State Implementation Plan. The alleged violations were the subject of Notices of Violations (“NOVs”) that the Environmental Protection
Agency (“EPA”) issued to EME Homer City, Homer City OL6 LLC, and others in June 2008 and May 2010. On January 7, 2011, the United States
District Court for the Western District of Pennsylvania granted the motion by the Pennsylvania Department of Environmental Protection and the State of
New York to intervene in the lawsuit as additional plaintiffs. On February 16, 2011, the State of New Jersey filed an Intervenor’s Complaint in the lawsuit.
On January 7, 2011, two plaintiffs filed a putative class action titled Scott Jackson and Maria Jackson v. EME Homer City Generation L.P., et al. in the
United States District Court for the Western District of Pennsylvania on behalf of a putative class of persons who have allegedly incurred damage to their
persons and/or property because of the violations alleged in the action brought by the U.S. Homer City OL6 LLC is a defendant in this action. On
October 12, 2011, the court issued an order dismissing the U.S.’s lawsuit with prejudice. The Government entities have appealed from the order
granting defendants’ motion to dismiss. On October 13, 2011, the court also issued an order dismissing the federal claims in the putative class actions
with prejudice and dismissing the state law claims in the putative class actions without prejudice to re-file in state court. EME Homer City has
acknowledged its obligation to indemnify Homer City OL6 LLC for any claims relating to the NOVs. Due to the acknowledged indemnification obligation,
this matter is not included in the aggregate estimate of range of reasonably possible loss. In a February 13, 2012 letter to EME Homer City, Homer City
OL6 LLC and others, the Sierra Club indicated its intent to sue for alleged violations of the Clean Air Act and to seek to enjoin the alleged violations,
seek unspecified penalties and attorneys’ fees, and other relief. Homer City OL6 LLC has served a claim for indemnification on EME Homer City.
In the Matter of Chemform, Inc. Site, Pompano Beach, Broward County, Florida. In July 2010, the EPA advised MLIC that it believed payments
were due under two settlement agreements, known as “Administrative Orders on Consent,” that New England Mutual Life Insurance Company (“New
England Mutual”) signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the “Chemform Site”). The EPA originally
contacted MLIC (as successor to New England Mutual) and a third party in 2001, and advised that they owed additional clean-up costs for the
Chemform Site. The matter was not resolved at that time. The EPA is requesting payment of an amount under $1 million from MLIC and such third party
for past costs and an additional amount for future environmental testing costs at the Chemform Site. The Company estimates that the aggregate cost to
resolve this matter will not exceed $1 million.
Sales Practices Regulatory Matters. Regulatory authorities in a small number of states and FINRA, and occasionally the SEC, have had
investigations or inquiries relating to sales of individual life insurance policies or annuities or other products by MLIC, MICC, New England Life Insurance
Company and General American Life Insurance Company, and four Company broker-dealers, which are MetLife Securities, Inc., New England
Securities Corporation, Walnut Street Securities, Inc. and Tower Square Securities, Inc. These investigations often focus on the conduct of particular
financial services representatives and the sale of unregistered or unsuitable products or the misuse of client assets. Over the past several years, these
and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution
payments. The Company may continue to resolve investigations in a similar manner. The Company believes adequate provision has been made in its
consolidated financial statements for all probable and reasonably estimable losses for these sales practices-related investigations or inquiries.
Unclaimed Property Inquiries and Related Litigation
More than 30 U.S. jurisdictions are auditing MetLife, Inc. and certain of its affiliates for compliance with unclaimed property laws. Additionally, MLIC
and certain of its affiliates have received subpoenas and other regulatory inquiries from certain regulators and other officials relating to claims-payment
practices and compliance with unclaimed property laws. An examination of these practices by the Illinois Department of Insurance has been converted
into a multistate targeted market conduct exam. On July 5, 2011, the New York Insurance Department issued a letter requiring life insurers doing
business in New York to use data available on the U.S. Social Security Administration’s Death Master File or a similar database to identify instances
where death benefits under life insurance policies, annuities, and retained asset accounts are payable, to locate and pay beneficiaries under such
contracts, and to report the results of the use of the data. It is possible that other jurisdictions may pursue similar investigations or inquiries, may join the
multistate market conduct exam, or issue directives similar to the New York Insurance Department’s letter. In the third quarter of 2011, the Company
incurred a $117 million after tax charge to increase reserves in connection with the Company’s use of the U.S. Social Security Administration’s Death
Master File and similar databases to identify potential life insurance claims that have not yet been presented to the Company. It is possible that the
audits, market conduct exam, and related activity may result in additional payments to beneficiaries, additional escheatment of funds deemed
abandoned under state laws, administrative penalties, interest, and changes to the Company’s procedures for the identification and escheatment of
abandoned property. The Company believes that payments for life insurance claims not yet presented and interest thereon will not be materially different
from the reserve charge noted above. To the extent the Company can estimate the reasonably possible amount of potential additional payments, it has
been included in the aggregate estimate of reasonably possible loss provided above. It is possible that there will be additional payments or other
expenses incurred with respect to changes in procedures, and the Company is not currently able to estimate these additional possible amounts but
such costs may be substantial.
Total Asset Recovery Services, LLC on behalf of the State of Illinois v. MetLife, Inc., et. al. (Cir. Ct. Cook County, IL, filed January 24,
2011). Alleging that MetLife, Inc. and another company have violated the Illinois Uniform Disposition of Unclaimed Property Act by failing to escheat to
Illinois benefits of 4,766 life insurance contracts, Total Asset Recovery Services, LLC (“the Relator”) has brought an action under the Illinois False Claims
Whistleblower Reward and Protection Act seeking to recover damages on behalf of Illinois. The action was sealed by court order until January 18, 2012.
The Relator alleges that the aggregate damages, including statutory damages and treble damages, is $1,572,780,000. The Relator does not allocate
this claimed damage amount between MetLife, Inc. and the other defendant. The Relator also bases its damage calculation in part on its assumption
that the average face amount of the subject policies is $110,000. MetLife, Inc. strongly disputes this assumption, the Relator’s alleged damages
amounts, and other allegations in the complaint, and intends to defend this action vigorously.
198 MetLife, Inc.