Prudential 2012 Annual Report Download - page 222

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
23. COMMITMENTS AND GUARANTEES, CONTINGENT LIABILITIES AND LITIGATION AND
REGULATORY MATTERS (continued)
November 2012. In December 2012, the parties reached an agreement in principle to settle the matter. Pursuant to the settlement
agreement, PRIAC received $33 million in addition to the amount previously recovered as a result of the SEC settlement. These recoveries
reimburse PRIAC for amounts previously paid to the plans for their losses and related costs. In January 2013, the action was dismissed with
prejudice in accordance with the settlement.
Other Matters
In October 2012, a shareholder derivative lawsuit, Stephen Silverman, Derivatively on Behalf of Prudential Financial, Inc. v. John R.
Strangfeld, et. al., was filed in the United States District Court for the District of New Jersey, alleging breaches of fiduciary duties, waste of
corporate assets and unjust enrichment by certain senior officers and directors. The complaint names as defendants the Company’s Chief
Executive Officer, the Chief Financial Officer, the Principal Accounting Officer, the Company’s Board of Directors and a former Director.
The complaint alleges that the defendants made false and misleading statements regarding the Company’s current and future financial
condition based on, among other things, the alleged failure to disclose: (i) potential liability for benefits that should either have been paid to
policyholders or their beneficiaries, or escheated to applicable states; and (ii) the extent of the Company’s exposure for alleged state and
federal law violations concerning the settlement of claims and the escheatment of unclaimed property. The complaint seeks an
undetermined amount of damages, attorneys’ fees and costs, and equitable relief including a direction for the Company to reform and to
improve its corporate governance and internal procedures to comply with applicable laws.
In October 2012, the Board of Directors received a shareholder demand letter (the “Demand”), containing allegations of wrongdoing
similar to those alleged in the Silverman complaint. The Demand alleges that the Company’s Senior Management: (i) breached their
fiduciary duties of loyalty and good faith in connection with the management, operation and oversight of the Company’s business;
(ii) breached their fiduciary duty of good faith to establish and maintain adequate internal controls; and (iii) breached their fiduciary duties
by disseminating false, misleading and/or incomplete information, all in connection with the Company’s alleged failure to use the SSDMF
and to pay beneficiaries and escheat funds to states. The Demand requests that the Board of Directors: (a) undertake an independent
internal investigation into Senior Management’s violations of New Jersey and/or federal law; and (b) commence a civil action against each
member of Senior Management to recover for the benefit of the Company the amount of damages sustained by the Company as a result of
the alleged breaches described above.
In August 2012, a purported class action lawsuit, City of Sterling Heights General Employees’ Retirement System v. Prudential
Financial, Inc., et al., was filed in the United States District Court for the District of New Jersey, alleging violations of federal securities
law. The complaint names as defendants the Company’s Chief Executive Officer, the Chief Financial Officer, the Principal Accounting
Officer and certain Company Board of Directors. The complaint alleges that knowingly false and misleading statements were made
regarding the Company’s current and future financial condition based on, among other things, the alleged failure to disclose: (i) potential
liability for benefits that should either have been paid to policyholders or their beneficiaries, or escheated to applicable states; and (ii) the
extent of the Company’s exposure for alleged state and federal law violations concerning the settlement of claims and the escheatment of
unclaimed property. The complaint seeks an undetermined amount of damages, interest, attorneys’ fees and costs.
In October 2006, a purported class action lawsuit, Bouder v. Prudential Financial, Inc. and Prudential Insurance Company of
America, was filed in the United States District Court for the District of New Jersey, claiming that Prudential failed to pay overtime to
insurance agents in violation of federal and Pennsylvania law, and that improper deductions were made from these agents’ wages in
violation of state law. The complaint seeks back overtime pay and statutory damages, recovery of improper deductions, interest, and
attorneys’ fees. In March 2008, the court conditionally certified a nationwide class on the federal overtime claim. Separately, in March
2008, a purported nationwide class action lawsuit was filed in the United States District Court for the Southern District of California, Wang
v. Prudential Financial, Inc. and Prudential Insurance, claiming that the Company failed to pay its agents overtime and provide other
benefits in violation of California and federal law and seeking compensatory and punitive damages in unspecified amounts. In September
2008, Wang was transferred to the United States District Court for the District of New Jersey and consolidated with the Bouder matter.
Subsequent amendments to the complaint have resulted in additional allegations involving purported violations of an additional nine states’
overtime and wage payment laws. In February 2010, Prudential moved to decertify the federal overtime class that had been conditionally
certified in March 2008 and moved for summary judgment on the federal overtime claims of the named plaintiffs. In July 2010, plaintiffs
filed a motion for class certification of the state law claims. In August 2010, the district court granted Prudential’s motion for summary
judgment, dismissing the federal overtime claims. In January 2013, the Court denied plaintiffs’ motion for class certification in its entirety.
In April 2012, the Company filed two actions in New Jersey state court captioned The Prudential Insurance Company of America, et
al. v. JP Morgan Chase, et al. and The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. Both matters seek to
recover damages attributable to Company and affiliate entities’ and funds’ investments in residential mortgage-backed securities
(“RMBS”). Among other allegations stemming from the defendants’ origination, underwriting and sales of RMBS, the complaints assert
claims of common law fraud, negligent misrepresentation, breaches of the New Jersey Uniform Securities Act and breaches of the New
Jersey Civil RICO statute. The complaints seek unspecified damages. In August 2012, the Company filed four additional actions in New
Jersey state court captioned The Prudential Insurance Company of America, et al. v. Nomura Securities International, Inc., et al.,The
220 Prudential Financial, Inc. 2012 Annual Report