Prudential 2007 Annual Report Download - page 186

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
21. COMMITMENTS AND GUARANTEES, CONTINGENT LIABILITIES AND LITIGATION AND
REGULATORY MATTERS (continued)
Other
In August 1999, a Prudential Insurance employee and several Prudential Insurance retirees filed an action in the United States District
Court for the Southern District of Florida, Dupree, et al., v. Prudential Insurance, et al., against Prudential Insurance and its Board of
Directors in connection with a group annuity contract entered into in 1989 between the Prudential Retirement Plan and Prudential
Insurance. The suit alleged that the annuitization of certain retirement benefits violated ERISA and that, in the event of demutualization,
Prudential Insurance would retain shares distributed under the annuity contract in violation of ERISA’s fiduciary duty requirements. In July
2001, plaintiffs filed an amended complaint dropping three counts, and the Company filed an answer denying the essential allegations of
the complaint. The amended complaint seeks injunctive and monetary relief, including the return of what are claimed to be excess
investment and advisory fees paid by the Retirement Plan to Prudential. In March 2002, the court dismissed certain of the claims against
the individual defendants. A non-jury trial was concluded in January 2005. In August 2007, the court issued its decision and order
dismissing the case. In September 2007, plaintiffs filed a notice of appeal with the Eleventh Circuit Court of Appeals. In December 2007,
the appeal was withdrawn.
In October 2007, Prudential Retirement Insurance and Annuity Co. (“PRIAC”) filed an action in the United States District Court for
the Southern District of New York, Prudential Retirement Insurance & Annuity Co. v. State Street Global Advisors, in PRIAC’s fiduciary
capacity and on behalf of certain defined benefit and defined contribution plan clients of PRIAC, against an unaffiliated asset manager,
State Street Global Advisors (“SSgA”) and SSgA’s affiliate, State Street Bank and Trust Company (“State Street”). This action seeks,
among other relief, restitution of certain losses attributable to certain investment funds sold by SSgA as to which PRIAC believes SSgA
employed investment strategies and practices that were misrepresented by SSgA and failed to exercise the standard of care of a prudent
investment manager. PRIAC also intends to vigorously pursue any other available remedies against SSgA and State Street in respect of this
matter. Given the unusual circumstances surrounding the management of these SSgA funds and in order to protect the interests of the
affected plans and their participants while PRIAC pursues these remedies, PRIAC implemented a process under which affected plan clients
that authorized PRIAC to proceed on their behalf have received payments from funds provided by PRIAC for the losses referred to above.
The Company’s consolidated financial statements, and the results of the Retirement segment included in the Company’s Investment
Division, for the year ended December 31, 2007 include a pre-tax charge of $82 million, reflecting these payments to plan clients and
certain related costs.
In September and October 2005, five purported class action lawsuits were filed against the Company, PSI and PEG claiming that
stockbrokers were improperly classified as exempt employees under state and federal wage and hour laws, were improperly denied
overtime pay and that improper deductions were made from the stockbrokers’ wages. Two of the stockbrokers’ complaints, Janowsky v.
Wachovia Securities, LLC and Prudential Securities Incorporated and Goldstein v. Prudential Financial, Inc., were filed in the United
States District Court for the Southern District of New York. The Goldstein complaint purports to have been filed on behalf of a nationwide
class. The Janowsky complaint alleges a class of New York brokers. Motions to dismiss and compel arbitration were filed in the Janowsky
and Goldstein matters, which have been consolidated for pre-trial purposes. The three stockbrokers complaints filed in California Superior
Court, Dewane v. Prudential Equity Group, Prudential Securities Incorporated, and Wachovia Securities LLC; DiLustro v. Prudential
Securities Incorporated, Prudential Equity Group Inc. and Wachovia Securities; and Carayanis v. Prudential Equity Group LLC and
Prudential Securities Inc., purport to have been brought on behalf of classes of California brokers. The Carayanis complaint was
subsequently withdrawn without prejudice in May 2006. In June 2006, a purported New York state class action complaint was filed in the
United States District Court for the Eastern District of New York, Panesenko v. Wachovia Securities, et al., alleging that the Company
failed to pay overtime to stockbrokers in violation of state and federal law and that improper deductions were made from the stockbrokers’
wages in violation of state law. In September 2006, Prudential Securities was sued in Badain v. Wachovia Securities, et al., a purported
nationwide class action filed in the United States District Court for the Western District of New York. The complaint alleges that Prudential
Securities failed to pay overtime to stockbrokers in violation of state and federal law and that improper deductions were made from the
stockbrokers’ wages in violation of state law. 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 the
Company failed to pay overtime to insurance agents who were registered representatives in violation of federal and state law, and that
improper deductions were made from these agents’ wages in violation of state law. In December 2006, these cases were transferred to the
United States District Court for the Central District of California by the Judicial Panel on Multidistrict Litigation for coordinated or
consolidated pre-trial proceedings. The complaints seek back overtime pay and statutory damages, recovery of improper deductions,
interest, and attorneys’ fees. In December 2007 plaintiffs moved to certify the class. The motion is pending.
184 Prudential Financial 2007 Annual Report