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Susan Antilla
2024-03-06T21:30:22Z
- The US Department of Justice has subpoenaed Globe Life and subsidiary American Income Life.
- The DOJ seeks information on insurance policies and customer payments after Business Insider reported claims of fraud.
- Warren Buffett's Berkshire Hathaway has sold off all 6.35 million shares it held in Globe Life.
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The U.S. Department of Justice has subpoenaed Globe Life Inc. and its subsidiary American Income Life seeking documents related to one of its top life insurance agencies — the Pittsburgh-based Arias Organization. News of the subpoenas was detailed in an internal Globe document obtained by Business Insider.
In Business Insider articles published in 2023, former agents described a culture at Arias of customer abuses and sexual harassment, including multiple allegations of sexual assault on the job. One former agent, Renee Zinsky, filed suit claiming her boss, Michael Russin, had sexually assaulted her in his car numerous times.
The internal document, written by Joel Scarborough, Globe's general counsel for its insurance subsidiaries, said the subpoenas seek information about internal investigations, life insurance policyholders, customer payment information, and files about insurance policies written in 2022 by Arias. Trina Orlando, a spokesperson for Arias, declined to comment.
After BI described the Scarborough document to Cathy Seifert, a securities analyst at CFRA Research, Seifert said she will be watching how management addresses the DOJ subpoenas to its investors. "If Globe does not adequately, clearly and honestly disclose not only the problem but the nature of the problem, then all of a sudden you not only have the DOJ, but you will have the Securities and Exchange Commission involved as well in terms of the disclosures."
Globe Life executives made no mention of the DOJ probe during a quarterly earnings call on February 8.
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On January 22, Globe sent an email with the Scarborough attachment to an unspecified AIL "Distribution List," instructing recipients to preserve documents related to the DOJ's orders. Scarborough wrote that the US Attorney's Office for the Western District of Pennsylvania had sent subpoenas to Globe and AIL on behalf of the DOJ and told people to hold onto records related to Arias and six of its current and former leaders and staff, including agency owner Simon Arias; his executive assistant Natalie Price; and Russin.
"The consequences of violating the duty to preserve documents may be very serious," Scarborough wrote. In the document, he directed recipients to preserve any email, texts, or other communications related to Arias Agencies or any of the leaders who were named.
The Department of Justice declined to comment. A spokeswoman for Globe and AIL did not respond to inquiries.
The DOJ probe is just the latest blow to the company. Warren Buffett's Berkshire Hathaway owned 6.35 million shares of Globe when BI began its investigative series on the company and its subsidiaries a year ago. He has since sold all of his Globe shares. In October, insurance regulators in Pennsylvania fined American Income Life $130,000 for engaging in deceptive consumer practices. Arias Agencies was not named in the consent decree in that case, but it operates half of AIL's Pennsylvania offices. In November, the Equal Employment Opportunity Commission said it was reopening two sexual harassment cases against AIL that it had previously dismissed, an unusual move for the agency. One of the two cases was Zinsky's.
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Now, the Department of Justice appears to be conducting its own investigation into possible abuses of customers with its broad requests for policyholder information.
BI was the first to write about allegations of widespread customer abuses at Arias, including increasing premiums without customers' knowledge, pushing products on people in financial straits, and forging customers' signatures. Several former agents previously told BI they saw colleagues write up policies in the names of dead people and take mouth swabs for people who smoked in order to get them lower rates on policies.
Up to now, Globe has said little about BI's investigations. But during the earnings call on February 8, James Darden, Globe's co-chief executive officer, said that "an online publication" had posted articles related to legal cases against AIL and one of its state general agents, apparently referring to Arias. Darden said that he would not be taking questions on the matter, but that AIL "vigorously" disputes the allegations. "We do not believe the litigation will be material to Globe Life's overall results or American Income Life's agency operations," he said.
Darden told the analysts that "as soon as American Income became aware of" the allegations, AIL hired an outside investigator to look into the matter. (AIL hired the investigator in November 2021. Zinsky had spoken with Simon Arias about Russin's behavior three months before that, in August 2021, but AIL has said that it was unaware of the complaints until Zinsky reached out to the company directly, that November.)
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That investigator, attorney Janet Hendrick of the Phillips Murrah law firm in Dallas, was "a neutral and independent third-party investigator," according to an email that an AIL lawyer sent to Zinsky in late 2021. Despite the claim of neutrality and independence, another attorney from the same firm, Kathryn D. Terry, later represented Globe and AIL against Zinsky after she filed a charge against them with the EEOC. Neither Phillips Murrah attorney responded to a request for comment.
"The same firm cannot be both the investigator and defense counsel," said Liz Rita, a senior attorney investigator at Investigations Law Group, a Denver firm that conducts workplace investigations. "The investigator has to be truly separate and independent from counsel, or the whole process is tainted."
If you work at AIL and have information to share about the company, please contact Susan Antilla at susan.antilla1@gmail.com.
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