All DOJ components and offices that prosecute corporate crime now have a voluntary self-disclosure policy that is publicly available on their websites. These policies set forth the component’s expectations of what constitutes a voluntary self-disclosure, including with regard to the timing of the disclosure, the need for the disclosure to be accompanied by timely preservation, collection, and production of relevant documents and/or information, and a description of the types of information and facts that should be provided as part of the disclosure process.  The policies also lay out the benefits that corporations can expect to receive if they meet the standards for voluntary self-disclosure under that component’s policy, and what circumstances constitute aggravating factors under the component’s policy.

Specifically, all Department components must adhere to the following three principles regarding voluntary self-disclosure.

• First, absent aggravating factors, the Department will not seek a guilty plea where a corporation is determined to have met the requirements of the applicable voluntary self-disclosure policy, fully cooperated, and timely and appropriately remediated the criminal conduct. Each Department component shall define such aggravating factors in their written policies.
• Second, the Department will not require the imposition of an independent compliance monitor for a cooperating corporation that is determined to have met the requirements of the applicable voluntary self-disclosure policy and, at the time of resolution, demonstrates it has implemented and tested an effective compliance program.  Such decisions about the imposition of a monitor will continue to be made on a case-by-case basis and at the sole discretion of the Department. See JM 9-28.1700.
• Third, the Department will apply a presumption in favor of declining prosecution of a corporation that voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated misconduct uncovered as a result of due diligence conducted shortly before or shortly after a lawful, bona fide acquisition of another corporate entity, subject to the requirements described in Section 9-28.900(A)(3) of the Justice Manual.  (source:  https://www.justice.gov/corporate-crime/voluntary-self-disclosure-and-monitor-selection-policies )

In 2008, Principal Life Insurance Company promoted their Principal U.S. Property Separate Account  (PUSPSA), a 401K separate account, as a fixed income account, which prompted several thousand additional 401k investors to  transfer their 401k dollar resources into the account. The values in the account surged.   Then, on September 26th, at 11:45 pm, Principal emailed a notice to all account holders that the  PUSPSA would have a withdrawal restriction placed at midnight, which immediately prevented millions of plan participants from withdrawing their invested dollars, and the value of which diminished by almost $3 billion in the weeks that followed.  At issue were the diminishing values.   The account, invested mainly in commercial buildings, were  being reported by Principal to have unrealized losses, a loss underwritten on paper only, which would later recover.  Meanwhile, the actual cash dollars which had supported the fund were being drained out of the account by Principal to the tune of billions of dollars, dollar values that would never be recovered.

The legal issues facing regulators are multi-faceted.  The fact that Principal has criminalized the 401K industry is a known fact by most insurance and savings marketers in the industry.  Principal buys the right from regulators, including the SEC and the DOL, to commit their crimes.  It is now time for change.  When a solution to prevent Principal from having to be accountable for stealing money from investors is to set a “reserve fund” as recommended by the NAIC, expensed by the investors themselves, we have reached a crisis point in this discussion.

The NAIC and the American Academy of Actuaries have been trying for years to find a way to “insulate” the insurance company General Account from separate account assets.  The individual states clearly define how the separate account assets should be addressed… separately from the insurance company assets.  But the billions of dollars in the separate account underlying assets were purchased by the insurance company with cash collected from 401k investors.  The cash is converted into “units of value” that actually bear no value.  Meanwhile the cash is safely tucked into Principal’s General Account for a rainy day.  Now the lines between General Account assets and insulated separate account assets become blurred, and when the insurance company falls short to pay their guaranteed commitments, companies like Principal will steal the cash from the non-guaranteed separate accounts to cover their losses.

Ok, so Principal stole 3-5 billion dollars between 2007 and 2012 from the PUSPSA.  The numbers, charts  and graphs prove that as fact.  Principal altered the reporting documents filed with the DOL… ie., the Schedule D reports for the respective years were grossly understated or grossly overstated, depending on where the money was needed, or not needed.

To begin, the EFAST reporting system functions as a resource to prevent fraud, pure and simple.  But when the Department of Labor needed the system in place, Principal graciously stepped forward to offer their services.  They designed the system, as I understand, and they also paid for the system.  And when Principal decided to juggle the books in 2006-2008, it appears there was a DOL insider that helped that to happen.  The EBSA has been making public all form 5500 records since 2006, except for Principal and the Principal U.S. Property Separate Account documents for those specific years.

They also make it more difficult for the public to view the records.  Click on this link which will take you to the public page of PUSPSA records.  Type as the Plan Name “Principal U.S. Property Separate Account.”  Review the PUSPSA records as displayed by the DOL.  To begin, the list of plan sponsors is scrambled… and you will note the records are missing for several years.  If you export the chart to CSV, the same issues exists.

Next, click on the blue arrow in the first column to open the form 5500 and the Schedule D.  What you won’t find are any listings for 2006, 2007, or 2008.  Those years were fraudulently reported to the extent the DOL did not want to publish them.  I tried to get digital copies, and was told I would have to spend almost a thousand dollars to receive paper copies from the Washington, DC archives.  Fortunately, a CD disk showed up at my residence one day with all three years, so I do have a copy… must have been a good Samaritan at the DOL that wanted to stop the corruption…. Below are files you will not find on the DOL Website:

 PUSPSA 2008 5500                             PUSPSA 2008 5500 Sch H                        PUSPSA 2008 5500 Sch D  PUSPSA 2007 5500                             PUSPSA 2007 5500 Sch H                         PUSPSA 2007 5500 Sch D  PUSPSA 2006 5500                             PUSPSA 2006 5500 Sch H                         PUSPSA 2006 5500 Sch D

After weeks of research, I was able to convert the three missing report years to an alphabetical order listing, and after applying my years of business studies in college, was able to put together a statistical analysis.  The results were shocking.  In 2006 and 2007, based on my information and belief, Principal omitted almost 4,000 plans from their Schedule D report for each year.  In 2008, Principal reported almost $800,000,000 was transferred out of the plan by plan participants.  It never happened… that cash was also stolen.  They had also reported plans in 2008 that didn’t exist to account for those monies that were illegally reported as transfers out.  Principal also grossly under-reported transfers of assets into the plan as well by new plan participants.  My wife and I were two that fit that profile.

You will note in the PUSPSA attached reports the all three of the form 5500 reports filed by Principal are blank for the years 2006, 2007, and 2008.  The Schedule H forms are grossly inaccurate.  First case in point as follows:

The 2008 Schedule H form filed with the DOL shows on line (5), partnerships/joint ventures valued at $4,577,530,235.  The 2008 PUSPSA Annual Report shows real estate joint ventures $15,733,715.  Loans are zero in the Schedule H, $11,658,331 in the Annual Report.  Real Estate at fair value is $6,758,4525,000 in the Annual Report, $1,742,884,000 in the Schedule H.

Nothing in these two reports even come close to matching.  The report in the Annual Report is audited, the  Schedule H is not, so Principal can lie themselves to eternity and there will be no questions asked.

To both the SEC and the DOL, the message is now is the time to investigate Principal with an intent to act on the facts.  The millions of retirees they have defrauded has to stop, and only you guys can make it happen.  What can now be proven, with evidence I have presented with this report, is the fact that Principal intentionally submitted fraudulent reports to the DOL concerning their retirement accounts, and that Principal stole billions of dollars from 401K plan participants.

NOTE:  The following Narrative and Exhibits were provided in kind to the Securities & Exchange Commission as well as the Department of Justice recently under their respective Whistleblower programs.

Principal life Insurance Company markets Group Variable Annuities through 401k plans to Employers.  As such, Annuities are regulated by FINRA and the Securities & Exchange Commission.  In 2008, Principal placed a withdrawal restriction on the Principal U.S. Property Separate Account (PUSPSA), a popular real estate investment account in which many of their 401k clients invested due to the fact that Principal had re-defined the account as a fixed income account a few months prior to the withdrawal restriction.

Almost immediately following the restriction, the PUSPSA began to lose value, dropping almost a billion dollars in 2008, then another billion dollars in 2009.  Another billion dollars were lost as an unrealized loss in value until 2014, when the account began to recover.  By then, the damage had be considerable to the investors, and many lost over a third of their original investment.

The arbitrary estimated market value of the account holdings were recognized as an unrealized loss for six years by Principal, and a review of their financial reports filed annually proved out the fact that Principal’s subjective analysis of unrealized losses was the key player in the account losing billions of dollars in value between 2008 and 2013.

The attached  header image illustrates the unrealized losses estimated each year by Principal, as found in the annual reports also attached as Exhibits in this report.  Interestingly, EXHIBIT 2 depicts a letter written by then CFO Terrance J. Lillis, also Senior Vice President, in which he discusses at length the function of Principal’s “non-guaranteed separate account,” offered to 401k clients, including the presumption that said accounts represents “zero” risk weight to the insurer as provider of these investments.  This chart shows between 2008 & 2010, the PUSPSA lost almost 40% of it’s value, which would account for Principal’s sudden “gift” of over $3 billion.   Principal needs to pay back the money they stole, pure & simple, and  the SEC and DOJ are the only regulators that can make this happen.

Mr. Lillis did make a point in his letter I will pursue in filing this Whistleblower’s claim.  It seems that Mr. Lillis, almost in a boastful manner, on page 8 in the last paragraph, asserts the following statement:

“At year-end 2008, Principal had an after-tax and after-DAC unrealized loss position on AFS debt securities of $4.2 billion dollars. Since then, only a small fraction of that amount has emerged as an actual realized loss. Actual after-tax realized losses on AFS debt securities from 2009 through 2011 have totaled only $507 million, which represents approximately 12% of the original unrealized loss position on these investments.”

By definition, an “AFS debt security” meets the true definition of a Principal separate account such as the Principal U.S. Property Separate Account.  On page 9, Mr. Lillis also states that at the end of 2011, Principal had an unrealized gain of $728 million, yet they reported the PUSPSA continued to lose value, up to and including 2013.

His letter really does a fine job of arguing this case for the benefit of thousands of plan providers as well as tens of thousands of 401k savers.  If, on the other hand, Mr. Lillis refutes his own letter, I believe the Governors of the Federal Reserve System as well as the Office of the Comptroller of the Currency may have some questions as well.  I suspect Mr. Lillis would like to get this matter resolved, as would myself and my fellow 401k savers.  The Principal Group of Companies have been ravaging millions of savers of their hard earned savings over the past thirty years, and if this matter goes before a Judge, I have a portfolio of evidence that would likely shut down the company.

My position regarding this matter is for the Principal Insurance Company to reimburse past PUSPSA investors for their losses, by disbursing in full the estimated $3 billion, plus the accrued interest since 2008.

The attached Exhibits include the following:

Exhibit 1……………….  Unrealized loss worksheet

Exhibit 2……………….  Terrance Lillis Letter

Exhibit 3……………….  Audited financial statement for 2008/2009

Exhibit 4……………….  Audited financial statement for 2010/2011

Exhibit 5……………….. Audited financial statement for 2012/2013

Exhibit 6……………….. 2008 Annual Report

Exhibit 7……………….. 2009 Annual Report

Exhibit 8……………….. 2011 Annual Report

Exhibit 9……………….. 2013 Annual Report

Exhibit 10……………… Principal U.S. Property Separate Account Profile

ADDENDUM 1.0

Compare the above header chart and statements made with EXHIBIT 11, which displays a  “year-on-year” quarterly growth & shares outstanding chart for Principal.  It is obvious that Principal’s financial problems far exceeded Mr. Lillis’s statements in his letter.  Principal appears to be well on it’s way to bankruptcy.  Principal should have been in a crisis state of mind at this time, their share values had plummeted, and the number of shares outstanding had plummeted as well, as the above graph also shows.  In fact, their shares remained below par until 2013, when PFG shares began a slow climb.

EXHIBIT 12 shows Principal’s share value had plummeted at the beginning of 2007, hitting bottom on March 12, 2009, when share price was $7.77.  They had been operating in the red early in 2006, and likely much earlier than that date.

Then suddenly, the company was infused with billions of dollars in cash!  Of course, Lillis explained in his letter that Principal had no “troubled asset” issues, and didn’t even apply for federal funding.  The facts are that they did apply, then learned several of their comrades had been audited and sentenced to prison for their misdeeds.  EXHIBIT 13 shows Principal had a serious issue with troubled assets.  The chart shows Principal’s troubled assets went through the roof at the same time their shares plummeted, and in March, 2010, almost 50% of their owned assets were underwater.  But then, once again, suddenly appears their savior, and their troubled assets plummeted to a normal 15% by year’s end!

I believe the above facts clearly show that things were not as rosy as Mr. Lillis expressed in his letter to the banking regulators, and SEC Chairperson Mary Shapiro may have agreed, since she called a meeting in her office on Thursday, February 26, 2010, to discuss undisclosed matters.  In attendance were Larry Zimpleman, then CEO, James McCaughan, CEO of Principal Global Investors, and Jeffrey Hiller, Chief Compliance Officer (see EXHIBIT 14).  As I recall, earlier in the week, she met with the Iowa State Insurance Commissioner.

Several other charts and graphs are available, as well as UCC reports and county records to add more bread crumbs to implicate Principal in a money laundering scheme using the Principal U.S. Property Separate Account.  Evidence will show the movement of funds through mortgage lending schemes using the attached Loan Purchase Agreement (EXHIBIT 15), whereby the 401k account would guarantee the loan under any circumstance.

EXHIBIT 11

EXHIBIT 12

EXHIBIT 13

EXHIBIT 14

EXHIBIT 15

I have exhausted my retirement life dealing with Principal’s total lack of morality.  Setting aside the cocaine issues, the fraud and lies to investors, how bad can it get?  The answer is, “pretty bad.”  170 King Street in San Francisco was purchased by Principal for the Principal U.S. Property Separate Account in  2003.  Basically, the residential building is located across the street from Oracle Park baseball stadium.  As a fiduciary for the Principal U.S Property Separate account, one can only ask how low can a Principal employee go to in owning and managing this building.

The images below somehow explain the low mentality of whatever Principal General Manager possessed to conceive the facade on the front of the building.  Words can’t adequately express the total disgust and demonic mindset that person had to waste what appears to be millions of dollars to “refurbish” the facade…. the image of Mark Hanrahan shown here was the Principal Project Manager that purchased this building on behalf of the 401k investors.

Contrast these images with the image shown below of a young woman holding her pet… this image appears on their web page.

Now that the foundation of 12 years of investigation of Principal Life Insurance Company has been submitted to the Securities & Exchange Commission (SEC) and the Department of Justice (DOJ), the clock starts running for Principal… Based on information and belief, the best estimate is that Principal stole at least $3 Billion, and possibly $4-$6 Billion from 401k investors during the past 20 years, mostly from the Principal U.S. Property Separate Account.  They were able to accomplish that feat by gaining the confidence of multiple federal agencies and politicians, paying out tens of millions in lobbyist funding to our federal government.

Today, many of the perpetrators involved have retired, but Principal is being placed on notice at this time for a good reason.  Both the SEC and the DOL have in place amnesty options to avoid prison terms and/or heavy fines if the corporate entity self-reports the wrongdoing within 120 days of the receipt of the Whistleblower’s report.  The clock is running, and if Principal fails to self-report by even 1 hour after the deadline to do so, the die is cast.  The risks for Principal not to self-report is so high, it would make no sense to delay the inevitable.  First, like those whose lives they destroyed by stealing their savings, the Principal executives will pay a high price themselves if they receive prison terms.  Most of the politicians and federal agency managers and employees who accepted bribes and other gratuities from Principal have moved on as well, and those in positions of authority in deciding this case have no reason to protect the guilty.

The above graph is perhaps the most convincing evidence to support a decision for the SEC/DOJ to prosecute should Principal fail to self-report.  When used with other existing evidence, it leaves a trail of breadcrumbs of corruption within the company.  When viewing this chart in comparison with the Website header image, the header image displays a large influx of cash during the same time the Principal U.S. Property Separate Account was in a withdrawal restriction status.  Since Principal is shown in the red financially prior to and following the time periods involved, an investigator could easily reason that the excess funds came from the PUSPSA.

Several other charts and graphs are available, as well as UCC reports and county records to add more bread crumbs to implicate Principal in a money laundering scheme.  Evidence will show the moving of funds through mortgage lending and altering agency required reports by understating the number of plan sponsors during that same period of time,.

The only remaining task is to convince Principal the facts are on the table. Past posts I have published in the past were generalities, mostly lacking evidential material; future posts will provide a detailed description of the course of events that led us to where we are today.  Once Principal self-reports, it will then be prudent for me to unpublish fiduciaryfactor.com and allow legal decisions write the final chapter.