Crime & Corruption in Your 401k

A forthcoming book titled Crime & Corruption in Your 401k exposes fraudulent practices by financial institutions in managing retirement funds. One major case involves an insurance company allegedly laundering $500 million in 401k deposits by acquiring worthless stock from a Canadian investment firm. The shares were bundled into proprietary mutual funds, sold at inflated prices, then later repatriated and canceled—effectively erasing any trace of the transactions.

Many 401k service providers, including Principal Financial, are implicated in such fraudulent schemes. Principal, a leading provider for small to medium-sized plans, allegedly misled plan sponsors, who often lacked financial expertise, into investment choices that prioritized corporate interests over investor benefits.

One of the book’s allegations concerns Principal Financials’ handling of the Principal U.S. Property Separate Account (PUSPSA). In 2008, Principal imposed a withdrawal freeze without prior notice, trapping investors in a declining fund. Despite reporting billions in losses, these were characterized as “unrealized” and did not affect Principal’s own financial standing. The company allegedly restructured its commercial property holdings into privately registered LLCs, allowing transactions to be concealed off the official balance sheet.

Further allegations suggest Principal manipulated commercial property taxes by overpaying to generate refund checks.  As liquidity in the account diminished, Principal defaulted on loans secured against plan assets, forcing investors to absorb losses. In various transactions, the company allegedly used investors’ funds to acquire distressed properties at inflated prices or as collateral for bank loans that ultimately defaulted.

The book also claims Principal engaged in securities fraud through commercial mortgage-backed securities (CMBS), intentionally setting up investors to lose while benefiting internally. Given its alleged history of financial misconduct, there are calls for stricter enforcement and prosecution by the U.S. Department of Justice.

The author suggests that with former President Donald Trump’s return to office, there may be an opportunity to overhaul regulatory oversight and hold financial institutions accountable. However, past political ties—including alleged connections between Principal executives, Hillary Clinton and the Clinton Foundation’s “pay to play,” and the Obama/Biden administrations—have complicated efforts to pursue justice.

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