Author: Dennis Myhre

Overview of Allegations:

This complaint concerns fraudulent mismanagement of retirement funds by Principal Life Insurance Company (“Principal”), specifically regarding the Principal U.S. Property Separate Account (PUSPSA). Evidence suggests that Principal engaged in deceptive practices involving misappropriation of investor funds, failure to report plan assets accurately, and questionable real estate transactions—leading to significant financial losses for 401(k) participants.

Details of Wrongdoing:

1. Failure to Accurately Report 401(k) Plans (2006–2007):
   • Principal allegedly under-reported thousands of 401(k) plans to the Department of Labor.
   • Contributions from these unreported plans remain unaccounted for.
2. Improper Use of Retirement Funds in Joint Ventures:
   • Principal entered a $1 billion joint venture with Trammell Crow Co. (TCC) in 2006, claiming the investment was backed by the PUSPSA.
   • No financial record from 2006 indicates the availability of $1 billion in “ready capital.”
   • The majority of TCC’s projects failed to appear in the PUSPSA portfolio, raising concerns over fund misallocation.
3. Questionable Real Estate Transactions:
   • 1412 Broadway (New York City):
     • Acquired by Principal for $168.9 million (2006); recapitalized in 2009, resulting in a loss exceeding $60 million for PUSPSA investors.
   • 104 W. 40th (New York City):
     • Purchased by Principal in 2007 for $140 million.
     • Entered foreclosure proceedings in 2010 due to mortgage default and was later sold for only $10 million, causing investor losses.
     • Columbia Business School hosted a seminar highlighting Principal’s mishandling of this transaction.
4. Misuse of Proprietary Funds in 401(k) Accounts:
   • Principal primarily invests in proprietary funds, raising concerns about conflicts of interest.
   • The company allegedly engaged in a form of short-selling against investors:
     • Selling fund shares it did not own using off-balance-sheet accounting.
     • Delaying fund contributions, resulting in deferred payments at unfavorable rates.
   • This practice mirrors characteristics of financial fraud and Ponzi-like investment schemes.

Supporting Evidence:

• White House Fact Sheet (Feb. 23, 2015) discussing financial misconduct.
• SEC study reporting $1 billion in monthly retirement investor losses.
• Public news reports detailing Principal’s questionable investment activities.
• Case study hosted by Columbia Business School addressing Principal’s financial mismanagement.

Legal and Regulatory Violations:

• Potential violations of ERISA (Employee Retirement Income Security Act).
• Possible misrepresentation under federal securities laws.
• Concealment of financial risks to investors.
• Shadow banking and non-GAAP accounting practices used to obscure liabilities.

Requested Action:

• DOJ investigation into Principal’s financial activities related to retirement plan management.
• Review of compliance with fiduciary responsibility laws governing 401(k) plans.
• Enforcement actions to recover investor funds lost due to mismanagement.
• Policy recommendations to prevent misuse of proprietary funds in employer-sponsored retirement plans.

Declaration:

I submit this complaint in good faith, believing the described activities warrant investigation.

Dennis Myhre, ASIC

Whistleblower Report to the U.S. Department of Justice (DOJ)

Subject: Allegations of Investor Fraud and Corporate Misconduct by Principal Life Insurance Company and Former CEO Larry Zimpleman.  Financial Misrepresentation by Principal Life Insurance Company (2008-2013)

1. Introduction

I am submitting this whistleblower report regarding fraudulent financial practices conducted by Principal Life Insurance Company, specifically involving its Principal U.S. Property Separate Account (PUSPSA). This report details evidence of misconduct, financial misrepresentation, and investor fraud related to the acquisition and sale of 1412 Broadway, New York City, between 2004 and 2009.

2. Summary of Allegations

This complaint outlines fraudulent financial transactions in the commercial real estate market that resulted in significant financial losses for 401(k) investors, particularly through the PUSPSA. Former COO/CEO Larry Zimpleman is implicated in overseeing transactions that appear designed to defraud investors. The misconduct includes:

• Inflated asset valuation: 1412 Broadway was purchased for $178.4 million in 2006—double the $98 million value recorded two years earlier.
• Conflict of interest: Principal Life owned the mortgage while selling the property to its separate account, violating standard ethical investment practices under ERISA.
• Fabricated sales transactions: The property was reportedly sold in 2009 for $109.4 million, reflecting a $70 million loss for investors. However, internal documents suggest the actual buyout price was $6 million, contradicting official reports.
• Mezzanine loan default: Principal took out a $20 million mezzanine loan that subsequently defaulted, further impacting investor losses.

These actions resulted in cumulative investor losses exceeding $250 million, affecting retirement accounts nationwide, including those managed by TIAA-CREF.

3. Evidence Supporting Claims

The fraudulent transactions are supported by official records, including:

• Real estate transfer deeds and mortgage assignments filed in New York County between 2004 and 2006.
• 2009 PUSPSA Annual Report detailing the alleged sale of 1412 Broadway.
• Statements from Norman Sturner, Principal’s investment partner, confirming a separate recapitalization process contradicting reported financial losses.
• SEC filings and financial disclosures reflecting irregularities in commercial real estate investments managed by Principal.

4. Impact on Investors and Retirement Accounts

The fraudulent transactions had widespread consequences:

• Significant loss of retirement savings for thousands of investors relying on Principal-managed 401(k) accounts.
• Potential ERISA violations due to Principal’s dual role as both lender and investor without fiduciary oversight.
• Compromised financial integrity within commercial real estate investments, impacting other financial institutions linked to the transaction (e.g., Bank of America, Murray Hill Properties, and TIAA-CREF).

5. Legal Basis for Investigation

These actions may constitute violations of federal securities laws, including:

• Securities Fraud (18 U.S.C. § 1348): Misrepresentation of financial transactions in real estate investments.
• Wire Fraud (18 U.S.C. § 1343): Potential fraudulent communications regarding the transaction.
• False Statements (18 U.S.C. § 1001): Misrepresentation in official reports.
• ERISA Violations (29 U.S.C. § 1104 & § 1106): Failure to act in the best interest of plan participants.

Given the scale and severity of these violations, I urge the DOJ, SEC, and other regulatory bodies to investigate and hold accountable those responsible.

6. Requested Action

I respectfully request that the DOJ:

• Initiate a formal investigation into Principal Life’s investment practices and management of the PUSPSA.
• Conduct forensic audits of real estate transactions tied to Principal Life between 2004–2009.
• Prosecute individuals involved in fraudulent practices, including former CEO Larry Zimpleman.
• Implement investor restitution measures to recover lost funds.

Tracking Number: 20241005-0002
Subject: Financial Misrepresentation by Principal Life Insurance Company (2008-2013)
Submitted By: Dennis R. Myhre, AIC
Affected Parties: 401(k) Plan Investors in Principal U.S. Property Separate Account (PUSPSA)

Summary of Allegations: This complaint concerns potential financial misrepresentation and discrepancies in commercial real estate transactions conducted by Principal Life Insurance Company, acting as the plan provider for the Principal U.S. Property Separate Account (PUSPSA). Specifically, the sale of 1875 Lawrence Street, Denver, Colorado involves a shortfall of $1 million from the reported exchange of funds.

According to the original Real Estate Purchase and Sale Agreement, the agreed-upon sale price between PUSPSA and Harvard Property Trust, LLC was $35 million. However, the PUSPSA 2008 Annual Report records the sale at $34 million, thereby omitting $1 million from the transaction records presented to investors. The financial discrepancy warrants further investigation for potential misrepresentation, financial misconduct, or fraud.

Transaction Details:

• Property: 1875 Lawrence Street, Denver, CO
• Seller: Principal U.S. Property Separate Account (PUSPSA)
• Buyer: Harvard Property Trust, LLC
• Purchase Agreement Sale Price: $35 million
• Reported Sale Price in Annual Report: $34 million
• Unaccounted Funds: $1 million

Additionally, the Real Estate Purchase and Sale Agreement stipulates that the buyer must deposit $2 million into escrow, broken into two payments:

• Initial deposit: $1 million within two business days of agreement execution
• Second deposit: $1 million upon election to proceed, before approval date

The omission or misrepresentation of these escrow deposits may have misled investors about the financial transactions conducted by PUSPSA.

Legal Implications: Under U.S. federal and state financial regulations, the withholding or misrepresentation of property valued at $1 million or more may constitute felony theft or grand larceny, violating corporate fiduciary duty and securities laws. Given that this discrepancy may be part of broader financial misconduct concerning PUSPSA, I urge the DOJ to investigate similar transactions from 2008 to 2013, where conflicting real estate sale prices may have led to additional losses for investors, possibly totaling hundreds of millions of dollars.

Request for Investigation: I formally request the Department of Justice conduct a full investigation to determine whether Principal Life Insurance Company engaged in fraudulent misrepresentation, financial misconduct, or securities violations. If evidence of wrongdoing is confirmed, I respectfully request appropriate enforcement actions be taken to ensure accountability and restitution for affected investors.

Supporting Documents:

• Sales & Purchase agreement (Page 2, showing $35 million price)
• 2008 PUSPSA Annual Report (Page 21, showing $34 million sale price)

Declaration: I affirm that the information provided in this report is accurate to the best of my knowledge. I submit this report in good faith with the intention of bringing transparency and accountability to this matter.

Dennis Myhre, AIC
[email protected]

Principal Life Insurance Company
Tracking Number: 20241005-0002
Subject: Financial Misrepresentation by Principal Life Insurance Company (2008-2013)
Submitted By: Dennis R. Myhre, AIC
Date: October 5, 2024 (Original Submission)
Affected Parties: 401(k) Plan Investors in Principal U.S. Property Separate Account (PUSPSA)

1. Summary of Allegations

Principal Life Insurance Company engaged in financial misrepresentation following the reclassification of its Principal U.S. Property Separate Account (PUSPSA) as a fixed-income account in 2008. This reclassification led to withdrawal restrictions, causing substantial financial losses for 401(k) investors.

The company’s valuation methods relied on projected unrealized gains and losses rather than market-based assessments. Statements made by then-CFO Terrance J. Lillis indicate discrepancies between reported unrealized losses and actual realized financial outcomes. These inconsistencies suggest fraudulent accounting practices that warrant DOJ and SEC investigation.

2. Detailed Description of Violations:

a. Misrepresentation of Financial Losses

• Principal Life Insurance reported after-tax unrealized losses of $4.2 billion in 2008. However, actual realized losses from 2009-2011 amounted to only $507 million—just 12% of the original unrealized loss position.
• In 2011, Principal reported an unrealized gain of $728 million, yet investors continued to experience declining account values through 2013.
• The company relied on subjective valuation methods rather than market-based assessments, further exacerbating financial misrepresentation.

b. Contradictory Financial Statements

• CFO Lillis stated that Principal’s separate accounts held a “zero risk weight” classification—despite observable financial losses suffered by investors.
• His statements conflict with Principal’s reported valuation metrics and audited financial outcomes, creating doubt about its regulatory compliance.

c. Potential Legal & Regulatory Violations

The following violations appear to be present based on financial reporting inconsistencies:

• Securities Fraud (Misrepresentation under SEC regulations).
• FINRA Disclosure Violations (Failure to provide accurate investment information).
• DOJ Anti-Fraud Statutes (Potential corporate fraud liability).

3. Legal Basis for Whistleblower Disclosure

Principal Life Insurance’s actions appear to violate multiple federal financial regulations, including:

• SEC Rule 10b-5 (Fraudulent misrepresentation in securities transactions).
• FINRA Rule 2020 (False statements in communications with investors).
• DOJ Fraud Enforcement Statutes (Potential corporate fraud liability).

4. Requested Action

Given the financial harm caused to PUSPSA investors, this report formally requests:

1. DOJ & SEC Investigation into Principal Life Insurance Company’s financial reporting practices (2008-2013) to determine compliance failures.
2. Investor Restitution estimated at $3 billion plus accrued interest since 2008.

a. Unrealized vs. Realized Losses

Principal’s financial statements indicate that unrealized losses played a critical role in PUSPSA’s decline. Exhibit 1 provides a worksheet detailing annual losses, demonstrating the impact of projected, non-realized losses on investors’ portfolio values.

A letter by then CFO & Senior Vice President Terrance J. Lillis (Exhibit 2) addresses Principal’s classification of separate accounts for 401(k) plan participants. In this document, Mr. Lillis describes these accounts as “zero risk weight,” a statement that contradicts the observed financial losses (Lillis, 2008).

b. Contradictory Financial Statements

Further examination of Mr. Lillis’ statements reveals inconsistencies in financial reporting:

1. On page 8 of his letter, he states:

• “At year-end 2008, Principal had an after-tax and after-DAC unrealized loss position on AFS debt securities of $4.2 billion. 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.”

2. On page 9, Mr. Lillis reports an unrealized gain of $728 million at the end of 2011—yet Principal continued to report declining account values through 2013.

These discrepancies suggest financial misrepresentation, affecting thousands of investors and warranting regulatory scrutiny.

 c. Legal & Regulatory Violations

• Securities Fraud under SEC regulations.
• Failure to comply with FINRA disclosure rules.
• Possible violations of anti-fraud statutes under DOJ oversight.

d. Requested Action

Given the financial losses suffered by past PUSPSA investors, this report formally requests:

1. A regulatory investigation into Principal Life Insurance Company’s financial reporting practices from 2008-2013 to determine compliance failures and deceptive valuation methods.
2. Compensation for affected PUSPSA investors, estimated at $3 billion plus accrued interest since 2008.

e.  Supporting Exhibits

      At your request, the following Exhibits will be provided:

• Exhibit 1: Unrealized loss worksheet
• Exhibit 2: Terrance Lillis Letter
• Exhibit 3: Audited financial statements (2008-2009)
• Exhibit 4: Audited financial statements (2010-2011)
• Exhibit 5: Audited financial statements (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
• Exhibit 11: Quarterly growth & share performance of Principal.
• Exhibit 12: Principal’s share value decline between 2007-2009.
• Exhibit 13: Principal’s troubled assets skyrocketing in 2010.
• Exhibit 14: SEC meeting records from February 26, 2010.
• Exhibit 15: Loan Purchase Agreement demonstrating fraudulent fund movements.

f.  Conclusion

This report presents evidence of financial misrepresentation by Principal Life Insurance Company, highlighting inconsistencies in its reporting of unrealized losses between 2008 and 2013. Based on financial statements, regulatory filings, and internal correspondence, the findings warrant regulatory intervention and financial restitution for affected investors.

Immediate investigation and legal action are necessary to ensure compliance, hold Principal accountable for misrepresentation, and provide financial relief to investors harmed by withdrawal restrictions and valuation practices.

References

• Lillis, T. J. (2008). Letter on Principal Separate Accounts. Principal Life Insurance Company.
• Securities & Exchange Commission. (n.d.). Regulations for group variable annuities. Retrieved from SEC Website.

A whistleblower report detailing financial misconduct within Principal Life Insurance Company had been officially submitted to the Securities & Exchange Commission (SEC) and the Department of Justice (DOJ) under the Biden administration. The findings suggested a significant enforcement action may be imminent, marking one of the largest regulatory crackdowns in recent history.

Twelve years of extensive research had uncovered evidence that Principal may have unlawfully diverted $5 billion from 401(k) investors over the past two decades. At the core of this operation is the Principal U.S. Property Separate Account, a financial vehicle allegedly used to conceal the misappropriation of funds. The complexity of the scheme raises pressing questions regarding whether it was an isolated operation or part of a broader network of financial misconduct involving a less than stellar insurance company.

While certain individuals involved had retired, the impact of their actions remained significant. Federal agencies, including the SEC and the Department of Labor (DOL), provided amnesty provisions that could allow Principal to reduce penalties—such as fines and prison sentences—if Principal had chosen to self-report within 120 days of the regulators receiving the whistleblower report.  Since Principal’s executives failed to act, regulatory intervention should have been inevitable, and executives linked to the scheme should soon face serious consequences, perhaps prison terms, for their past sins.  But Principal somehow knew they would be “safe” from prosecution.  My reports ended in the trash and a gang of thieves continued to walk the halls of the Principal group of companies.

Fast forward to 2020, and once again, despite a major pandemic and low returns on investments, Principal blossomed forth hundreds of millions of net income while values in the Principal U.S. Property Separate Account plummeted, all while  the investors were frozen out of the PUSPSA.  This letter was linked to a forum in 2020, reporting the fact that in 2020 the PUSPSA Manager decided to limit withdrawals in order to “achieve several outcomes:”

1.  To protect the long-term interests of Plan Participants who have interests in the
      account,
2. To avoid forced liquidation of income producing properties at a
     disadvantageous point in time, and
3. To provide generally for fair treatment to those participants wishing to retain
     their interest in the portfolio, as well as those who are redeeming.

It was as if lightning had struck twice… Principal’s brigade of thieves had struck twice, once again, hauling off millions, if not billions of dollars in 401k investor’s savings. The fact that our Federal regulators, once again, turned a blind side to thei crimes, is unbelievable, but the evidence is overwhelming.  Sure, Principal filed all the necessary reports with the SEC, and the SEC returned the reports for clarification, but then once again,  Principal’s CFO responded with an excuse, and the regulator accepted the lies and once again, it was business as usual for the Fed’s.  And once again, tens of thousands of 401k investor’s got the shaft.

There is so much evidence to show what Principal is doing to steal the retiree’s money, and yet the federal investigator’s, under the Biden administration, ignored the evidence.  But today things are different.  A new Sheriff, and eventually, the crooked regulator’s and Agency administrator’s will be shown the door, and Principal will start digging deeper into their pockets to buy off yet again, more politicians.

Principal Life Insurance Company
Tracking Number: 20241005-0002
Subject: Financial Misrepresentation by Principal Life Insurance Company (2008-2013)
Submitted By: Dennis R. Myhre, AIC
Date: October 5, 2024 (Original Submission)
Affected Parties: 401(k) Plan Investors in Principal U.S. Property Separate Account (PUSPSA)

Summary of Allegations: This report details fraudulent financial activities allegedly conducted by Principal Financial Group between 2006 and 2012. These actions, supported by statistical analysis, demonstrate systemic misrepresentation of financial data, falsification of reports filed with the U.S. Department of Labor (DOL), and improper concealment of billions of dollars in plan sponsor assets.

Background Information: In 2006, IT Director Mike Vaughan, employed by Principal, developed a formula designed to generate a randomized sorting function. While Vaughan likely created this formula as part of his assigned IT duties, it later played a critical role in obscuring financial misconduct related to pension and retirement plan filings. His sister, Terri Vaughan, former Iowa Insurance Commissioner, also had longstanding connections with Principal Financial Group as well.

Alleged Fraudulent Practices:

1. Manipulation of Reports & Concealment of Fraud:
   • Between 2007 and 2012, Principal allegedly misappropriated between $3 billion and $5 billion from PUSPSA plan funds.
   • The company falsified Schedule D records filed with the DOL to conceal the diversion of funds.
   • A deliberate restriction of access to plan sponsor data further complicated public oversight and independent auditing.
2. Evasion of Regulatory Oversight:
   • The Employee Benefits Security Administration (EBSA) was established to prevent fraud through its EFAST reporting system.
   • Principal played a significant role in the design and funding of this system, raising concerns of insider collusion.
   • Key fraudulent financial disclosures between 2006 and 2008 were missing from public DOL records.
3. Specific Misrepresentations:
   • Principal omitted nearly 4,000 plans from Schedule D filings in 2006 and 2007.
   • In 2008, the company falsely reported $800 million in investor withdrawals, which were never executed.
   • To conceal fraud, Principal reported nonexistent plans, balancing fraudulent asset transfers.

Call for Investigation: The evidence presented in this disclosure indicates intentional financial misrepresentation, document falsification, and significant investor fraud by Principal Financial Group. Despite regulatory awareness, no substantive intervention has occurred. It is critical that the DOJ, SEC, and DOL launch an investigation with the intent to prosecute the responsible parties.

The fraudulent actions described have affected millions of retirees and investors. Immediate regulatory action is necessary to hold Principal Financial Group accountable and safeguard investor funds.

Supporting Documentation:   Available upon request.

Conclusion: Principal Financial Group’s pattern of misrepresentation, financial manipulation, and document falsification demands urgent review. I respectfully urge the DOJ to take swift investigative action to protect investors from further harm.