Since 2008, I have reported on the many crimes of the Principal Group of Companies (Principal).  A daunting task, Principal owned a multi-faceted process to steal your savings.  This effort  required hundreds of employees, many of whom were unaware that they were perpetrating a crime.  Others, many holding higher level positions within the company, lived double lives to hide their motives.  Some were drug addicts, most were simply starved for cash, and even though they stole billions of dollars, they needed more, and your 401k  savings became an easy target.  Your money could also buy them a position with a company that thrived on criminal behavior.  The company had perpetrated crimes since the company’s inception in the early 1980’s, and many of the original perpetrators were classmates at Drake University.  Their activities reeked of cronyism that extended well beyond the walls of Principal.  It wasn’t uncommon for Principal’s top executives to hire their wives for elevated positions, paying them exorbitant salaries to perform small tasks.  Certain State of Iowa regulators and district court judges were also college classmates with Principal executives, and many of them also played a major role in helping Principal to perpetrate their crimes, later becoming employees or board members with the company.  Family members of high ranking Iowa State regulators were also provided high paying jobs with Principal, assuming important positions and provided technical skills to defraud 401k investors of billions of dollars.

The most intense period of criminal activity thrived during the decade of 2004 through 2014, and peaked during the financial crisis in 2008-2009.  Greed forced Principal’s hand in crime to reign through 2007, and 401k investors covered the company’s losses, measured in the billions of dollars, when the Principal U.S. Property Separate Account was frozen in September, 2008.  I have published almost 600 articles related to Principal’s crimes.  Recently, when the Department of Justice introduced their Whistleblower’s Pilot Program, I locked the website from public view, although isolated articles can still be found floating around in Internet outer space.   With the introduction of the new Trump appointed DOJ Attorney General, the future of the Whistleblower’s program will likely continue in force, so I thought I would at least re-start public interest in this issue,  since thousands of investors had followed my articles in the past.

Future articles will follow in greater detail the methodology used by Principal to steal billions of dollars from their clients, and expanding on conflicting regulations that exist today to propagate these crimes against Americans that simply want to save for retirement.  Under previous administrations, Principal had the support of our government employees to steal.  Hopefully, under the Trump administration, the recent purging of government officials and future efforts to correct broken laws and regulatory functions, Federal and State perpetrators, as well as corporate criminals, will be brought to task for their crimes.    I recommend to my readers that they follow closely not only my future articles, but the industry as well.  If you sense a weak regulator, bring your thoughts to their attention… with existing and future whistleblower programs, public voices like you own will grow to protect your financial future.

Preface

My wife and I had saved for retirement since the early 1990’s, fully realizing we had no other means of savings or a pension to rely on when we retired.  In 2008, having reached the age of retirement, we made plans to withdraw our retirement, as defined in our Group Annuity Contract with Principal, and continue working.  Instead, we watched most of our life savings vaporize.  Our funds sat in the Principal U.S Property Separate Account with a withdrawal restriction, being told we did not qualify to receive our totally vested savings, because they (Principal) had “redefined” the definition of retirement to include “separation of service”!

Neither of us had wanted to quit our jobs… we both enjoyed working in the catastrophe industry for almost 20 years, working claims for insurance companies and FEMA, and we had no plans to quit.  But our savings was dying, and we had no way to stop the bleeding.  Somehow, I reasoned that Principal will use some common sense and reopen the PUSPSA to withdraws.  It had all started with a 15 minute warning, at 11:45 pm on September 26, 2008, that the account was to be locked at midnight to protect all investors from a soon to be financial crisis.  They emphasized the fact they had a “fiduciary duty” to do so., and under the law they claimed a right to do so.  They never came to reason that they should return our money, at least those at retirement age and still working.

We first accepted the decision believing Principal was doing their duty, but soon, at years’ end 2008, a billion dollars disappeared from the account, soon followed by another 1.5 billion in 2009, and another 500 million in 2010.  Finally, in 2011, the account seemed to level off and by years’ end most investors had received their savings, albeit in a grossly reduced amount, and the bad memories were expected to fade, at least from Principal’s perspective.

But for the Myhre’s it was a different story.  We had resigned our jobs in 2010, fearful that our entire savings would evaporate, leaving us nearly  penniless, and the meager amount we received from Principal was used to extinguish what debt we had, and purchase a small home at auction for $60,000.  The $300,000 home we had owned in Branson, Missouri, was sold at less than market value to cover the mortgage.

For the past 12 years I have investigated, and continue to investigate, the “real” Principal Group of Companies.  I have identified the methods in which they steal from their 401K clients, leading back an entire generation of Principal executive employees, and involving billions of stolen retirement dollars.  What follows in the coming weeks is an expose’ of Principal’s crimes.

A Brief History of Principal Life Insurance Company

Principal Life Insurance Company is a nationwide provider of life insurance and annuities products, with the senior citizen market comprising a large share of its business. In the past, the company has also sold annuity products as Principal Mutual Life Insurance Company. In 2000, Principal Life Insurance settled a class action suit involving approximately 960,000 life insurance and annuity holders. An Iowa district court approved the $374 million settlement in early 2001.

The class action claimed that Principal Life Insurance sales agents deceived the class members into purchasing life insurance and annuity products through the use of false and misleading policy illustrations, marketing materials, and sales presentations. The plaintiffs alleged that Principal Life Insurance made marketing statements and presented sales illustrations that depended on deceptive actuarial assumptions and undisclosed material facts. According to the plaintiffs, Principal sales agents fraudulently concealed the presently known fact that the assumptions upon which the performance of the “vanishing premium” policies were based could not be supported by Principal’s current experience. The plaintiffs also claimed that Principal knew the dividend, interest, and investment return assumptions essential to its sales illustrations could not be maintained, and indeed, their projections did not even indicate that they could be maintained. Nonetheless, the plaintiffs argued that the sales personnel used these illustrations to induce the class members to purchase the life insurance and annuity products.

Aside from the above narrative, there have been multiple legal cases involving Principal’s poor judgement at best, or clearly criminal activities at their doorstep that has been commonplace.  Principal’s criminal history has followed the company since it’s inception in 1879, and it’s heritage follows closely behind even today.  My focus relates to the Principal Group of Companies, including their affiliates, the stench of which has ruined the lives of millions of 401k savers today, and will continue to do so until the Federal government decides to act on what is obvious, that being the fact that Principal is a grossly corrupted company that must be reorganized by the Federal Government.

Is Principal a Fiduciary?

Before we can decide Principal’s culpability regarding actions they take to relieve the 401k saver of his or her life savings, we need to define Principal’s status as it relates to your savings plan.  Of course, all of the pros will tell you to read your Group Variable Annuity contract for answers, but they would be wrong!  actually, you will find no reference to the term “fiduciary” in any plan documents you receive from Principal, and you never will.  Your savings plan has it’s own label, and you will not find it anywhere as well in your plan documents.

To open this issue, I will quote a comment voiced by the National Association of Insurance Commissioners (NAIC) directed to the American Academy of Actuaries, stating the following, The charge of the NAIC Work Group is to, “Study the need to modify existing regulatory guidance related to separate accounts where, in recent years, various products and contract benefits have increased the risk to the general account.”  As a footnote, the following was explained, “A non-unitized separate account is one in which benefits are declared by the insurer and are not directly related to the assets held in the separate account. This contrasts with a unitized separate account, in which benefits are expressed in units whose value varies directly with the value of the separate account, such as a variable annuity. For the purpose of the NAIC analysis and
the SAWG’s comments, we are also assuming that unitized separate accounts would include all types of pass-thru separate accounts, including some non-unitized private placement VUL, since the issues being discussed relate to the nature of the product and its risk to the general account, not to how the product allocates separate account assets among policy or contract-holders.”

As confusing as it appears, it is even more so for millions of separate account investors, whose ownership is controlled by a Variable Group Annuity.  With Principal, most 401k plans include the Variable Group Annuity and separate account investments.  Your boss does not understand how the separate account works, you do not understand, and as you can see above, even the regulators do not fully understand the function either.   There is one word that describes your separate account investment… the State of Iowa will NOT allow you to own your own money, will not allow Principal to claim to be a “fiduciary,” and under almost any circumstance, Principal can steal at random all the value from the separate account you own, and they cannot be stopped.

Who owns the money that is deposited with Principal by your employer every month?

Principal does not market or maintain any separate account product that provides a minimum return or account value guarantee to a contract holder or participant upon contract surrender.  But, the problem is that Principal also retains zero risk on the separate accounts as well.  Principal has no asset or liability risks with your money, so common law prevails, and since the State of Iowa also tells you that once Principal gets their filthy hands on your money, they own it.

Principal claims they are fiduciaries of the actual separate account, and they can do whatever is necessary to “protect” the account, which does not include protecting the money. From their past activity, it appears that they believe in giving themselves total control with no restrictions, so they steal your money.  Pretty simple when you think about it!  I hope this is clear for you, because your employer is clueless, and he/she will agree by contract to agree with Principal on any issue that develops if the money disappears, as did happen in 2008-2009.

Has Principal engaged in any money laundering schemes?

During my 12 years of investigating Principal, I discovered at least one instance where they engaged in money laundering, by traditional means, using a regional bank in Maryland. As near as I could tell, Principal executives assumed a role as bank executives, and that was how they were discovered, because their new banking roles showed up of SalesForce.com. The list of names were long, 41 Principal executives, and a few names, like an Iowa Insurance Commissioner, who was hired by Principal after she termed out as the Commissioner.

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 )

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.

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. Then 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.