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.
