Loan Purchase agreements & Structured fraud

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)

I. Introduction

This report outlines substantial evidence of fraudulent financial activities involving Principal Real Estate Investors (PREI) and Trammell Crow Company (TCC), particularly in connection with the Principal U.S. Property Separate Account (PUSPSA), a 401(k) investment fund. Evidence suggests systematic misrepresentation of assets, unlawful securities transactions, and mortgage origination fraud, resulting in financial losses for investors and violations of federal securities laws.

II. Summary of Allegations

PREI and TCC engaged in non-arm’s length transactions that defrauded investors by using their funds to finance highly leveraged real estate developments, while withholding profits and misrepresenting asset ownership and valuations. Specific allegations include:

1. Misuse of Investor Funds:
   • Investors contributed financial resources but were misled about their ownership stakes in the properties.
   • Profits generated from the properties were retained by PREI and TCC rather than being allocated to investors.
2. Unregistered Securities Sales:
   • PREI marketed unregistered securities to investors, violating SEC regulations on private placements under Regulation D.
3. Loan Purchase Agreements (LPAs) as Fraudulent Instruments:
   • PREI signed LPAs with banks for defaulted loans related to real estate developments, effectively laundering money through loan acquisitions.
   • Investors unknowingly covered costs of defaulted loans, including accrued interest and penalties.
4. Mortgage Origination Fraud:
   • PREI utilized investor funds to purchase defaulted loans with no intention of repayment.
   • Properties developed under these financial arrangements were later sold, generating millions in illicit profits for PREI and TCC while investor accounts suffered significant losses.
5. Withdrawal Restrictions to Conceal Fraud:
   • Amid the 2008 financial crisis, PREI imposed withdrawal restrictions on investors while continuing profit-generating transactions, further devaluing the fund by approximately 50%.
6. Money Laundering via Subordinate Loans:
   • PREI granted “subordinate loans” to sellers for approximately 10% of property sale prices, which were repaid with investor funds, effectively laundering money within the PUSPSA.

III. Evidence of Wrongdoing

Documents and reports substantiate these allegations, including:

• Annual Reports from the PUSPSA (2007-2011), showing inconsistencies in acquisitions, ownership claims, and financial transactions.
• SEC filings and Real Estate Agreements, demonstrating non-arm’s length transactions.
• Records of Loan Purchase Agreements and Defaulted Loan Transactions, revealing structured financial fraud.

IV. Legal Violations

The actions described above constitute clear violations of multiple federal statutes, including but not limited to:

• Securities Act of 1933 & Exchange Act of 1934 – Sale of unregistered securities.
• Investment Advisers Act of 1940 – Breach of fiduciary duties.
• Federal Money Laundering Statutes (18 U.S.C. § 1956 & 1957) – Structured financial transactions to conceal fraud.

V. Potential Impact

These fraudulent practices have had severe repercussions on retirement investors, many of whom suffered significant financial losses. Furthermore, failure to hold PREI and TCC accountable could set a precedent for financial misconduct within institutional investment firms.

VI. Request for Action

This whistleblower submission calls for:

1. A formal investigation by DOJ, SEC, and relevant federal agencies into the fraudulent activities outlined.
2. Immediate audit of PUSPSA financial records to assess the full extent of investor losses.
3. Legal action against PREI and TCC executives involved in facilitating these unlawful transactions.
4. Policy reforms to prevent institutional investment firms from engaging in similar fraudulent practices.

VII. Conclusion

The evidence provided in this report demonstrates a coordinated effort by PREI and TCC to defraud retirement investors through misleading transactions and fraudulent financial practices. This matter warrants urgent federal investigation to protect investor rights and uphold financial integrity.