Your Economy (No Politics)

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Aflac could be the next Wells Fargo

Is it possible that everything that is wrong about the way the American economy is structured could exist within a single company? Aflac suggests the answer may be yes.

BEHIND THE DUCK: FORMER AFLAC EMPLOYEES ALLEGE FRAUD AND ABUSE IN NEARLY EVERY ASPECT OF COMPANY

THE INSURANCE FIRM Aflac has exploited workers, manipulated its accounting, and deceived shareholders and customers, according to nine former employees. This article is based on interviews with multiple current and former employees, as well as three previously unreported lawsuits.

The allegations contained in the lawsuits involve nearly every aspect of Aflac’s business and have already led to a series of investigations by state and federal regulators. But though Aflac’s top management and board of directors have known about the claims for over a year, they have not disclosed anything to shareholders in public filings with the Securities and Exchange Commission beyond generalities about unnamed pending lawsuits that they say they expect will not hurt the company’s bottom line.

The revelations could damage the public image of the Columbus, Georgia-based insurer, a Fortune 500 stalwart that boasts about being named one of the world’s most ethical companies for 11 consecutive years and one of the best companies to work for in America. But behind Aflac’s facade, according to the former employees, lurks a company that fails to live up to promises made in employee recruitment. Indeed, one of the ways Aflac exploits workers is by calling them “independent contractors” when they are really employees. For the purposes of this article, we will refer to these workers as employees.

“What they’re doing is unfair,” said Louis Varela, who spent three years as a sales associate for Aflac in New York City. The allegations pull together virtually every major corporate scandal of the past two decades into the behavior of a single company, drawing on the various misdeeds of for-profit colleges, Herbalife, Uber, Wells Fargo, Enron, Trump University, and more.

The allegations in the lawsuits include:

Recruiting thousands of employees with promises of six-figure incomes in the first year, which ultimately less than 2 percent of new hires manage to earn

Encouraging employees to sell policies to friends and relatives and recruit them into the company, akin to a multi-level marketing scheme

Widespread misclassification of employees as independent contractors, despite Aflac controlling virtually every aspect of the work experience

Much like at Wells Fargo, employees under pressure to meet sales goals selling policies without customer authorization or consent, illegally “bundling” policies, and issuing others to ineligible customers
Wage theft, where commissions rightfully owed to associates are transferred to managers

At least one charge of sexual harassment

Massaging of key operational metrics to prove company growth to investors
Earnings statement manipulation, by moving sales earned in certain weeks into different quarters to hit numbers

Retaliation against whistleblowers

Employees initially presented the allegations to management through official company channels in December 2016, at which point Aflac management categorically denied them. However, the company thereafter made several changes to its recruiting materials, compensation plan, and operational metrics, suggesting at least some validity to the claims — or a striking coincidence.

Aflac spokesman Jon Sullivan responded to a detailed list of questions by saying the company “will not comment on pending litigation.” After publication, the company released a statement saying that it had investigated the charges and plans to fight them. “Recent media stories regarding Aflac contain false allegations made by a very small group of independent contractors. Aflac intends to aggressively fight these allegations beginning with filing for their dismissal,” the statement read. “The Company has investigated these claims and found them to be without merit.”

Aflac President Paul Amos II, the grandson of the founder, abruptly resigned in June to join a boutique private equity firm, receiving a $3.4 million golden parachute. Four days after the announcement, Amos sold off 222,889 shares of stock, nearly half his total holdings, for $17 million. Other Aflac executives have sold large blocs of shares recently; according to Ben Silverman, director of research at InsiderScore, his organization reports only 3,000 shares purchased by insiders in the 2017 calendar year, and 363,512 shares sold.

Amos’s sale triggered a derivative shareholder lawsuit in federal court in New York brought by the ex-employees, who happened to be shareholders because of small distributions of Aflac stock as part of their compensation. The case accuses Amos and others of insider trading while holding material, non-public information: the allegations of fraud at Aflac.

In November, the ex-employees showed Aflac a 93-page draft of a class-action suit against the company, in an attempt to settle the dispute out of court. But Aflac immediately filed for a temporary restraining order in two jurisdictions – Georgia and New York – to block the plaintiffs from filing the class-action, citing the forced arbitration clause in all employee contracts. A court in the Georgia case last week ruled that Aflac could compel arbitration and stop the lawsuit from being filed. However, Aflac put the draft complaint into evidence in the Georgia case without requesting that it be placed under seal. So Aflac’s attempt to push the suit into arbitration ended up exposing it.

This is the first installment of a series analyzing the employees’ claims. We’ll start by looking at how Aflac treats its workers, which took on heightened political importance when Aflac joined in the chorus of major companies offering workers bonuses and promising domestic investments after the passage of the GOP tax plan.
https://theintercept.com/2018/01/11/aflac-fraud-lawsuit-sales-associates/?link_id=0&can_id=ba13e7838fd3c6b025e3cc98ffe351c2&source=email-aflac-could-be-the-next-wells-fargo&email_referrer=email_285214&email_subject=aflac-could-be-the-next-wells-fargo