Secretary of the Commonwealth of Massachusetts William F. Galvin on Monday charged MetLife Inc. with fraud connected to the insurer's revelation that it has not paid about 13,500 participants in its group annuity population over the past 25 years due to insufficient administrative practices.
Mr. Galvin's office in a news release said the complaint alleges that MetLife's public filings contained material misstatements about company finances, because reserves set aside for missing participants were released and "became assets which inflated MetLife's bottom line."
"MetLife has an obligation to provide truthful statements in its public filings. They did not," Mr. Galvin said in the news release. "Shareholders and investors were denied the ability to rely on MetLife's public statements. My action today is based on the misleading statements as to MetLife's financial condition."
In January, MetLife said it had uncovered a "material weakness" in financial reporting and reached out to regulators about its lapses after determining that it didn't have enough money set aside to pay some annuity and pension customers.
In a Feb. 8-K filing with the Securities and Exchange Commission, MetLife said about 25 years ago, "companies that are or have been MetLife Inc. subsidiaries established a practice of releasing the full insurance liability after two attempts at contacting these annuitants, based on the presumption that these annuitants would never respond and had not become entitled to benefits based on certain contractual provisions." The company said about 13,500 participants had been affected over the past 25 years.
MetLife said the reserves set aside for those participants were released. Now, the company has added $510 million back to those annuity reserves.
In a statement emailed by MetLife spokeswoman Kim Friedman, the company said, "We self-identified and self-reported this issue to our regulator and to the public. We have taken aggressive steps to locate unresponsive annuitants who are due funds and already have or will commence payment, including interest, once the necessary paperwork is complete."