Prudential agrees to settle with SEC
Prudential Financial yesterday agreed to settle allegations from the SEC that it used reinsurance contracts to overstate its income by more than $200 million.
Prudential Financial Inc. yesterday agreed to settle allegations from the SEC that it used reinsurance contracts to overstate its income by more than $200 million.
In U.S. District Court in Newark, N.J., the Securities and Exchange Commission alleged that from December 1997 to December 2002, Prudential’s former property-casualty subsidiaries, known as Prupac, based in Holmdel, N.J., entered into a series of reinsurance contracts with Stamford, Conn.-based General Re Corp., a subsidiary of Omaha, Neb.-based Berkshire Hathaway Inc.
These contracts had no economic substance and served only to build up and draw down on an off-balance-sheet asset that Gen Re held for Prupac, the SEC said. Between 1997 and 1999, Prupac built up this asset, then drew down on it between 2000 and 2002, improperly recording the payments as income.
In 2001, when Prudential of Newark went public, those inaccurate financial statements became part of its annual, quarterly and current filings with the SEC, the regulator alleged.
The insurer did not admit or deny the SEC’s accusations. However, it did consent to a permanent injunction and did not pay any fines.
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