Financial Crimes and Compliance…

crimes and complianceFinancial Crimes and Compliance…

Back in 2014, financial journalist Jack Willoughby authored an article for Barron’s entitled “Principal Deserves More Interest.”   The focus of the story was centered around the alleged fact that Principal had weathered the financial crisis of 2008 quite well, and was “mostly unaffected by the credit freeze.”   Then Chairman, president, and CEO Larry Zimpleman was quoted as stating “The financial crisis showed the cost of being held hostage to one economy,”

Zimpleman should know a lot about being held hostage, since during the 2008 financial crisis, he was a hostage-taker for hundreds of thousands of  his own clients.  He was the Chief Executive Officer at Principal Financial Group, Inc. in 2008 when his company froze the Principal U.S Property Separate Account (PUSPSA).  While holding 401k investors hostage, Principal stole over $3.5 billion from the account in 14 months.  The fact that Principal weathered the 2008 financial crisis “quite well” was due in large part to the fact they stole investors retirement savings to shore up the company’s financial strength, purchasing troubled assets and paying off defaulted loans stressed by their own borrowers so they would not have to foreclose on their own co-investors.

crimes and compliance
Mark Hanrahan, Managing Director for Principal Real Estate Investors

Zimpleman was adept at finding the right individuals for the task of defrauding thousands of investors.  One such individual was Mark Hanrahan.  Hanrahan was a Managing Director for Principal Real Estate Investors, responsible in part for the PUSPSA account, and for the purchase and sale of billions of dollars in real estate during the financial crisis.  Hanrahan, a crack cocaine user, was later arrested in Des Moines, Iowa, the corporate headquarters for Principal Financial Group of Companies.  His crime… kidnapping a young man at gun point, demanding that he find Hanrahan drugs.  When he was finally arrested, hours later, with the hostage still in his truck along with the handgun used to abduct the victim at gunpoint, Hanrahan was charged with a lesser crime and released… no doubt his position of authority with Principal played a major role in that decision as well.

crimes and complianceThe Barron’s article also addresses the fact that Principal “now owns one of Chile’s largest pension plans…,”   a fact that most Chilean’s regret.  Since Principal’s take-over of the Chilean pension plan, there have been protests by the Chilean workers, and Chile’s pension regulator is now reviewing the purchases for a possible tax evasion crime.  Once the world’s poster child for pension plans, Principal has relegated the Chilean pension plan to  a mediocre status.

These are facts supported by news articles and respected journalists… not rants by a disgruntled investor.  They are cognizable claims, and meet the basic criteria of viability for being tried by our court system.  Yet, our federal government has failed to act judicially to represent the public’s best interest in making Zimpleman accountable for his misdeeds.

The U.S. Department of Justice employs thousands of workers to investigate suspected crimes.  And yet, when a corporate crime is committed, they call on independent resources to complete an investigation.  The reason for this rests in the nature of corporate crimes.  Identifying the wrongdoer is difficult and time-consuming.  It often requires the cooperation of the wrong-doer themselves to admit to the crime, which seldom happens.  By forcing the company to clean it’s own house of cards, the DOJ can show leniency for the company willing to give up the wrongdoer and admit to the crime.  Often the board members are anxious to cooperate to exonerate themselves from criminal and civil liability.

Principal’s crimes appear to be long term and likely involved not only high ranking executives but lesser individuals willing to comply.  It may have included board members, former regulators, and data processing individuals who helped conceal missing funds and alter reports to the Department of Labor.  It appears one board member may have even contributed a corporate IP address to move ill gotten funds to a complicit banking resource.

The bottom line in this financial fiasco is that there are corporate executives willing to reach to new depths to steal investor’s retirement savings, and

crimes and complliance

our elected officials must be more pro-active in bringing these facts to the surface.  One major deterrent to the success of doing so is the fact that many of these same elected officials are receiving kick-backs from the criminal wrongdoers in the form of lobbyist dollars.  It is difficult to throw a corporate criminal in prison when you are receiving monthly checks from that same individual.

 

In Zimpleman’s case, his own son was employed by the U.S. Justice Department out of college, hired by then AG Eric Holder as a civil lawyer.  The younger Zimpleman’s first case…. defending Hillary Clinton in a civil action brought by an embassy employee while Clinton was the Secretary of State!

Only when these financial crimes are punished and the missing funds returned to investors, will the 401k retirement industry begin to act in the best interest of its clients…. with or without a Conflict of Interest Ruling.

 

 

 

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Author: Dennis Myhre

Mr. Myhre can be contacted at..... dmyhre@fiduciaryfactor.com