The complaint came from Bob DeFillippo, chief communication officer for Prudential Financial, Inc., who fired it off the day that The Audit’s Ryan Chittum gave a thumbs up to Bloomberg’s David Evans in an Audit Notes.
Chittum’s assessment of “good work” was for Evans’ reporting on a life insurance industry practice of retaining lump-sum death benefits, sending beneficiaries “drafts” with which to withdraw the money and, in the meantime, investing the benefits and paying beneficiaries a portion of the earnings. The Bloomberg stories said this was a problem because Prudential and other insurers didn’t disclose clearly that the accounts were not federally insured and made it needlessly difficult for bereaved families to obtain the lump sums that 95 percent of them had requested. Meanwhile, the wire said, the insurer invested the money well for itself, but paid relatively low interest to beneficiaries.
“Hard-hitting investigative journalism is something that deserves our praise and support,” DeFillippo wrote. “Unfortunately, that isn’t what the public is getting from Bloomberg’s David Evans and his reports on the Servicemembers Group Life Insurance Program, which is administered by Prudential Financial. Your praise for Evans and Bloomberg is misplaced.”
The Audit’s chief, Dean Starkman, asked me to take a look in my role as the Arbiter. After all, it’s consistent with the goal of improving financial journalism to take complaints seriously. And anyone who’s been in this business for awhile knows that journalists are capable of making mistakes. Somewhere in my files I have a copy of a Washington Post correction of a recipe that said to boil baby spinach but left out the word “spinach.”
DeFillippo’s charges were pretty tough, and I understand why he is upset. Bloomberg’s reporting stirred up a hornets’ nest of regulatory inquiries, criticism and litigation with Prudential and Met Life at the center of it. And I think he has some points. Sometimes the language in the Bloomberg stories is a little over the top, although, when it is, it is usually in a quote. I also think DeFillippo has a point that Bloomberg should have mentioned every time it pointed out the accounts are not insured by the Federal Depository Insurance Corp. that the industry argues that the accounts are protected by state insurance guaranty funds.
But having said that, overall, I think Bloomberg’s stories—a series with three installments and related articles in Bloomberg Markets magazine, plus many day stories on the wire, which ran between July 28 and Sept. 30—are good, solid journalism that clarify a policy that was poorly understood, even by regulators. (Links to PDFs of key stories are here and here.) The wire also showed that the policy, while a moneymaker for insurers, could be disadvantageous to the families to whom benefits were owed. One mark of the value of Bloomberg’s reporting: it got results. Regulators issued consumer alerts, attorneys general announced investigations and the U.S. Veterans Affairs Department, which hired Prudential to administer the program, altered its practices in response to the series. The stories also do an excellent job of raising the issue of the industry’s lack of federal regulation.
First a word about process. After I read DeFillippo’s complaint and talked to him, I called David Evans, the main reporter on the series, and spoke briefly with him and Jonathan Neumann, who edited the principal articles. Evans and Neumann initially declined to comment, citing Bloomberg policy, though they did send eight stories Bloomberg had done on the issue, two of which I already had from DeFillippo. They also sent a point-by-point rebuttal to DeFillippo’s consisting of paragraphs from the stories. I read that only after I had read the stories myself and made my own initial conclusions.
Now, let me slip on my Arbiter robe and go through DeFillippo’s complaint:
The articles have been inaccurate and irresponsible because they fail to point out that beneficiaries have always been able to get all of their money when they want it by using our Alliance Account. Prudential does not withhold a penny of the money that belongs to beneficiaries. In fact, we pay interest. This information is clearly explained in the first letter sent to beneficiaries. Bloomberg has knowingly withheld these facts (emphasis added) and, as a result, has done the beneficiaries of our fallen servicemembers a great disservice.
The first story appeared on the Bloomberg wire July 28, 2010, under the headline: “Fallen Soldiers’ Families Denied Cash as Insurers Profit.” (Indeed, I think the headline was too strong, as I’ll explain below.)