A Texas law firm is investigating Citigroup and other banks for taking out secret life insurance policies on current and former employees, and collecting the benefits when they die.
HOUSTON, Jan 13, 2009 (BUSINESS WIRE)-- Attorneys from Houston's The Clearman Law Firm ( www.clearmanlaw.com ) are announcing a nationwide investigation of banks that have purchased secret life insurance policies in order to collect benefits when current and former employees die.
Many of the world's largest banks have purchased "bank-owned life insurance" or "BOLI" for years, including Bank of America, JP Morgan Chase, Bear Stearns, Citigroup, Wachovia, Washington Mutual, Wells Fargo and many others.
"We are investigating banks that insure the lives of employees without their knowledge or consent, " says class-action attorney Scott Clearman of The Clearman Law Firm. "These types of policies benefit only the banks, not their employees."
In a BOLI program, a bank designates itself as the beneficiary of life insurance policies covering its employees. Nearly half of all U.S. banks have reported owning BOLI policies at an estimated value of $120 billion.
A bank purchasing a BOLI policy must provide the insurer with personal information belonging to each covered employee, including his or her name, sex, age and Social Security number. Employees' Social Security numbers are then used to conduct "death sweeps" where banks typically hire outside brokers to sweep public records in order to learn if an employee or former employee has died.
A person whose life a bank insured without consent may have a right to sue for the bank's misappropriation of their identity (name, sex, age and Social Security number). Employees may be able to recover profits made by the bank, broker and insurer.
"It is ironic that thousands of bank employees have been laid off, and yet the banks still stand to benefit financially when those employees die, " says Mr. Clearman.
Since the early 1990s, Mr. Clearman has been a pioneer in class-action lawsuits against employers for wrongfully insuring employees' lives for the employers' benefit. Following several individual lawsuits for the families of deceased employees, Mr. Clearman pursued landmark class-action claims against Wal-Mart and Fina that resulted in major settlements for his clients.