Banks that used to distribute SGLI funds are apparently engaging in a shameless scam that uses SGLI money entitled to Gold Star families to make profits for themselves.
The scam works like this: instead of sending the family the money, the banks that used to distribute the funds (in the case of SGLI, Prudential and Metlife) send the family a "checkbook" and a notice that for the convenience of the family the money has been placed in an interest bearing account from which the "checkbook" will draw funds.
Only the "interest bearing account" is not an FDIC insured checking account, as was recently discovered by Cindy Lohman after her son was killed in Afghanistan:
As time went on, she says, she tried to use one of the "checks" to buy a bed, and the salesman rejected it. That happened again this year, she says, when she went to a Target store to purchase a camera on Armed Forces Day, May 15.
Lohman, a public health nurse who helps special-needs children, says she had always believed that her son's life insurance funds were in a bank insured by the FDIC. That money -- like $28 billion in 1 million death-benefit accounts managed by insurers -- wasn't actually sitting in a bank.
It was being held in Prudential's general corporate account, earning investment income for the insurer. Prudential paid survivors like Lohman 1 percent interest in 2008 on their Alliance Accounts, while it earned a 4.8 percent return on its corporate funds, according to regulatory filings.
That's right. Banks are making life insurance funds less accessible to the families of deceased service members in order to earn interests on the deaths of America's heroes.
Iraq Veteran, Paratrooper and VoteVetsPAC endorsed Congressman Patrick Murphy (D-PA), as well as my favorite Republican, Walter Jones (R-NC) (seriously, Jones is pretty awesome) are working to end the practice, as well as calling for hearings into the scam.
The U.S. Department of Veterans Affairs is investigating the situation, as is Congressman Patrick Murphy, who expressed his "outrage" over the "immoral" practice in a press release Thursday after reading the Bloomberg story.
Murphy, who said the companies are "secretly profiting off the death of U.S. troops," has written a letter to the head of Prudential Financial Inc., demanding that it end the practice immediately. The 8th District Democrat also wants the company to disclose the exact amount of profit it made off troops' death benefits, and return the money to the families.
"I am outraged to learn that life insurance companies are ripping off parents and spouses of troops who sacrificed their lives in Iraq and Afghanistan, making millions off benefits that should be going directly to the families," he stated.
These "Alliance Accounts" and accompanying vouchers have been a source of confusion and consternation to the families of deceased servicemembers. These families deserve receipt of life insurance benefits in a clear, transparent manner. I think this issue merits investigation and review by your Committee. On behalf of America's brave servicemenbers and their families, I respectfully urge you to schedule a hearing on this matter as soon as possible. Thank you for your consideration.
In support of Jones, Murphy and most importantly our Gold Star families who have lost their loved ones, VoteVets.org has started a petition calling for hearings into the scam. You can sign that petition here. Please sign our petition and forward it to as many friends as possible so that we can let Congress know that letting banks profit off the death of our troops is unacceptable.
UPDATED: The story of banks investing SGLI benefits for their own profit was originally reported by Bloomberg News.