Class-Action Lawsuit Alleges Deceit and Fraud at Globe Life Inc.
The financial world was rocked last month when an investment research firm dropped a bombshell report on Globe Life Inc., causing shares to plummet by 53%. The report alleged that officers at the insurance company had been concealing fraud and sexual harassment issues. Globe Life vehemently denied these allegations, but the City of Miami’s employees’ retirement trust has now filed a class-action lawsuit against the company, claiming new charges of deceit that artificially inflated the stock value for over five years.
The lawsuit, representing thousands of shareholders in Globe Life, points to a report by Fuzzy Panda Research that accused the company of widespread fraud and a culture that turned a blind eye to harassment and drug use. Fuzzy Panda, which recommended short-selling Globe stock, claimed that a Globe Life subsidiary had issued policies for deceased or fictitious individuals and added policies to accounts without policyholder consent.
The Miami retirement fund, which had invested in Globe Life stock from 2019 until the report was released, suffered significant losses as a result. The lawsuit, filed in federal court in the Eastern District of Texas, alleges that Globe Life officers failed to disclose internal issues that would have impacted the stock price.
Globe Life Inc., based in McKinney, Texas, owns five subsidiaries that sell life, accident, and Medicare supplement products. The lawsuit accuses the company of making false and misleading statements that artificially inflated the stock price. The company has yet to respond to the complaint, and media and investor relations representatives could not be reached for comment.
After the Fuzzy Panda report was released, Globe Life issued a statement refuting the claims and stating that the analysis was based on unsubstantiated claims and conjecture. The stock price did recover slightly after the statement, but it had already dropped significantly from $105 to under $50. As of late Thursday, the stock was trading at around $79 per share.
The class-action lawsuit raises questions about the statutory safe-harbor provisions that protect companies from misstatements by officers. The suit argues that these provisions do not apply to the allegedly false statements made by Globe Life officers. The lawsuit names current and former officers of the company, including co-CEO Frank Svoboda.
The complaint also sheds light on how Globe Life insurance agents are compensated, revealing a change in the company’s bonus structure in recent years. Agents now receive front-loaded sales commission bonuses, with bonuses paid out in the next paycheck instead of at the end of the year. The company also implemented a claw-back policy, requiring agents to repay bonuses on policies that were cancelled within a certain timeframe.
The lawsuit does not specify the damages sought, but it provides valuable insights into the inner workings of Globe Life and raises important questions about transparency and accountability in the insurance industry. Investors will be closely watching as this legal battle unfolds and the implications it may have for other publicly traded insurance companies.