The Veterans Affairs Department was not aware that Prudential Insurance encouraged its counselors to keep casualty pay-out monies in-house as a way to boost company profits, or that its agents were schooled to try to change the minds of surviving family members who sought a traditional lump-sum payment.

Prudential's practices came to light last week with the court-ordered release of internal company documents to the Veterans of Foreign Wars, which joined in a class-action lawsuit against Prudential in 2010. Prudential is under contract to handle Sevicemember Group Life Insurance and Veterans Group Life Insurance policies.

Among the documents was one detailing a plan to increase company profitability by retaining control of money that would normally be awarded to survivors in a lump sum. Another revealed the company trained personnel on how to deal with survivors who insisted on a lump-sum payout rather than leaving the money with Prudential in "Alliance Accounts" that provided the beneficiary with a fraction of the interest that Prudential would gain from it.

VFW National Commander John A. Biedrzycki Jr. last week called for an independent investigation of the VA and the Alliance Accounts, saying the department turned a blind eye to Prudential's profiteering off beneficiaries.

"The documents speak for themselves, and they show that Prudential initiated this program for the money that could be gained, not to help grieving military families -- and the VA knew all about it," he said at the time. "For an insurance company to profit off the dead is sickening, but for our own government to turn a blind eye to profiteering is something entirely else."

On Monday, VA spokesman James Hutton told Military.com that VA knew nothing of Prudential's financial strategy related to the accounts.

"VA does not know how Prudential trained its employees to communicate with beneficiaries about the advantages of retained asset accounts prior to 2010 or whether the company believed that such accounts would improve its earnings," Hutton said in a statement.

Bloomberg Business, which reported on the accounts in 2008, said Prudential was paying 1 percent interest on the Alliance Accounts while earning nearly 5 percent on its corporate funds.

Hutton said that following the Bloomberg and other media reports on the Alliance Accounts the VA mandated administrative changes to "ensure that VA beneficiaries receive clear and complete information regarding their life insurance benefits."

Additionally, he said, VA ordered claim forms modified to require that beneficiaries be able to choose among four clearly defined payment options and updated SGLI and VGLI information online and in handbooks, including a better explanation of the Alliance Accounts and other disbursement payment options.

The department also began requiring Prudential to contact all beneficiaries whose Alliance Accounts were still open after six months to make sure they understood the terms of the arrangement and that there were other payout options available, he said.

The VA also ordered Prudential to remove the SGLI seal from all checks, forms and correspondence from Prudential and replace it with language making clear they were from Prudential's "Office of Servicemembers' Group Life Insurance."

VA also mandated that Prudential use VA-drafted letters explaining life insurance payment options.

Negative publicity over the accounts prompted a class action lawsuit in 2010 that Prudential settled in 2014 for $39 million -- with each eligible member of the suit receiving a payment of $125, according to the VA.

Prudential also agreed as part of the deal to donate $20 million over a period of five years to not-for-profit groups and charities devoted to veterans, VA said.

-- Bryant Jordan can be reached at bryant.jordan@military.com