“We’re adding a little something to this month’s sales contest. As you all know, first prize is a Cadillac Eldorado,” thunders Blake, played by Alec Baldwin in the David Mamet movie “Glengarry Glen Ross.” “Second prize is a set of steak knives. Third prize is you’re fired. You get the picture?” Constant pressure to meet goals is nothing new in sales, and it can breed desperation. We saw it at Wells Fargo, where line-level staff resorted to issuing fake accounts without customer authorization or consent. And sales personnel at supplemental insurance company Aflac, according to documents filed in federal court cases, signed people up to policies without their knowledge, illegally bundled policies, falsified applications and records, and transferred commissions away from agents who wrote legitimate business. These allegations come from an exhibit in a derivative shareholder lawsuit filed by three former Aflac sales agents in federal court in New York, which the plaintiffs say represent material information that should have been disclosed to investors. Allegations of harms to workers also show up in a draft class-action complaint filed as part of two other federal lawsuits between Aflac and nine former sales agents. The plaintiffs claim that commission transfers prevented sales associates from meeting the lofty financial rewards promised them by Aflac recruiters. Along with the named plaintiffs, The Intercept interviewed 18 current and former Aflac workers from 13 different states, along with a former employee at Aflac headquarters in Columbus, Georgia, all of whom requested anonymity for fear of reprisal from Aflac. Dozens of other agents communicated with The Intercept via email. These individuals described similar practices enumerated in the allegations. The practices were often directed by state, regional, and district managers to make quotas and win internal sales contests, according to lawsuit allegations and interviews with current and former staff. They led to sales associates losing commissions on business they sold, as well as customers paying for insurance they didn’t want. The manipulations may also have impacted key sales metrics watched by financial analysts evaluating the company, according to allegations The Intercept reported on earlier this month. “It happened in every state I was in,” said one agent who worked in sales and managerial positions with Aflac for over a decade in three states in the South and Midwest. “It was extremely discouraging to hear about continual contest manipulation, forging signatures, doing anything to hit contest goal numbers.” Because the bulk of the conduct was performed by independent contractors, it’s difficult to establish Aflac’s culpability — another advantage of maintaining a sales staff not legally considered employees. But in 2012, Aflac paid a $1.6 million penalty to three states – Missouri, Minnesota, and Idaho – over a variety of market conduct issues involving underwriting and marketing, including areas like “overselling/suitability” and “producer bonuses, incentives, contests, prizes, and awards” which mirror some of the allegations. At the same time, Missouri fined three Aflac insurance agents for “falsifying information on consumers’ insurance applications and creating bogus policies,” which bear additional similarities. “It’s the same stuff we allege and more,” said Dimitry Joffe, co-counsel for the plaintiffs. “They are on the record saying our allegations are false, yet here is the 2012 document with their signature on it.” After the 2012 settlement, Aflac, which neither admitted nor denied guilt, had to submit compliance reports to regulators for three years. The plaintiffs claim that sales practices like gaming contests and writing false policies never stopped. “Upon information and belief, Aflac is not in compliance with the 2012 RSA,” the plaintiffs claim in their amended shareholder derivative complaint, filed on Wednesday, referring to the regulatory settlement agreement. “Further upon information and belief, the three state parties to the RSA have opened another market examination of Aflac in 2017, which is ongoing.” The Intercept asked Aflac for the reports but did not receive them. The Intercept also asked the three states whether the regulatory investigation had been reopened, as alleged by the plaintiffs. Missouri’s Department of Insurance would not confirm or deny whether it had; Idaho and Minnesota declined to comment.

The headquarters of Aflac Inc. stands in Columbus, Ga., on Wednesday, Jan. 28, 2009. Photo: Chris Rank/Bloomberg/Getty Images



Aflac’s field force of roughly 75,000 sales agents, virtually all of whom are independent contractors, sell supplemental policies, which sit on top of traditional health insurance. But while sales associates get the largest commission share from writing a policy, district sales coordinators, regional sales coordinators, and market directors – the next three positions up in the hierarchy – all take a piece. Even other Aflac personnel, like the state trainer and “broker development coordinator,” get a cut. As in most sales professions, district and regional coordinators must hit a sales quota. Also labeled independent contractors, they can get additional bonuses for winning a contest called FAME, which stands for the Founders Award for Management Excellence. Hitting three key metrics earns district and regional coordinators a FAME victory. Contest winners get trips to locations like Las Vegas, Cabo san Lucas, and the Dominican Republic. Sales associates can win contests as well, from trips to cash prizes or luxury goods like suits or watches. With the carrots came sticks. Failure to reach quotas or make FAME can get a district or regional coordinator demoted, former and current sales agents explained. To do well in the contest, however, agents can sell policies that quickly lapse. For instance, according to interviews with numerous sales personnel and the former employee, associates can buy policies for themselves and their families, let them lapse, and keep the contest credit. That credit goes toward district and regional coordinators’ bonuses and FAME awards as well. “It was all about playing the FAME game,” said a former regional coordinator with 15 years of experience with Aflac. There’s supposed to be a fail-safe in the form of the “no-pay” rule, which stipulates that associates with a certain number of policies that miss the first payment – because the insured change their minds or fail to pay the premium – get disqualified from contests. Plus the commission, which is advanced to the agent, must be paid back to Aflac. This is all explained in a document on the Aflac website. However, as long as the first payment gets made, the no-pay rule is not effective. “A policy calculating as not paid will change to paid when the full modal premium is applied to the policy,” the document explains; “modal premium” refers to the installment payment. So associates writing policies on themselves or families could pay the first premium and then cancel the policy, to earn contest credit. “That happened everywhere,” said one former associate. Because FAME metrics include success by new associates, managers have an incentive to spread business around, transferring it away from the sales agent who wrote it. Aflac coordinators at the regional level and above can set up “sit codes” to cut anyone authorized to sell Aflac policies in on a sale. “The widespread use of ‘sit codes’ by the regional sales coordinators and market directors to split the commission credits and reassign them at will without the associates’ knowledge and consent have resulted in our clients and similarly situated associates being cheated out of commission they would have otherwise been entitled to,” according to the December 10, 2016 Dispute Notice sent to Aflac top management, and included as an exhibit in the derivative suit. The notice cites one associate, Debbie Cort, who should have received around 35-40 percent commissions on her accounts; after splitting the business, her average commission was closer to 5 percent. Former and current sales agents in 13 states discussed these practices with The Intercept, complaining of having to put a sale in the name of people they never met, or finding out after submitting the business that a new agent got credit for it. “They actually wrote a lot of premium into my name when I got my contract so a [district sales coordinator] could make quota,” said one sales associate in the Midwest. “I got commission, but I wasn’t there for the enrollment, nor did I have anything to do with the business.” Another sales agent forwarded an email to The Intercept, which shows a regional coordinator offering managers a $250 bonus for attaching a new recruit to any last-minute accounts so he could get a “fast start,” one requirement for FAME.



A former Aflac employee told of transmittal sheets, which list who gets credit for policies, with 30 different names on it, all with 0 percent commission but some portion of production credit. They were listed simply for the contests. Several representatives told of a regular practice where state or regional managers would get their wives a writing number for Aflac and transfer business to them through sit codes, so the spouses could qualify for trips and contests. “People who don’t even know the name of accounts, where they are located, what they do for business, what the Aflac products are or do, are being paid commissions as associates,” said Martin Conroy, lead plaintiff in the federal lawsuits. A search of the public database of state insurance licensees in New York finds several agents with Aflac licenses with the same last name and same home address. They did not respond to a request for an explanation, but the arrangements are consistent with a pattern described by the plaintiffs to funnel production credit to the spouses of sales managers. Use of sit codes also fed recruiting, because new associate production factored into the bonus, and new recruits with warm networks represented new accounts that could become another source of commission splits. Manipulation of sit codes was part of the 2017 derivative shareholder suit filed against Aflac. As of 2018, district coordinator bonuses no longer include new associate production, though milestones new associates need to hit are still part of the equation. Former district managers described how sales associates became inured to losing their own business. “One girl said to me, I have $10,000 [in production], where do you want me to put it?” said one former district sales coordinator. “I said, who wrote the business? She said she did, but her last manager told them to hold the business so they could move it around to get FAME.” If Aflac sales personnel were merely gaming the system to win contests, the only people harmed would be agents who lost commissions in the exchange. But the constant pressure to perform also could harm customers, say the former sales associate plaintiffs. For example, the December 2016 Dispute Notice, attached to an active derivative shareholders lawsuit, refers to associates selling a “mommy package,” which tied a stand-alone maternity policy with a policy covering hospital visits. It quotes a communication from a regional coordinator about how to market these packages in schools and “maximize your opportunity” to sell policies. But New York insurance law, for example, states that policies sold separately cannot be marketed as a bundle; that would comprise an unlawful inducement. Louis Varela, a former sales associate from New York City and one of the plaintiffs in the federal lawsuits, heard about the mommy packages when he was sent to the Chappaqua, New York school district in fall 2015 to talk to teachers during their open enrollment period. This is typically an opportunity for Aflac associates to write additional business, or update information on policies. Teachers complained to Varela that they were paying for bundled packages they didn’t want. “Associates were telling teachers they had to buy the mommy package,” Varela said. After informing the teachers that they didn’t need to buy the whole bundle, Varela cancelled several of these policies, but got chewed out by his district coordinator. “I said the teachers don’t want the policies,” he explained. “He said, don’t cancel them.”