More details are emerging concerning allegations of fraud and worker exploitation at Aflac reportedearlier this week.

Aflac is responding even more strongly thatclaims spelled out in a derivative shareholder lawsuit against thecompany, its former president and some of its directors areunfounded and the Columbus, Georgia-based carrier intends to file amotion to dismiss the case.

“Recent media stories regarding Aflac contain false allegationsmade by a very small group of current and former independentcontractors," Aflac spokesman Jon Sullivan said in an emailstatement to BenefitsPro. "Aflac is renowned for the company’scommitment to transparency. We communicate with all of our keystakeholders frequently on matters that are relevant to them.

“A special independent committee of Aflac’s board of directorswas formed and they retained independent counselto investigate claims contained in these stories," hecontinued. "The independent special committee (SLC) found theclaims that it has investigated to be without merit. Aflacvoluntarily released the report of the SLC and independent outsidecounsel, by posting it on our investor relations website andfiling an 8-K with the SEC. We plan to file amotion to dismiss these claims."

The latest statements were prompted by an article in The Intercept – the second in a series -- detailing the claimslisted in a lawsuit filed by three former employees acting as Aflacshareholders due to small distributions of Aflac stock received aspart of their compensation. (The allegations are separate from theclass-action suit filed by these employees as well as six otherformer employees, claiming pervasive fraud andother misconduct.)

The derivative shareholder lawsuit, filed in December in thefederal court for the Southern District of New York, accuses formerAflac president Paul Amos II and other board members of insidertrading while knowing of the “pervasive fraud” committed at thecompany, but failing to investigate those allegations properly,concealing them from the public, and letting the fraudcontinue.

The lawsuit, provided by the plaintiffs’ attorney, DimitryJoffe, alleges that when Amos last June “suddenly resigned”from his position as president -- one month after being re-electedto the board -- and sold $17 million worth of Aflac stock, “theboard stood by silent,” even after the employees named in thelawsuit demanded the directors take action against the insidertrading and other misconduct.

Moreover, the other directors named in the lawsuit eitherdirectly participated in, had direct knowledge of, or knowinglyfailed to prevent or remedy that fraud; issued or caused to beissued materially false and misleading statements in the company’s2017 proxy statement and in its annual report and the year inreview report for 2016; engaged in insider trading while inpossession of material nonpublic company information; andauthorized a 56 million share repurchase in July and August 2017,artificially boosting the company’s stock price and increasing thevalue of the defendants’ Aflac securities.

A year before the employees filed the lawsuit, they sent adispute notice to Amos and his father, Aflac’s CEO and ChairmanDaniel Amos, as well as the company’s general counsel Audrey BooneTillman, detailing the alleged fraud and other misconduct.

Among numerous other wrongdoings, the dispute notice allegedAflac’s manipulation of one of its “key operational metrics” – thenumber of average weekly or monthly producers, i.e., salesassociates actively selling Aflac insurance during the reportingperiod – that Aflac had represented to the market as an importantindicator of the company’s growth and earnings potential.

“These numbers are inherently inflated due to the large-scalefraudulent recruiting and the resulting extremely high attritionrate within the first year,” the lawsuit states. “Moreover, thesenumbers are further inflated because they include the newlyrecruited associates as ‘producers’ even though many of them do notproduce anything during their short stay at the company. In orderto count them as ‘producers,’ at the end of a reporting periodAflac falsely assigns a minimal amount of production – as low as $1– to the non-producing associates in order to count them towardsthe ‘average producer’ metric by taking that production amount fromother, producing associates.”

The lawsuit alleges that Aflac would manipulate its bonus andcompensation structure to incentivize its coordinators to pad thosenumbers.

Paul Amos was also aware of another fraudulent practiceoccurring at Aflac: the conversion of pre-existing individualpolicies into nearly identical new group policies, according to thelawsuit.

“The only plausible explanation for this individual-to-groupconversion is to allow Aflac to report the $100,000 as its ‘newannualized premium sales,’ which is the key indicator of thecompany’s growth rates and earning prospects, without disclosingthat Aflac’s ‘new’ premium is in fact the result of cannibalizingAflac’ own pre-existing business,” the lawsuit states.

Another alleged fraud is the company’s issuance of policies topolicyholders without their knowledge, authorization or consent –much like Wells Fargo’s ‘cross-selling’ fraud.

On Dec. 14, 2016, Aflac responded to the dispute notice throughits in-house counsel Catherine Coppedge, stating that “we takethese allegations seriously and will be looking into themthoroughly,” according to the lawsuit. Three weeks later, Aflacsent another letter to the plaintiffs’ counsel stating that “Aflacunequivocally denies the allegations raised in your Dec. 10, 2016letter,” and labeling them “wholly without merit.”

Then on Jan. 27, 2017, Aflac internally decommissioned theaverage weekly producer reports, and in its FY2016 annual reportomitted the average producers number from the list of its “keyoperational metrics,” renaming the list as “key sales metrics.”

“The decommissioning of the AWP reports, followed by thedisappearance of that metric from Aflac’s public filings,constitutes an implicit admission by Aflac that plaintiffs’allegations had merits,” the lawsuit alleges.

“Aflac is committed to always doing the right thing, acting withethical behavior and ensuring we put our policyholders andclaimants first," Sullivan said. 'Several third-parties haverecognized Aflac for doing the right thing, including being named aWorld’s Most Ethical Company for 11 consecutive years by Ethispheremagazine; recognition as one of the World’s Most Admired Companiesfor 17 years as well as one of the Best Companies to Work For for19 years and one of the 100 Best Workplaces for Millennials byFortune.

“Again, the independent special committee (SLC) found the claimsthat it has investigated to be without merit. Aflac plans to fightthem vigorously, using every legal means available,” Sullivanconcludes.