EMPLOYEES WORTH MORE DEAD THAN ALIVE…

Class-action lawsuits are nothing new for Wal-Mart. But this one is, to steal a phrase from the attorney bringing the suit, plain creepy. Michael Myers alleges that Wal-Mart has been collecting on life insurance policies it secretly took out on its employees. From The Tampa Tribune: When Karen Armatrout died in 1997, her employer, Wal-Mart, collected thousands of dollars on a life insurance policy the retail giant had taken out without telling her, according to a lawsuit filed in U.S. District Court. Armatrout was one of about 350,000 employees Wal-Mart secretly insured nationwide, said Texas attorney Michael D. Myers, who estimated the company collected on 75 to 100 policies involving Florida employees who died. Myers is seeking to make the Armatrout lawsuit a class-action case on behalf of the estates of all the Florida employees who died while unwittingly insured by Wal-Mart. "Creepy's a good word for it," Myers said. "If you ask the executives that decided to buy these policies and the insurance companies that sold them, they would say this was designed to create tax benefits for the company, which would use the benefits for benevolent purposes such as buying employee medical benefits. "If you asked me, I would say they did it to make more money." I don't buy it. Wal-Mart makes more in a day than it could be collecting from low-cost (what else?) life insurance policies. The risk is too high and the payout too low. Something else is going on. The company settled two lawsuits with employees represented by Myers in Texas and Oklahoma, one for about $10 million and one for about $5 million. He said Karen Armatrout came to his attention when Wal-Mart mistakenly gave her husband's phone number to an Oklahoman who called the retailer inquiring about the settlement. Myers said he also has filed a lawsuit against Wal-Mart in Louisiana. Richard Armatrout, who is retired, does not want to speak publicly about his case, Myers said. Armatrout did not respond to a message left by the Tribune. Karen Armatrout was 50 when she died of cancer, said Myers, who said she had worked several years in the pharmacy of the store on West Waters Avenue. Myers said the policy payouts ranged from $50,000 to $80,000, depending on the person's age and gender. They were taken out on all full-time Wal-Mart employees who, in December 1993, were between ages 18 and 70 and participated in the medical benefits plan. Company's routinely take out what are called key-man policies on important executives. But those are purchased with the full knowledge of the executive and are for the purpose of covering business loses if a central employee meets an untimely death. Those policies are for millions, not pocket change like $65,000. But then there is this: Wal-Mart, which said it canceled its policies in early 2000 because it was losing money on the arrangement, says the program was intended to reduce its income taxes to help pay rising employee health care costs. Could Wal-Mart really be that stupid? We'll see. Jeff Hess: Have Coffee Will Write.

16 Responses to “EMPLOYEES WORTH MORE DEAD THAN ALIVE…”

  1. UncleBob says:

    I don’t know if I’d call it “creepy”, persay. Weird?

    Anywhoo, What’s the cost to hire in and train a replacement associate? Perhaps the cost went to cover that… ;)

    Is this practice really illegal or just mostly unethical?

  2. Is this practice really illegal or just mostly unethical?

    Depends on the state and how it was done.

    As I understand it, Wal-Mart lost a lot of money on this. I want to say at least $100 million. They tried to sue their insurers for this. They lost, but some of my reading suggests they may still be pursuing it quietly.

    I wish I’d saved those files on this computer. It would be helpful now.

  3. An Armatrout Family Member says:

    I think it’s just horrible that any company would benefit on an employees death; especially your own loved one. She’s been gone for almost 10 years and now her name suddenly appears in all the headlines. It’s too bad no one knew her before she died for the superstar she really was. If Wal-Mart loses in court that’s just to bad; they had it coming. Karen will always be missed.

  4. RDS says:

    This sounds like a losing proposition to me!! If they insured 350,000 employees at say $10.00 per employee, per month, times 12 months, it would total $42 million a year!! Now, if say 100 of the insured died during the year and each policy paid out $80 thousand, that would equal $8 million, or $34 million LESS than what the policies cost!! And, what would happen if say only 50 people died during the year? I don’t really think Wal-Mart is that stupid!!

  5. [...] EMPLOYEES WORTH MORE DEAD THAN ALIVE… Class-action lawsuits are nothing new for Wal-Mart. But this one is, to steal a phrase from the attorney bringing the suit, plain creepy. Michael Myers alleges that Wal-Mart has been collecting on life insurance policies it secretly took out on its employees. Keep reading… [...]

  6. Jeff Hess says:

    Shalom Uncle Bob,

    The way Wal-Mart turns over assciates, I’d hope it had the costs down pretty low.

    B’shalom,

    Jeff

  7. Jeff Hess says:

    Shalom Someone,

    That Wal-Mart actually lost money on this scheme makes my head spin even faster.

    Could it be possible that when the idea was first floated that no one at the table raised a hand and said: this is not a good idea?

    Is it possible that corporate America is just not soulless, but irrational?

    B’shalom,

    Jeff

  8. Jeff Hess says:

    Shalom Family Member,

    Allow me to express my sorrow for the loss of your mother. I lost my own mother suddenly in 2000.

    B’shalom,

    Jeff

  9. Jeff Hess says:

    Shalom RDS,

    As I now begin to understand this scheme, it’s more about avoiding taxes.

    Wal-Mart pays out the policies and then borrows against them tax free.

    Could it be that Wal-Mart could be about to pull an Al Capone and go down for tax fraud?

    B’shalom,

    Jeff

  10. UncleBob says:

    If we could just go to the “FairTax” system then we wouldn’t have to worry about evil corperations avoiding taxes.

  11. RDS says:

    UncleBob,

    Amen to that, the “Fair Tax” would eliminate most tax loopholes!! It probably would encourage more saving, too!!

  12. Jeff Hess says:

    Shalom Uncle Bob and RDS,

    OK guys, I’ll bite. How do you define “fair tax?”

    B’shalom,

    Jeff

  13. UncleBob says:

    Jeff:

    The FairTax is a pretty radical idea of tax reform where, basically, *all* forms of federal taxes are replaced with a 23% inclusive or 30% exclusive sales tax on new goods and services. There’s a lot more to it than that, but that’s the basic idea. There’s no special tax breaks for any particular groups and no exclusions on any items – which means there’s no crazy schemes to get through tax loopholes.

    Check out FairTax.org. It should answer any questions you might have.

  14. Jeff Hess says:

    Shalom Bob,

    Ah. Got yah.

    If they place a sales tax on everything you buy — especially financial instruments, I might go for it.

    Otherwise, it’s a tremendously regressive tax.

    I’ll check out the website. Thanks.

    B’shalom,

    Jeff

  15. [...] at the beginning of July I asked the question: Could Wal-Mart really be that stupid? Despite my own incredulity, it now appears that the answer to that question is yes. And for an [...]

  16. [...] at the beginning of July, I asked the question: Could Wal-Mart really be that stupid? Despite my own incredulity, it now appears that the answer to that question is yes. And for an [...]

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