The package arrived at Cindy
Lohman’s home in Great Mills, Maryland, just two weeks after she
learned that her son, Ryan, a 24-year-old Army sergeant, had
been killed by a bomb in Afghanistan. It was a thick, 9-inch-by-
12-inch envelope from Prudential Financial Inc., which handles
life insurance for the Department of Veterans Affairs.

Inside was a letter from Prudential about Ryan’s $400,000
policy. And there was something else, which looked like a
checkbook. The letter told Lohman that the full amount of her
payout would be placed in a convenient interest-bearing account,
allowing her time to decide how to use the benefit.

“You can hold the money in the account for safekeeping for
as long as you like,” the letter said. In tiny print, in a
disclaimer that Lohman says she didn’t notice, Prudential
disclosed that what it called its Alliance Account was not
guaranteed by the Federal Deposit Insurance Corp., Bloomberg
Markets magazine reports in its September issue.

Lohman, 52, left the money untouched for six months after
her son’s August 2008 death.

“It’s like you’re paying me off because my child was
killed,” she says. “It was a consolation prize that I didn’t
want.”

As time went on, she says, she tried to use one of the
“checks” to buy a bed, and the salesman rejected it. That
happened again this year, she says, when she went to a Target
store to purchase a camera on Armed Forces Day, May 15.

‘I’m Shocked’

Lohman, a public health nurse who helps special-needs
children, says she had always believed that her son’s life
insurance funds were in a bank insured by the FDIC. That money
-- like $28 billion in 1 million death-benefit accounts managed
by insurers -- wasn’t actually sitting in a bank.

It was being held in Prudential’s general corporate
account, earning investment income for the insurer. Prudential
paid survivors like Lohman 1 percent interest in 2008 on their
Alliance Accounts, while it earned a 4.8 percent return on its
corporate funds, according to regulatory filings.

“I’m shocked,” says Lohman, breaking into tears as she
learns how the Alliance Account works. “It’s a betrayal. It
saddens me as an American that a company would stoop so low as
to make a profit on the death of a soldier. Is there anything
lower than that?”