DALLAS — McKinney-based insurance company Globe Life disclosed details of a Department of Justice probe into its business Tuesday, as it rejected claims of fraud by a short-seller that caused its stock to drop more than 50 percent earlier this month.
Globe Life co-CEO Frank Svoboda told investors the company received subpoenas from the U.S. Attorney’s Office for the Western District of Pennsylvania in late 2023 seeking “documents related to sales practices from certain licensed insurance agents contracted to sell American Income policies.”
American Income Life is a Waco-based subsidiary of Globe Life.
Globe Life has the naming rights to the Texas Rangers' home stadium, Globe Life Field. The Rangers and the City of Arlington declined to comment on the Globe Life news when it broke earlier this month. In 2017, Globe Life extended its naming rights agreement through 2048.
Svoboda said Globe Life is cooperating fully with the federal probe.
“The company currently is not aware that any legal proceedings are contemplated by government authorities,” he said, but added that “no assurances could be made.”
Globe Life executives also told investors on its first-quarter earnings call Tuesday that the company has hired an external audit firm to investigate the claims of fraud made by the group Fuzzy Panda Research. The claims caused the company’s stock to lose $5 billion in value, according to the Wall Street Journal.
Fuzzy Panda Research said April 11 that it had taken a short position in the company after conducting an investigation, which it alleged revealed evidence of wide-ranging insurance fraud. Investors make money in so-called short positions when the value of a company goes down.
Fuzzy Panda alleged that third-party policy sellers known to have committed insurance fraud contributed over 60% of the new business at American Income Life, which accounted for nearly half of the total underwriting margins last year.
Globe Life rejected the claims in the Fuzzy Panda report in April and continued to do so on the earnings call Tuesday.
“In this instance we believe the short seller’s report represents a fundamental lack of understanding of the life insurance business generally and how our company operates and reports revenue,” said co-CEO Matthew Darden.
He denied allegations of a “pyramid scheme” and said the company has not aware of any bribes or kickbacks.
“The short-seller’s report relies heavily on allegations by a former employee who following an internal review was terminated for cause based on violations of the company’s policies regarding sexual harassment,” Darden said.
Globe Life, Inc. employs more than 3,000 people at its headquarters in McKinney.
