Full opinion text
(Appearances of counsel are listed in Appendix A) OPINION TABLE OF CONTENTS VOLUME 1 Page INTRODUCTION...............................................................467 FINDINGS OF FACT...........................................................468 I.The Plaintiffs, the Defendants, the Objectors, and Various State Insurance Representatives Participated in These Proceedings............................468 A. The Class Includes All Persons or Entities Who Owned Certain Life Insurance Products During the Class Period..............................468 B. The Plaintiff Representatives Are Typical Victims of Prudential’s Deceptive Sales Practices During the Class Period..............................469 1. Carol Nicholson Was Victimized by Churning, Vanishing Premium Tactics, and Investment Plan Tactics................................469 2. Martin Dorfner Was Victimized by Churning and Vanishing Premium Tactics .........................................,........470 3. Vincent and Elizabeth Kuchas Were Victimized by Churning and Investment Plan Tactics...........................................471 4. Norman Gassman Was Victimized by Vanishing Premium and Investment Plan Tactics...........................................472 C. The Court Has Granted the Requests of Several Class Members to Intervene............................................................472 D. Plaintiffs Sued Prudential, a Mutual Life Insurance Company and One of the Largest Life Insurance Companies in the Country.....................472 E. Plaintiffs Have Also Sued Several Individual Defendants Who Were Upper Echelon Prudential Managers....................................473 F. Several State Government Representatives Have Contributed to These Proceedings..........................................................473 II.Plaintiffs Allege that Prudential Conducted a Scheme to Deceive Policyholders into Buying Prudential Life Insurance Products ..................473 A. Prudential Used a Deceptive Sales Practice Called “Churning” to Sell Policyholders Replacement Policies......................................474 B. Prudential Misstated that the Premiums on Its Life Insurance Products, Including Abbreviated Payment Plan Policies, Would Vanish................476 C. Prudential Fraudulently Marketed Its Insurance Policies as Investment Vehicles .............................................................476 D. Prudential and the Individual Defendants Knew About the Fraudulent Marketing Scheme....................................................477 E. Plaintiffs Allege Federal and State Causes of Action to Challenge Prudential’s Deceptive Sales Practices...................................478 III. Background..............................................................478 A. Plaintiffs Sued Prudential Throughout the Country Concerning Prudential’s Deceptive Sales Practice and the Judicial Panel on Multi-District Litigation Consolidated the Actions and Transferred them to this Court.....478 B. The New Jersey Insurance Commissioner Led Insurance Regulators Throughout the Country to Form a Task Force...........................480 C. Connecticut Conducted its Own Investigation and Produced an Independent Report...................................................480 D. Plaintiffs Organized and the Court Approved a Consolidated Team to Prosecute the Prudential Fraudulent Sales Practices Actions ...............481 E. Plaintiffs Conducted Both Formal and Informal Discovery to Obtain Information Relating to Prudential’s Alleged Fraudulent Sales Practices.....481 F. Plaintiffs Rebuffed Prudential’s Early Settlement Overtures While Discovery and Motion Practice Continued................................482 G. Motion Practice Continued and Plaintiffs Pursued Informal Discovery.......483 H. The Court Dismissed Many of the Claims in Plaintiffs’ First Amended Complaint............................................................483 I. The Task Force Found that Prudential Had Committed Widespread Sales Practice Abuse, Fined Prudential $35 Million, and Released the Task Force Plan......................................................484 J. The MDL Panel Continued to Transfer Actions to this Court and Some Individual Plaintiffs Filed a Consolidated Motion to Remand................485 K. While Class Counsel Continued to Pursue Discovery and to Amend the Complaint, Prudential Counsel and Class Counsel Resumed Settlement Negotiations, Which Resulted in the Settlement Agreement and Later in the Stipulation of Settlement ...........................................485 L. The Court Ordered Conditional Certification of the Class and that the Parties Mail Class Members Notice of the Proposed Settlement.............487 IV. Stipulation of Settlement Teims.............................................488 A. The Proposed Settlement Provides an Alternative Dispute Resolution Process Through Which Policyholders May Obtain Full Remediation.....488 1. The ADR Procedures Cast a Wide Net to Gather Evidence Relevant to Class Members’ Claims.................................488 2. The ADR Process Contains Specific Claim Evaluation Procedures to Ensure that All Relevant Evidence Is Considered ..................488 3. The ADR Process Provides that Claims Are Scored Generously According to the Class Members’ Claim and the Available Evidence.....489 B. Policyholders Who Do Not Desire to Participate in the ADR Process Receive Real and Valuable Benefits Through Basie Claim Relief.............490 C. Financial Commitments Guarantee that Class Members Will Receive Substantial Relief Under Any Turn of Events.............................491 D. The Unprecedented Outreach Program Will Ensure that All Class Members Are Aware of Their Rights and Will Encourage Injured Class Members to Participate in the Proposed Settlement Relief..................492 E. The Proposed Settlement Substantially Improves the Task Force Plan.....492 1. The Proposed Settlement Provides Significant Enhancements to the Task Force Plan..................................................492 a. The Proposed Settlement Provides Valuable Financial Commitments ................................................492 b. The Proposed Settlement Improves Claim Scoring and Evaluation Criteria for the Benefit of Claimants...................492 c. The Proposed Settlement Includes Four Valuable ADR Remedies Not Included in the Task Force ADR Plan..............493 2. The Proposed Settlement Provides Significant Enhancements to Each Form of Basic Claim Relief and Creates a New Form of Basic Relief...........................................................494 3. The Proposed Settlement Provides an Elaborate Program to Inform Class Members of the Relief Available to Them................494 F. The Proposed Settlement Offers Significant Value to the Class..............494 V.Class Counsel and Prudential Have Provided Class Members With Extremely Effective Individual and Published Notice of the Proposed Class and Proposed Settlement.............................................495 VI.The Proposed Settlement Has Been Enhanced Since the Execution of the Stipulation of Settlement...................................................496 A. The Court Ordered Additional Remediation to Class Members in Response to Reported Document Destruction Incidents....................496 B. Through Negotiations with State Regulators Prudential Has Agreed to Several “Final Enhancements” to the Proposed Settlement.................498 VII.Class Response to the Proposed Class Certification and the Proposed Settlement Has Been Favorable.............................................499 VIII.The Fairness Hearing Provided the Parties, Objectors Appearing Through Counsel, State Regulators, and All Individual Objectors an Opportunity to Express Their Positions to the Court........................................499 VOLUME 2 CONCLUSIONS OF LAW.......................................................500 I. This Court Has Subject Matter Jurisdiction Over Plaintiffs’ Claims Against Prudential................................................................500 A. This Court Unquestionably Has Federal Question Jurisdiction Over this Action...............................................................500 B. The Court Also Has Diversity Jurisdiction Over this Action.................502 II.The Court’s Jurisdiction over Plaintiffs’ Claims Does Not Violate the Article III Case or Controversy Requirement.......................................505 III. The Court Has Personal Jurisdiction over All Plaintiffs, Present and Absent.....506 IV. The Predominance of Common Factual and Legal Issues, the Adequacy of Class Counsel and Class Representatives, and the Superiority of the Class Action Device as a Tool to Resolve the Current Controversy Require Class Certification..............................................................507 A. The Proposed Settlement Class Must Be Certified as if the Case Were to Be Tried...........................................................508 B. The Objectors Have Standing Both to Attack the Propriety of Class Certification and to Attack the Proposed Settlement.......................508 C. The Prudential Life Insurance Sales Practices Class Action Satisfies Federal Rules of Civil Procedure 23(a) and 23(b)(3)........................510 1. The Estimated Eight Million Policyholders Satisfy the Numerosity Requirement.....................................................510 2. Prudential’s Orchestrated Sales Presentations, the Plaintiffs’ Common Legal Theories, Prudential’s Common Defenses, and Other Common Issues Undoubtedly Satisfy the Commonality and Predominance Requirements...................................510 a. Plaintiffs Must Establish Many Common Factual Issues to Establish Liability ............................................512 b. Plaintiffs Must Establish Many Common Legal Issues to Establish Liability ............................................512 c. Prudential’s Affirmative Defenses Add Common Issues to this Class Action..................................................512 d. Prudential’s Document Destruction is an Extremely Pervasive Issue Common to Class Members...............................513 e. Prudential’s Fraudulent Concealment of Its Misrepresentations and Misdeeds Is an Issue Common to Class Members..............513 f. The Agents’ Use of Identical Oral Misrepresentations Weighs in Favor of the Finding of Predominance of Common Issues.....513 (1) Prudential Agents’ Oral Misrepresentations Were Uniform Throughout the Country....................................514 (2) To Create Consistent Oral Sales Presentations, Prudential Trained Its Agents and Provided Its Agents with Uniform Sales Materials............................................515 g. Plaintiffs’ Claims that May Entail Establishing Reliance Do Not Undermine the Predominance of Common Issues..............516 h. Individual Damages Do Not Undermine the Predominance of Common Issues...............................................517 i. Objectors’ Arguments that Common Issues Do Not Predominate Are Unpersuasive.................................517 j. Common Issues Overwhelmingly Predominate the Individual Issues in this Case............................................517 3. The Plaintiff Representatives’ Claims Are Typical of Those of the Other Class Members.............................................517 4. Class Counsel and the Class Representatives Adequately Represent the Class........................................................519 a. Class Counsel Adequately Represent the Class....................519 (1) Class Counsel Are Extremely Qualified.......................519 (2) Class Counsel Also Are Extremely Committed to the Class and All Class Members and Are Unhampered By Any Conflicts of Interest or Separate Inventories of Cases.....519 (3) The Value of the Proposed Settlement to All Class Members Demonstrates that Class Counsel’s Representation Is Adequate ................................520 (4) Class Counsel Vigorously Have Represented the Class Throughout These Proceedings..............................520 b. The Plaintiff Representatives Adequately Represent the Class.....520 5. The Class Action Device Is Superior to Any Other Means to Adjudicate this Controversy........................................522 a. There Are No Other Sensible Means to Adjudicate this Controversy..................................................522 b. Individual Plaintiffs Have Little Interest in Controlling the Prosecution of Separate Actions.................................523 c. The Number of Actions Pending Elsewhere Weighs in Favor of Finding the Class Action Mechanism Superior....................524 d. To Concentrate this Litigation in New Jersey Is Desirable .........524 e. Although Managing this Case Will Be Challenging, No Anticipated Difficulties Render this Action Unmanageable..........524 V. The Class Notice and Supplemental'Materials Fulfill the Notice Requirements of Federal Rules of Civil Procedure 23(c)(2) and 23(e).............526 A. The Class Notice Adequately Describes the Allegations of the Complaint.....528 B. The Class Notice Adequately Advises Class Members of the Consequences of Deciding Not to Opt Out................................529 C. The Class Notice Need Not Describe Parallel State Court Proceedings or All Potential State Law Causes of Action ..............................529 D. The Class Notice Need Not Identify Objectors to the Proposed Settlement............................................................529 E. The Class Notice Accurately Describes the Interaction Between the Task Force Plan and the Proposed Settlement............................529 F. The Class Notice Adequately Indicates Class Members’ Waiver of Then-Right to a Jury Trial..................................................530 G. The Class Notice Adequately Indicates Prudential’s Agreement Not to Oppose Attorneys’ Fees................................................530 H. The Class Notice Was Not Required to Include an “Opt-Out Form”.........531 I. The Class Notice Was Not Required to Include Individual Policy Illustrations..........................................................531 J. The Class Notice Adequately Informed Policyholders About the Information Considered in the ADR Process and Need Not Have Informed Policyholders Individually of Available Evidence..................531 K. The Class Notice is Not ^Cumbersome” or Inadequate to Alert Policyholders ..............................................................532 L. The Class Notice Adequately Indicated the Deadline to File Objections or Opt Out...........................................................533 M. The Class Notice Fairly Describes Basic Claim Relief and Alternative Dispute Resolution Provisions ..........................................533 N. Objections that Ostensibly Attack the Class Notice But Really Concern Proposed Settlement Terms Will Be Addressed in the Context of the Proposed Settlement’s Fairness.........................................533 O. Considering All of the Circumstances, Class Notice in the Present Case Comports with Rule 23 and with Due Process.............................533 VOLUME 3 VI. The Proposed Settlement Is Fair, Reasonable, and Adequate In Light of the Multifarious Factors that the Court Must Consider............................534 A. The Proposed Settlement Provides Extraordinary Relief to Injured Policyholders.........................................................535 B. The Complexity of this Action and the Likely Lengthy Duration of the Litigation Warrant Approval of the Proposed Settlement...................536 C. Class Reaction to the Proposed Settlement Has Been Overwhelmingly Favorable and Weighs in Favor of Class Approval.........................537 D. Approval of the Proposed Settlement at this Stage of the Proceedings Is Appropriate Because the Plaintiffs Have Completed Extensive Discovery and Settlement Now Would Save the Extensive Costs of Additional Discovery and Trial ...................................................538 E. The Significant Risks Attendant to Plaintiffs’ Ability to Establish Prudential’s Liability and Damages Weigh In Favor of Approving the Proposed Settlement...............................................538 F. The Risks of Maintaining this Class Action Through Trial Weigh in Favor of Approving the Proposed Settlement.............................540 G. Prudential’s Inability to Withstand a Greater Judgment Is a Factor Weighing in Favor of Approving the Proposed Settlement..................540 H. The Proposed Settlement Is Reasonable in Light of the Best Possible Recovery and All of the Attendant Risks of Litigation......................540 I. Plaintiffs Conducted Adequate Discovery Precedent to Agreeing to Settle................................................................541 J. The Proposed Settlement is Reasonable In Light of the Plaintiffs’ Preliminary Discovery.................................................542 K. The Settlement Accounts for All Causes of Actions and Types of Relief Sought in the Second Amended Complaint................................542 L. The Parties Completed Negotiations of the Proposed Settlement Before Negotiating Attorneys’ Fees and the Attorneys’ Fee Agreement Is Legal and Proper...........................................................542 M. Class Counsel’s Approval of the Proposed Settlement Indicates Its Fairness.............................................................543 N. The Objectors’ Panoply of Other Concerns Fall Under Their Own Weight ..............................................................543 1. The Pi’oposed Settlement Improves Upon the Task Force Plan.........543 2. ADR Review Is Impartial..........................................545 3. The ADR Process is Simple........................................546 4. The ADR Process Provides Adequate Substantive Relief...............546 5. The Proposed ADR Scoring Provisions Adequately Determine Whether Prudential Misled Individual Class Members.................547 6. The ADR Process is an Appropriate Mechanism to Assess Whether Class Members Were Affected by Prudential’s Deceptive Sales Practices........................................................548 7. The ADR Process Adequately Identifies Churning Cases ..............549 8. The ADR Process Adequately Identifies Cases in Which Prudential Sold Life Insurance Policies as Investment Vehicles...................550 9. The Proposed Presumptions for APP Claims Are Unnecessary and Inappropriate....................................................551 10. No Additional Evidentiary Considerations Are Necessary..............551 11. Agent Conduct Is an Appropriate Talisman of Prudential’s Wrongful Conduct................................................552 12. A Presumption in Favor of the Policyholder Where the Policyholder’s Statement Conflicts with an Agent’s Statement Is Unnecessary and Undesirable..................................................552 13. The Agent’s Presence Before a Decisionmaker Is Unnecessary to Adjudicate Class Members’ Claims..................................553 14. The Complaint History Factor is Adequate...........................553 15. The Proposed Settlement’s Method of Assembling Associated Complaints is Adequate ...........................................553 16. Class Members Need Not Be Informed of Agents’ Complaint Histories Prior to Choosing Relief..................................554 17. Unauthorized Execution as a Positive Consideration is Adequately Described and Effective...........................................554 18. The ADR Process Fairly Addresses Document Destruction ............555 19. Policyholders Receive Adequate Representation in the ADR Process..........................................................556 20. The Time Periods Allocated to Each Step in the ADR Process Are Fair, Reasonable, and Adequate....................................556 21. The ADR Procedures Properly Consider as Undermining Evidence that a Class Member Received a Clear Written Disclaimer at the Time of Sale.....................................................557 22. This Court’s Role in Allocating the Additional Remediation Amount Is Appropriate and Does Not Undermine the Ability of Class Members to Evaluate the Proposed Settlement’s Fairness .............557 28. Basic Claim Relief Is a Valuable Remedy............................557 24. The Settlement Does Not Discriminate Against Policyholders Who Cannot or Desire Not to Purchase Basic Claim Relief.................558 25. The Proposed Release Is Fair and Appropriate.......................558 26. There Is No Basis to Appoint a Custodial Receiver or Special Fiscal Agent...........................................................559 27. The Proposed Settlement Does Not Violate State Law.................560 28. The McCarran-Ferguson Act Does Not Apply to the Proposed Settlement, Which Does Not Affect Policyholders’ State Substantive State Law Rights.............................................561 561 29. The Rules Enabling Act Does Not Apply to the Proposed Settlement, Which Does Not Affect Policyholders’ State Substantive State Law Rights................................. 562 30. This Court Properly Preliminarily Certified the Class for Settlement Purposes Only.................................... 562 31. The Fairness Hearing Format Was Fair........................ 562 a. The Opt-Out and Objection Period Was Sufficient............ 562 b. Objectors Had Sufficient Opportunity to Conduct Discovery to Prepare for the Fairness Hearing.......................... 563 c. Objectors Had No Absolute Right to Present and Cross Examine Witnesses at the Fairness Hearing, and Under the Circumstances, These Activities Were Inappropriate.......... d. Krell and All Objectors Were Afforded an Adequate Opportunity to Present All of Their Factual and Legal Arguments ........................................ 564 CONCLUSION.......................... 564 WOLIN, District Judge. INTRODUCTION The Prudential Insurance Company of America, the institution that for years has represented itself as the quintessence of stability, the Rock, used pervasive and systematic deceptive sales tactics to sell many individuals a great number of life insurance policies, to the benefit of Prudential and its sales agents, but to the detriment of trusting consumers. The old adage resounds trae: insurance is not bought; it is sold. And through selling consumers “a piece of the rock,” Prudential ultimately crushed the hopes and expectations of many policyholders with the colossal weight of hidden fees and costs. Prudential forced many individuals to pay amounts that far exceeded their means, and caused others to lose the policies that they had worked so long and so hard to build. The plaintiffs now ask the Court to help them alleviate the burdens that they allege Prudential has forced upon them. Plaintiffs seek class certification under Federal Rule of Civil Procedure 23(b)(3) and request this Court to approve the proposed class settlement as memorialized in the Stipulation of Settlement dated October 28, 1996, and amended by the Amendment to the Stipulation of Settlement dated February 22, 1997 (“Stipulation Amendment”) and by this Court’s Order of February 3,1997 (collectively the “Proposed Settlement”). The Court finds that the facts at bar compel class certification. Unlike Georgine, the typicality, adequacy of representation, predominance, and superiority requirements are clearly met. With regard to typicality and adequacy of representation, all class members allegedly were uniformly injured by Prudential’s deceptive sales practices and there are no “futures claimants.” Additionally, Class Counsel have tenaciously represented all class members equally. With regard to predominance and superiority, Prudential’s alleged common scheme to defraud its policyholders has created a plethora of common factual and legal issues, which dramatically outweigh any individual issues. This is a commercial dispute involving purely economic damages and no personal injuries. And, as recommended by In re School Asbestos Htigation, Class Counsel have grouped potentially applicable state laws systematically into manageable patterns, completely obviating potential complications from choice of law differences. Not only do the facts at bar compel class certification, but, beyond a doubt, the Proposed Settlement is fair, reasonable, and adequate in light of the many factors that this Court must consider. The Proposed Settlement’s alternative dispute resolution process will provide many claimants the choice between obtaining (1) full rescission and restitution or (2) full benefit of the bargain relief. Importantly, the Proposed Settlement relief is uncapped; all class members may obtain full remediation, regardless of the benefits allocated to other class members. And substantial minimum payment guarantees secure Prudential’s commitment to compensate policyholder claims. Indeed, the Proposed Settlement is extraordinary because class members have relatively modest individual claims that would be impracticable to redress individually. The fairness of the Proposed Settlement is also confirmed by the fact that all fifty states and the District of Columbia have found that the Proposed Settlement, or the preceding plan, the Task Force Plan, is fair, reasonable, and adequate to compensate fairly, fully, and quickly their constituents whom Prudential misled. Consequently, based upon the evidence of record, the Court’s findings of fact and conclusions of law, and for the reasons stated herein, the Court concludes that all of the requirements of Federal Rule of Civil Procedure 23 have been met and that the Proposed Settlement of this class action is fair, reasonable, and adequate for the class and, therefore, should be approved. Today’s Opinion and Order affirms, explains, and supplements the Court’s Memorandum Opinion and Order issued on March 7,1997. FINDINGS OF FACT I. The Plaintiffs, the Defendants, the Objectors, and Various State Insurance Representatives Participated in These Proceedings A. The Class Includes All Persons or Entities Who Owned Certain Life Insurance Products During the Class Period 1. The class encompasses, with some exceptions, all persons or entities who owned one or more of Prudential’s new or additional insurance policies between January 1, 1982 and December 31, 1995 (the “Class Period”). Stipulation of Settlement at 13, ¶ A.l.at. Approximately eight million class members own approximately 10.7 million insurance policies. B. The Plaintiff Representatives Are Typical Victims of Prudential’s Deceptive Sales Practices During the Class Period 1.Carol Nicholson Was Victimized by of Churning, Vanishing Premium Tactics, and Investment Plan Tactics 2. Plaintiff Carol Nicholson, executrix of the estate of decedent Keith E. Nicholson is an Illinois citizen. Consolidated Second Amended Class Action Complaint and Jury Demand (“Second Am. Compl.”) at ¶ 13. Keith Nicholson was a brick mason, while Carol Nicholson is a retired K-Mart personnel manager. Second Am. Compl. at ¶ 107. Carol and Keith Nicholson purchased four life insurance policies between 1966 and 1984 with death benefits totaling approximately $30,000 (the “original policies”). Second Am. Compl. at ¶ 106. In 1986, Keith Nicholson purchased from Prudential a $100,000 whole life insurance policy (policy number 76460936), allegedly as a result of Prudential’s common scheme. Second Am. Compl. at ¶ 13. Carol Nicholson alleges churning, vanishing premium, and investment plan claims. Second Am. Compl. at ¶¶ 106-19. 3. In 1984, Prudential agent Homer Ger-nigan contacted the Nicholsons and advised them that they could use the dividends and earnings from the original policies to “work for them” in connection with their estate and retirement planning. Second Am. Compl. at ¶ 108. Gernigan further advised the Nicholsons that they could acquire additional insurance by paying the premiums on the additional policy with the earnings from the original policies, with no additional out-of-pocket costs. Second Am. Compl. at ¶ 108. Gernigan represented that the additional insurance would be needed for the Nicholsons’ financial security during retirement or estate security for the Nicholsons in the event of Keith Nicholson’s death. Second Am. Compl. at ¶ 108. 4. In 1984, in reliance on Gernigan’s misrepresentations, the Nicholsons agreed to acquire a $100,000 whole life insurance policy (the “additional policy”). Second Am. Compl. at ¶ 110. Gernigan told the Nicholsons that to apply the earnings from the original policies to the premiums for the additional policy, Keith Nicholson had to sign certain Prudential forms in blank. Second Am. Compl. at ¶ 112. Keith Nicholson did. just that. Second Am. Compl. at ¶ 112. Unknown to the Nicholsons, these forms authorized loans from the cash value of the Nicholsons’ original policies. Second Am. Compl. at ¶ 113. 5. Subsequently, the Nicholsons received notices from Prudential indicating that policy loans had been taken and the additional policy had lapsed. Second Am. Compl. at ¶ 114. The Nicholsons contacted Prudential, which advised them to ignore the notices. Second Am. Compl. at ¶ 115. 6. Keith Nicholson was diagnosed with leukemia in 1989 and died on August 26, 1994. Second Am. Compl. at ¶ 117. At the time of Keith Nicholson’s death, Carol Nicholson learned that, because of Prudential’s misrepresentations and omissions, his $130,-376 in insurance coverage had dwindled to $22,514.43. Second Am. Coiiipl. at ¶ 118. Carol Nicholson learned that Keith Nicholson’s additional policy had lapsed and that unauthorized loans had substantially diminished the available death benefits of the other policies. Second Am. Compl. at ¶ 118. Carol Nicholson also learned of Gernigan’s material omissions and misstatements in selling the Nicholsons the additional policy: (1) that loans were made on the cash value of the original policies to pay the premiums on the additional policy; (2) that these loans would diminish the cash values and death benefits of the original policies; (3) that despite Gernigan’s representations, the earnings and dividends on the original policies were insufficient to pay the premiums and other charges of the additional policy; (4) that the earnings, dividends, and cash values of the original policies would dissipate; and (5) that without additional premium payments the additional policy would lapse. Second Am. Compl. at ¶ 118. Carol Nicholson, as the executrix for the Estate of Keith Nicholson, sued Prudential on February 6, 1995. Second Am. Compl. at ¶ 119. 2. Martin Dorfner Was Victimized of Churning and Vanishing Premium Tactics 7. Plaintiff Martin Dorfner is a Pennsylvania citizen. Second Am. Compl. at ¶ 14. He and his wife operate a small grocery store. Second Am. Compl. at ¶ 120. In April of 1991, Dorfner purchased from Prudential a $50,000 variable appreciable life insurance policy (policy number 97-522-008), allegedly as a result of Prudential’s common scheme. Second Am. Compl. at ¶ 14. Dorf-ner alleges damages from churning and his purchase of a vanishing premium policy. Second Am. Compl. at ¶¶ 120-46. 8. As of July of 1989, Martin and Audrey Dorfner had purchased several Prudential life insurance policies to insure Martin including a $100,000 term life policy (policy number 73-438-990), a $5,000 whole life policy (policy number 22-218-366), and an essentially paid-up policy having a death benefit of $3,000. Second Am. Compl. at ¶ 124. Additionally, Audrey was insured by a Prudential $10,000 whole life policy (policy number 73-381-858) and the Dorfner’s children were insured: Martin, Jr. for $5,000 (policy number 24-749-189), Brian for $5,000 (policy number 25-501-819), Donald for $5,000 (policy number 25-233-873), and Denise for $5,000 (policy number 25-233-872). Second Am. Compl. at ¶ 124. 9. In July of 1989, Prudential agent Susan Sheldon met with the Dorfners to review their coverage. Second Am. Compl. at ¶ 125. As trained by Prudential, Sheldon advised the Dorfners that Martin Dorfner would be entitled to a “free” insurance policy by using the dividends from his $3,000 policy. Second Am. Compl. at ¶ 125. In reliance on Sheldon’s misrepresentations, the Dorfners agreed to complete the paperwork for the “free” policy. Second Am. Compl. at ¶ 126. 10. That month, Prudential issued another whole life policy in Martin Dorfner’s name (policy number 73-831-273) (the “free policy”). Second Am. Compl. at ¶ 127. The Dorfners never received any policy documents or other information regarding the amount of death benefits provided by the “free” policy. Second Am. Compl. at ¶ 128. 11. The Dorfners later learned that in July of 1989, without authorization, Sheldon withdrew $300.50 from Martin’s original $3,000 policy to pay for his “free policy.” Indeed, Sheldon continued to withdraw funds each year thereafter until 1993. Second Am. Compl. at ¶ 128. The Dorfners also discovered that in April of 1991 a living needs rider had been added to the “free policy” without their knowledge. 12. In the spring of 1991, Prudential’s Vice-President of the District Agencies sent Martin Dorfner a form Notice marked “important” and a copy of the computer printout of policy information. Second Am. Compl. at ¶ 129. The Notice stated that a Prudential representative would contact Dorfner to review the circled “convertible amount” of his term policy. Second Am. Compl. at ¶ 129. 13. In March of 1991, Sheldon approached Martin Dorfner regarding conversion of the term policy and presented Martin Dorfner with an offer to convert his term policy to a “new” Prudential Variable Appreciable Life (“VAL”) policy. Second Am. Compl. at ¶ 130. Sheldon showed Martin Dorfner deceptive illustrations and explained that the VAL policy was superior to his term coverage, because the VAL was a whole life product. Second Am. Compl. at ¶ 131. Sheldon also explained that the VAL was a financial savings because the premiums could be expected to be completely paid within eight years by using the dividends of the Dorfners’ other policies. Second Am. Compl. at ¶ 131. Sheldon told the Dorfners that the childrens’ policies were essentially paid-up and that she would administer the dividend application to the new policy. Second Am. Compl. at ¶¶ 132-33. Relying on Sheldon’s presentation, Martin Dorfner agreed to apply for a $50,000 VAL policy. Second Am. Compl. at ¶ 135. As trained by Prudential, Sheldon did not leave copies of the illustrations or any prospectus for the new VAL with the Drainers. Second Am. Compl. at ¶ 134. In fact, Prudential never provided the Dorfners with a copy of the VAL policy. Second Am. Compl. at ¶ 137. 14. In July of 1992, unknown to the Dorf-ners, without authorization, and contrary to Sheldon’s earlier representations, Sheldon took a $680.61 loan against Martin Dorfner’s $5,000 whole life policy (policy number 22-218-366). Second Am. Compl. at ¶ 138. In 1993, Sheldon took another $300.50 loan, this time from policy number 73-831-273, the “free policy.” Second Am. Compl. at ¶ 139. 15. On March 8, 1994, Prudential advised Martin Dorfner that a new agent would be servicing his account. Second Am. Compl. at ¶ 140. Soon thereafter, the new agent told Martin that an unauthorized loan had been made against his original policy and applied to the VAL policy. Second Am. Compl. at ¶ 140. The agent also advised Martin that Audrey’s policy and the childrens’ policies were in danger of lapsing because the dividends and cash value had been applied to the premiums of the VAL. Second Am. Compl. at ¶ 141. Prudential admitted in letters to Martin dated August 11, 1994 and September 13, 1994 that the loans taken to fund the VAL were not authorized. Second Am. Compl. at ¶ 142. Martin Dorfner sued Prudential on January 19, 1995. Second Am. Comp, at ¶ 146. 3. Vincent and Elizabeth Kuchas Were Victimized by Churning and Investment Plan Tactics 16. Plaintiffs Vincent and Elizabeth Ku-chas (the “Ruchases”) are Connecticut citizens. Second Am. Compl. at ¶ 15. In 1987, Elizabeth Kuchas purchased a $100,000 variable appreciable life insurance policy (policy number R0147600) and Vincent Kuchas purchased an $80,000 variable appreciable life insurance policy (policy number R0147606) from Prudential allegedly as a result of Prudential’s common scheme. Second Am. Compl. at ¶ 15. The Ruchases allege churning and investment plan based fraudulent sales practices. Second Am. Compl. at ¶¶ 147-59. 17. Vincent Kuchas has retired, after working for thirty-seven years as a roofer. Second Am. Compl. at ¶ 147. Elizabeth Ku-chas’s occupation is unknown. On November 5, 1983, Vincent Ruchas purchased a variable life insurance policy from Prudential with a face amount of $46,908. Second Am. Compl. at ¶ 148. On November 11, 1987, Elizabeth Kuchas purchased a variable life policy from Prudential with a face amount of $40,000. Second Am. Compl. at ¶ 148. These polices are the “initial policies.” Second Am. Compl. at ¶ 148. 18. In December of 1987, Prudential agent Richard Dings recommended that the Ruchases purchase new life insurance. Second Am. Compl. at ¶ 149. The Ruchases told Dings that they wanted a retirement investment similar to an IRA, not just additional life insurance. Second Am. Compl. at ¶ 149. The Ruchases also informed Dings that they could not afford an investment plan if they had to continue to pay premiums on the initial policies. Second Am. Compl. at ¶ 149. Dings proceeded to conceal from the Ruchas-es all of the adverse information that agents commonly withheld from customers to churn them. Second Am. Compl. at ¶ 150. On December 1, 1987, relying on Dings’ representations, particularly as to financing terms, the Ruchases purchased two VAL policies (the “1987 VALs”). Second Am. Compl. at ¶ 152. Prudential provided no prospectus at the time of sale. Second Am. Compl. at ¶ 152. 19. In early 1988, the Ruchases began to receive information suggesting that further premiums would be due on the initial policies. Second Am. Compl. at ¶ 154. Dings repeatedly assured the Ruchases that they need only pay what they could afford on the initial policies to keep up the 1987 VALs and that the 1987 VALs were still good “IRA investments.” Second Am. Compl. at ¶ 154. Relying on these false assurances, the Ru-chases continued to make small monthly payments in amounts they could afford toward the premiums on the initial policies. Second Am. Compl. at ¶ 155. Unknown to the Ru-chases, however, Prudential did not credit these partial payments. Second Am. Compl. at ¶ 155. In February of 1994, when the Ruchases discovered that Prudential had not accepted their partial payments, Dings told the Ruchases not to worry and that he would take care of it. Second Am. Compl. at ¶ 155. 20. In September of 1994, the Ruchases learned that the initial policies had lapsed for non-payment of premiums, and that Dings had taken out loans against the initial policies to pay premiums on the 1987 VALs. Second Am. Compl. at ¶ 156. Consequently, the Ru-chases had to pay additional funds to have the initial policies reinstated and to keep the 1987 VALs in force. Second Am. Compl. at ¶ 157. The Ruchases sued Prudential on February 28, 1995. Second Am. Compl. at ¶ 157. 4. Norman Gassman Was Victimized by Vanishing Premium and Investment Plan Tactics 21. Plaintiff Norman Gassman is an Ohio citizen. Second Am. Compl. at ¶ 16. He manages a women’s shoe store. Second Am. Compl. at ¶ 160. In August of 1992, Gass-man purchased from Prudential a variable appreciable life insurance policy (policy number 98354001), allegedly as a result of Prudential’s fraudulent scheme. Second Am. Compl. at ¶ 16. 22. In August of 1992, Gassman had $20,-000 invested in a certificate of deposit when Prudential agent Ben Schwartz, who held himself out as a “financial planner” or “financial consultant,” contacted him. Second Am. Compl. at ¶ 161. Schwartz misrepresented that a VAL policy was part of an “investment plan” that was “better than a CD,” that it would pay a higher rate of interest at low risk, and that the earnings on this investment would be tax-free. Second Am. Compl. at ¶ 162. Schwartz also misrepresented to Gassman that he would not be required to pay any premiums for the VAL policy because the VAL policy could reasonably be expected to yield enough dividend income to pay its own premiums in addition to providing a yield exceeding that which Gassman had earned on his Certificate of Deposit. Second Am. Compl. at ¶ 162. Although Schwartz disclosed to Gassman that some life insurance would be included with the VAL policy, he failed to disclose that the product was not an investment plan and that a substantial portion of the funds Gassman was “investing” would not, in fact, be invested. Second Am. Compl. at ¶ 165. 23. Relying on these misrepresentations, Gassman agreed to invest the money from his CD in the VAL policy. Second Am. Compl. at ¶ 164. During the following months, Gassman received notices from Prudential that contradicted Schwartz’s representations. Second Am. Compl. at ¶ 166. When Gassman confronted Schwartz, he responded that Gassman should not worry because Gassman was being assessed special charges that would cease after the first two years. Second Am. Compl. at ¶ 166. 24. In March of 1995, Gassman discovered that the VAL policy was not an investment plan, that he had paid undisclosed fees and commissions to Prudential and its agent, and that Prudential had concealed that its dividend scales would not perform as represented. Second Am. Compl. at ¶ 167. Gass-man sued Prudential on May 25, 1995. Second Am. Compl. at ¶ 168. C. The Court Has Granted the Requests of Several Class Members to Intervene 25. The Court granted the motions of objectors Treadway, Parnell, and Ginsberg to intervene in Scheduling Order No. 6, dated January 6, 1997 and the Court granted the motion of objectors Rathryn Johnson and Richard Johnson to intervene in the Court’s Order of January 29,1997. D. Plaintiffs Sued Prudential, a Mutual Life Insurance Company and One of the Largest Life Insurance Companies in the Country 26. Prudential is a corporation organized under the laws of New Jersey, and has its principal office at 751 Broad Street, Newark, New Jersey. Second Am. Compl. at ¶ 17. Prudential is a mutual life insurance company, meaning that it is owned by its policyholders by virtue of their ownership of Prudential products. Second Am. Compl. at ¶ 19. Unlike other corporate forms, a mutual life insurance company has no shareholders. Prudential was formed in 1873 and is one of the oldest and largest life insurance and annuity companies in the United States. Second Am. Compl. at ¶ 19. As such, Prudential does business in all fifty states and employs over 20,000 full-time professional career agents in the United States and Canada. Second Am. Compl. at ¶ 20. Prudential also uses other distribution networks to sell its financial products. Second Am. Compl. at ¶ 20. 27. Prudential has invited public trust and confidence in its integrity and skills by using national advertising and standardized sales presentations that portray the Rock of Gibraltar as Prudential’s service mark and that refer to Prudential products as a “piece of the Rock.” Second Am. Compl. at ¶20. E. Plaintiffs Have Also Sued Several Individual Defendants Who Were Upper Echelon Prudential Managers 28. The individually named defendants include Robert A. Beck, Ronald D. Barbaro, and Robert C. Winters. Beck is a New Jei’sey citizen. He was Pxnxdential’s President from 1972 to 1979, and its Chaiiman and CEO from 1978 to 1987. Second Am. Compl. at ¶ 18(a). Barbaro is a Canadian citizen. He was Prudential’s President from 1990 to 1992. Second Am. Compl. at ¶ 18(b). Winters is a New Jersey citizen. He was Prudential’s Chairman and CEO fi’om 1987 to 1993 and its Chairman, CEO, and President from 1993 to 1994. Second Am. Compl. at ¶ 18(c). F. Several State Government Representatives Have Contributed to These Proceedings 29. The Court has allowed several states to participate in these proceedings because the states have expressed strong interests in the outcome. The Court has permitted the California Insurance Commissioner and the Floi’ida Insurance Commissioner to appeal as amicus curiae. Order dated February 3, 1997. The Court has permitted the Massachusetts Insurance Commissioner, the Massachusetts Attorney General, and the Texas Insurance Commissioner to intervene pursuant to Federal Rule of Civil Procedure 24(b). Id. The Court has recognized that the Florida Attorney Genei’al has standing to appear before the Court as an objector to the Proposed Settlement. Id. And, although the Court has not formally addi’essed the status of the New Jersey Department of Insurance in these pi'oceedings, the Court has permitted the depaiiment amicus curiae status, on behalf of the department itself and on behalf of the Multi-State Life Insurance Task Force. See infra section III.B. 30. California, Florida, Massachusetts, and Texas initially filed objections to the Proposed Settlement. Between February 20 and 22, 1997, all four of these states settled with Prudential, or signed letters of intent to do so, and withdrew their objections to the Proposed Settlement. At that time, Prudential agreed to additional enhancements (the “Final Enhancements”) to the Proposed Settlement. Because of these additional enhancements, the four previously objecting states now find that the Proposed Settlement is fair, reasonable, and adequate and fully protective of the rights of their citizens. These Final Enhancements have been incorporated into the Proposed Settlement to benefit class members in all states. II. Plaintiffs Allege that Prudential Conducted a Scheme to Deceive Policyholders into Bxiying Prudential Life Insurance Products 31. Prudential engaged in a systematic fraudulent marketing scheme in which its agents wrongfully induced policyholders to purchase certain Prudential life insurance policies. Second Am. Compl. at ¶ 5. Prudential implemented its scheme through the use of false and misleading sales presentations, policy illustrations, marketing materials, and other information that Prudential approved, prepared, and disseminated to its nationwide sales force. Second Am. Compl. at ¶ 5. 32. Prudential sells primarily three types of financial products: (1) life insurance policies (term, whole life, and combinations of these), (2) annuities, and (3) investments through its securities subsidiary. Second Am. Compl. at ¶ 21. Prudential’s whole life insurance products consist of both traditional whole life policies and VAL polices. Second Am. Compl. at ¶ 21. 33. Prudential prepares, underwrites, and issues all of its products from Prudential’s New Jersey headquarters. Second Am. Compl. at ¶ 22. Prudential also provides or approves all sales presentations, policy illustrations, and other information used to sell insurance to the public. Second Am. Compl. at ¶ 22. Prudential supplies its agencies with preapproved materials including product brochures, pre-call letters, computer-based sales and illustration systems, seminar materials, and newspaper advertisements. Second Am. Compl. at ¶ 22. Prudential prohibits its agents from using any advertising or marketing materials that Prudential has not first approved. Second Am. Compl. at ¶¶ 22-23. 34. Beginning in the early 1980’s, Prudential used its centralized marketing system to implement a scheme to sell new insurance polices to existing and new customers through three deceptive sales tactics: “churning,” “vanishing premium,” and “investment plan” techniques. Second Am. Compl. at ¶ 25. A. Prudential Used a Deceptive Sales Practice Called “Churning” to Sell Policyholders Replacement Policies 35.Prudential agents used “churning” tactics to induce policyholders with significant cash values in existing policies to purchase new policies, thereby depleting the cash values of existing policies and diverting these values to Prudential. Second An. Compl. at ¶¶ 30-40. 36. In the life insurance context, the term “churning” refers to the removal, through misrepresentations or omissions, of the cash value, including dividends, of an existing life insurance policy or annuity to acquire a replacement insurance policy. Second Am. Compl. at ¶ 28. The value of the first policy may be reduced either by borrowing against the policy or by virtue of the policy’s lapse. Second Am. Compl. at ¶ 28. Churning often results in financial detriment to the policyholder, a financial benefit to the agent by virtue of a large commission on the first year premium, and administrative charges being paid to the insurer. Second An. Compl. at ¶ 29. 37. Prudential and the individual defendants trained Prudential’s nationwide sales force to convince existing policyholders to use the cash values and/or dividends of existing polices to purchase replacement insurance policies with purportedly greater death benefits and cash values. Second Am. Compl. at ¶ 30. Prudential carried out its scheme through informing agents of, among other policyholder information, the amount of accumulated cash values in existing policies. Second Am. Compl. at ¶ 31. Prudential agents used this information to target elderly persons who had cash values in existing policies. Second Am. Compl. at ¶ 32. On June 5, 1995, Prudential finally announced to its agents that they were not to use specialized software to determine current policyholders’ cash values or dividends. Compl. at ¶ 51. Second Am. 38. Prudential distributed to its agents software programs that contained numerous form letters to solicit business from then-existing customers. Second Am. Compl. at ¶33. Prudential also gave new agents a “book of business,” which listed existing Prudential policyholders and illustrated each policyholder’s built-up cash values and accumulated dividends, instructed the new agents to sell the existing policyholders additional insurance and replacement policies, and provided its agents with audio tapes to teach the agents to churn. Second Am. Compl. at ¶ 34. 39. The agents then used their knowledge of existing customers’ cash values and their knowledge of how to churn to call on the existing customers and convince them to acquire new insurance policies. Second Am. Compl. at ¶ 35. Agents misrepresented that the new insurance could be acquired through using only dividends from existing policies and that the policyholder would receive additional coverage for little or no additional premiums. Second Am. Compl. at ¶ 36. 40. Additionally, Prudential trained its agents to ask the customer to sign one or more “disbursement request forms” in blank. Second Am. Compl. at ¶ 37. Prudential printed the forms and distributed them to its agents. Second Am. Compl. at ¶37. The forms allow policyholders to make policy loans, to execute dividend option changes, to surrender paid-up additional insurance, to withdraw accumulated dividends, or to cash surrender the policy. Second Am. Compl. at 1137. 41. Prudential trained its agents to complete the loan section of the disbursement request form to facilitate and conceal their churns. Second Am. Compl. at ¶¶ 38^40. The agent would indicate on the form that a loan would be used to pay premiums on other contracts and would, thereby, extend Prudential credit to the insured to cover the premiums to acquire a replacement policy. Second Am. Compl. at ¶38. The insured, thereby, could be led to believe for several years that the replacement policy provided increased death benefits without additional premiums. Second Am. Compl. at 1140. When the existing policy cash values had been depleted by the loans, however, Prudential would then require the insured to pay the additional premiums. Second Am. Compl. at ¶ 40. If the insured was unable or unwilling to pay, the policies would lapse. Second Am. Compl. at ¶ 40. 42. Prudential compounded the injuries caused by its churning by classifying replacement policies as new policies. Second Am. Compl. at ¶ 41. This classification allowed Prudential and its agents to exact significantly higher fees and commissions than would be permitted in the case of a legitimate replacement transaction. Second Am. Compl. at ¶ 41. 43. Prudential was aware that replacement is rarely in the best interests of the policyholder because: (1) existing policy premiums are usually lower because a replacement takes place when the insured is in a less favorable underwriting class; (2) acquisition costs are charged in the early years of a policy and the policyholder incurs these costs again with the replacement policy; and (3) replacement renews the risk that an incontestability or suicide clause will be incorporated into a policy. Second Am. Compl. at ¶ 44. Prudential’s own corporate policy manuals purport to prohibit churning. Second Am. Compl. at ¶ 46. 44. Prudential required agents to give prospective policy purchasers a replacement disclosure form explaining that replacement is not typically in the policyholder’s best interests, but agents routinely failed to do so. Second Am. Compl. at ¶47. Prudential repeatedly discouraged and inhibited its agents from providing adequate disclosures to the policyholders. Second Am. Compl. at ¶47. Moreover, Prudential’s agent compensation system, which caused rapid agent turnover and a “produce or die” atmosphere, exacerbated the pressure to churn. Second Am. Compl. at ¶ 49. 45. Prudential trained its agents to extend the deception when they were contacted by policyholders who had received confusing paperwork from Prudential. Second Am. Compl. at ¶ 50. Policyholders would call Prudential when they received notices indi-eating that loans had been taken against their policies. Prudential trained its agents to advise customers “not to worry,” “that the notice was a mistake,” or that the agent “would take care of it.” Second Am. Compl. at ¶ 50. B. Prudential Misstated that the Premiums on Its Life Insurance Products, Including Abbreviated Payment Plan Policies, Would Vanish 46. Prudential agents used “Abbreviated Payment Plan” (“APP”), or “vanishing premium” policies, often in conjunction with churning, to sell permanent life insurance policies to class members; Prudential agents misrepresented that policyholders would have to pay no out-of-pocket premiums after a certain number of premium payments during the initial years of the policies. Second Am. Compl. at ¶¶ 52-61. 47. Prudential agents sold these APP policies to class members by using standardized sales presentations and written policy illustrations created from the hardware and software that Prudential distributed. Second Am. Compl. at ¶¶ 53, 55-56. Moreover, Prudential prepared and disseminated standardized sales presentations, scripts, and other materials to extol Prudential’s APP policies. Second Am. Compl. at ¶¶ 52-56. 48. Prudential’s standardized sales presentations and policy illustrations failed to disclose that the policy premiums would not vanish and that Prudential did not expect the policies to pay for themselves as illustrated. Second Am. Compl. at ¶ 56. Prudential’s illustrations also did not inform policyholders of the assumptions on which the policy illustrations were based, assumptions which had no reasonable basis in fact. Second Am. Compl. at ¶ 56. 49. Agents frequently merged churning tactics and APP policies, forcing policyholders to pay the premium cost of the APP policy by dissipating the cash value of an existing life insurance policy. Second Am. Compl. at ¶ 57. Agents would intentionally conceal this dissipation from the policyholders. Second Am. Compl. at ¶ 57. 50. Prudential failed to apprise policyholders of the enhanced risks that they assumed in purchasing Prudential life insurance polices in the 1980’s. Second Am. Compl. at ¶ 58. At that time, Prudential created new classes of dividend participating individual life policies sensitive to then-existing interest rates, policies based on the so-called Income Generation Approach (“IGA”). Second Am. Compl. at ¶ 58. Prudential knowingly failed to disclose that these policies would suffer greater adverse consequences when interest rates declined and Prudential lowered its dividend rates to correspond with declining interest rates. Second Am. Compl. at ¶ 59. Whereas in previously written policies dividends were pooled with premium proceeds from policies invested over many years, these new policies were invested in a smaller pool and risked greater exposure to declining returns on Prudential investments. Second Am. Compl. at ¶ 59. Prudential agents used standardized illustrations that failed to disclose this enhanced risk. Furthermore, Prudential agents failed to explain the risk at the time of sale or afterward. Second Am. Compl. at ¶ 59. 51. Prudential’s senior management knew early in the Class Period that the assumptions underlying the APP illustrations were fundamentally flawed, but continued to approve the sale of these policies to class members without adequate disclosures. Second Am. Compl. at ¶ 61. C. Prudential Fraudulently Marketed Its Insurance Policies as Investment Vehicles 52. Prudential fraudulently marketed life insurance polices as “investment plans,” “retirement plans,” or similar investment vehicles. Second Am. Compl. at ¶¶ 62-71. Plaintiffs allege that Prudential agents failed to disclose that these purported “investment plans” were really standard life insurance policies, which carried costs and other components that materially and adversely differed from true investment or retirement plans. Second Am. Compl. at ¶¶ 62-71. These misrepresentations and omissions violated many applicable regulations prohibiting the sale of life insurance as an investment plan. Second Am. Compl. at ¶ 70. 53. Specifically, Prudential misrepresented to policyholders, through standard presentations and materials, that life insurance policies were equivalent to investment or savings accounts, pension maximization or retirement plans, college-tuition funding plans, mutual funds, or other investment or savings plans. Second Am. Compl. at ¶ 62. Prudential’s sales presentations did not even use the phrase “life insurance.” Second Am. Compl. at ¶ 63. For example, Prudential used mailers and promotional brochures entitled “Guaranteed Income for Life,” which did not indicate that the product being sold was life insurance. Second Am. Compl. at ¶ 63. Instead, these presentations labeled what were essentially premium payments as “deposits,” “savings,” “contributions,” or “payments.” Second Am. Compl. at ¶ 63. 54. As with the APP plans, Prudential agents often used the investment plan scheme in conjunction with churning to persuade existing policyholders to replace their policies with “new” ones, misrepresenting the benefits that policyholders could achieve by transferring the accumulated cash values to the “investment plan.” Second Am. Compl. at ¶ 63. In particular, agents often misrepresented Prudential’s VAL policy as a financial investment. Second Am. Compl. at ¶ 64. Prudential encouraged or permitted these fraudulent sales by providing agents presentations and materials (including mailers, promotional brochures, and videotapes). Second Am. Compl. at ¶¶ 65-66. 55. Prudential knew that agents selling the VAL policies were required to be registered with the National Association of Securities Dealers (“NASD”), and that delivery of a prospectus was required, but nevertheless encouraged VAL sales by agents who were not NASD registered and who did not provide the appropriate prospectus. Second Am. Compl. at ¶¶ 67, 70. Thus, Prudential was aware of the widespread use of the “investment plan” sales tactic and encouraged it. Second Am. Compl. at ¶ 71. D. Prudential and the Individua