GWEN IFILL: For years, it has been common practice for private companies to sell life insurance and mutual funds investments to young soldiers who may not need or be able to afford it.
Even though such sales pitches have commonly occurred on military bases and some insurance agents have been disciplined along the way, Congress, the insurance industry, and the Pentagon have all failed to address the issue. New York Times reporter Diana Henriques's two-part investigation reveals new details. She joins us now. Welcome Diana.
DIANA HENRIQUES: Thank you, Gwen.
GWEN IFILL: Give us a nuts and bolts overview of what you found in your investigation.
DIANA HENRIQUES: Well, as you say, this is a long-standing and deeply rooted problem of sales agents who are mutual funds and insurance products getting access to soldiers, especially young recruits, the least experienced and most, you know, financially vulnerable young people, and selling them products that they don't understand, may not need and may not be suitable at all for them at all.
And they sometimes use misleading or deceptive sales practices to do that.
GWEN IFILL: Whose job is it to protect these marines and soldiers from these kinds of pitches?
DIANA HENRIQUES: Well, the Pentagon has a body of rules that govern commercial solicitation on military bases and those rules would, of course, prevent all of the practices that I found in my investigation but the problem is that those rules have been so inconsistently and weakly enforced over the years, that they're really quite ineffective.
The sanctions the Pentagon has imposed have been very rare, and efforts of the people at the individual bases to tackle these problems is really quite a mismatch. You have a local base and a few people there working on it up against the big national insurance company with its lawyers and its friends in Congress and it's quite an unequal match.
GWEN IFILL: I'm going to ask you to tell us some of the stories of the soldiers you profiled in your series, starting with a young man by the name of Brandon Conger.
DIANA HENRIQUES: Well, Brandon Conger was a young man from Missouri, going through Fort Benning, basic training at Fort Benning in late summer of 2002. He was part of a large group and his whole company was marched to a classroom at their barracks for what was supposed to be a briefing on personal finance.
Now the instructor giving that briefing, two people actually, who call themselves financial planners who were going to teach the kids about savings and investments, were actually insurance agents. And they quick stepped Brandon and his classmates through a bunch of paperwork, you know, sign here, initial here, and they marched out thinking they had signed up for some kind of savings plan that would help them save while they were in Iraq.
In fact, they had bought an expensive insurance policy that gave them a very small amount of additional life insurance coverage in exchange for very high premiums and a slow growing cash value that they would have to wait 20 years to get any money from. So they didn't understand what they were buying.
And Brandon went off to Iraq, served honorably there and came home. Now he is still trying to get a copy of his policy, to find out what he has actually signed up for, and feels very baffled by the whole process.
GWEN IFILL: Similar experiences for both Nick Stackler and Mike Friesenberg.
DIANA HENRIQUES: Yes, well Mike Friesenberg is in the same boat as Brandon. He's a delightful young 19-year- old who had just gotten engaged to his high school sweetheart. He thought he had some kind of a savings plan and has an insurance policy he is trying to understand.
When Nick Stackler came back from Iraq, however, his mother who carefully watched his finances while he was away, had been baffled by what this money was coming out of his paycheck for, and together they arranged to cancel his policy.
And that's when they learned that he had a policy in the first place and that by... even though he canceled it, he had lost $1300 of the $1,800 that had been taken out of his paycheck while he was away.
GWEN IFILL: So did these young soldiers and marines feel pressured when they walked into these compulsory planning sessions to sign up? Did they think it was part of the military policy?
DIANA HENRIQUES: Well, Gwen, you have to remember as some of the senior officers have told me, that troops going through basic training are running on four and five hours sleep, they're being taught information that will save their lives in combat.
They're supposed to say "yes, sir; no sir" and pay scrupulous attention to everything that happens in these classrooms. So they're very vulnerable to a sales pitch like this. It's a very vulnerable time.
That's actually why one of reasons the Pentagon's rules specifically forbid soliciting insurance business from recruits and trainees. They know that they're at a very vulnerable time in their military career.
GWEN IFILL: But if the rules specifically forbid this behavior, you said in your stories that this sort of thing has been documented for years, included going back as far as the Vietnam War -- if the rules forbid it, what actions have been taken to prevent it?
DIANA HENRIQUES: It is one of the most broken enforcement systems I've ever seen. The people who are trying to police this at the base level have very few resources, and if they try to sanction an agent or a company, it requires a lot of paperwork and hearings and due process procedures, so they often wind up just settling for fairly weak sanctions, a temporary suspension of sales, you know, a warning letter, that sort of thing.
The Pentagon itself at the headquarters level, has right to ban any company that misbehaves from coming back on base. But that's a sanction that's used only once in its history - back in 19...
GWEN IFILL: And in fact... I was just interrupting you to say in fact that's where Congress comes in. Congress had a chance to expand that ban and didn't do that.
DIANA HENRIQUES: Congress has been wrestling with this for at least five years under terrific lobbying pressure from the insurance industry, and it's understandable. There are lots of honest insurance agents who are trying to serve the military market and you know, they don't like that the whole universe of agents gets tarred with a bad brush when some agents misbehave.
But the struggle on whether or not to ban insurance agents from the bases entirely has preoccupied the lawmakers, the Pentagon policy makers and the industry lobbyists. That seems like an extreme step to the industry. They oppose it. And Congress has to a large extent supported them in that fight with the Pentagon.
So instead of focusing on a broken enforcement process, we focused instead on this particular piece of policy, and that sort of tied things in a knot for a long time.
GWEN IFILL: What about state insurance regulators? For instance, Fort Bragg, abuses are found... could the State of Georgia take action?
DIANA HENRIQUES: Fort Bragg in North Carolina or Fort Benning in Georgia, absolutely.
GWEN IFILL: I got the two forts confused. I apologize.
DIANA HENRIQUES: That's okay. Certainly state regulators police the markets and ideally could take action against the agents and companies in this case. The track record of that happening though, Gwen, is very uninspiring and un-encouraging.
The state regulators often don't have the resources. They don't have the easy access to the base. Sometimes the military can't be as cooperative. Sometimes the witnesses, the potential plaintiffs, have already been deployed to some foreign country or some other base in another state and the state regulators have trouble tracking them down.
So while it sounds good and easy to say "well let the state regulators do it, it's their job." When it comes to military people and military bases, it's a lot more complicated than that.
GWEN IFILL: So you've spent some time working on this project. What kind of response have you gotten from the readers and from people who maybe recognize themselves and the stories you told?
DIANA HENRIQUES: You know, I don't think I've ever gotten a response like this to stories that I've done. My e-mail today and telephone calls have been flooded with people in the military or recently out of the military who say "the same thing happened to me or the same thing happened to my son or my son just got back from Iraq and the same thing happened to him."
I've gotten a heartwarming number of messages from people saying "thank you for doing this, for focusing some attention on this."
And there does seem to be a very quickly growing interest in Congress to looking at this issue more broadly than they have so far, focusing beyond the issue of do we ban insurance agents or don't we, and looking at the overall issue.
GWEN IFILL: Diana Henriques, thank you very much, very good story, thank you.
DIANA HENRIQUES: Thank you, Gwen.