U.S. Securities and Exchange Commission
Washington, DC 20549
NOTICE OF EXEMPT SOLICITATION
1. Name of the Registrant:
AETNA, INC.
-----------------------------------------------------------------------------
2. Name of the person relying on the exemption:
CHANGE TO WIN INVESTMENT GROUP
-----------------------------------------------------------------------------
3. Address of the person relying on exemption:
1900 L STREET, NW, SUITE 900, WASHINGTON, DC 20036
-----------------------------------------------------------------------------
4. Written materials. Attach written materials required to be submitted
pursuant to Rule 14a-6(g)(1):
From: Emma Bayes
Sent: Thursday, April 25, 2013 11:59 AM
To: [various recipients]
Subject: New Inaccuracies in Aetna's Political Spending Disclosure
Hello,
Please find linked [as reproduced below] the CtW Investment Group's letter
to Aetna, Inc. Our research indicates that the company's political
disclosure reports since 2005 contain some significant inaccuracies, findings
which we hope you will consider before voting at the company's May 17, 2013
annual meeting. As our letter describes, we found that Aetna has consistently
understated the size of its contributions to the Republican and Democratic
Governors Associations, cumulatively understating contributions by over $1
million. Our findings follow last year's revelation that Aetna had
contributed over $3 million to the American Action Network without
disclosure, suggesting serious weaknesses in the Aetna's internal controls
over political spending.
Please feel free to contact Rich Clayton at (202) 721-6038 if you have any
questions
Regards,
Emma Bayes
CtW Investment Group
1900 L St. NW, Suite 900
Washington, DC 20036
CTW INVESTMENT GROUP
April 17, 2013
Edward J. Ludwig
Lead Director
Aetna, Inc.
151 Farmington Avenue
Hartford, CT 06156
Dear Mr. Ludwig:
Our research indicates that significant inaccuracies exist in Aetna's
political reporting. As we describe in detail below, since 2005 Aetna's
receipts understate Aetna's actual contributions by over $1 million.
We urge you and the board of directors to immediately take the following
steps to address these inaccuracies:
- Issue a correction to past political spending disclosures to ensure
that shareholders viewing these disclosures online have the most
accurate information available to them.
- Retain a forensic accounting firm to independently audit Aetna's
political contributions since 2005 to ensure that there are no other
inaccuracies in these reports.
- Take whatever steps necessary to ensure that future political
reporting is fully vetted by the board so that inaccuracies similar
to those we have discovered do not mislead shareholders with respect
to the scale and direction of Aetna's political activities.
The CtW Investment Group works with pensions and benefit funds sponsored
by unions affiliated with Change to Win, which collectively invest over
$200 billion in assets. These funds are significant shareholders in publicly
traded companies, including Aetna.
BACKGROUND TO AETNA'S DISCLOSURE OF CORPORATE POLITICAL SPENDING
In the 2006-07 proxy season, Mercy Investment Services filed a shareholder
resolution requesting Aetna's disclosure of corporate political contribution
expenditures. The resolution was withdrawn because the two entities were
able to negotiate a political spending policy, which was outlined in a letter
of agreement. The letter from Aetna was dated January 22, 2007 and reads in
part as follows:
- Aetna will annually disclose (in either its Political Contributions
Report or some newly created report and on its external website) the
following information with respect to the use of corporate funds for
political purposes:
- the total annual amount of corporate funds expended by Aetna for
state and federal lobbying and political purposes (which includes
compensation paid by Aetna for lobbying, outside consultant fees,
coalition and trade association payments used for lobbying, etc.)
- The portion of all coalition and trade association payments (total
dollars) paid by Aetna and allocated for lobbying, political and other
non-deductible purposes (such as grassroots expenditures).
1900 L Street, NW, Suite 900 Washington, DC 20036
202-721-0660
330 W. 42nd Street, Suite 900 New York, NY 10036
212-290-0308
www.ctwinvestmentgroup.com
- The identity of the top trade associations receiving Aetna corporate
funds ($50,000 plus) and the portion of our payments allocated by such
coalitions or trade associations to lobbying, political or other non-
deductible activities./1/
Our research indicates that Aetna has yet to live up to this agreement. In
addition to well-documented instances where Aetna contributed funds to the
U. S. Chamber of Commerce and the American Action Network for unambiguously
political purposes, Aetna's disclosures of its contributions to "527" groups
have understated its actual contributions by over $1 million./2/
In Aetna's 2011 Political Contributions and Related Activity Report (the most
recent year available) the company disclosed contributions of $100,000 to both
the Republican Governors' Association (RGA) and the Democratic Governors'
Association (DGA). Both Governors Associations' 8872 filings with the Internal
Revenue Service (IRS) tell a different story: a total of $350,000 in
contributions to the RGA from Aetna, Inc. and a total of $350,250 in
contributions to the DGA from Aetna subsidiary Aetna Schaller Anderson.
These undisclosed contributions increase Aetna's corporate political
expenditure total for 2011 by 44%. The opening letter of the 2011
contributions report tells shareholders that the report details the corporate
political contributions of Aetna, Inc. and its subsidiaries, falsely leading
the reader to believe that the report does indeed include all corporate
political contributions.
In fact, our analysis shows that Aetna has a pattern of under-reporting RGA and
DGA contributions. Going back to 2005, when Aetna began disclosing its
corporate political expenditures, the disclosed total contributions to the RGA
and DGA almost never match with the IRS filings, as shown on the chart below:
[CHART APPEARS HERE]
TABLE I: AETNA'S REPORTED VS. ACTUAL CONTRIBUTIONS 2005-2011/3/
Year RGA Contributions DGA Contribution Corporate Contribution Totals
Disclosed Actual Disclosed Actual Disclosed Actual Differ- %
ence Increase
2011 $100,000 $350,000 $100,000 $350,250* $636,350 $1,136,600 $500,250 44.0%
2010 $70,000 $ 71,350 $50,000 $ 50,315* $452,950 $ 454,615 $ 1,665 0.4%
2009 $0 $100,000 $0 $100,295**$124,700 $ 324,995 $200,295 61.6%
2008 $0 $ 450 $0 $100,125 $185,831 $ 286,406 $100,575 35.1%
2007 $0 $ 50,000 $0 $0 $219,650 $ 269,650 $ 50,000 18.5%
2006 $2,500 $ 77,500 $0 $ 50,000 $251,500 $ 376,500 $125,000 33.2%
2005 $0 $ 26,375 $0 $ 10,000 $188,150 $ 224,525 $ 36,375 16.2%
__________________
/1/ http://www.iccr.org/news/press_releases/pdf%20files/070912AetnaDisclosure
Letter.pdf
/2/ "527" groups are named from the section of the tax code under which they
are fall if their primary activities are "influencing or attempting to
influence the selection, nomination, election or appointment of any individual
to any Federal, state, or local public office or office in a political
organization, or the election of a Presidential or Vice-Presidential
electors." http://www.irs.gov/irm/part7/irm_07-027-011.html
/3/ Disclosed amounts are compiled from Aetna's Political Contributions and
Related Activity Reports; actual contributions complied from Forms 8872 filed
with the IRS for the Republican and Democratic Governors Associations.
Because the Audit Committee is responsible for oversight of corporate political
contributions and "compliance with the overall policy, process and contributions
criteria with respect to such contributions or activity,"/4/ these discrepancies
undermine the credibility of the board. The fact that the corporate political
contributions to both the Republican and Democratic Governors' Associations do
not match the amount disclosed in the contribution reports brings into question
whether all corporate contributions are indeed being evaluated by the Audit
Committee in accordance with policy.
Furthermore, this underreporting suggests a larger problem. Our analysis is
limited to the RGA and DGA because, as 527s, they have a legal obligation to
report their receipts to the IRS, which makes those reports publicly available.
Other organizations, including trade associations and purportedly educational
non-profits, are not obligated to make such disclosures even when they utilize
contributed funds for such overtly political purposes as television
advertisements imploring viewers to vote against candidates in an upcoming
election. Consequently, it is not possible for shareholders to independently
determine if Aetna's disclosures of corporate political spending contain any
other inaccuracies. However, the fact that the only recipients of Aetna's
corporate political expenditures that are required to disclose receipts report
substantially different contributions from Aetna and its subsidiaries than
Aetna itself discloses strongly suggests to us that these discrepancies are
only the "tip of the iceberg."
AETNA'S ACCIDENTAL DISCLOSURES SUGGEST EVEN GREATER UNDERREPORTING
We believe that the Aetna's unintended disclosure of its recent contributions
to the Chamber of Commerce of the U.S.A. ("Chamber") and the American Action
Network confirm the existence of a substantial "iceberg." As you know, in
June of 2012 Aetna reported a $4,479,200 contribution to the Chamber and a
$3,317,925 contribution to the American Action Network in a year-end
regulatory filing with the National Association of Insurance Commissioners
("NAIC")./5/ When shareholders pressed Aetna about the additional
contributions, the company argued that the money went to "education
activities"/6/ and therefore did not require disclosure under its political
spending policy. Aetna subsequently amended the NAIC filing to exclude the
disclosures./7/ $4 million of the Aetna contribution to the US chamber of
Commerce was later added to the 2011 Political Contributions and Related
Activity Report as a mere footnote and with a distinction that it was for
"voter education initiatives," while the ANN contribution was left out
entirely./8/
It is unclear to us why the board accepts this dubious distinction, since
"voter education" at the Chamber involves ad campaigns which attack
political candidates running for office. For instance, a television ad in
Virginia told voters to "Reject Tim Kaine and the Union Bosses."/9/ In
Ohio, one Chamber ad attacked Sherrod Brown for being a "deciding vote
for Obamacare" and asking "Sherrod, what planet are you on?"/10/ At the
same time the Chamber launched another ad in Ohio, which tells voters to
support Representative Renacci because of his efforts to "repeal
Obamacare."/11/ In fact, the above mentioned ads were just a part of the
largest ad campaign in the Chamber's
____________________
/4/ http://www.aetna.com/about-aetna-insurance/document-library/pac/2011-
Aetna-PAC-annual-report.pdf - pg 6
/5/ http://www.citizensforethics.org/page/-/PDFs/Legal/Letters/6-14-12_
Aetna_Letter_Exhibits.pdf?nocdn=1
/6/ http://www.prnewswire.com/news-releases-test/investor-group-reacts-
to-aetna-political-contributions-report-says-lack-of-disclosure-
underscores-need-for-greater-transparency-in-corporate-political-and-
lobbying-expenditures-167972966.html
/7/ http://money.cnn.com/2012/06/14/news/economy/aetna-political-
contributions/index.htm
/8/ http://www.aetna.com/about-aetna-insurance/document-library/pac/2011-
Aetna-PAC-annual-report.pdf - pg 6
/9/ http://www.youtube.com/watch?v=CHcJlUO_rzI
/10/ http://www.youtube.com/watch?v=2QADOQlGUKU
/11/ http://www.youtube.com/watch?v=OVpuGVkmI04
history. The campaign targeted 12 House of Representatives seats and eight
Senate races, placing ads in 16 states and more than 40 media markets across
the country./12/ There is no doubt that the contributions given to fund
these ad campaigns were political and should have been disclosed as such on
the annual political contributions report. The argument that campaigns to
educate voters through attack ads on candidates for public office are not
political does not hold much weight in our view.
Similarly, in 2012 The American Action Network launched a $1.2 million dollar
ad campaign to repeal the Affordable Care Act. One mailer used the following
sentence to scare seniors: "If the Obama government takeover of healthcare is
not repealed, seniors across America will suffer." The American Action
Network spent money to support or oppose 38 candidates for the United States
Congress in the 2012 election cycle./14/ In fact, the American Action
Network spends so much of its time trying to influence voters that its
nonprofit status with the IRS has been challenged by watch groups./15/
These unintentionally disclosed corporate political contributions suggest a
substantial problem. Since neither the Chamber nor the American Action Network
are required to disclose their contributors, we cannot confirm the accuracy of
Aetna's unintentional and partial disclosures. If the Audit Committee and the
board as a whole are not receiving accurate reports from company staff
concerning the amounts the corporation contributes to political groups, then
Aetna appears to be experiencing a significant breakdown in its internal
controls environment. Conversely, if the Audit Committee and the board are
aware that reported amounts are inaccurate, then directors are deliberately
misleading shareholders. In either case, a genuinely independent audit of
Aetna's political expenditures since 2005 is clearly needed.
CONCLUSION
Despite a long-standing agreement with shareholders to comprehensively report
political spending, it is evident that both the company's and the board's
current practices are inadequate. In the one area where corporate political
spending can be independently checked, substantial inaccuracies in Aenta's
reports to shareholders are evident. Moreover, it is clear that Aetna
contributes substantial sums for political purposes to groups that are not
required to disclose their contributions, preventing shareholders from
determining if even the partial reporting Aetna has provided with respect to
these contributions is accurate. We urge you and your fellow directors to
immediately correct the inaccuracies we have discovered, to retain an
appropriately independent and skilled forensic accountant to audit its past
political contributions and reporting, and to take all necessary steps to
ensure the accuracy and completeness of future political spending reports.
Sincerely,
/s/
Richard W. Clayton III
Research Director, CtW Investment Group
____________________
/12/ http://www.cleveland.com/open/index.ssf/2012/02/us_chamber_of_commerce_
places.html
/13/ http://americanactionnetwork.org/topic/aan-launches-12-million-advocacy-
encouraging-members-keep-fighting-obamacare-voting-repeal-wee
/14/ http://www.opensecrets.org/outsidespending/recips.php?cmte=American+
Action+Network&cycle=2012
/15/ http://www.campaignlegalcenter.org/attachments/Final_Letter_to_IRS_8-
9-12.pdf