John Priebe Senior Waseca, Minn. Death: Five years before his beloved granddaughter passed away, Paul Rosenau purchased a winning lottery ticket and saw divine providence at work.
He and his wife, Sue, set aside a sizable portion of their net winnings, $26.4 million, to find a cure for the rare genetic disorder that claimed their granddaughter’s life. To manage the money, Rosenau hired a financial adviser from Waseca, Minn., who was associated with Principal Financial Group, based in Des Moines.
Rosenau claims Principal and the adviser invested in inappropriate and costly insurance products, causing financial harm. Last week, Rosenau’s charitable foundation was awarded a $7.3 million arbitration judgment against an arm of Principal, reportedly the largest of its kind in Minnesota.
“We are kind of old-fashioned people, and we trusted our advisers,” said Rosenau, who is 70 years old.
“When they told us to ‘sign here,’ that is what we did, and in the end, it was not in our best interest.”The principal did not respond to multiple requests for comment. John Priebe, the Principal Representative who directly managed the Rosenaus’ funds, died in January 2020.
Rosenau only played the lottery when the jackpots were large — and on May 3, 2008, when he purchased one Powerball ticket, the kitty was at record highs. He and Sue were watching the 10 o’clock news in their Waseca home when the anchorman said that someone in Minnesota had won large. Rosenau took out his ticket and listened as the newscaster read the magic numbers. His and Sue’s lives had abruptly and profoundly transformed.
Rosenau, a bulldozer and backhoe operator who has three children, earned $180 million. At the time, it was Minnesota’s highest Powerball jackpot ever. Rosenau accepted the funds in the form of a $88 million cash payout adjusted for present value. After taxes, Harry and Sue had a nest egg worth approximately $60 million.
“We pretty much gave everything but $10 million away,” according to Rosenau. Rosenau, a Lutheran pastor’s son, gave a generous donation to his church. His generosity assisted a local hospital as well as a Waseca community fund.
The pair donated $26.4 million to the Rosenaus Foundation, which fights Krabbe disease, a deadly condition that damages the nervous system, generally in young children. The Rosenaus’ first grandchild, Makayla, died at the age of two. Paul Rosenau carries a frame containing photos of his granddaughter Mikayla.
The Rosenau Family Research Foundation, which has its own scientific advisory group, awards $1.5 million to $2 million annually to scholars across the United States, he said. The foundation provided funding for pre-clinical research that led to the development of a Krabbe disease medication that is currently being tested by federal regulators.
Rosenau stated that he called his accountant shortly after confirming that they had the winning lottery tickets. With no investment background, he had to figure out how to manage all of that money. Rosenau signed on with Priebe and the Principal.
Rosenau signed on with Priebe and the Principal. As a token of thanks, the Principal dispatched a company plane to fly the Rosenaus from Waseca to Des Moines for a meeting with its senior executives.
“They were trying to impress us that they were a big company and that they could handle us,” Rosenau told me. And Priebe “seemed to be an honest person you could trust,” Rosenau stated. Rosenau and Priebe, who was voted Principal’s Agent of the Year in 2012, occasionally traveled together.
They went to Omaha twice to attend Berkshire Hathaway’s annual meeting, which featured the company’s famed CEO, Warren Buffett. Rosenau stated that they traveled to Hawaii and Jamaica with their spouses on the Rosenaus’ dime. However, by spring 2017, the Rosenaus’ trust in Priebe and Principal had diminished, according to records in a Minnesota lawsuit against Principal Financial Group and a case against the associated Principal Securities before the Financial Industry Regulatory Authority.
The documents stated that there was a disagreement about the viatical sale of an insurance policy established by Priebe. Sue’s life insurance coverage was held by the charity. Viatical offers are discount sales designed to free up cash while the person is still living.
Sue died in 2018, after being diagnosed with cancer in October 2015. If the viatical transaction had not occurred, the foundation would have received the policy’s full value of $3 million for her life. Sue died in 2018, after being diagnosed with cancer in October 2015. If the viatical transaction had not occurred, the foundation would have received the policy’s full value of $3 million for her life. Instead, the foundation received approximately $1.4 million from the viatical sale, but the investor who purchased the policy received the entire $3 million.
Don McNeil and Patrick O’Neill, Minneapolis attorneys, filed a complaint with FINRA in 2022 on behalf of the Rosenau foundation, alleging that Principal Securities breached FINRA guidelines and US securities laws. FINRA is a federally authorized body that enforces standards for securities brokers and brokerage firms. The foundation claimed that Priebe and Principal made unwise and costly investments, losing 99% of the Rosenau foundation’s capital in variable nonqualified annuities and eight life insurance policies.
A nonqualified variable annuity is similar to a mutual fund portfolio that makes tax-deferred payments. However, the foundation noted that it has high costs and fees and provides no higher returns than less expensive mutual funds. Furthermore, the foundation was tax-exempt, thus the annuities’ tax benefits were ineffective. However, the annuities “generated huge commissions for Priebe and Principal,” according to the foundation’s FINRA complaint. “The foundation’s assets were wasted.”
The Rosenau foundation said it would have made more money if not for the alleged mismanagement. It sought to collect $22 million for “loss of use of capital” — such as expected gains from a portfolio of stocks and bonds — or at least $6.8 million for money lost due to inappropriate annuity and life insurance purchases.
On June 5, a panel of three FINRA arbitrators ruled Principal Securities responsible without explaining their reasoning. It ordered Principal to pay $7.34 million in compensatory damages, but refused the foundation’s request for punitive penalties and legal expenses. In 2022, the foundation and Rosenau family members filed a lawsuit against Principal Financial and two of its subsidiaries in Waseca County District Court, alleging negligence and fraud. The pending dispute involves two Rosenau family life insurance trusts that are separate from the foundation.
Priebe is not individually named in the lawsuit or the FINRA process because they were filed after his death. The Rosenau Foundation ended its affiliation with Priebe in 2017. Principal “discharged” Priebe in late October 2019 because to “concerns with his business practices and the lack of documentation supporting them,” according to a FINRA document. Priebe, 49, died of suicide less than three months later.
Wo Was John Priebe
Financial Advisor at Principal Financial Group. This past May, the Waseca Area Foundation (WAF) received a large cash gift from the late John P. Priebe. According to John’s desires, two funds have been established to support grants in Waseca County. The first fund is the John P. Priebe Fund for Community Runs, Outdoor Events, and Bike Paths in Waseca County. The second fund is the John P. Priebe Memorial Fund for Waseca/Janesville K–12 Education. Grants for both programs will commence in 2021, with applications available at the WAF office or on the website.
John was a Senior Advisor at Principal Financial Group dba Priebe Financial for the previous eighteen years, and he had been actively involved in his community: I am a Waseca Chamber member, a Rotary member, and a former WAF board member. In addition, John contributed financially to a number of community-sponsored events, youth sports groups, and schools. Whether it was the Waseca Triathlon, the Waseca County Fair, Books for Kids, the Fire Department, or Farm America, John’s generosity was extensive.
