Bizarre Tale of $33 Million, & Where it Went

"Bedi convinced Davidson that he needed a bodyguard, at a cost of $30,000 a month, to protect him from Opus Dei and the United States government. Bedi told Davidson that he had hired a former member of the Israeli Mossad named 'Massoud' who would protect Davidson, although Davidson was never to look for him or expect to see him. Davidson paid Bedi thousands of dollars every month for Massoud's alleged protective services, through charges made by Bedi on Davidson's American Express ('AMEX') cards, to which Bedi and Ingvarsdottir had been given access." (All brackets as in complaint.)

Davidson adds: "Among other threats, Bedi falsely told Davidson that his children were in danger of being kidnapped, but that Bedi had devised an elaborate plan to protect them, which would cost Davidson $3 million, and could be paid in 'small' installments of $25,000 per week to Datalink, which would transfer the funds overseas. Such lies were used by Bedi to justify additional charges on Davidson's AMEX cards. Over a nearly five-year period, the Datalink charges for hundreds of unspecified services placed on Davidson's AMEX cards would eventually exceed $7 million."

Davidson claims that Ingvarsdottir, an Icelandic national, "aided Bedi in his efforts to convince Davidson that his life and those of his wife and children were in serious, imminent danger from dangerous and powerful individuals and international organizations."

He says that "taking advantage of the illusion of danger he had fabricated, Bedi pressured Davidson to enter into a series of agreements between them under which Bedi would assume responsibility for the Davidson family's personal security, and for computer security through protection arranged by Datalink."

He claims that Bedi persuaded him to enter into a "Complete Computer Solution Agreement," which required Davidson to make a onetime payment of nearly $11 million for electronic and physical security services, which were never provided.

"Bedi moved quickly thereafter to insure that Davidson would pay him the nearly $11 million for these alleged but worthless 'services,' as well as paying a gift tax of nearly $5 million for Bedi so he would pay no taxes on his windfall," according to the complaint.

Davidson says the millions came from his family trust at Wachovia and were handled by Bedi's accountant.

"Without any input from Davidson and without his knowledge, Bedi decided that his payment from Davidson was to be declared a 'gift' for federal gift tax purposes, even though the payment was for alleged security 'services.' This required Davidson to pay a large federal gift tax in addition to the $10.95 million he paid to Bedi," the complaint states.

In 2005, Davidson made Bedi a co-trustee of a $66 million family trust, according to the complaint.

Davidson says Bedi conspired with Wachovia brokers to bring Davidson's accounts to their bank and invest a portion of the trust's assets in Wachovia securities.

He says that though he had made it clear that he had no interest in hedge funds or derivatives, "around September 2007, the Wachovia brokers began to press Davidson to have the Davidson trusts purchase such an investment, called a 'periodic reset option'. It was a complex, highly leveraged investment in a basket of funds of hedge funds ('the hedge fund investment'). They suggested an initial $10 million investment from the Redwood Trust. ...

"Wachovia brokers, acting as agents for Wachovia Bank, claimed it would be 'safer than U.S. Treasury bills' and that Wachovia itself would 'take all the risk.'

"In reality, the risk was that any significant decrease in the value of the funds in the basket could quickly lead to the forced liquidation of the funds and the rapid decline in value of Davidson's investment unless he were willing to pump more money into the hedge fund investment. Moreover, the funds were very illiquid and could take many months or years to sell, as eventually happened in this case. Davidson did not understand this proposed investment, made clear he had no interest in it and demanded that the Wachovia brokers never suggest it again."

Nonetheless, Davidson says, without his knowledge or permission, through documents he never saw, Wachovia and Bedi took $10 million from Davidson's family trust and put it into the hedge fund: "Although Davidson had made his opposition to investing in this hedge fund product clear, and was readily available to the Wachovia brokers and Wachovia Bank officials, Wachovia Bank chose to work exclusively with Bedi on this transaction, even though it knew Davidson's money would be funding the hedge fund investment."

He claims that Wachovia did not even get his signature on the investment documents, and that "After Davidson protested that he was put into the investment against his will, the group told him, falsely, that the hedge fund investment was a done deal and it would cost him a considerable amount of money to get out of it."

Davidson says that in 2008, Wachovia brokers ended their relationship with Davidson and Bedi "in an effort to protect themselves from liability."

The bank then liquidated Davidson's investment and began an "early unwind" of the hedge fund investment, causing Davidson to lose much of the $10 million, Davidson claims.

He says although Wachovia had knowledge of Bedi's fraud, they continued to deal with Bedi as co-trustee of Davidson's trust until late 2008.

In 2009, Bedi joined Davidson in filing a lawsuit against Wachovia brokers, claiming the bank had "browbeat" them into investing in a "volatile basket" of hedge funds.

By the time Davidson discovered Bedi's hoax, he says, he had spent more than half a million dollars on the misdirected litigation.

Davidson says Bedi and Ingvarsdottir bought a string of properties in Westchester County with the money they misappropriated from his trusts. He says the properties were transferred from Datalink to other corporations under Bedi's control to protect the defendants from criminal and civil action.

Davidson seeks compensatory and punitive damages for fraud, unjust enrichment, negligence, intentional infliction of emotional distress and breach of fiduciary duty.

He is represented by Lee Wiederkehr with Delbello, Donnellan, Weingarten, Wise & Wiederkehr.

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