MANHATTAN (CN) – Guardian Life Insurance claims an employee hid $100 million in trusts set up for Bernard Madoff Investment Securities. Guardian says it had no idea it was holding Madoff’s money until it saw its name on a published list of Madoff investors.
Guardian claims defendant Gerald McEvoy hid two trusts from Guardian’s board of directors, depriving the company of administrative fees and compromising its ability to comply with federal banking laws.
McEvoy was chief administrative officer of Guardian Trust FSB, a subsidiary of The Guardian Life Insurance Co. of America, according to the complaint in New York County Court.
In January 2007, Guardian Trust was appointed administrative trustee of two Madoff accounts, created by New Jersey real estate developer Fred Daibes, according to the complaint. Daibes claims he lost more than $17 million in Madoff’s Ponzi scheme.
Former Guardian Trust president Barry Drogy “was responsible for bringing these client relationships to GTC and opening these trusts,” the complaint states. Drogy is not named as a party to this complaint.
“Under the pledge agreements, the assets of the Trusts consisted exclusively of investment management accounts with Bernard L. Madoff Investment Securities, as to which GTC had no investment discretion,” according to the complaint.
No records were kept of the fees paid by Daibes, or to his company River Road, for administering the Madoff accounts, according to the complaint.
Guardian’s audit department searched the company’s internal operating systems but found no record of any accounts related to the trusts, the complaint alleges.
Guardian claims McEvoy admitted that the trusts did not go through the “standard procedures for accepting new accounts,” including steps to comply with the Bank Secrecy Act and regulations of the Office of Foreign Asset Control.
Drogy allegedly told McEvoy to waive the fees in an effort to obtain future business from Daibes and an unnamed law firm that referred the trusts’ business to Guardian.
The audit department requested McEvoy’s files of the accounts, which included account statements from Madoff, according to the complaint. He turned them over to the company, but a search of his office later revealed more files, Guardian says.
“For two years, McEvoy and Drogy were the only two senior officers of GTC or Guardian who were aware of the existence of the Trusts,” according to the lawsuit.
Guardian Trust said it was forced to “abandon a number of its client relationships, and has lost revenue and good will.”
Guardian demands damages for breach of fiduciary duty and damage to its reputation. It is represented by Edward Cerasia III with Morgan, Lewis & Bockius.
McEvoy is the only defendant.
The New York Law School graduates LinkedIn page says he served as counsel for Lincoln Savings bank for 23 years and was VP of Law & Compliance at Morgan Stanley before joining Guardian in 2004.