Nuns Claim They Were Taken for Millions

CLEVELAND (CN) - The Ursuline religious order of nuns was duped into investing $5 million into annuities that yielded just 1 percent return, the sisters claim in court.

The Ursuline Academy of Cleveland, a nonprofit corporation that controls the assets of the Ursuline Sisters of Cleveland, sued Axa Advisors LLC, Axa Network LLC, SunAmerica Annuity and Life Assurance Co. fka AIG SunAmerica Life Assurance Co., SunAmerica Capital Services, and Matthew A. Mooney, in Cuyahoga County Court.

"The Sisters take vows of poverty, chastity, obedience and service in Christian education"; there are 171 members of the Ursuline order in Cleveland, according to the complaint.

More than a decade ago, the Academy decided it needed better financial investment strategies to ensure its survival; defendant Mooney offered to provide that assistance, the Sisters say.

"Mooney was, at all relevant times, familiar with Ursuline Academy and well-connected with many Sisters," the complaint states.

"Mooney has three aunts who are Sisters, and Mooney had developed a relationship of trust and confidence with the Sisters.

"Mooney served on at least one committee at Ursuline Academy related specifically to overseeing Ursuline Academy's financial well-being.

"In July 2003, defendants, through Mooney as their agent, began soliciting Ursuline Academy's business using, among other things, written marketing materials to entice Ursuline Academy to entrust millions of its dollars to the defendants. Defendants professed, in writing, that they had 'the solution' for Ursuline Academy."

The Sisters claim the defendants told them to invest $10 million in variable annuity contracts, and promised "that Ursuline Academy 'can exchange annuitants named' on the annuity contracts 'at any time.'"

After 10 years, the defendants claimed, the contracts would yield a 10 percent return, and "this 10 percent rate of return would be retrospective, such that there would be a 10 percent rate of return on Ursuline Academy's investment for the first ten years of the annuity contracts," according to the complaint.

"Defendants explained to Ursuline Academy, through Mooney as their agent, that when this ten-year, 10 percent maximization point was reached, Ursuline Academy could switch the annuitants who were named on the annuity contracts to one single annuitant.

"This newly named single annuitant, according to defendants, would be a Sister in poor health, nearing the end of her natural life, and whose death would cause the money arising from the annuity contracts to be paid to Ursuline Academy as beneficiary, at the time that the annuity contracts would yield their highest rate of return."

The Sisters eventually purchased 10 annuity contracts for $3 million. But in August 2011, an email from one of Mooney's associates "stated for the first time that they [the defendants] would not allow the annuitants named in the annuity contracts to be changed."

The Sisters say that since they cannot changed the named annuitants, "in the event that a Sister annuitant lives to the age of 90 the annuity contracts would annuitize, and the annuity contracts would pay out to the individual Sister annuitant, and not to Ursuline Academy," resulting in "adverse tax and other consequences, including loss of Medicaid benefits, to the individual annuitant Sister."

And because the Sisters take vows of poverty, "the fact that 10 individual Sisters, or even one of them, could receive the value of the annuity contracts is completely contrary to Ursuline Academy's expectations and mission, including the Sisters' vows of poverty. Ursuline Academy would never have spent over $3 million on the annuity contracts if it knew there was a possibility that some or all of the pay-outs on the annuity contracts would not go to Ursuline Academy," the complaint states.

The Academy seeks $5 million for breach of contract, fraud and breach of fiduciary duty.

It is represented by Stephen O'Bryan with Taft, Stettinius and Hollister.

The Ursuline order was founded in 1535 in Brescia, Italy, dedicated to the education of girls, and care for the sick and needy. Pope Paul III recognized them as a religious order in 1546. At its greatest extent, in the early 1700s, the order had 15,000 to 20,000 nuns in 350 convents.

The Ursuline Sisters were the first nuns to come to the New World, in 1639, in Canada, where they learned native languages and educated children.

Follow @@kkoeninger44

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit