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Thursday, May 16, 2024 | Back issues
Courthouse News Service Courthouse News Service

Sentinel Receiver Alleges Massive Bribery

CHICAGO (CN) - The receiver for Sentinel Management Group claims FTN Financial Securities sold Sentinel "hundreds of millions of dollars" of risky, illiquid securities by bribing Sentinel's head trader, churning paper and cooking the books. Sentinel collapsed and was left holding worthless paper, according to the federal complaint.

Plaintiffs claim defendants FTN, Stephen M. Folan and Jacques de Saint Phalle bribed Sentinel's head trader, Charles Mosley, to sell Sentinel "hundreds of million of dollars worth of structured finance products, most of them known as 'PreTSLs.'"

De St. Phalle was a managing director of FTN's Structured Finance Group and helped create the PreTSL instruments, the complaint states. He lives in Greenwich, Conn., and Coral Gables, Fla.

Folan is a broker in FTN's Chicago office, the complaint states. He owns homes in Chicago and Plainfield, Ill., and Lake Geneva, Wisc.

The complaint continues: "Defendants Folan, de Saint Phalle and FTN sold PreTSLs and similar securities to Sentinel using two corrupt and deceptive methods. First, defendants compromised, co-opted, duped and bribed Mosely by improperly providing him with lavish meals, wine, entertainment, lodging, travel, tickets to sporting events, and other benefits and things of value. Second, having compromised Mosley's independent judgment, one or more of the defendants furthered their deceptive scheme by providing Sentinel with false and misleading information about the liquidity of the securities, particularly FTN's ability and willingness to make a market in these securities, the ratings of the securities, and whether the securities were exposed to risk arising from non-prime lending.

"Defendants participated in this conduct in order to earn huge income commissions, compensation and profits associated with the sale of these securities. To magnify this unlawful income, defendants traded in and out of various PreTSL positions when there was no legitimate reason for Sentinel to engage in such transactions. "

Chapter 11 Trustee Frederick Grede wants money and punitive damages. He is represented by Jenner & Block.

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