CHICAGO (CN) – The trustee for the Sentinel Liquidation Trust claims that FTN Financial Securities and Jacques de Saint Phalle bribed Sentinel’s head trader to sell Sentinel “hundreds of millions of dollars worth of structured finance products, most of them known as ‘PreTSLs.'”
The bribes to Sentinel head trader Charles Mosley allegedly included “visits to strip clubs, lavish meals, wine, entertainment, lodging, travel, tickets to sporting events, and other benefits and things of value.”
According to the federal complaint, “Defendants engaged 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.
“In August of 2007, Sentinel collapsed under the weight of the risky and/or illiquid securities it had purchased, including the PreTSLs purchased from FTN, and the huge debt it had incurred to finance the purchase of such securities. On August 13, 2007, Sentinel notified the Customers by letter that Sentinel was halting customer redemptions (the ‘No Redemption Letter’). Upon receipt of the No Redemption Letter, many of the Customers demanded immediate redemption of their funds held by Sentinel. But as a result of Sentinel’s and Mosley’s breach of their fiduciary duties to the Customers and defendants’ collusion with Sentinel and Mosley, Sentinel was left with securities that were worth a fraction of their face value or nothing at all. Thus, Sentinel was unable to meet its liabilities to Customers, who suffered hundreds of millions of dollars in damages.”
FTN is a subsidiary of First Tennessee National Bank and Trust Association.
“Defendant Jacques de Saint Phalle (“de St. Phalle”) is, on information and belief, a resident of Greenwich, Connecticut. De St. Phalle also owns a home in Coral Gables, Florida. Between February 2006 and July 2007, De St. Phalle was employed as a managing director in the Structured Finance Group of defendant FTN Financial Securities Corp., in its office in New York, New York. De St. Phalle was one of the people who created the PreTSL instruments,” according to the complaint.
The trustee seeks disgorgement and penalties for unjust enrichment, aiding and abetting breach of fiduciary duty, and negligence.