Suit Says T.D. Bank|Made Money Disappear

(CN) - A life insurance beneficiary claims in court that T.D. Bank assisted its client in stealing over $30 million in trust fund monies.

In a complaint filed July 17, Universitas Education, an education savings plan provider, says it was named as the sole beneficiary on two life insurance policies taken out by Holdings Capital Group on its employee Sash Spencer.

After Spencer's death, however, plan administrator Nova Group refused to pay the death benefits based on Universitas' alleged failure to file a timely claim.

An arbitrator affirmed that Nova must pay the benefits, and a federal judge confirmed the award, entering a judgment of $30.1 million, the original amount plus interest.

But now the funds have gone missing, and Universitas claims T.D. Bank was complicit in their disappearance.

"This action concerns the unlawful, knowing, and willful participation by the Defendant TD Bank and its agents in a fraudulent scheme that converted more than $30 million in life insurance proceeds that TD Bank's client, the Charter Oak Trust, held in trust for plaintiff Universitas, the sole beneficiary of said life insurance proceeds that the Trust held, prior to TD Bank's agreement with the trustee of the Trust to unlawfully remove said proceeds," the complaint begins.

Instead, Nova allegedly conspired with TD Bank by "nefariously transferring the death benefits from the trust to multiple TD Bank accounts under the Nova Group's control."

These transfers should have raised numerous red flags, especially given that Nova Group's chairman, Daniel Carpenter, has been twice convicted of fraud, and the IRS raided Nova's offices in 2010, the complaint says.

Nevertheless, TD Bank "rubber-stamped each and every one of the Nova Group's in seriatim surreptitious fraudulent transfers," Universitas claims.

Carpenter allegedly shopped around to find a bank that would ignore its due diligence obligations - he solicited Bank of America and others to open a new account for the trust, but was denied.

Bank of America "did not have the small-town ties that existed between Carpenter and TD Bank via TD Bank's agents at the Simsbury, Connecticut branch," the complaint says.

"Based on its close relationship with Carpenter and the Nova Group, TD Bank assisted the Nova Group in looting the trust in order for TD Bank to continue its lucrative business with Carpenter, including Carpenter's (fulfilled) promise of millions of dollars in new deposits at TD Bank's Simsbury, Connecticut branch."

TD Bank allegedly allowed Nova to make mortgage payments with the trust's money, and even continued to allow Nova to shuffle large amounts of money between accounts after it was aware of Universita's accusations of fraud.

The Second Circuit ruled in April that a federal judge went too far in sanctioning Nova Group by ordering it to deposit the $30 million judgment it owes with the court.

"The district court cannot become a de facto collection agency for plaintiffs struggling with recalcitrant judgment debtors," the appeals court said, albeit noting that Nova no doubt deserved sanctions for its abusive litigation.

Universitas is represented by Marie Napoli with Reyhani Nemirovsky in New York.

Representatives of the defendant could not immediately be reached for comment.

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