March 29, 2019
REILLY COMPLETES CLOSING ARGUMENTS IN $108M BANK TRUSTEE BREACH OF DUTY CASE
Reilly has completed closing arguments in a Missouri federal court case over the mishandling of insolvent National Prearranged Services Inc. (NPS) funeral funds. The case was brought by Jo Ann Howard and Associates, P.C., the Special Deputy Receiver, a group of state guaranty associations and its national organization, the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA). The case arose out of a nationwide Ponzi scheme by NPS, a Missouri-based seller of pre-need funeral contracts.
“The bank committed multiple and systemic breaches of trust through its six-year tenure as trustee,” said Daniel Reilly, of Reilly, who serves as lead counsel for the plaintiffs.
The plaintiffs seek $108 million in trust losses plus punitive damages and interest and asserts that Allegiant Bank, a trustee of National Prearranged Services Inc.’s fraudulent pre-need funeral fund breached multiple trustee duties in failing to exercise the required control over the trusts, protect its assets and keep adequate records of its activities and by relinquishing control of the trusts’ pre-need assets to NPS and the individuals who owned and controlled NPS. Six of those individuals were criminally indicted, all were sentenced, and served time in prison.
The plaintiffs further assert that Allegiant “repeatedly violated its duty of impartiality to the multiple beneficiaries of the NPS trusts.” In addition to seeking compensatory damages, plaintiffs argue that substantial punitive damages are justified due to Allegiant violating its duty of loyalty in putting its interests above the interests of the trusts’ beneficiaries including thousands of Missouri consumers and hundreds of Missouri funeral homes.
“Allegiant adopted three internal protocols which guaranteed that NPS’s improper demands for trust funds would always be allowed,” said Dan Reilly. “The trust was underfunded from day one, and conditions only worsened under Allegiant’s watch, with evidence supporting that Allegiant’s abandonment of its obligation to protect the trusts’ assets enabled the Ponzi scheme to continue to flourish.”
In 2009, the Special Deputy receiver and state guaranty associations filed the dispute against 35 defendants including 9 banking and accounting firm, and multiple individuals. All of the original defendants either settled or were dismissed except PNC. PNC Bank was sued as successor to Allegiant Bank.
After a five-week trial, a jury awarded the plaintiffs $355.5 million in compensatory damages and $35.5 million in punitive damages. The jury’s award was appealed and subsequently overturned by the Eighth U.S. Circuit Court of Appeals, holding that under trust law the case should have be re-tried to a judge.
Closing arguments in the remand proceedings were before Senior Judge E. Richard Webber of the Eighth Circuit Court of Appeals of the Eastern District of Missouri who also presided over the first trial.