FTC CHARGES MINNESOTA LAW FIRM AND BANK WITH CONSPIRING TO DEFRAUD THE AGENCY OUT OF AN $11 MILLION JUDGMENT IN WILLIAM URLICH COIN FRAUD CASE
12/92 - The Federal Trade Commission has charged a Minnesota law firm and a Minneapolis bank in federal district court with fraudulently agreeing to prevent the agency from collecting on an $11.2 million federal court judgment.
The FTC had won the judgment for consumer redress in a previous case against a rare-coin marketer. Named in today's case are Larkin, Hoffman, Daly & Lindgren, Ltd., of Bloomington; and the National City Bank, of Minneapolis.
According to the FTC, the defendants helped the coin marketer fraudulently transfer several million dollars in rare coins into trusts for his three daughters and then convert a substantial portion of the coins back to his own use, and that they unlawfully and wrongfully acted to conceal assets belonging to the coin marketer and to put those assets beyond the reach of the FTC.
In its complaint detailing the allegations, the FTC is seeking to void all illegal transfers of money made to the defendants, pursuant to federal and state law; compensatory damages against the defendants for aiding and abetting, conspiracy, and, as to National City Bank, breach of fiduciary duty; and, according to the complaint, an award for punitive damages not to exceed $11.2 million.
This case stems from the FTC's 1986 case against Minneapolis coin dealer William J. Ulrich and his firm, Security Rare Coin & Bullion Corporation, a leading nationwide seller of coins for investment that was based in Minneapolis.
The FTC filed its suit against Ulrich and his firm on Dec. 29, 1986, and sought consumer redress in excess of $20 million.
According to the complaint filed late yesterday, FTC staff began investigating Ulrich in the summer of 1986, and came to believe that he was selling his coins for three to four times their true value while representing that they were low-risk, high- profit investments sold at or near their market value.
During the fall of 1986 and the winter of 1987, the complaint states, Ulrich's attorneys and the bank knew that his "potential liability in the FTC matter could equal tens of millions of dollars."
Yet, beginning in the fall of 1986 and continuing until May of last year, according to the complaint, Ulrich conspired with, and was aided and abetted by, the law firm and the bank "in an unlawful plan to remove, conceal, and protect his assets from the reach of the FTC."
This allegedly was accomplished through a series of fraudulent conveyances and other unlawful transactions, which succeeded in making Ulrich virtually judgment proof, the FTC charged.
According to the complaint, in the fall of 1986, Ulrich, with the assistance of the Larkin, Hoffman firm, allegedly attempted to place a substantial amount of his rare-coin holdings into three identical trusts the firm had helped him set up for his daughters in 1985.
The complaint states that an attorney at Larkin, Hoffman, worked with Ulrich to devise a plan -- which included backdating documents and altering them to remove creation-date codes -- to make it appear as if the coin holdings had been placed in the trusts prior to Ulrich's knowledge of the FTC investigation. (Had this been the case, the FTC could not have reached the trust- account holdings in its suit for consumer redress.)
Later, according to the complaint, an attorney at Larkin, Hoffman made numerous false statements during a deposition and misled the court in an affidavit about when he believed the gifts to the trust actually had been made.
Further, the complaint states, the National City Bank of Minneapolis allegedly accepted a position in April 1987 as corporate trustee of Ulrich's trusts despite the objection of several bank employees who were concerned about Ulrich's legal problems and possible unlawful motives for using the bank as trustee.
The "gifted" coins then were physically transferred to the National City Bank's vault. Then, the FTC charged, National City Bank and Ulrich agreed not to liquidate the coins, as required by state law and federal banking regulations.
From June 1989 until April 1991, the FTC alleged, National City Bank substantially assisted Ulrich in a scheme to shield assets from the FTC by giving him free rein to control and liquidate the trust assets as he chose, in violation of the bank's legal responsibilities.
The FTC alleged that the bank appointed Ulrich as its agent to liquidate the coins and allowed him to remove the coins from the bank's vaults.
The complaint states that, although the coins at issue in these sales were estimated by the bank to be worth upwards of several million dollars in 1987, the trust accounts received only $266,000 from the sales.
Ulrich allegedly converted approximately $400,000 of the coin sale proceeds to his own use. Ulrich's free rein over the trust coins continued long after it was clear to National City Bank the value of the trust assets was being substantially depleted, according to the complaint.
In a separate statement, concurring in part and dissenting in part, Commissioner Deborah K. Owen stated, "The complaint in this matter pleads four causes of action. Based on the evidence available, I concur in three counts, and dissent as to the count alleging conspiracy. Because others may review the Commission's complaint for guidance in their own efforts to comply with the law, I would stress that the complaint should be read as a whole.... Certain of the individual actions alleged here might well be consistent with lawful professional conduct, under different circumstances. However, given the weight of the evidence available, I was persuaded that a complaint with three counts should issue, based on the totality of the alleged conduct."
MINNEAPOLIS LAW FIRM WILL TRANSFER $250,000 LIEN ON CLIENT'S HOUSE AND PAY $35,000 - 03/93
The Minneapolis law firm of O'Connor & Hannan has agreed to transfer to the Federal Trade Commission a $250,000 lien it holds on a house once owned by a former client, and to pay the FTC $35,000 in cash thereby avoiding a federal lawsuit in connection with its representation of the former client, coin marketer William J. Ulrich.
The FTC also announced settlements with three coin dealers who will avoid federal charges arising out of the FTC's claims that they conspired with, and aided and abetted Ulrich to, defraud the agency out of collecting on an $11.2 million judgment against Ulrich.
The dollar amount reached under the settlement agreement with O'Connor & Hannan is based on attorney's fees "Ulrich fraudulently paid O'Connor & Hannan to avoid his anticipated obligations to the FTC," according to the settlement document. O'Connor & Hannan denies all claims and contentions asserted by the federal government.
Three other settlements also announced by the FTC today in connection with the Ulrich case require coin dealers to turn over certain of their assets or make certain payments to the Commission. The settlement agreements release the dealers from civil liability arising from the FTC's contentions against each of them that they conspired with and aided and abetted Ulrich to defraud the FTC of its claims in the matter. The dealers deny the FTC's contentions. The dealers are:
-- Fred Lucas, a nationwide coin dealer whose principal place of business is in San Diego, California, and who has assigned to the FTC his $94,380 security interest in Ulrich's house;
-- Richard Melamed and his company, Melamed Rare Coins, Inc., a nationwide coin dealer based in Costa Mesa, California, who have paid the FTC $10,000; and
-- Wilbur Montgomery Sims, a nationwide coin dealer based in Richmond, Virginia, who has paid the FTC $8,000 in cash and has assigned the agency his $62,764 security interest in the Ulrich house.
MINNEAPOLIS LAW FIRM OF LARKIN, HOFFMAN TO PAY $375,000 IN CONNECTION WITH COIN-FRAUD CASE - 05/94
The Minneapolis law firm of Larkin, Hoffman, Daly & Lindgren, Ltd. has agreed to pay $375,000 over two years to settle charges arising out of their representation of a former client, coin marketer William J. Ulrich.
The Federal Trade Commission obtained a judgment for $11,185,848 against William J. Ulrich, and his firm, Security Rare Coin and Bullion Corporation, in 1990. The judgment remains largely unsatisfied. The money was to be used for providing redress to Ulrich's customers.
The judgment followed 1986 FTC charges that Ulrich and Security Rare Coin had been selling coins for three to four times their true value while representing that the coins were low-risk, high-profit investments sold at or near their market value. At the time, Security Rare Coin was based in Minneapolis.
In December 1992, the FTC alleged in a civil suit that Larkin, Hoffman and the National City Bank of Minneapolis assisted Ulrich to prevent the FTC from collecting on the judgment through a series of fraudulent conveyances and other unlawful transactions which succeeded in making Ulrich virtually judgment proof, the FTC charged at the time.
(Another Minnesota law firm, O'Connor & Hannan, and three coin dealers avoided related charges by signing settlements with the FTC that were announced in March 1993. Charges against the bank remain pending.)
Under the settlement with Larkin, Hoffman, the firm will make payments over two years, and upon any default, the entire balance would become due.
NATIONAL CITY BANK OF MPLS AGREES TO PAY $400,000 - 10/94
The National City Bank of Minneapolis has agreed to pay approximately $400,000 to settle charges in connection with its oversight of trusts that were established by rare-coin marketer William J. Ulrich.
Under its settlement with the FTC, National City Bank will pay $399,750, plus interest from July 1, 1994, to the FTC. The funds will be combined with others collected in the case and, if practical, used to provide refunds to the customers of Security Rare Coin.
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