FTC CHARGES MINNESOTA LAW FIRM AND BANK WITH CONSPIRING TO
DEFRAUD THE AGENCY OUT OF AN $11 MILLION JUDGMENT IN 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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