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Court Unravels Money Laundering Scheme


Seven insurance companies are the plaintiffs in this case and they are appealing a decision that was made in favor of the defendant, Dreyfus Service Corporation granting a summary judgment dismissing the case. A New York Family Lawyer said that throughout the decade of the 90s, the insurance companies were looted by a fraud scheme that was perpetrated by Martin Frankel. The insurance companies (the receivers) in the original case at hand were seeking to impose civil RICO liability and tort on Dreyfus Service Corporation as they were the investment company that was used by Frankel to funnel money through the funds of the insurance companies.

The district court heard the case and reviewed the federal and New York laws in the manner granted a summary judgment that was in favor of the defendant for each claim made by the insurance companies. For the court came to the conclusion that there were 8 accounts where no duty came to the seven insurance companies and the receivers failed to exhibit causation for the other 5 accounts regarding the tort claims. The court decided that there was no way to find anyone at Dreyfus Service Corporation who deliberately ignored the money laundering activities of Frankel in regard to the RICO claim.

A Nassau County Family Lawyer said the plaintiffs are appealing this initial verdict of a summary judgment in favor of the defendant.

Case Background

From the years 1981 through 1991, Frankel solicited $11 million in funds for an investment project that he named Creative Partners. He used $5 million of this money for his own personal use. To replenish this money he started looking for banks for purchasing and looting. When this scheme failed, he began purchasing and looting insurance companies. These fraudulent activities continued throughout the nineties with Frankel recruiting more individuals to help him.

In 1994, Dreyfus Service Corporation, which is a broker/dealer company that is registered, unknowingly became a part of Frankel’s schemes. Frankel used the company to transfer funds from the insurance companies to his personal accounts that were set up in Switzerland.

The activities of Frankel were finally realized in 1999 when the insurance regulators become conscious that they were managing looted insurers. Each of the companies were placed in liquidation and the Receivers brought litigation against over 70 parties. A Nassau County Child Support Lawyer said the individual claims were joined in the current action and DSC was added in 2001. Almost all of the other defendants entered bankruptcy settled, or defaulted. After some time, DSC filed their motion for summary judgment. The receivers filed two different motions for a partial summary judgment.

Case Review and Verdict

The district court decided that under the laws of New York, Dreyfus Service Corporation did not owe the insurance companies duty of protection from the looting done by Frankel. It was found that the company had no idea that Frankel was conducting fraudulent activities and there is no proof that anyone from the company ignored facts that could have led to this discovery.

Our finding is in favor of the defendant, Dreyfus Service Corporation. The receivers have not provided any information in regards to the accounts that prove their case. For this reason, the district courts initial ruling for a summary judgment that is in favor of Dreyfus Service Corporation is upheld.

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