CNO Financial Group Inc. has filed suit in the U.S. DistrictCourt for the Southern District of New York against executives atBeechwood Re, claiming they fraudulently redirectedreinsurance trust fund assets to Platinum Partners, an embattledLong Island hedge fund under investigation by federalauthorities.

The suit filed by lawyers at Winston & Strawn claims thatCNO subsidiaries Bankers Conseco Life Insurance Co. and WashingtonNational Life Insurance Co. have lost hundreds of millions ofdollars as a result of a conspiracy to surreptitiously bringinstitutional investor money under Platinum’s control.

The case, Bankers Conseco Life Insurance Company v.Feuer, 16-cv-07646, has been assigned to Southern DistrictJudge Edgardo Ramos.

Platinum, which purportedly invests in high-risk and speculativeinvestments, has long reported market-beating returns but struggledto attract institutional investors.

One of Platinum’s founders, Murray Huberfeld, was arrested inJune and charged with bribing a New York City corrections officers’union official to make a $20 million investment in one ofPlatinum’s funds.

Beechwood executives targeted in suit

Although CNO’s suit doesn’t name Beechwood as a defendant, ittargets executives Moshe Feuer, Scott Taylor, and David Levy — anephew of Platinum’s Huberfeld. The suit claims that Feuer, aformer Marsh USA Inc. CEO, and Taylor, a former executive at Marsh& McLennan Co., served as front men for Beechwood to drum upreinsurance business.

“The scheme to attract institutional investors in the Platinumfunds had succeeded,” wrote Winston & Strawn litigation partnerAdam Kaiser. “Plaintiffs gave Beechwood the keys to a $550 millionreinsurance trust, without ever suspecting that they were inreality doing business with Platinum.”

The suit claims that Beechwood officials repeatedly concealedconnections to Platinum, including the fact that many Platinumemployees worked for Beechwood or were seconded at the reinsurancefirm.

Beechwood, according to the suit, repeatedly diverted trustassets to Platinum investments and overvalued assets tied toPlatinum — including a loan to the principal in a Ponzi scheme,bond investments in failing oil and gas companies and a loan to apayday loan company charged with consumer protection violations bya federal consumer watchdog.

According to the suit, overzealous valuations gave theimpression that trusts were fully funded when they were not andallowed Beechwood to remove $134 million from the trusts aspurported “surplus.”

‘Baseless innuendo,’ says Beechwood

Beechwood spokesman David Goldin said in an emailed statement thatCNO has suffered no losses and that the company has acted properlyat all times.

“Beechwood will take every possible step to refute these falseclaims and regrets CNO’s inappropriate decision to file a meritlesslawsuit filled with baseless innuendo as a method of gainingleverage in a business negotiation,” Goldin said.

Defense counsel for the three Beechwood executives have yet tomake an appearance in the case.

Winston’s Kaiser didn't respond to a phone message. But in acompany release, the Indiana-based CNO said that it had takenaction to take control of $550 million in long-term careliabilities by terminating its reinsurance agreements withBeechwood and commencing arbitration against Beechwood itself.

Ross Todd is a reporter for PropertyCasualty360.comaffiliate law.com.He can be reached at [email protected].