CNO CNO Financial Group Inc

An Indiana insurance company Thursday filed a lawsuit seeking to recapture hundreds of millions of dollars from an advisory firm with ties to embattled hedge fund Platinum Partners.

The lawsuit against executives of Beechwood Re, which alleges widespread conspiracy, fraud and negligence, adds to the mounting fallout from multiple federal investigations swirling around Platinum.

In addition, the insurer, CNO Financial Group Inc., said it was ending its reinsurance agreements with Beechwood and planned to recapture around $550 million in long-term care policies. In a recapture, an insurance company takes back some or all of its business from a reinsurer.

Beechwood is expected to contest any effort by CNO to recapture the money.

Beechwood, founded in 2013, was part-owned by family-member trusts of Platinum's founders, and some employees of Platinum have gone on to work for Beechwood. Since early 2014, Beechwood has put more than $200 million in Platinum-linked investments, The Wall Street Journal has reported.

The 12-count civil complaint filed Thursday by CNO units Bankers Conseco Life Insurance Co. and Washington National Life Insurance Co., in Manhattan federal court includes charges of racketeering, fraud and negligence against Beechwood executives Moshe "Mark" Feuer and Scott Taylor and former Beechwood Chief Investment Officer David Levy.

Lawyers for the three men couldn't be reached for comment.

While Beechwood itself isn't named as a defendant, the complaint describes Beechwood as a criminal enterprise in which executives allegedly conspired to enrich Platinum through assets invested in Beechwood and for years concealed the companies' overlapping ownership.

"The scheme to attract institutional investors in the Platinum funds had succeeded," the complaint alleges. "Plaintiffs gave Beechwood the keys to a $550 million reinsurance trust, without ever suspecting that they were in reality doing business with Platinum."

"There have been no losses, including to CNO, and Beechwood has acted properly at all times," said David Goldin, a spokesman for Beechwood. "Beechwood will take every possible step to refute these false claims and regrets CNO's inappropriate decision to file a meritless lawsuit filled with baseless innuendo as a method of gaining leverage in a business negotiation."

Since June, when Platinum emerged as the focus of investigations by two sets of federal prosecutors and securities regulators, the firm has moved to shut down.

One of Platinum's founders, Murray Huberfeld, was arrested in June in connection with an alleged bribery and kickback scheme involving the New York City corrections officers' union.

Mr. Huberfeld has pleaded not guilty in that case, brought by the U.S. attorney's office in Manhattan. At the same time, investigators with the Brooklyn U.S. attorney's office are probing possible securities fraud at Platinum, people familiar with the matter have said.

Platinum has denied wrongdoing in both matters.

CNO said in the suit that Beechwood used assets from reinsurance agreements to meet Platinum investor demands, conducted business with associates of Mr. Huberfeld and Platinum executive Mark Nordlicht and lent money to "at least a dozen entities controlled by Platinum that any reasonable investment manager would pass on because they were too risky for reinsurance trusts."

The complaint alleges that Messrs. Nordlicht, Huberfeld and Levy, who is Mr. Huberfeld's nephew, owned 40% of Beechwood and that Beechwood's professional staff was serving Platinum.

In February 2014, CNO brought in Beechwood to manage about $500 million of long-term-care policies. In an SEC filing last month, CNO said it had audited $126 million of that total and believed "some or all of those assets may bear some connection to Platinum" or to parties with a link to Platinum.

CNO said in a statement Thursday that it recently expanded the audit to include an additional $90 million in potentially-impacted investments.

Rob Copeland

(END) Dow Jones Newswires

September 29, 2016 23:05 ET (03:05 GMT)

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