Ritchie Capital Management has filed a lawsuit against Coventry First for pervasive fraud in the secondary market for life insurance.
Coventry, in a statement, called the suit “a cheap publicity stunt” by Ritchie to divert attention from its own problems, which Coventry said include issues with the Securities and Exchange Commission and a significant withdrawal of capital by investors. Coventry said it would seek immediate dismissal with prejudice.
Ritchie’s complaint cites Coventry for alleged fraud, breach of fiduciary duty and breach of contract, and was filed in the Southern District Court of New York in Manhattan by attorney Thomas Puccio, legal counsel for Geneva, Ill.-based Ritchie Capital. The suit makes its allegations under the federal Racketeer Influenced and Corrupt Organizations Act, or RICO Act, which increases the penalties for acts committed as part of an ongoing criminal enterprise. If found guilty of violations under the RICO Act, Coventry would have to pay 3 times the $700 million that Ritchie Capital seeks in the complaint, or about $2 billion.
“This is one of the first lawsuits in the life settlements industry to expose companies like Coventry First that defrauded both policy owners and investors to maximize its profits,” said Puccio. “We intend to pursue Coventry First to the fullest extent of the law.”
According to Ritchie Capital, the company reached an agreement with Coventry in 2005 to invest in life insurance products. Ritchie said it had conducted due diligence but also relied on Coventry, based on its experience and reputation.