Daniel Carpenter Guilty of $30 Million Fraud Out of Prison and Fights Collection of Judgment
Keeping the Proceeds of Fraud Refused by Tenth Circuit
Post 4966
Universitas Education, LLC sued to recover funds it lost in an elaborate insurance fraud scheme perpetrated by convicted felon Daniel Carpenter. The underlying litigation occurred in the Southern District of New York, leading to a civil judgment against multiple defendants. Among the corporate entities allegedly used to perpetrate the fraud was Avon Capital, LLC and several of its affiliates located in Oklahoma, Nevada, and Wyoming. Universitas sought to garnish a $6.7 million insurance portfolio held by SDM Holdings, which Avon owns, located in Oklahoma.
In Universitas Education, LLC v. Avon Capital, LLC, Nos. 23-6125, 23-6167, 23-6126, 23-6168, 24-6066, 24-6033, United States Court of Appeals, Tenth Circuit (December 31, 2024), after registering the judgment in Oklahoma, Universitas sought summary judgment on its entitlement to the funds.
The district court entered summary judgment for Universitas and authorized a receivership over Avon and SDM. Avon and SDM appealed, claiming a myriad of procedural defects and disputes on the merits. After an adverse appellate decision the court again entered judgment in favor of Universitas after Universitas re-registered the New York judgment. The district court re-entered summary judgment in its favor, and reauthorized the receivership over Avon and SDM. Avon and SDM challenged that ruling, claiming the district court lost jurisdiction over the claims and that Universitas did not properly revive them as required by Oklahoma law.
BACKGROUND
Fraud Resulted in Criminal Conviction of Daniel Carpenter
Carpenter had devised and carried out an insurance fraud scheme that, among other wrongdoing, defrauded Universitas of $30 million in life insurance proceeds. The fraud was uncovered, and Mr. Carpenter was convicted for his crimes.
In its efforts to recover losses, Universitas sued in the Southern District of New York, naming as defendants a group of Mr. Carpenter’s corporate entities. One of those entities was Avon Capital, LLC, a Connecticut company.
Universitas eventually secured a judgment in that suit for $30.6 million in 2014, of which $6.7 million was against Avon Capital, LLC. Each of these Avon entities was ninety-nine percent owned by Carpenter Financial and one percent owned by Caroline Financial-both of which were controlled by Daniel Carpenter.
The district court referred cross-motions for summary judgment, along with follow-on evidentiary motions, to the magistrate judge, who issued a 73-page Report and Recommendation finding that the entities were “one and the same for purposes of their liability to Universitas.” The magistrate judge also determined that, because Avon-WY fraudulently acquired the SDM insurance portfolio using stolen funds (provided by Avon-NV), the insurance portfolio was subject to garnishment.
The district court agreed and granted summary judgment to Universitas over the objections of Avon and SDM. The district court traced the fraudulently transferred funds to Avon-WY’s acquisition of SDM Holdings life insurance portfolio and pierced Avon-WY’s corporate veil to allow Universitas to execute the judgment against the insurance portfolio.
In an order issued February 11, 2021, the district court enjoined Avon-WY from transferring or disbursing any of its interests in SDM and placed it into a receivership under Oklahoma law.
ANALYSIS
Avon and SDM raised a combined cascade of nineteen issues on appeal.
JURISDICTION AFTER THE MANDATE
Receivership
Avon and SDM argued that the district court erred by reappointing a receiver over Avon Capital-WY and its interests in SDM Holding. The appointment of the receiver rests on interpretation of an authorizing statute, the district court’s interpretation was reviewed and found to be proper.
CONCLUSION
In 2008, Mr. Carpenter stole $30 million worth of life insurance proceeds that were meant for Universitas. Universitas received its arbitration judgment against Mr. Carpenter and his entities, including Avon, in 2012. That judgment is valid for twenty years. Mr. Carpenter has been tried and convicted for his fraudulent business activities twice. See generally, United States v. Carpenter, 405 F.Supp.2d 85 (D. Mass. Dec. 15, 2005); United States v. Carpenter, 190 F.Supp.3d 260, 274 (D. Conn. June 6, 2016).
He has been sentenced and even fully served out those sentences in the years since Universitas first received its judgment.
While Mr. Carpenter’s debt to society may have been repaid, his entities’ debts to Universitas certainly have not and the judgment may be collected from the receivers.
ZALMA OPINION
Insurance fraud perpetrators, like Mr. Carpenter, prefer to spend time in jail rather than pay the victims of his crime by multiple motions, trials, appeals and obfuscation. This case put to rest Mr. Carpenter’s attempts to avoid payment to the victim of his fraud, Universitas and the lawyers will be forced to deal with the need to pay Universitas $30 million plus interest..
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Post 5418
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