Gaffney v. Thandi
| Docket Number | 2:20-cv-00173 |
| Decision Date | 21 July 2023 |
| Parties | KEVIN J. GAFFNEY, in his official Capacity as Commissioner of the Vermont Department of Financial Regulation, solely as Liquidator of Global Hawk Insurance Company Risk Retention Group, Plaintiff, v. JASBIR S. THANDI and GLOBAL CENTURY INSURANCE BROKERS, INC., Defendants. |
| Court | U.S. District Court — District of Vermont |
(DOC. 108)
Plaintiff Kevin J. Gaffney[1] brings this action in his official capacity as Commissioner of the Vermont Department of Financial Regulation ("VDFR"), solely as Liquidator of Global Hawk Insurance Company Risk Retention Group ("Global Hawk"), a Vermont nonstock mutual insurance company. The case arises out of alleged fraud perpetrated by Jasbir Thandi, the controlling officer of Global Hawk and president and sole owner of Global Century Insurance Brokers, Inc. ("GCIB"). Pending before the court is Plaintiffs August 24, 2022 request for default judgment damages against Mr. Thandi and GCIB. No opposition was filed.
Plaintiff is represented by Eric A. Smith, Esq. and Jennifer Rood, Esq. Mr. Thandi is represented by Brian A. Suslak, Esq., Michael J. Racette, Esq., and Tory A. Weigand, Esq.
In his October 30, 2020 Complaint, Plaintiff asserts nine causes of action against Defendants Mr. Thandi, GCIB, Jaspreet Padda, and QuantBridge Capital LLC ("QuantBridge"): violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO") against all Defendants (Count I); breach of fiduciary duty against Mr. Thandi and GCIB (Count II); breach of fiduciary duty against Mr. Padda and QuantBridge (Count III); aiding and abetting breach of fiduciary duty against Mr. Padda and QuantBridge (Count IV); conversion against Mr. Thandi and GCIB (Count V); aiding and abetting conversion against Mr. Padda and QuantBridge (Count VI); fraud against all Defendants (Count VII); breach of contract against GCIB (Count VIII); and breach of contract against QuantBridge (Count IX). In Count X, Plaintiff seeks an accounting. Plaintiff, Mr. Padda, and QuantBridge subsequently stipulated to the dismissal with prejudice of all claims against Mr. Padda and QuantBridge.
On February 26, 2021, the Clerk of Court entered a default against GCIB after it failed to plead, file an answer, or otherwise defend against this action. (Doc. 21.) Mr. Thandi appeared in this action and filed an answer to the Complaint. On April 21, 2021, Plaintiff served document requests and interrogatories on Mr. Thandi. Six weeks later, on June 4, 2021, Mr. Thandi asserted the Fifth Amendment privilege against self-incrimination in response to every document request and interrogatory.
On July 9, 2021, Plaintiff filed a motion to compel discovery from Mr. Thandi, which Mr. Thandi opposed on July 30, 2021. The court granted in part and denied in part the motion to compel discovery on December 28, 2021. It ordered Mr. Thandi to produce responsive GCIB documents in his possession, custody, or control as well as documents responsive to some of Plaintiffs first set of document requests within thirty days of the December 28, 2021 Opinion and Order.
After Mr. Thandi failed to produce any documents by the court-ordered deadline, Plaintiff sought an entry of default from the Clerk of Court against Mr. Thandi on January 31, 2022. The court denied Plaintiffs application on February 28, 2022, reasoning that Plaintiff sought an entry of default as a discovery sanction which the Clerk of Court was not authorized to grant. Plaintiff filed a motion for entry of a default against Mr. Thandi on March 9, 2022.During a motion hearing on June 10, 2022, Mr. Thandi's counsel advised the court that Mr. Thandi was not opposing the motion. The court granted Plaintiff's motion and entered a default judgment against Mr. Thandi pursuant to Fed.R.Civ.P. 37(b)(2)(A)(vi) as a sanction for failure to comply with discovery. (Doc. 104.)
In granting a default judgment, the court found that Mr. Thandi failed to comply with the court's December 28, 2021 Order and that his "blanket objections to [Plaintiffs] documents request as well as his complete disregard of the [c]ourt's order reflect a pattern of prolonged and vexatious obstruction of discovery with respect to highly relevant records." (Doc.102 at 6.) Mr. Thandi "had ample notice that a default judgment was sought and ...[did] not oppose[] it." Id. at 7.The court found that his noncompliance with discovery was deliberate, willful, and continuing, and an entry of a default judgment was thus an appropriate sanction.
The court issued an Order on June 30, 2022 directing Plaintiff to produce support for the amount of the default judgment requested. On August 24, 2022, Plaintiff filed a Memorandum in Support of Damages against Defendants Mr. Thandi and GCIB. Mr. Thandi and GCIB sought an extension of time to respond until September 30, 2022, which the court granted, but ultimately did not file an opposition.
Based upon Plaintiffs submissions and the facts alleged in the Complaint, which are deemed to be true, the court makes the following findings by clear and convincing evidence.
Global Hawk is a Vermont-domiciled insurance company and risk retention group subject to regulation by the VDFR.GCIB is a corporation incorporated under the laws of California with its principal place of business in Livermore, California. At all relevant times, Mr. Thandi was the President and sole owner of GCIB and the President and Treasurer of Global Hawk, as well as a director of Global Hawk. QuantBridge is a limited liability corporation incorporated under the laws of New York with its principal place of business in Henrietta, New York. At all relevant times, Mr. Padda was the managing member, chief compliance officer, portfolio manager, and sole employee of QuantBridge.
Beginning in 2005, GCIB managed Global Hawk's business pursuant to a "managing general agent agreement" between the two entities. (Doc. 1 at 3, ¶ 6.) GCIB issued insurance policies, collected premiums, managed Global Hawk's bank and investment accounts, recorded all bank transactions, and had principal responsibility for maintaining Global Hawk's general ledger.
In 2014, Global Hawk retained Global Insurance Management & Consulting LLC as its "Captive Manager" to maintain its books and records in Vermont. Beginning in 2016, QuantBridge managed some of Global Hawk's assets pursuant to a management authority agreement with Global Hawk dated August 9, 2016 and an investment advisory contract dated March 23, 2020.
GCIB emailed monthly reports on insurance policies and premiums, bank statements, and investment statements to the Captive Manager and provided the Captive Manager with electronic access to Global Hawk's general ledger. Using the information provided by GCIB, the Captive Manager prepared Global Hawk's quarterly and annual financial statements. The Captive Manager emailed draft and final versions of the financial statements to Mr. Thandi and another GCIB officer, who responded with comments and the signed and notarized statements.
As a risk retention group, Global Hawk could only issue policies to its members. Each Global Hawk member was required to make a onetime capital contribution of $200. GCIB's monthly premium reports provided the Captive Manager with information regarding new and renewed insurance policies as well as the premiums for those policies. The Captive Manager used this information to prepare Global Hawk's accounts and financial statements, as well as to identify new members and to request payment of the new members' capital contributions to Global Hawk by GCIB.
The premium reports GCIB provided did not include all of the policies it issued in Global Hawk's name. Plaintiff's accounting expert used records from Agile Premium Finance ("Agile"), a commercial financing company that financed premiums on policies written by Global Hawk, and the Federal Motor Carrier Safety Administration ("FMCSA") to identify 525 "ghost policies" that were issued by GCIB between January 1, 2017 and August 12, 2020 but were not reported to Global Hawk. More than half of the new policies GCIB issued during the last eleven months of Global Hawk's operations were not recorded in Global Hawk's records. GCIB did not report the ghost policies to the Captive Manager in the premium reports or pay the premiums or capital contributions due for these policies to Global Hawk. GCIB included the $200 capital contribution as a "broker fee" on premium invoices to policyholders who were not new members. GCIB collected and retained the capital contributions on renewal policies.
Agile financed $2,707,130 in premium payments to GCIB on eighty-eight ghost policies. Because the FMCSA records did not include premium accounts, the accounting expert calculated the estimated amount of premiums on the remaining 437 ghost policies collected by GCIB but not remitted to Global Hawk using the average premium cost of a non-ghost, reported Global Hawk policy. He concluded that GCIB collected $9,672,574 in ghost policy premiums that it did not remit to Global Hawk.
Global Hawk maintained bank accounts at Bridge Bank, a division of Western Alliance Bank, in Oakland, California, and at Mechanics Bank in Richmond, California. Mr. Thandi was the sole authorized signatory on the Bridge Bank account and one of the authorized signatories on the Mechanics Bank account. Beginning in 2016, Global Hawk maintained two investment accounts at Stifel Nicolaus & Company ("Stifel"). QuantBridge was the investment advisor for the Stifel accounts. Mr. Padda generated monthly QuantBridge statements that he sent to GCIB. Mr....
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