Universitas Educ., LLC v. Benistar

Decision Date15 March 2021
Docket NumberNo. 3:20-cv-00738 (JAM),3:20-cv-00738 (JAM)
CourtU.S. District Court — District of Connecticut
PartiesUNIVERSITAS EDUCATION, LLC, Plaintiff, v. BENISTAR et al., Defendants.
ORDER RE PENDING MOTIONS TO DISMISS

This lawsuit is the latest stage of a long-running effort by plaintiff Universitas Education, LLC ("Universitas") to collect the proceeds of life insurance policies that were stolen more than a decade ago. Universitas brings this action to enforce a prior judgment against 11 individuals, trusts, and companies that were not parties to the prior action, but that are allegedly "alter egos" and part of the same "criminal enterprise" as the judgment debtors. The complaint alleges six counts based on theories of alter ego liability, constructive trust, and liability for attorneys' fees.

The defendants have filed four separate motions to dismiss on a variety of grounds. I conclude that Universitas has stated a plausible claim that some—though not all—of the defendants may be subject to alter ego liability, but that most of Universitas's claims do not state a plausible claim. Accordingly, I will grant the motions to dismiss in part and deny them in part.

BACKGROUND

The following facts are set forth in the light most favorable to Universitas as the non-moving party and whose allegations are accepted as true for the purposes of this motion.

This action involves efforts by Universitas to collect the proceeds of two life insurance policies for Sash Spencer. Universitas was the sole, irrevocable beneficiary of Spencer's life insurance policies, which were owned by the Charter Oak Trust ("COT") and managed by Nova Group, Inc. ("Nova Group"). Doc. #1 at 5 (¶¶ 27-28). COT and Nova Group are both controlled by Daniel Carpenter, who Universitas alleges is a "prolific fraudster who has been convicted on seventy-six felony counts including, inter alia, the theft of $30 million from Universitas." Id. at 3, 5 (¶¶ 16, 29).

In 2008, Spencer died unexpectedly, but Daniel Carpenter and his associates fraudulently denied Universitas's claim for Spencer's life insurance proceeds and transferred the death benefits to entities owned and controlled by Daniel Carpenter while Universitas's appeal was pending. Id. at 5-6 (¶¶ 30-35).

In January 2011, an arbitrator found in Universitas's favor and entered an award of $26.5 million against Nova Group, and this award was confirmed by Judge Swain in the Southern District of New York. Id. at 7-8 (¶¶ 42, 45); see also Universitas Educ., LLC v. Nova Grp., Inc., 2012 WL 2045942, at *3 (S.D.N.Y. 2012), aff'd, 513 F. App'x 62 (2d Cir. 2013). Following extensive post-judgment discovery, Universitas brought three turnover motions before Judge Swain to enforce its judgment pursuant to Federal Rule of Civil Procedure 69 and New York Civil Practice Law and Rules ("CPLR") § 5225(b).

The first turnover motion sought the proceeds of an insurance policy on a property owned by Moonstone Partners, LLC ("Moonstone"). Daniel Carpenter, Molly Carpenter, and Moonstone all appeared in the turnover proceeding. See Universitas Educ., LLC v. Nova Grp., Inc., 2013 WL 6123104, at *1 (S.D.N.Y. 2013). After a bench trial, Judge Swain granted Universitas's turnover petition in November 2013. Id. at *13. Judge Swain concluded that Daniel "Carpenter caused Nova, the Charter Oak Trust, and other affiliated entities, directly or indirectly, to transfer the Life Insurance Proceeds to which [Universitas] is entitled" and "Carpenter caused the Life Insurance Proceeds to be transferred to and through entities that he controlled, either directly or indirectly, including Moonstone, for the personal benefit of Mr.Carpenter and his affiliates." Id. at *7. Judge Swain found that Moonstone was Daniel Carpenter's "shell" company, as were others of the hundreds of companies that Daniel Carpenter founded and controlled from the same address. Id. at *2, 5.

The second turnover petition sought the turnover of assets by Daniel Carpenter and seven affiliated entities, including Carpenter Financial Group. Following an evidentiary hearing and voluminous filings, Judge Swain concluded that Daniel Carpenter and the turnover respondents engaged in a series of fraudulent transfers with the intention of depriving Universitas of the Spencer life insurance policy proceeds. See Universitas Educ., LLC v. Nova Grp., Inc., 2014 WL 3883371, at *10-11 (S.D.N.Y. 2014). Judge Swain entered judgment against each of the turnover respondents, including a $30.6 million judgment against Daniel Carpenter and an $11.14 million judgment against Carpenter Financial Group. Id. at *11, 13; Doc. #1 at 10 (¶ 55).

In 2015, Universitas filed a third turnover motion before Judge Swain seeking turnover of an insurance policy held by one of the judgment debtors, Grist Mill Trust ("GMT"). Judge Swain determined that the turnover motion and other proceedings related to GMT's insurance policies were "well beyond the scope of the [court's] ancillary jurisdiction" because they were "premised on the assertion of rights based on trust agreements, insurance policies, and other contracts that were not involved in the underlying arbitration and original judgment enforcement proceedings, nor implicated in the subsequent fraudulence conveyance proceedings." Universitas Educ., LLC v. Nova Grp., Inc., 2015 WL 57097, at *3 (S.D.N.Y. 2015). Judge Swain denied Universitas's third turnover motion "without prejudice to appropriate proceedings in fora of competent jurisdiction." Id. at *4.

In 2016, in a criminal trial before Judge Chatigny in the District of Connecticut, Daniel Carpenter was found guilty of 57 counts of mail and wire fraud, conspiracy to commit mail andwire fraud, illegal monetary transactions, money laundering, conspiracy to commit money laundering, and aiding and abetting those substantive offenses, including for his conduct defrauding Universitas. Doc. #1 at 11 (¶ 58); see United States v. Carpenter, 190 F. Supp. 3d 260 (D. Conn. 2016), aff'd sub nom. United States v. Bursey, 801 F. App'x 1 (2d Cir. 2020). Among the relevant findings in that case were that "the evidence shows that the formal corporate structure of the various Benistar Entities had little meaning for the people involved" and the "evidence also shows that corporate entities were created and discarded at Mr. Carpenter's direction when it suited his purposes." Doc. #1 at 14, 16 (¶¶ 72, 79); Carpenter, 190 F. Supp. 3d at 274. Carpenter was sentenced to 30 months of imprisonment, which he is serving in New York until a scheduled release date in May 2021. Doc. #74-7 at 3; No. 3:13-cr-00226-RNC-1 Doc. #466.

Daniel Carpenter and the other judgment debtors are not named as defendants in this action, but Universitas alleges that the named defendants are each part of Carpenter's "criminal enterprise" that it refers to as "Benistar." Doc. #1 at 4-5, 14 (¶¶ 22-23, 73). Universitas alleges that "Benistar is a single economic entity comprised of hundreds of corporations, LLCs, trusts, and other entities. Any distinction between Benistar entities is fictitious - Benistar entities are operated such that they lack any separate identity and in a manner that is abusive to the corporate form." Id. at 13 (¶ 67). Universitas argues that Daniel Carpenter's entities, including the defendants, operate as a "single entity with a common purpose and course of conduct - the personal enrichment of Mr. Carpenter, Mrs. Carpenter, and Mr. Trudeau." Id. at 13-14 (¶¶ 68-73).

Universitas alleges defendant Benistar Admin Services, Inc. ("BASI") is the "hub" of Daniel Carpenter's entities, and that it controls the trusts within Carpenter's network through theuse of shell-company trustees that then contract services to BASI. Id. at 18 (¶¶ 90-91). In addition, it alleges BASI was previously found by a Massachusetts court to be an alter ego of Daniel and Molly Carpenter in a veil piercing action. Ibid. (¶ 92).

Defendant TPG Group, Inc. ("TPG") is owned by defendants BASI, Molly Carpenter, and Donald Trudeau, but controlled by Daniel Carpenter, and has been used to transfer more than $1 million of assets to a judgment debtor in a way that allows Daniel Carpenter to profit from TPG's operations without being on TPG's official records. Id. at 19-20 (¶¶ 102-03).

Moonstone "is a shell company created to purchase and manage a vacation property for Daniel Carpenter and Molly Carpenter." Id. at 21 (¶ 116). The vacation property was purchased using the fraudulently-transferred Spencer life insurance proceeds. Id. at 21-22 (¶¶ 117, 120). Judge Swain found Universitas's "interest in the Property and any insurance proceeds is superior to those of the insurance company ... and those of all of the Moonstone Respondents." Id. at 22 (¶ 120); Universitas, 2013 WL 6123104, at *13.

Defendant Molly Carpenter is Daniel Carpenter's wife and is an executive of BASI, TPG, Moonstone, and various other related entities. Doc. #1 at 26 (¶¶ 144-45). She holds Daniel Carpenter's primary power of attorney while he is incarcerated but "defers all executive decisions to Mr. Carpenter, thereby providing Mr. Carpenter with control over Benistar while helping to conceal his involvement in Benistar." Ibid. (¶¶ 144-45). Molly Carpenter was "heavily involved with COT" and is or has been a signatory on dozens of Benistar bank accounts, including those belonging to COT, TPG, and BASI. Ibid. (¶¶ 146-48). She personally owns 99% of Moonstone, and she has personally received other transfers of the Spencer life insurance proceeds from judgment debtors. Id. at 21, 27 (¶¶ 116-19, 150-51).

Defendant Donald Trudeau is the President of BASI and TPG as well as an executive in other related entities, has submitted false testimony on Daniel Carpenter's behalf in prior proceedings, and directed the fraudulent transfer of millions of dollars of the Spencer life insurance proceeds, including to entities that he controls. Id. at 23-25 (¶¶ 131-32, 138-40).

Defendant Grist Mill Partners, LLC ("GMP") owns the property ...

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