A federal appeals court has upheld a $ 107 million judgment against PNC Bank, a unit of PNC Financial Services Group, in a lawsuit over a multi-state fraud scheme involving funeral home contracts.
The Eighth Circuit Court of Appeals issued its ruling on Monday, two years after District Judge E. Richard Webber of the Eastern District of Missouri ordered the nine-digit judgment.
PNC was the sole remaining bank defendant in litigation first filed in 2009 that alleged fraud and breach of fiduciary duty by St. Louis-based Allegiant Bancorp in administering seven trusts. Allegiant was purchased in 2003 by National City Corp., which was bought by PNC in 2008.
PNC had appealed a $ 107 million judgment, arguing that the judge improperly included punitive damages and made other errors, but the Eighth Circuit Court of Appeals disagreed.
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Six individuals were convicted and served jail time for fraud perpetrated by National Prearranged Services, a St. Louis seller of funeral contracts, and two related and now-defunct Texas life insurers. Roughly 250,000 customers in 35 states paid for prearranged funeral contracts that were required by state law to be kept in a secure trust.
“These banks let a Ponzi scheme run through their trust departments and didn’t do anything to protect the trust’s assets,” said Dan Reilly, a partner at the law firm Fennemore Craig, who was the lead plaintiff trial counsel. Because PNC bought Allegiant, it bought the bank’s liabilities, he said.
PNC did not respond to a request for comment.
PNC had argued on appeal that the district court improperly calculated compensatory damages; improperly awarded punitive damages; erred in awarding prejudgment interest; and exceeded its authority by awarding attorneys’ fees and declining to reduce the award.
Plaintiffs in the lawsuit included 35 state guaranty associations and the National Organization of Life and Health Insurance Guaranty Associations.