Ex-N.H. bank at center of multimillion investor suit



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A dispute that could affect "millions and millions of dollars" in retirement investments, and involving a now-dissolved custodian bank in Concord, has landed in U.S. District Court in New Hampshire.According to the suit, filed by RealTrust IRA Alternatives, based in Washington state, defendants The Entrust Group and its former affiliate, Concord-based International Bank and Trust, "not provided an accounting" of RealTrust clients' funds, putting those funds at "great risk."John Dennehy, the plaintiff's attorney, said that his clients' suit concerns about $10 million in cash and much more in various investments that were once held by IBTRealTrust, which handles self-directed IRAs and 401(k) plans.But instead of the money going into traditional stocks, bonds and mutual funds, the money is invested in real estate, private lending, businesses, precious metals and commodities, and similar investments, with the client determining exactly what he or she would like to invest in.RealTrust is not a bank, so it needs a federally insured custodial banking institution to handle the money, and that's where Entrust came in.Entrust, a company based in Oakland, Calif., was founded by Hugh Bromma, author of such books as "How to Invest in Real Estate & Pay Little or No Taxes." He's often quoted by The Wall Street Journal and Bloomberg.While Entrust's Web site doesn't disclose its assets, according to Dennehy, it holds some $450 million, with about $45 million in cash.In 2003, Entrust started Entrust Bank and Trust, which two years later became International Bank and Trust, a non-depository trust institution. (In other words, it didn't accept deposits from retail consumers.)RealTrust set up a custodial agreement in July 2008, but on May 26, 2009, IBT suddenly terminated the agreement with 30 days' notice, according to the suit. (The plaintiffs claim the agreement insisted on a 90-day notice.)IBT dissolved as a corporate entity last October, according to records at the New Hampshire Secretary of State's office.What exactly happened to IBT, and why, is not clear. Calls to Entrust and its attorney were not returned, and the New Hampshire Banking Department would not confirm or deny any investigation into the company, aside from normal auditing.In any case, the custodial agreement and the money moved to Mechanics Bank, another defendant and a community bank in California.RealTrust said it didn't like the terms of the new arrangement, but with short notice had no choice to go along.RealTrust said they were unhappy with Entrust because it "unilaterally" imposed a "duplicative cash management scheme" in 2007 that added $30,000 to $40,000 in fees, costing RealTrust $100,000 over time.Then on May 28, 2010, Entrust again suddenly terminated an agreement with 30 days' notice, this time transferring the money to First Trust Company of Onaga, Kan. But this time, RealTrust was ready and had already worked out its own deal with Washington Federal Bank in Washington, to take custody of the funds.And that's what it wants the court to do. This is not the first lawsuit against International Bank and Trust. IRA Plus Southwest LLC, represented by the same attorney, filed a similar suit in Merrimack County Superior Court in 2008.In 2009, a judge dismissed some counts, but left most of the lawsuit intact. In that suit, IRA Plus charged that IBT, with the knowledge of Wells Fargo -- a conduit for the funds, and another defendant in that suit -- put a large portion of $7.6 million invested back in May 2006 in certificates of deposit at "literally hundreds" of undisclosed banks of "questionable financial stability," as evidenced by one bank's failure, and that IBT had "unlawfully pooled millions of dollars" of the client's funds.IBT however urged that the court dismiss the case because it was being filed in retaliation to an Entrust suit against IRA Plus in Oakland, alleging that it had stolen Entrust's trade secrets and infringed on its trademarks and copyrights.IBT also sought to throw out the case on numerous technical grounds, including the state Banking Commission's "exclusive authority" on matters concerning the Consumer Protection Act. It also claimed that the IRA Plus couldn't prove any actual damages.Entrust also is the subject of a lawsuit filed in January by Ronald Steinberg, a 66-year-old retiree who said he lost $230,000 after his funds were transferred without his approval "to an apparent Ponzi scheme," allegedly run by Oxford Global Advisors/Universal Brokerage FX.Oxford, Universal and Crown Forex SA are all defendants in a Securities and Exchange Commission suit filed last November alleging a "fraudulent scheme that has taken in at least $190 million from at least 1,000 victims" based in companies primarily operating out of Minnesota. The SEC complaint does not mention Entrust. -- BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW

 

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