Negligent Trust Management Leads To Multi-Million Dollar Loss

ByVictoria Negron

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Updated onAugust 7, 2018

This case involves an insurance company that put its money into a trust with a depositor that ended up losing its money. The insurance company had a fronting agreement with a depository company. Part of the deal included the bank holding collateral in a trust account. As initially funded, the trust account had about $25 million in securities and cash. The depositor of the trust account then swapped out good securities for junk bonds. Because of this, the beneficiary of the trust needed to pull funds to defray losses from the fronting arrangement. Since the bank swapped out the good for bad, the insurance company had to take the loss.

Question(s) For Expert Witness

1. Please describe your experience as a bank trust officer for insurance companies.

2. What are the fiduciary duties of a banking trust in a fronting arrangement?

3. In what scenario is it acceptable to swapped out good securities in a trust under this type of agreement for junk bonds?

Expert Witness Response E-033509

inline imageI have worked at both an insurance company and a bank trust department. For 10 years, I served as the corporate vice president of an insurance group where I oversaw equity and private placements of over $125 million. I then worked as the director of securities regulation and as an appointed trustee of the investor protection trust for a northeastern state. Fiduciary power in this instance is not defined by explicit law but by case law. Swapping good collateral for so-called junk bonds was not prudent. The officer should have received explicit authority in written form from the beneficiary.

About the author

Victoria Negron

Victoria Negron

Victoria Negron has extensive experience in journalism and thought leadership in the legal space, with a background crafting content, whitepapers, webinars, and current event articles pertaining to the role of expert witnesses in complex litigation matters. She is a skilled professional specializing in B2B product marketing and content marketing. Currently, she serves as an Enterprise Product Marketing Manager at Postman, and previously held the position of Technical Product Marketing Manager at Palantir Technologies, where she developed her skills in launch strategies, go-to-market strategy, and competitive analysis.

Her expertise in content marketing was further refined during her tenure at the Expert Institute, where she progressed from a Marketing Writer to Senior Content Marketing Manager, and eventually to Associate Director of Content & Product Marketing. In these roles, she honed her abilities in digital marketing, SEO, content strategy, and thought leadership.

Educationally, Victoria holds a Master of Business Administration from the University of Florida - Warrington College of Business and a Bachelor of Arts in Literature, Art, and Hispanic Studies from Hamilton College. Her diverse educational background and professional experience have equipped her with a robust skill set in product marketing, content development, and strategic marketing initiatives.

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