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A Utah bank and its insurer have agreed to pay more than $5 million to settle claims arising out of its handling of monies from American Pension Services of Riverton, whose owner has been accused of pilfering $24 million from retirement accounts.
First Utah Bank, a small community institution in Salt Lake County, will turn over $2 million to the court-appointed receiver who has taken over American Pension Services and is seeking to recoup as much of the missing funds as it can.
First Utah Bank's insurer, Everest National Insurance Co., is to pay out $3 million as part of an agreement that still needs the approval of U.S. District Judge Robert Shelby. Bank President and CEO Brad Baldwin said Thursday that while the bank "certainly had a valid defense" of its handling of monies deposited with the company, it chose to settle after lengthy negotiations and mediation.
"We think the resolution at this time is in the interest of all parties," Baldwin said, "and will provide an imminent and substantial payment to the APS account holders."
He said that the $2 million payment was approved by federal and state regulators and leaves the bank in a strong financial position. First Bank of Utah has 106 employees at seven branches.
The Securities and Exchange Commission sued APS and its owner, Curtis DeYoung, last year, alleging that the Draper resident had siphoned off $24.6 million from accounts of people with self-directed IRAs and 401(k) retirement accounts.
Under federal law, DeYoung, as the administrator of the accounts, was prohibited from giving investment advice or directing it to investments without the written directions from the owners.
But the SEC alleges that between 2000 and 2014, DeYoung misappropriated about $24.7 million from the accounts, rendering the business insolvent. DeYoung signed a settlement agreement with the SEC that says he appropriated more than $19 million from the accounts, much of which went to loans or investments with friends and for salaries to DeYoung and his wife.
DeYoung also is facing criminal charges in federal court.
As part of a liquidation plan, most of the holders of 5,500 self-directed IRA and 401(k) accounts with assets of $366 million got back their monies, minus 10 percent that was held back to make up for the missing millions.
The court-appointed receiver of APS, Los Angeles attorney Diane Thompson, declined to answer questions on what the settlement amounts might mean for account holders, but said in an email that, "We believe the settlement is in the best interests of the parties."
First Utah Bank served as the custodian for APS funds since 1992. Thompson alleged that the bank had breeched its agreement with account owners by "negligently failing to provide adequate oversight" of DeYoung to ensure he didn't misappropriate funds from a master account where all the monies were deposited.
The bank denied it was liable and asserted a number of defenses before settlement.
Other provisions of the proposed settlement include the assignment of a Hartford Fire Insurance policy of up to $1 million to the receiver and other considerations worth a bit less than $500,000.
DeYoung is set for a two-week jury trial beginning Feb. 29. A federal grand jury indicted DeYoung in February on 15 charges of mail fraud, each carrying a possible prison term of up to 20 years.