The top two former executives of Northbrook-based Sentinel Management Group Inc. have reached a $10.7 million settlement with the trustee for the bankrupt cash-management firm.
Sentinel founder and Chairman Philip Bloom and his son, Chief Executive Eric Bloom, are the key participants in the agreement, which also includes entities affiliated with the pair, according to papers filed Friday by Trustee Frederick Grede in U.S. Bankruptcy Court in Chicago.
Sentinel filed for Chapter 11 bankruptcy in August, four days after it froze investor assets, citing credit market instability. In October, Grede filed a $350 million suit against Philip and Eric Bloom, among others, accusing them of committing “a long-term, massive fraud against Sentinel and its customers.”
The $10.7 million settlement “represents substantially all the assets of the settling defendants, other than assets which are or claimed to be exempt,” said Grede’s court filing. As part of the settlement, the trustee would obtain an order preventing third parties from making claims against the Blooms.
A hearing on the proposed deal is scheduled for June 9.
Approval of the settlement won’t put an end to the Sentinel saga, as several other lawsuits, including ones involving a bank and an auditing firm, are pending.
The Securities and Exchange Commission also has sued Sentinel, claiming that the company used hundreds of millions of dollars of client securities without their knowledge as collateral to obtain a $321 million line of credit from Bank of New York Mellon Corp.
SEC lawyers couldn’t be reached for comment Friday afternoon, but, according to court records, a hearing on the agency’s case filed in the U.S. District Court in Chicago is scheduled for June 17.
In March, Grede sued Bank of New York Mellon for $550 million, claiming bank officials helped cause Sentinel’s collapse.
That same month, Grede sued auditor McGladrey & Pullen LLP for $550 million, claiming malpractice that aided and abetted Sentinel’s fraud.
“Those cases are all proceeding,” Chris Gair, a Jenner & Block lawyer representing Grede, said Friday.
Also proceeding is a plan approved in December for Grede to sell up to $800 million in fixed- and floating-rate corporate bonds, asset-backed securities and fixed-capital securities held by Sentinel in accounts at Bank of New York Mellon and JPMorgan Chase.
According to a document filed with the bankruptcy court earlier in the week, Grede had realized $412 million from the liquidation of those securities as of April 30.
Eric Bloom’s lawyer, Terence Campbell of Cotsirilos Tighe & Streicker, declined to comment Friday. Philip Bloom’s lawyer couldn’t be reached.
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