business

Michael Antonello, a New Brighton insurance agent who made millions selling policies to wealthy clients before losing his license on allegations of fraud, now stands accused of playing a "shell game" with his assets to avoid paying millions in court judgments.

Antonello is a noteworthy violinist, art collector and the namesake of a concert hall at the MacPhail Center for Music in Minneapolis, to which he contributed more than $1 million in 2008.

But his fortunes soured a year later, when the Minnesota Department of Commerce revoked his license and fined him $250,000. The agency found that he'd been profiting from the sale of massive life insurance policies to elderly clients with improper plans to flip the policies to investors.

The market for these so-called "life settlement" policies collapsed in the wake of statutory changes and enforcement actions, and Antonello has faced a barrage of lawsuits resulting from his role in such transactions.

The most recent suit involved a $30 million policy he sold on the life of Harold S. Zlot, 73, of Santa Rosa, Calif. Marion and Steve Newman formed a family partnership in Minneapolis and paid $434,000 to help fund the policy on Antonello's guarantee that their investment would return at least a 50 percent profit. The partnership sued in Hennepin County in March, demanding $651,000. The case settled recently for undisclosed terms. Neil Meyer, the Newmans' attorney, declined to comment Tuesday on whether his clients have been paid.

Minneapolis attorney Phillip Gainsley represents two trusts that won judgments in February against Antonello that exceed $3.15 million, including interest. Gainsley sent a letter last week to Hennepin County District Judge Mel Dickstein alleging that Antonello is trying to thwart his attempts to collect.

Gainsley declined to comment. But according to his letter and related court filings, Antonello's companies have ignored summonses seeking to garnish his income. Antonello transferred the title of his heavily mortgaged former homestead in New Brighton to his son, and now claims that a second home he and his wife own outright on Lake St. Croix Beach is their real homestead and therefore exempt from foreclosure, Gainsley wrote.

He alleges that Antonello also has tried to protect his valuable art collection and musical instruments through a series of transactions involving his former insurance company, Michael J. Antonello and Associates Ltd.

In a recent deposition, Antonello said that the firm generates revenue now by liquidating fine art. Court documents show that in December, he and his wife, Jean, sold the company numerous paintings, two Steinway pianos, and stock worth a total of at least $3.7 million. The sale was used to retire a $3.6 million line of credit from the company that Antonello said he had relied on for living expenses.

Gainsley noted that the artwork was used to secure funding from a New York firm in January, which placed liens on the pieces. And in April, Antonello's company sold his prized 1720 Stradivarius violin -- once valued at $3 million -- but he has refused to provide details about the transaction.

Court documents put the assets of Antonello and Associates at about $20 million. But Antonello's attorney, Warren Peterson of St. Paul, says they're exempt from the judgments because the firm is owned outright by an employee stock ownership plan (ESOP). Antonello is the sole beneficiary and trustee of the plan, Peterson said.

Gainsley alleges that the structure of the ESOP is flawed, that Antonello failed to perform required annual appraisals in recent years and that he borrowed money from the plan for living expenses. Even if the ESOP was valid at one time, he said, "Mr. Antonello's abuses of the plan, and its operation, nullify its exemption from seizure."

In May, the Antonellos sued the trusts that Gainsley represents, seeking to halt an Aug. 1 foreclosure sale on their home in the 1400 block of Riviera Av. S., Lake St. Croix Beach. The Antonellos filed papers to classify it as their homestead in 2011.

Gainsley noted that their address in New Brighton has been listed as their homestead through 2010. It's also the address listed on their driver's licenses, bank and credit card statements. Their voter registrations show that address from 2006 through 2009, though it now lists the Lake St. Croix Beach address, according to their attorney.

District Judge Ellen Maas ruled recently that foreclosure could go forward Aug. 1, noting that they Antonellos will still have a year to redeem the home. She scheduled a trial for Oct. 17 to determine whether the property was properly homesteaded.

If so, Peterson said, the trusts can't foreclose. State law prohibits a foreclosure on a homesteaded property when a non-debtor is co-owner, and Jean Antonello was not a party to the court judgments against her husband.

"If it's not a homestead, they can foreclose Mike's interest, but they can't foreclose her interest," Peterson said. "So they would acquire Michael's half, and then he's got a year to redeem. And if he doesn't redeem it, at the end of the year they and his wife would own the property as joint tenants. And then what? Who gets to sleep in the bed?"

Dan Browning • 612-673-4493