Civil Suit Seeks to Hold Bank Liable for Haitian Ponzi Scheme
Recently, the court appointed receiver of Creative Capital Consortium, LLC, the organization at the center of a massive Haitian ponzi scheme, filed a civil suit in the United States District Court for the Southern District of Florida against Wells Fargo Bank, N.A. for its predecessors role in furthering the ponzi scheme. This case highlights the potential culpability of financial institutions for their lack of effective anti-money laundering programs and errors in compliance with the Bank Secrecy Act.
The Bank Secrecy Act (“BSA”), and its applicable federal regulations, require financial institutions to verify the sources of money coming into its customers accounts. Financial institutions are required to file Suspicious Activity Reports (“SAR”) for transactions which appear suspicious and are given the authority to shut down accounts should money laundering be suspected. Financial institutions generally accomplish the goals of the BSA through the use of an anti-money laundering compliance program that allows a financial institution to effectively monitor transactions and determine if they are suspicious.
According to the complaint filed by the receiver, George Theodule, founder and director of Creative Capital Consortium, LLC (“CCC”), operated a massive ponzi scheme that was directed at Haitian Americans. The complaint alleges that from 2007 to the end of 2008, Theodule targeted thousands of investors from Florida, Georgia, and New Jersey by promising quick and large profits from their initial investments. Theodule allegedly formed numerous, in excess of 100, “investment clubs” and used CCC to oversee the scheme. The clubs would then structure transactions between themselves through their separate accounts to appear as investments. In total, the complaint alleges that Theodule made $68 million from the scheme.
Having already settled with Theodule in a separate suit for $5.5 million, the receiver has now turned its attention to Wells Fargo Bank, N.A. for the remainder based upon the actions of its predecessor Wachovia Bank, N.A. According to the complaint, Wachovia failed to provide adequate safeguards to prevent the scheme from occurring. The complaint alleges that Wachovia provided special privileges to Theodule, CCC, and the 36 investment clubs that had accounts at the bank and often ignored “red flags” of suspicious activity. Examples of Wachovias alleged failures include a failure to investigate and inquire into the nature of CCC and Theodules business and failing to file SARs for numerous structured transactions.
This is not the first time Wachovia has been accused of failing to comply with its duties under the BSA. Prior to its merger with Wells Fargo, in 2009, Wachovia was criminally charged with violations of the BSA for willfully failing to establish an anti-money laundering compliance program and for failing to file SARs. As a result, Wachovia and Wells Fargo entered into a deferred prosecution agreement, forfeited $110 million and paid $50 million in fines.
If you have questions pertaining to the BSA, anti-money laundering compliance or how to ensure that your business maintains regulatory compliance at both the state and federal levels, contact Fuerst Ittleman PL at firstname.lastname@example.org.