JPMORGAN CHASE BANK AGREES TO PAY $4.65 MILLION TO SETTLE AIDING AND ABETTING LAWSUIT RELATED TO MILLENNIUM BANK PONZI SCHEME
The attorney represented the Plaintiffs, Edmund and Roberta Mansor (“Mansors”), in a case filed against Defendant, JPMorgan Chase Bank, N.A. (“Chase”) in the U.S. District Court for the District of Massachusetts. the attorney and co-counsel negotiated a settlement of this action that will provide $4.625 million in monetary relief to fewer than two hundred investors who purchased or otherwise acquired CDs from the promoters of the Millennium Ponzi scheme, during the five months between September 25, 2008 and March 9, 2009. This settlement marks the end of more than five years of hard-fought litigation, and has provided significant relief to the members of the settlement class.
The case arises from William Wise’s $150 million Millennium Bank Ponzi scheme, which involved the sale of bogus CDs with unrealistically high interest rates. Wise and alleged his co-conspirators, Jackie and Kristi Hoegel, used the accounts and services of two Washington Mutual Bank (“WaMu”), and later Chase branches in Napa, California to steal millions of dollars of deposits that they had collected from unsuspecting investors. Wise is presently serving a 23 year sentence in federal prison after admitting his guilt in the criminal scheme. The Mansors brought this claim on behalf of a class of investors against Chase for aiding and abetting the Millennium fraud.
The Mansors alleged that the Millennium scheme was enabled by Chase employees, and particularly so by branch manager, Tamara Ressler (“Ressler”), who they claimed had acquired specific knowledge of Wise’s illegal activities while working at WaMu and willingly assisted the Millennium Bank fraud anyway, The Mansors had alleged, inter alia, that Ressler:
observed a high volume of checks being deposited into the Millennium accounts, which included memos referring to the terms and interest rate the CDs that investors believed they were purchasing;
observed that Wise and the Hoegels were not placing any money illegitimate banking or other investment activities;
received calls from investigators regarding the nature of the Millennium business and Wise;
recommended and established a remote wiring interface to reduce Millennium’s visibility at branch offices; and
assisted Wise and the Hoegels in having restraints removed from personal and Millennium accounts.
The Mansors further alleged that Ressler continued to assist the Millennium fraud after September 25, 2008, when the United States Office of Thrift Supervision placed WaMu into receivership with the FDIC, and sold certain of WaMu’s assets to Chase. Those assets included the Millennium Bank accounts, as well as the two Napa branches where Wise and the Hoegels had been executing their fraud. Accordingly, all of the Napa branch employees, including Williams and Groves, became employees of Chase.
The Millennium Bank scheme finally came to an end on March 25, 2009, when the SEC filed a civil enforcement action against Wise and his associates in the United States District Court for the Northern District of Texas before Judge Reed O’Connor. By that time, Millennium Bank investors had lost millions of dollars.
In early 2009, Mansors’ Counsel, the attorney, began investigating potential claims against third parties arising from the Millennium fraud. During that time, the attorney interviewed witnesses, including William Wise, his attorneys, the Hoegels and numerous investors in the Millennium scheme. Based on this informal discovery, the attorney filed a complaint in Boston against Chase on March 23, 2012, which Chase, represented by Foley & Lardner LLP, moved to dismiss.
The parties then engaged in a court battle over ‘privilege’ issues after the attorney came into possession of documents voluntarily provided by the court-appointed Receiver in the SEC action, which included information relating to Suspicious Activity Reports (“SARs”) governed by the Bank Secrecy Act (“BSA”). Ultimately, the Court refused to suppress most of the documents in the attorney’s possession, which Chase then attempted to certify to the First Circuit Court of Appeals. The First Circuit agreed to review the issues, ordered full briefing, heard oral arguments in June, 2015, and then denied the Chase Petition in August, 2015.
Almost one year later, in April 26, 2016, the Court denied Chase’s motion to dismiss the Mansors’ Third Amended Complaint, and discovery proceeded, with numerous depositions being conducted throughout the U.S., including in Massachusetts, California, Texas, Colorado and the state of Washington.
Finally, in March, 2018, the parties by agreement conducted mediation before former Massachusetts Superior Court Judge Margaret R. Hinkle 8, and reached the material terms of a settlement of the class claims. The Court, by Magistrate Judge Judith Dein, finally approved the settlement in the total amount of $1,625,000 on November 14, 2018. The SEC Receiver will now make a distribution of the settlement proceeds to the approved class members, constituting all persons who purchased or otherwise acquired Millennium CDs from September 25, 2008 through March 9, 2009.