PHOENIX (CN) – An Arizona couple claims that Charles Schwab and Wells Fargo Bank helped operators of a Ponzi scheme defraud them of $1.9 million.
Barry L. and Judy Stern claim they were victimized by a Ponzi scheme run by unlicensed securities brokers Deborah C. and Alva J. Bennett, who promised them 20 to 30 percent monthly returns on investments.
The Sterns claim they “were encouraged and advised to deposit or transfer funds to the Bennetts’ Wells Fargo ‘portfolio management account,'” not knowing the Bennetts would combine that money with other investors’ money and their own. They say the Bennetts then transferred large amounts of money into a Charles Schwab brokerage account “where they again commingled the money with other investor funds.”
The Sterns say the Bennetts used investors’ money to unsuccessfully trade “hundreds of millions of dollars of securities through aggressive day trading on margin” and disguised their losses by paying the Sterns returns from their own money and the funds of other investors.
The Sterns claim that Wells Fargo and Charles Schwab were aware of the Bennetts’ financial situation and of the “significant charges that the Bennetts made on their credit cards” and chose to ignore the large expenses, allowing “the Bennetts to open and continue maintaining personal accounts unsuitable for the size and type of transactions conducted therein.”
They claim the financial institutions failed to supervise the Bennetts’ accounts and detect that the Bennetts were using the accounts “to perpetuate fraudulent or otherwise illegal activity.”
The Sterns seek punitive damages for aiding and abetting securities fraud and negligence. Their lead counsel in Maricopa County Court is Martin R. Galbut.