Customers Sue Bank for $3.8 Million

     ST. LOUIS (CN) – First Bank helped bilk Fidelity National Title Insurance of more than $3.8 million, Fidelity customers claim in court.
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     Plaintiffs Signature Group Holdings, successor to Fremont Investment and Loan; PNC Bank, successor to National City Bank of Indiana; and two people sued First Bank in City Court.
     The claim involves James Thurman and his company Phoenix Title’s embezzlement of Fidelity escrow accounts. Thurman pleaded guilty to criminal charges in 2005.
     The plaintiffs claim First Bank’s Kurt Beanblossom, who oversaw the Phoenix/Fidelity account, “knew that, in effect, Thurman was running a ‘Ponzi’ scheme, covering up past thefts and embezzlements with monies from newer escrows,” according to the complaint.
     Neither Beanblossom nor Thurman are named as defendants in this case.
     The plaintiffs say the scheme lasted from 2002 until 2005. They claim First Bank breached its fiduciary duty by allowing overdrafts on the Phoenix account and by paying the overdrafts, in essence loaning hundreds of thousands of unsecured dollars to Phoenix.
     “By not closing Phoenix’s escrow bank account with First Bank, which was a condition to Phoenix being in business – as such was required by both Fidelity and Guarantee – and by covering such overdrafts with loans, First Bank and Beanblossom assisted or aided and abetted Thurman and Phoenix by making it appear to plaintiffs that Phoenix was backed by a respectable financial institution,” the complaint states.
     The plaintiffs claim Beanblossom knew that Phoenix’s account should always have a positive balance, and that Beanblossom helped Thurman keep the scheme going.
     “When checks were presented to First Bank that would result in account 6464 being overdrawn, Beanblossom or a subordinate bank employee would telephone James Thurman telling Thurman how much account 6464 was about to be overdrawn,” the complaint states. “With this knowledge, Thurman knew how much to delay disbursement from new escrows, so that the overdrafts in the escrow account could be covered by his ongoing lapping scheme.”
     Thurman ended up embezzling $3,820,536.91 from Fidelity and its customers, and pleaded guilty to federal criminal charges in 2005.
     The plaintiffs claim Thurman could have been stopped much sooner – and with much less damage done – had First Bank and Beanblossom fulfilled their duties.
     “First Bank ratified Beanblossom’s actions by retaining him as an officer and employee, after acquiring full knowledge of his actions in aiding, abetting, counseling, promoting and assisting James Thurman’s embezzlement and theft,” the complaint states.
     “Beanblossom had actual or constructive knowledge of Thurman’s embezzlement and stealing, or was willfully blind to such, and participated in assisting such by telling Thurman how much he had to steal.
     “Beanblossom reached a conscious decision to participate in Thurman’s tortuous activity well before March 2005.
     “Beanblossom acted with scienter in that Beanblossom knew and admits he knew that he did not know that Phoenix was qualified to maintain an FDIC insured escrow account with First Bank under either applicable federal law, federal banking regulations, or First Bank’s own policies and procedures for knowing its customers.”
     The plaintiffs seek actual and punitive damages on 10 counts, including falsely representing Phoenix’s solvency, aiding and abetting and breach of implied warranties. They are represented by John Davidson.

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