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Seminole Tribe Says Wells Fargo Ripped It Off

(CN) - The Seminole Tribe of Florida claims in court that Wells Fargo grossly mismanaged its money for years while charging the tribe millions in unwarranted fees.

In a complaint filed in Broward County. Fla. on Jan. 12, the Seminole Tribe created a trust account with Wells Fargo's predecessor in interest, Wachovia Bank, intent on using the revenue derived from its gaming facilities in Florida to help promote the economic development, self-sufficiency and strong governments of the tribe.

At the time, tribal elders were responding to a marked increase in the Seminole population in South Florida, and saw bolstering the tribe's financial interests as critical to the future well-being of its young people.

Despite its expectations for the bank, the tribe claims Wells Fargo created deficient and confusing account statements to cover up the collection of unauthorized fees to the minor trust beneficiaries, the complaint says.

The Seminole Tribe members also say that they lost at least $100 million dollars due to Wells Fargo mismanagement of their trust assets by using reckless investment strategies.

"It appears as if the Trustee established the trust, placed it in cruise-control, failed to properly advise the Tribe or its minor beneficiaries on investment strategies, and invested in a deficient portfolio in order to defraud the minor beneficiaries out of millions of dollars in fraudulent fees," the complaint says.

The trust fund, called the "Seminole Tribe of Florida Minors' Per Capita Payment Trust Agreement," was established on April 20, 2005.

"During the first year of the Trust the Tribe contributed $16.8 million and with additional funding each month and the addition of new Tribal Minor Beneficiaries the value of the Trust principal has grown to now approximately $1.4 billion," the complaint says.

The complaint alleges that in November 2007, due to the swelling of the trust corpus with additional funding and the addition of new minor beneficiaries, the tribe decided to merge its 2005 trust into three successive trust instruments and reappointed Wachovia as the trustee.

The Tribe members say that Wachovia modified the trust's fee schedule five times over a course of seven years.

"The Tribe was always concerned with the fees associated with the administration of the trust," the complaint says.

However, the complaint claims that the tribe never suspected "that although the trustee fees were being adjusted downward", Wachovia was also collecting hidden fees from the minor beneficiaries.

The complaint says that during a routine review of the Minor's Trust account records in the spring of 2015, the tribe uncovered "an elaborate fraudulent scheme" where Wachovia charged their trust account unauthorized fees outside the negotiated fee schedule.

"In both 2014 and 2015, the fees consumed more than 25% of the income and investment gains earned on the account. Total income and realized gains for 2014 was approximately $8 million and the fees charged by the Trustee were $2.1 million- equating to approximately 26% of the income earned on the account. In 2015, that figure increased to an astronomical 32% of the earnings," the complaint says.

After discovering the fraudulent fees, the tribe says they requested a meeting with Wachovia, and that during it, bank representatives Thomas Joyce, Terri Johnson and Melissa Barnhardt attempted to conceal the scheme by trying to convince tribe members to execute a new reduced fee structure.

Shortly after the meeting, "the Trustee admitted to fraudulent charging and collecting unauthorized fees from the tribe minor beneficiaries over the course of multiple years administering the Trust," the complaint says.

"The Trustee's conduct relating to the administration of the trust and the adoption of imprudent investment strategies have left the performance of the trust floundering," the complaint says.

The complaint alleges that due to Wachovia's failure to properly invest the trust's funds the minor beneficiaries and the Tribe members have had losses of over $100 million.

The Seminole Tribe members seek compensatory damages on claims of breach of fiduciary duty, gross negligence, breach of Trust, professional malpractice, unjust enrichment, accounting, violation of the Prudent Investor Rule and fraud.

They are represented by Albert Frevola Jr. of Conrad & Scherer in Ft. Lauderdale, Fla.

Vince Scanlon, the spokesperson and the vice president of Private Bank Media Relations for Wells Fargo, said that the bank does not have a comment on the lawsuit.

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