PORTLAND, Ore. (CN) – Umpqua Bank helped an investment firm embezzle $30 million from its clients in a Ponzi scam, the trustee of the bankrupt Summit Accommodators firm claims in Multnomah County Court.
Chapter 11 Trustee Kevin Padrick says Summit Accommodators owners Mark Neuman and Brian Stevens spent 13 years funneling millions from Summit’s bank accounts to affiliate Inland Capital before the company went bankrupt in 2008.
Lane Lyons and Tim Larkin joined Summit as quarter-owners in 2006, the trustee says. The owners freely used money from Inland’s accounts for personal use, according to the complaint.
Inevitably, the owners’ embezzlement caused liquidity problems, and when the company was unable to pay its bills, the owners started a Ponzi scheme, bringing in new investors in order to pay the old ones, the receiver says.
In 2007, the owners “practically bragged” to Umpqua executives about their embezzlement scam, Padrick says in the complaint. The owners “described in great detail all relevant aspects of their Ponzi scheme and embezzlement” to Umpqua’s CEO Ray Davis and then-President Dave Edson during a pitch to get a loan or equity investment from the bank, the lawsuit states.
Umpqua handed Summit “substantial loans” despite its knowledge of Summit’s Ponzi scheme, according to the complaint. It also encouraged Summit to shift all of its business over to Umpqua, facilitating the exchange of millions because of the large fees it earned on Summit’s deposit base. Even as Summit’s house of cards fell with the housing market, Umpqua continued to help Summit find new clients, the receiver says.
Padrick wants Umpqua to cover the lost $30 million. The receiver is represented by David Aman with Tonkon Torp.