(CN) - Wells Fargo must face claims that it helped a customer in a multimillion Ponzi scheme that defrauded foreign investors, a federal judge ruled.
Franz Lesti, Petra Richter and others sued Wells Fargo Bank and SunTrust Bank, alleging that they knowingly or negligently assisted one of their customers and his affiliates with a Ponzi scheme that looted millions of dollars from innocent foreign investors.
The amended complaint states that Wells Fargo voluntarily processed numerous receipts and fund disbursements via international wire transfer to and from bank accounts owned by PCO Client Management Inc.
When the transfers caused the accounts to incur significant fees, misappropriated investor funds were used to pay those amounts off, according to the complaint.
That allegedly resulted in more than $35 million in losses.
Wells Fargo knew about the fraudulent conduct by June 8, 2007, after which it directed PCO to close its accounts by Aug. 21, the plaintiffs claimed.
The accounts remained open, however, until about January 2008, though account holder Angelika Neumeier-Fuchs repeatedly asked Wells Fargo to close them, the complaint states.
A Wells Fargo representative allegedly said the account was still open and showed a balance of "-8k" in an email dated Dec. 10, 2007, but the bank claims that PCO's accounts were formally closed in October 2007 and January 2008.
The plaintiffs added that a Wells Fargo employee said in an email dated Sept. 26, 2007, that Fuchs "asked that we leave the account open for six more weeks to clear up any wire issues," and that the bank was permitted to do so until Nov. 9.
In addition, in an email dated Dec. 18, a Wells Fargo employee said that "one of the accounts is overdrawn again" and requested help to "get this rectified once and for all," according to the complaint.
This past March, a federal judge in Fort Myers, Fla., dismissed all five counts against SunTrust as time-barred and found the claims for aiding and abetting fraud and unjust enrichment against Wells Fargo insufficiently pleaded.
Wells Fargo then moved for summary judgment on the remaining claims against it. Count VI alleged aiding and abetting conversion; Count VII alleged aiding and abetting fraud; and Count IX alleged unjust enrichment.
U.S. District Judge John Steele denied the motion Wednesday.
"The issue is whether Wells Fargo's alleged rendering of substantial assistance in committing the conversion accrued after Dec. 15, 2007," Steele wrote. "Given the lack of clarity as to the significance of Wells Fargo's activities after Dec. 15, 2007, the court, drawing all reasonable inferences in favor of the plaintiffs, finds that there remains a genuine issue as to whether count VI is time-barred."
Steele also denied summary judgment as to Count VII, finding "a genuine issue of dispute as to the timing of Wells Fargo's alleged substantial assistance."
As to the unjust enrichment claim, the judge noted that the conferred benefits in question amount to "the fees earned by Wells Fargo for the international wire transfers through its accounts."
"Drawing all reasonable inferences in favor of plaintiffs, the court finds that there remains a genuine issue as to whether plaintiffs conferred a benefit to defendant Wells Fargo after Dec. 15, 2007," the opinion states. "Therefore, Wells Fargo's motion for summary judgment is denied as to count IX."
Wells Fargo, ranked 25th on the Fortune 500, reported $86.1 billion in revenue last year.
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