JPMorgan to pay $4.6 mln to settle Ponzi scheme lawsuit

6/22/18 REUTERS LEGAL 21:56:15
June 22, 2018
JPMorgan to pay $4.6 mln to settle Ponzi scheme lawsuit
Dena Aubin
(Reuters) – JPMorgan Chase has agreed to pay $4.6 million to resolve a proposed class action accusing it of aiding a Ponzi scheme at Caribbean-based Millennium Bank, which authorities say defrauded hundreds of investors with bogus certificates of deposits.

Disclosed in a Thursday filing in Boston federal court, the agreement ends a five-year legal fight by investors who lost money in the scheme, run by convicted Canadian banker William Wise. The investors alleged that Chase and its predecessor Washington Mutual let Wise steal millions of dollars of investors’ money from accounts at the banks despite numerous signs he was running a fraud.

The deal requires the approval of U.S. Magistrate Judge Judith Dein, who is overseeing the case.

Chase spokeswoman Elizabeth Seymour said the bank is “pleased to have resolved this legacy matter.”

Millennium had originally opened the accounts at Washington Mutual Bank, and Chase inherited the accounts when it bought Washington Mutual’s assets during the 2008 financial crisis.

In court filings, Chase said investors failed to show that it knew about the fraud or substantially assisted in it.

The investors are represented by lawyers at Kozyak Tropin & Throckmorton and the Law Offices of Keith Miller.

”It’s been years of hard-fought litigation but we are very pleased with this result,” Tal Lifshitz, a lawyer for the investors, said in an email.

The 2012 lawsuit accused Chase of failing to promptly notify authorities or close accounts for Millennium Bank at its California branches after allegedly learning of the illegal scheme.

In Thursday’s filing, lawyers for the investors said the settlement will give significant relief to an estimated 150 to 200 class members who lost money on the Millennium scheme. The investors will not get all their money back, but they faced significant expense if they had continued to litigate, the lawyers said, urging preliminary court approval of the deal.

Wise was sentenced to 22 years in prison in 2015 after pleading guilty to conspiracy, fraud and money laundering in connection with the scheme.

The scheme was shut down and Millennium, based in St. Vincent and the Grenadines, was put into receivership in 2009 after the U.S. Securities and Exchange Commission won a restraining order and a freeze of all assets of the bank, Wise and his co-conspirators, in Texas federal court. The SEC said Wise and several co-conspirators raised at least $68 million, targeting mostly U.S. investors, by misappropriating money that they had promised to invest in high-interest certificates of deposit.

The investors’ lawsuit said Washington Mutual received alerts of suspicious activity in the Millennium accounts and investigated them as early as 2006 but failed to stop the suspicious activity or protect investors.

When Chase took over the accounts, it also took over the Millennium investigative files and reviewed the accounts, but it too failed to promptly notify law enforcement authorities or close the accounts, the lawsuit said.

Dein in 2016 had dismissed part of the lawsuit, finding that Chase was not liable for Washington Mutual’s conduct before Chase acquired its assets. She said investors could pursue claims that Chase allowed Wise to defraud additional investors after it acquired the accounts.

The case is Mansor et al v. JPMorgan Chase Bank, U.S. District Court, Massachusetts District, No. 12-10544.

For the plaintiffs: Harley Tropin and Tal Lifshitz at Kozyak Tropin & Throckmorton and Keith Miller at Law Offices of Keith Miller

For the defendant: Beth Boland and Rachel Blise at Foley & Lardner

—- Index References —-
News Subject: (Business Lawsuits & Settlements (1BU19); Business Litigation (1BU04); Business Management (1BU42); Corporate Events (1CR05); Crime (1CR87); Financial Fraud (1FI18); Fraud (1FR30); Legal (1LE33); Major Corporations (1MA93); Social Issues (1SO05))
Industry: (Banking (1BA20); Financial Services (1FI37))
Region: (Americas (1AM92); Massachusetts (1MA15); North America (1NO39); U.S. New England Region (1NE37); USA (1US73))
Language: EN
Other Indexing: (FOLEY & LARDNER; WASHINGTON MUTUAL BANK) (Elizabeth Seymour; Beth Boland; Harley Tropin; Judith Dein; Keith Miller; Tal Lifshitz; William Wise; Rachel Blise)
Keywords: banking; fedlit (OCC:OLRTXT); (N2:US)Keywords:
Word Count: 589
End of Document
© 2018 Thomson Reuters. No claim to original U.S. Government Works.

City of Springfield Banned all Foreclosures! How Will The Supreme Court Rule On That?


BOSTON – A group of Western Massachusetts banks argued before the state’s highest court on Thursday that the city of Springfield’s anti-foreclosure ordinances should be overturned.

The banks say the local ordinances contradict state laws, and a bond levied on lenders constitutes an illegal tax. “It’s not that banks are opposed to mortgage laws and reform, but to how it’s being done,” said Craig Kaylor, general counsel for Hampden Bank, one of the banks that brought the lawsuit. “These are for the state to decide, not city by city.”

But the city disagrees and says the laws are necessary to avoid blight and protect neighborhoods that have high rates of foreclosure.

“This is the city’s response to the foreclosure crisis,” said Springfield Assistant City Solicitor Thomas Moore, who argued the case before the Supreme Judicial Court. “It’s a response from the city council and mayor based on what they see every day in the city. They’ve taken the strongest stance to protect homeowners and the city itself.”

The city of Springfield passed two anti-foreclosure ordinances in 2011 as the city was being hit hard by the mortgage foreclosure crisis. One ordinance requires a bank that forecloses on a home to pay for a $10,000 bond, which can be used by the city to maintain the foreclosed properties, if the bank fails to do so.

The other ordinance requires the establishment of a mandatory mediation program to help homeowners facing foreclosure. The bank would be responsible for paying most of the cost of the mediation.

Springfield is among the top cities in the state in the number of distressed properties it has. The city says high rates of foreclosures lead to health and education problems for children in families that lose their homes, and high rates of blighted or vacant properties lead to crime and violence in those neighborhoods.

Six western Massachusetts banks, with Easthampton Savings Bank as the lead plaintiff, challenged the ordinances. A U.S. District court judge upheld the ordinances. However, on appeal, the U.S. Court of Appeals issued a stay preventing Springfield from enforcing them. The federal court then asked the Supreme Judicial Court, the state’s highest court, to answer two questions related to state law before the federal court makes its ruling. The case is Easthampton Savings Bank and others vs. City of Springfield.

The SJC must decide whether the local foreclosure ordinances are preempted by existing state foreclosure laws. The court must also decide whether the $10,000 bond is a legal fee or an illegal tax. Cities and towns cannot create taxes without legislative approval.

The banks also argue that the ordinances violate the contract clause of the U.S. Constitution by impairing the contract between the homeowner and the mortgage-holder, a question that remains before the federal court.

During Thursday’s arguments, Tani Sapirstein, an attorney representing the banks, argued that the bond is a tax because banks do not get any particular benefit from paying it – which is the criteria for calling something a fee. The way the bond works is when a foreclosed property is sold, if the city did not have to use the bond money to maintain it, $9,500 would be returned to the bank and $500 is kept by the city as an administrative fee, used to maintain blighted properties and implement the foreclosure laws.

Chief Justice Ralph Gants questioned Sapirstein on whether the bank does not actually receive benefits. “You have an interest in preserving the value of your property,” Gants said. “If there are foreclosed properties going to hell all around your property, it diminishes the value of your property and diminishes the value of what you receive on the foreclosure. Why is this concern about avoiding blight not something that would benefit the bank as well as the city?”

Sapirstein replied that eliminating blight would benefit the bank “as well as the city and other property owners in the neighborhood.” “How is that a particularized benefit?” she said.

Moore argued that the bond is a fee, which the city needs to hire code inspectors and create a database of who controls foreclosed properties.

But Justice Geraldine Hines said if she pays for a copy of her birth certificate, she gets a document in return for the fee. “Here I don’t see that,” she said. “The property owners, the mortgagees, don’t have something tangible.”

Moore said the banks get a “well-regulated industry” and preservation of their property values. In addition, when a bank registers ownership in the database, the city knows who is responsible and problems can be resolved more easily.

Sapirstein also argued that local law cannot require more than state law in an area that is regulated by the state or the result would be “a patchwork of ordinances.”

Gants indicated that the court may move to narrow the ordinances – for example, applying them only to a bank that has taken possession of a house, not a bank that is in the process of foreclosure when the homeowner is still living there. Gants said the ordinance as written could fine a bank for not maintaining a property where the homeowner still lives. As a homeowner, Gants said, “I’d say I’m still living here. This is my home. How can they be punished for not invading what’s still my home just because they happen to be foreclosing on it?” Gants said.

Moore acknowledged that the ordinance may be overbroad and said the city does not anticipate pursuing a violation in a case like that. Moore said the lenders’ lawsuit is premature because there is no information yet about how the city will enforce the laws. “We have the lenders essentially saying the sky will be falling, we are worried about x, y, z happening. None of that has happened and none of that may happen,” Moore said.

Moore said the city is still writing the regulations for the ordinances and if they are upheld, “The city is ready to go forward with implementation within a period of weeks.”

Similar foreclosure ordinances were established in Lynn and Worcester, and local banks challenged those as well. That lawsuit is pending in U.S. District Court in Worcester. The case involving Lynn and Worcester could be affected by the SJC’s ruling in the Springfield case.

Several activists supporting homeowners came in from Lynn and Springfield to hear the arguments. Candejah Pink, a Springfield homeowner and community organizer battled foreclosure for four years before reaching an agreement to keep her home. She helped write the Springfield ordinances. Pink said the bond is there to ensure that homes are maintained, which keeps crime and violence down. The mediation program, she said, is important to help homeowners come to an agreement with lenders. “We’re not asking to live in our homes for free. We’re asking for some mediation,” she said.

Chase is defending 10,000 lawsuits. Find out more and join the party.


May God Help Us All

by Mark Stopa, Florida attorney

Wanna Buy a Government-Foreclosed Home? OK. Just Bring $10,000,000.00

Posted on June 29th, 2012 by Mark Stopa

I’ve often expressed my disgust at how Fannie Mae and Freddie Mac frequently pay banks 100% of their judgment amounts in foreclosure cases. It’s an appalling dynamic in foreclosure-world, one where banks often have no incentive to modify mortgages because "our" government will pay the banks in full once the foreclosure is over (and all the banks have to do is convey title to Fannie and Freddie). Incredibly, just when I thought I couldn’t be any more appalled, somehow, my disgust with "our" government reached a new level today.

I have it on good information (directly from someone personally involved) that Fannie and Freddie are selling foreclosed homes in bulk to third-party investors. Not one at a time, not several – dozens – at heavily discounted rates. In other words, many of the homes in Florida and elsewhere that have been foreclosed, with lower and middle-class homeowners thrown onto the streets and title transferred to Fannie or Freddie, are being sold to third-party investors in bulk.

If you think that sounds like an interesting investment opportunity, a chance to purchase a new home after you were foreclosed, let me stop you. Fannie and Freddie aren’t making these investments available to just anyone. To qualify, to even get inside the door to the auction room, you must have at least $10,000,000.00 in assets, and you must be able to prove the existence of those assets via bank statements and the like.

Ten million bucks, just to get in the door.

Is this what America has become? Throwing Americans onto the streets so "our" government pays the banks to foreclose and "our" government sells those houses in bulk at discounted rates to third-party investors with an eight-figure net worth?

Apparently so.


You know what’s arguably even worse? Nobody is even talking about this. No news stories. No media coverage. Nothing. Would you have known about this if Mark Stopa – basically a nobody in the scope of national news and politics – hadn’t blogged about it?

Why such secrecy? Where is the media coverage? Where’s the outrage? Who is running our government, exactly? This is as big an issue as Obamacare – thousands of homeowners getting foreclosed and their homes being sold in bulk to the mega-wealthy. Why is nobody even talking about it? Is America really a land where our government takes houses from the poor and middle class and sells them in bulk at discounted rates to the mega-wealthy – and it does so completely in secret? Does anyone care?

This is why I consider this the biggest post I’ve ever written. This is what is driving the whole foreclosure crisis, and nobody knows about it. Nobody’s even talking about it. Change is not possible without awareness, and right now, all Americans are totally in the dark about this dynamic. Well, all Americans except those who have $10,000,000.00.

May God help us all.
Mark Stopa

Chase is defending 10,000 lawsuits. Find out more and join the party.