A federal jury has deadlocked in a trial to find out if Umpqua Financial institution abetted a Novato-based monetary scheme that bilked some 1,200 traders out of greater than $250 million.
The three-week trial stemmed from a class-action lawsuit that aggrieved traders filed in opposition to the financial institution. The jury started deliberations on Feb. 26 and introduced the deadlock on Tuesday.
“We were all shocked that they couldn’t reach a verdict,” stated Philip Lastreto, who was residing in San Rafael when he invested his cash. “I’m embarrassed to admit, I had $706,000 invested. There is a group of us, friends and family, about five of us that had about $2.9 million invested.”
One other trial in the identical courtroom in San Jose has been tentatively scheduled for April 28.
Amy Zemanj, a companion with the Gibbs Legislation Group in Oakland, stated, “While we believe we presented ample evidence to support a verdict for the plaintiffs, we appreciate it is no simple task for a jury to reach unanimity. We are confident we will get the job done.”
Kurt Heath, a spokesperson for Umpqua Financial institution, stated, “We thank the jury for its service and will seek dismissal of this matter from the court on our pending post-trial motions.”
The fraud was engineered by Ken Casey, a Novato businessman, and his confederate, Lewis Wallach. They ran the scheme between 2007 and 2020 via actual property funding corporations known as Skilled Monetary Buyers Inc. (PFI) and the Skilled Buyers Safety Fund. PFI operated via financial institution accounts maintained on the Umpqua department in Novato.
“When investors’ checks or wires were deposited into one of the PFI enterprise’s clearing accounts, their money should have been promptly cleared into a segregated investment account, where it could be used to purchase real estate,” the go well with alleged. “But unbeknownst to investors, their money often remained in the clearing account until it was used to fund transfers to Casey’s and Wallach’s personal bank accounts, cover recurring overdrafts in other accounts and fund monthly payments to other investors.”
A key witness throughout the trial was June Weaver, a banker on the Novato department who labored intently with PFI for almost 15 years.
“At her deposition, Weaver admitted that she spent a lot of time monitoring PFI’s accounts and helping them shuffle money around to address overdrafts and funds shortages,” the lawsuit stated.
The go well with asserts that on 179 events, Weaver or others on the department personally transferred a complete of $5.2 million to certainly one of Casey’s or Wallach’s private accounts.
The rip-off was uncovered after Casey died in 2020. Wallach was convicted of wire fraud and conspiracy to commit wire fraud and sentenced to 12 years in jail.
Along with Weaver’s testimony, the plaintiffs offered circumstantial proof that Umpqua will need to have identified PFI was utilizing investor cash improperly.
The go well with states that between June 2018 and April 2020, Umpqua’s automated system for monitoring indications of fraud issued 146 alerts for PFI’s accounts — at the very least 61 of which particularly flagged the businesses’ clearing accounts for additional investigation.
The go well with states that after the fraud was uncovered, Umpqua launched an inside assessment of PFI’s accounts, however shortly deserted it after realizing the Novato department was recurrently serving to Casey switch investor funds to his private financial institution accounts.
The go well with says that it ought to have been inconceivable for Casey to proceed his life of economic crime after pleading responsible within the late Nineties to 21 counts of financial institution fraud, 5 counts of tax evasion, 5 counts of aiding and helping within the preparation and submitting of false tax returns and one depend of conspiracy to defraud the USA.
An area financial institution owned by a pal of Casey’s was prepared to supply PFI’s banking companies regardless of Casey’s file, the go well with alleges. That firm, Circle Financial institution, was acquired by Umpqua in 2012.
The jury reviewed the trial testimony of a former Circle Financial institution chief govt throughout its deliberations, stated Linda Lam, a plaintiff’s legal professional.
The go well with states that whereas Umpqua “apparently did not retain most of that bank’s records, it did internally circulate a memorandum that discussed Casey’s criminal history.”
The go well with alleges that workers on the Novato department have been incentivized to not do something to cease PFI’s fraudulent exercise.
“Umpqua assigns branch employees a goal for customer accounts and total deposits and ties bonuses, commissions and incentives to those metrics,” the lawsuit says. “Reporting PFI’s fraudulent activity would have caused the Novato branch to lose dozens of accounts and over 10% of its total deposits, leading to reduced compensation, worse performance reviews, and potentially even loss of employment.”
“Our argument is certainly that the Umpqua stood to benefit from the deposits that PFI had with the bank,” Lamb stated. “PFI was one of the, if not the, largest customer for the Novato branch and among the top 20 small business clients of Umpqua.”
Heath stated the financial institution had no data of the scheme.
“Wallach, who is currently serving time in federal prison for his role, testified under oath that he and Casey actively hid it from the bank,” Heath stated. “This case is an overreaching attempt by trial lawyers to seek further recovery of investor losses by targeting PFI’s depository bank.”
“In our defense, we will continue to emphasize a commitment to transparency, ensuring all facts come to light for the jury so that this matter may be brought to a fair resolution,” Heath stated. “Umpqua Bank should not be held responsible for the criminal acts of Lewis Wallach and Ken Casey, and we look forward to presenting our case to the jury.”
Initially Revealed: March 6, 2025 at 6:50 AM PST
