Hollis et al v. JPMorgan Chase Bank, N.A.

Filing 18

MOTION to Dismiss by JPMorgan Chase Bank, N.A.. (Attachments: # 1 Affidavit, # 2 Exhibit, # 3 Exhibit)(Delbasty, Jacqueline)

Exhibit B

NIALL P. McCARTHY (Cal. SBN 160175)
nmccarthy({.V,cpmlegal.com
2 ANNE MARIE MURPHY (Cal. SBN 202540)
amurphy@,cpmlegal.com
3 ARON lCLIANG (Cal. SBN 228936)
aliang@,cpmlegal.com
4 COTCBETT, PITRE & McCARTHY
840 Malcolm Road, Suite 200
S Burlingame, CA 94010
Tel: [phone]
6 Fax: [phone]
1

STEVEN N. BERK
(pro hac vice pending)
steven(mberklawdc.com
BERK"LAW PLLC
1225 15th Street. N.W.
Washington D.C. 20005
Tel: [phone]
Fax: [phone]

7
8

9

10

KEITH L. MILLER
(pro hac vice pending)
[e-mail]
. Twenty One School Street
Boston. MA 02108
Tel: [phone]
Fax: [phone]

ElvIe

11

Attorneys/or Plaintiffand the Putative

C{OSj'

12
B

UNITED STATES DISTRICT COURT

14

NORTHERN DISTRICT OF CALIFORNIA
SAt¥N4)l@DlVISION5

IS
16

KIMBERLY BENSON,

)

17

KARIMDAD BALOCH and

2 Jlfft
., II:'i

Civil Action No.
CLASS ACTION COMPLAINT

NEERJA JAIN GURSAHANEY,
individually and on behalf of all others
19 similarly sItuated,

(1)

AIDING AND ABETTING
CONVERSION;

(3)

AIDING AND ABETTING A
BREACH OF FIDUCIARY
DUTY

(4)

CONSPIRACY TO COMMIT
FRAUD AND CONVERSION

(5)

I

AIDING AND ABETTING
FRAUD;

(2)

IB

VIOLATION OF BUS. &
PROF. CODE § 17200, ET.
SEQ. - "UNLAWFUL",
"UNFAIR" AND
"FRAUDULENT" BUSINESS
PRACTICES

20

Plaintiffs,
21

vs.
22
23

JPMORGAN CHASE BANK, N.A.,
individually and as successor in interest
of WASHINGTON MUTUAL, INC.;

j

24

2S

Defendant.

26

)
27
I)

2B

JURY TRIAL DEMANDED

LAWo,rocu
COTCHETT,

PITRE
& MCCARTHY

CLASS ACTION COMPLAINT

coPY-

TABLE OF CONTENTS
INTRODUCTION

I

JURISDICTION AND VENUE

4

A.

JURISDICTION IS PROPER

4

B.

VEl\1JE IS PROPER SINCE THE MILLENNIUM PONZI SCHEME WAS
BASED OUT OF NAPA, CALIFORNIA
5

PARTIES

6

A.

PLAINTIFFS

6

B.

DEFENDANT

9

C.

UNKAMED CO-CONSPIRATORS

9

FACTUAL ALL EGATIONS

II

A.

HUNDREDS OF INVESTORS WERE DEFRAlmED BY
PURCHASING CERTIFICATES OF DEPOSIT FROM A FICTIONAL
BANK THROUGH Ul\IFORM AND IDENTICAL
11
MISREPRESENTATIONS

B.

VARJOUS WAMU ACCOUNTS WERE OPENED FOR THEPONZI
SCHEME AND USED TO LAUNDER INVESTOR MONIES TO
OFFSHORE BANKING ACCOUNTS

C.

15

THE CENTER OF GRAVITY OF THE SCHEME WAS WAMU'S
NAP.~BRANCHES

17

D.

WAMU'S NAPABRA:-ICHES KNOWINGL Y PROVIDED
SUBSTANTIAL ASSISTANCE TO WISE AND THE HOEGELS IN
THE COMMISSION AND FURTHERANCE OF THE MILLENNIUM
18
PONZI SCHEME

E.

WA1-1U'S INSTITUTIONAL FAILURE TO PREVENT MONEY
LAUNDERING OPERATIONS VIOLATED FEDERAL BANK
SECRECY AND MONEY LAillIDERING LAWS

21

F.

WAMU VIOLATED FEDERAL BANKING LAWS

23

G.

WA1-1U PROVIDES THE MILLENNIUM PONZI SCHEME WITH A
REMOTE BANKING PLATFORM AND PASSES THE PONZI
SCHEME THR01 JGH TWO DIRECT AUDITS
23

H.

THE FRAUD IS UNCOVERED AND THE SEC FILES AN ACTION . 26

CLASS ACTION ALLEGATIONS

CLASS ACTION COMPLAINT

28

1

VI.

31

FIRST CAUSE OF ACTION
Aiding and Abetting Fraud

31

SECOND CAUSE OF ACTION
Aiding and Abetting Conversion

34

THIRD CAUSE Of ACTION
Aiding and Abetting A Breacb of Fiduciary Duty

37

FOURTH CAUSE OF ACTION
Conspiracy to Commit Fraud and Conversion

40

FIFTH CAUSE OF ACTION
Violation ofBu~iness and Professions Code §§ 17200 et seq.
Unlawful, Fraudulent, and Unfair Business Acts and Practice

2

CAUSES OF ACTION

42

PRAYER FOR RELIEF

44

3

4
5

6

7
8

9
10

VII.

11

JURYTRIAI. DEMAND

46

12
13
14
15
16
17

18
19

20
21

22
23
24

25

26
27

$

28

LAWOFrlCU

COTCHETI,

Pmu;

& MCCARTHY

CLASS ACTION COMPLAINT

11

1

Plaintiffs Kimberly Benson, Karimdad Baloch and Neerja Jain Gursahaney

2 ("Plaintiffs"), individually and on behalf of the Class described below, brings this action
3 pursuant to California's Unfair Business Practices Act, Cal. Bus. & Prof. Code §§ 17200,
4

et seq.; and for violations of California common law against Defendant lPMorgan Chase

5 Bank, N.A. ("JPMorgan") as succeSSOr in interest to Washington Mutual, Inc.
6 ("hereinafter lPMorgan and Washington Mutual are collectively referred to herein as

7 "WAMU" or "Defendant").
8

I.

9

INTRODUCTION

10

I.

For over four years, W AMU actively and knowingly participated in the

11

fraudulent activities of a Caribbean island financial institution known as Millennium

12

Bank ("Millennium"), equal to the scam of Bernie Madaff and other notorious scam

13

artists. Millennium purportedly sold high yield certificates of deposits ("CDs") over the

14

Internet to United States and Canadian citizens. But in reality, Millennium was a massive

15

Ponzi scheme. Standardized misrepresentations were made to potential investors through

16

Millennium's website ¥i'Vlw.mlnbank.com. Those standardized misrepresentations

17 . included: (A) offering to pay exceptiona\ly high interest rates on "high yield CDs" above
18

those that could be obtained from other financial institutions; (B) falsely stating that

19

Millennium was offering high·yield CDs with "a guaranteed rate of return to avoid

20

market fluetuation"; and (C) falsely stating on its website that Millennium was "the

21

benefactor of Swiss banking ... as well as the vast global investment network that United

22

Trust of S\l..'itzerland S.A. has built over the last 75 years." Other unifonn and identical

23

misrepresentations were made to investors, as set forth in this complaint.

24

2.

W AMU's involvement was critical to the successful execution and

25

26

that were fraudulently obtained and used by the operators of the Millennium Ponzi

27
$

obfuscation of this fraudulent scheme. All of the investor monies, nearly $200 million,

scheme flowed through an account at the Napa WAMU branches - the center of gravity

28

for the Millennium Ponzi scheme. With full knowledge of the fraud, WAMU passed the

LAW OFfiCE.!;

COrCHETI,

PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

1

1

fraudulent Millennium account through two audits and approved fraudulent transactions

2

in violation of federal bank secrecy and money laundering laws. WAMU also knowingly

3

and intentionally developed and provided to Millennium a remote banking platform that it

4 could use to transfer and launder money faster and with less oversight, an in violation of
5 the law. Any cursory review of account activity would have detected a suspidous pattern
6 of transactions and uncovered the fraud being perpetrated on innocent investors.
7

3.

The Millennium Ponzi scheme was started by William J. Wise ("Wise"),

8 who had a long history of securities violations. He was assisted by Jacqueline Hoegel and
9 her daughter Kristi Boegel, who both also had histories with securities regulators. Wise
10

and the Hoegels obtained substantial assistance from WAMU's branch offices in Napa,

11

California to facilitate their sham banking operation. Over the last four years, WAMU

12

directly assisted Wise and the Hoegels in extracting millions from unwitting investors,

13

laundering that money through its accounts and transfedng those funds to offshore

14

banking havens.

t5

4.

Tamara Mlller, a Napa WAMU branch manager and Bianca Greeves, a

16 I

Napa WAMU commercial banking officer, and their various staff members, assisted Wise

17

and the Hoege!s in: (1) selling fraudulent CDs to innocent investors; (2) conuningJing

18

those investor funds in WAMU accounts; (3) laundering money on behalf of Wise and the

19

Hoegels; and (4) either transferring those investor funds to off·shore banking havens or

20

converting those funds for the personal use of Wise and the Hoegels.

21

5.

WAMU's involvement in the Mil.lennium fraud was active and pervasive.

22
23

banking platform, located in Wise and the Hoege!'s Napa office. that facilitated the illegal

24

transfer and laundering of investor funds. This remote banking platform essentially

25

allowed Wise and Millennium to function as "a bank within a bank," freeing the entire

26

enterprise to conduct the fraud. Prior to permitting the installation oftlle components of

27
(fl

For example, by early 2008, WAMU had recommended and installed a special remote

that remote platform, WMfU was required to and did conduct two separate audits of

28

Wise's Millennium operation. Based on such audits, WAMU knew that no Wise-related

LAw",FlC~S

CoTCHEIT,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

2

1 enterprise was registered to sell securities in the United States, notwithstanding clear
~

documentation in WA11U's database stating that it was aware that Wise was purportedly

3 in the business of selling securities, WAMU also knew that Wise was moving millions of
4

dollars in investor funds that were being deposited into Wise-controlled WAMU accounts

5 to offshore banking havens unrelated to his U,S.-based business. WA11U's audit
6 provided it with uncontroverted evidence that Wise and the Hoegels were engaging in an
7 illegal enterprise. Nevertheless, WAMU continued to participate fully in the fraud,
8 including providing both legitimacy and critical banking services to Wise's enterprise that
9 allowed to it to thrive and continue defrauding innocent investors for years.
10

6.

During the last two years, while participating in Wise's Ponzi scheme and

11

money laundering operation, WAMU was subject to a Consent Decree with the U.S.

12

Office of Thrift Supervision ("OTS") for its blalant failure to comply with the federal

t3

anti-money laundering statutes, including the International Money Laundering Abatement

14

and Financial Anti-Terrorism Act of 200 1, the Money Laundering Control Act ofl986

15

and the Bank Seerecy Act of 1970. The Consent Decree; (I) ordered strict compliance

16

with bank secrecy and money laundering reporting requirements; (2) the development of

17

new and improved policies for maintaining compliance with federal bank secrecy and

18

money laundering laws; (3) installed outside supervision on WAMU; (4) put into place

19

numerous restrictions on WAMU; and (5) required the appointment of at least one outside

20

member of WAMU's Board of Directors tasked with supervising future compliance with

21

federal bank secrecy and money laundering laws and reporting directly to the Board and

22

to the OTS regarding WAMU's remedial actions. (See Consent Decree, attached at

23

Exhibit A to this complaint).

24

7.

On September 25,2008, three days after the Federal Deposil1nsurance

25
26

liabilities. Prior to the acquisition of Washington Mutual's operations and accounts,

27

(i)

Company ("FDIC") seized Washington Mutual, JPMorgan acquired it assets and

lPMorgan conducted a thorough due diligence analysis of those operations and accounts.

28

Because of that due diligence, JPMorgan gained actual knowledge of Washington

LA\Oi O~~IC~S

COrCHETT,
PITRE
& MCCARTHY

CLASS ACTION COMPLAINT

3

1 Mutual's active participation in the Millennium Ponzi scheme. As a result ofthe
2

acquisition, lPMorgan became the "successor" in interest to WAMU in accordance with

?;

an agreement between lPMorgan and the FDIC entitled, "Purchase and Assumption

4

Agreement" between the Federal Deposit Insurance Corporation, Receiver of Washington

5 Mutual Bank, Henderson, Nevada, the Federal Deposit Insurance Corporation and
6 JPMorgan Chase Bank, N.A.
8.

)

WAMU had actual knowledge of the Millennium Ponzi scheme through its

8 monitoring of Wise and the Hoegel's daily banking activities (through WAMU's branch
9 manager and commercial banking officer), two specific audits by WAMU's Treasury
10

Services Department, and strict customer review and money-laundering reporting

11

requirements required by the OTS. Nonetheless, WAMU continued to provide substantial

12

assistance to Wise's illegal enterprise and promoted the continued success of that

13

enterprise for a period in excess of four years. These practices continued after JPMorgan

14

acquired WAMU in September of2008. For its ovm conduct and as WAMU's successor

15

in interest, lPMorgan is liable to Plaintiffs and the class for the damages they have

16

suffered.

17

II.

18

JURISDICTION AND VENUE

19

A.

JURISDICTION IS PROPER
9.

20

This Court has subject matter jurisdiction under 28 U.S.c. § 1332(a)

21

because it involves a matter in controversy between citizens of different states and the

22

amount in controversy exceeds the sums or value of$75,000, exclusive of interest and

23

costs.

24

10.

This Court also has jurisdiction under 28 U.S.C. §§ 1332 (d)(2) (the "Class

25
26

$5,000,000, exclusive of interest and costs, and members of the proposed Class are

27

*

Action Fairness Act") because the amount in controversy exceeds the sum or value of

citizens of a state different then that of the Defendant.

28

L,O... ""flCEO

COTCHETI,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

4

1
2

1I.

This Court has personal jurisdiction over the Defendant and venue is proper

because a substantial portion of the 'Wrongdoing alleged in this Complaint took place in

3 this state; the Defendant is authorized to do business here and does conduct business here;
4

Defendant has sufficient minimum contacts with this state; and/or the Defendant

5 otherwise intentionally availed itself of markets in this state through the promotion,
6 marketing and sales of its products and services in this state to render the exercise of
7

jurisdiction by this Court pennissible under traditional notions of fair play and substantial

8

justice.

9

12.

In particular, the scheme was perpetuated through WAMU's branch offices

10

in Napa, California, which is located in this District. WAMU's Napa branch offices

11

actively participated in the fraud and were a critical component of the scheme. The

12

closest division to Napa, California is the San Francisco division of the Northern District

13

of California.

14

B.

15

VENUE IS PROPER SINCE THE MILLENNIUM PONZI SCHEME WAS
BASED OUT OF NAPA, CALIFORNIA

16

13.

17

Venue is proper in this District pursuant to 28 U.S.C. § 1391(a) because

WAMU's involvement in the Millennium Ponzi scheme was principally through its Napa

18 branch offices and therefore, a substantial part of the events or omissions giving rise to
19 Plaintiffs' claims occurred in this District.
20

14.

The majority ofWAMU's wrongful conduct, as alleged in this complaint,

21

22

located at the WAMU branch offices in Napa. The UT of S, LLC ("UT of S") bank

24

account where all of the investor monies were being deposited into and then either

2S

withdrawn for personal use or transferred to offshore accounts was handled loeally

26

through WAMU's Napa branch offices. The remote banking p]atfonn that WAMU

27

*

key WAMU employees who handled the business for the Millennium Ponzi scheme were

23

'....>OI<lH>CES

originated in the Napa WAMU branches. Tamara Miller and Bianca Greeves, the two

provided to Wise and his associates was installed at their offices in Napa, California. The

28

COTCHETI,

PITRE
& MCCARffiY

CLASS ACTION COMPLAINT

5

1 audits that WAMU conducted prior to providing the remote banking platform took place
2

in Napa.
15.

3
4

Napa, California is designated a "High Intensity Financial Crime area"

under federal bank secrecy and money laundering laws. The fmancial services company

5 that Kristi and Jacqueline Hoegei used as the cover for their operations was located in
6 Napa, CaHfornia. The main office of that company is at 3432 Valle Verde Drive, Napa,
7 California 94558.
16.

8
9

The vast majority ofWAMlJ witnesses and documents related to the

Millennium Ponzi scheme are likely located at or near the WAMU Napa branch offices.

10

The two key WAMU employees involved with the Millennium Ponzi scheme, Tamara

11

Miller and Bianca Greeves, both reside and work in and around Napa, California. As

12

such, this venue is the most convenient location for prosecuting this litigation.

13

III.

14

PARTIES

15

16

A.

PLAINTIFFS
17.

Plaintiff Neerja Gursahane)" ("Gursahaney") is a citizen and resident of

17

the State of Virginia who resides in Clifton, Virginia. In or about August 2008, she

18

purchased a certificate of deposit, purportedly valued at $4,000,000 from Millennium

19

Bank and/or United Trust of Switzerland, SA. ("UTS"), by wiring funds to UT ofS.

00

Gursahaney sent the money directly to WAMU which was routed to UT of S, LLC' s

21

WAMU account: 0983949648.

22
23

24
25

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28
""W<Y~ICES

COICHETI,

PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

6

1

18.

Plaintiff Karimdad Baloch ("Baloch") is a citizen and resident of the State

2

of California who resides in Stockton, California. In or about February of 2008, Baloch

3

purchased a certifIcate of deposit, purportedly valued at $119,750 from Millenium Bank

I

and/or UTS. Baloch forwarded a check payable to Jackie and Krist; Hoegel at Globalized

5

Services at 3432 Valle Verde Drive, Napa, California.

6

7
8

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18
19

19.

Kimberly Benson C'Benson") is a citizen and resident of the State of

20
21

23,2006, May 15,2007 and May 14,2008, Benson purchased ccrtificates of deposit,

22

purportedly valued at over $144,000 from Millennium Bank and/or UTS. Benson was a

23

customer of WAMU and transferred over $100,000 of her total investment to the UT of S

24

W AMU account from her own WAMU personal checking account. WAMU knew that its

25

own customers were sending large sums of money into the Millennium Ponzi scheme and

26

did nothing to stop them. WAMU is liable not only for participating in the fraud, WAMU

27

51

California who resides in Shingletown, California. In or about the following dates, May

also owed a duty to its own eustomers, such as Benson, to protect them from transferring

28

money from their WAMU aecount to UT ofS's WAMU account.

.-OFFICU

COTCHETf,

PITRE
& MCCARTHY

CLASS ACTION COMPLAINT

7

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LOJNOFflCU

COTCHEIT,

PrTRE
& MCCARTHY

CLASS ACTION COMPLAINT

8

20.

1

Plaintiffs Benson, Baloch and Gursahaney bring this action individually and

2 on behal f of all others similarly situated who, from July 1, 2004 to the present, purchased
3

or otherwise acquired any Certificate of Deposit ("CD") from Millennium Bank and/or

4

UTS and/or otherwise tendered any monies to Wise, the Hoegels, Millennium Bank, UTS

5 or UT of S. The total number of investors in the Millennium Ponzi scheme is believed to
6

be in excess of350 individuals and/or entities and the total amount of such in.. . estments is

7

believed to be in excess of$150 million.

8

B.

DEFENDANT
21.

Defendant JPMorgan Chase Bank, N.A. (uJPMorgan "), successor in

to

interest to Washington Mutual, Inc., is a wholly owned subsidiary oflhe publicly traded

11

Delaware financial holding company JPMorgan Chase & Co. JPMorgan is a national

12

banking association with U.S. branches in twenty-three states, including California. On

13

September 25,2008, JPMorgan acquired eertain assets and liabilities of Washington

14

Mutual, Inc. from its receiver, the FDIC under the tenns of a "Purchase and Assumption

15

Agreement." With that transaction, JPMorgan became successor in interest to

16

Washington Mutual. Inc. and assumed certain assets and liabilities of Washington

17

Mutual, Inc" including liability for the claims alleged herein.
22.

18

Hereinafter, JPMorgan and Washington Mutual, Inc. will be referred to

19 jointly in this complaint as "WAMlJ."
20
2\

C.

UNNAMED CO-CONSPIRATORS
23.

Plaintiffs allege that WAMU conspired with numerous individuals and

22

entities in furtherance of the fraud. On March 26, 2009, an order was issued enjoining

23

any actions against any of the following individuals or entities.] That order was amended

24

on June 22, 2009. (See Order Appointing Receiver and Amended Order Appointing

25

26

27
28
LAWo-"CE'

The unnamed co-conspirators identified in this complaint are not named as
defendants in this action as a result of the Northern District of Texas' order enjoining all private
investor claims against the unnamed co-conspirators. Plaintiffs reserve the right to bring civil
claims against these individuals and entities at a later date.

COTCHETT,

PITRE
& MCCARTHY

CLASS ACTION COMPLAINT

9

1

Receiver, attached at Exhibits Band C to this complaint). Below is a list of some of the

2

individuals and entities that conspired with WAMU and are subject to the Receiver Order.
24.

3
4

Millennium Bank ("Millennium") is a bank licensed in 81. Vincent and

the Grenadines. Its business address is Financial Services Centre, Stoney Ground,

s Kingstown, 81. Vincent and the Grenadines. Millennium offered high-yield "CDs" and
6 other bank services from its website, \vww.mlnbank.com, and in other advertisements.
7 Millennium has never registered an offering of securities with the Commission.
25.

8

United Trust of Switzerland, S.A. ("UTS") is a Swiss chartered business

9 entity that wholly-owns Millennium. Millennium's offering materials claimed that UTS
10

operates "a vast global investment network."
26.

11

UT of S, LLC ("UT of S") is a Nevada limited liability company. UT of

12

S's principal office is located at 3432 Val1e Verde Dr., Napa, California. UT ofS was

13

organized in July of 2004. UT of S handled all of its banking operations at the WAMU

14

branch offices in Napa, California. WAMU knowingly provided substantial assistance to

15

UT of S in laundering investor monies to offshore banking havens andior converting

16

those funds for the personal use of Wise and the Hoege-ls.
27.

17

United T of S, LLC is a Nevada limited liability company. United T of S,

18

LLC was organized in July 2004. At various times relevant to this litigation, Jacqueline

19

Hoegel and Wise served as the manager of United T of S, LLC, and Kristi Hoegel has

20

been its managing member.
28.

21

Sterling I.S., LLC is a Nevada limited liability company. Sterling I.S.,

22

LLC was organized in July 2004. At various times relevant to this litigation, Jacqueline

23

Hoegel and Wise served as the manager of Sterling, I.S .• LLC, and Kristi Hoegel has been

24

its managing member.
29.

25
26

UT of S, United T of S, LLC and Sterling I.S., LLC are referred to

collectively as the "Nevada LLCs."

27
Gl

28

III

LJlWOfflCU

COTCHE'IT,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

10

30.

1
2

William J. Wise ("Wise"), 58, is a resident of Raleigh, North Carolina and

the Caribbean. At all relevant times. Wise controlled Millennium, UTS and UT of S. In

3 2003, Wise was reprimanded by the Pennsylvania Securities Commission and ordered to
4 comply with state securities laws in connection with the sale of high return "deposit
5 agreements" offered by a Grenada-based bank.

6

31.

Krist! M. Hoegel atkla Kristi M. Christopher atkla Bessy Lu, 34, is a

7

resident of Napa, California. At all relevant times, Kristi Hoegel exercised control over

8

Millennium, UTS and UT of S. On May 25, 2006, Kristi Hoegel was ordered to cease

9 and desist from selling unregistered securities in the State of Minnesota.
10

32.

Jacqueline S. Hoegcl atkla Jacquline S. Hoegel and Jackie S. Hoegel,

11

52, is a resident of American Canyon, California. Jackie Hoegel is Kristi Hoegel' s

12

mother. At all relevant times, Jacqueline Hoegel exercised control over and handled

13

official business for Millennium, UTS and UT of S.

14

IV.

15

FACTUAL ALLEGATIONS

17

HUNDREDS OF INVESTORS WERE DEFRAUDED BY PURCHASING
CERTIFICATES OF DEPOSIT FROM A FICTIONAL BANK THROUGH
UNIFORM AND IDENTICAL MISREPRESENTATIONS

lB

33.

16

A.

The Ponzi scheme underlying this litigation was orchestrated by Canadian

19

citizen and Raleigh, North Carolina resident, William 1. Wise ("Wise"). In March of

20

2009, the U.S. Securities and Exchange Commission ("SEC") filed a civil enforcement

21

action against V,lise, ffi'o close associates, Jacqueline and Kristi Boegel (the "Hoegels"),

22

and other related parties. The civil enforcement action alleged that Wise and the Hoegels

23

were engaged in an illegal financial investment scheme which the SEC claimed had

24

defrauded over 350 innocent investors out of about $150 million. (See SEC Complaint,

25

attached at Exhibit D to this complaint).

26
27
Gl

34.

Wise, a Canadian lawyer, has been involved in questionable and suspicious

investment schemes dating back to the early 1990's. In late 1999, he traveled to SI.

28

LAW OFfICES

COrCHETI,

PITRE
&MCCARrnY

CLASS ACTION COMPLAINT

11

t

Vincent & Grenadines in the Caribbean and opened an offshore bank, Millennium Bank

2 & Trust Company, later renamed simply Millennium Bank ("Millennium'').
3

35.

Using a website originally created in 2003 and an aggressive Internet

4 advertising campaign launched in 2004, Wise and his associates began promoting the sale
5 of Certificates of Deposit ("CDs") with promised annual yields that exceeded by 3-5
6 percent the best available rate for CDs available in the U.S. These as.sertions were
7 materially false and misleading. The misrepresentations made to Plaintiffs aud Class
8

members were uniform and identical and made principally via Internet advertising on

9 Millennium's website, W\.VW',mlnbank.com. According to the SEC, these unifonn and
10

identical misrepresentations included the following misrepresentations contained tn

11

Millennium advertisements:

12

•

Offering investors exceptionally high interest rates on its "high-yield CDs."

13

•

"Once you have invested in one of our accounts, your rate of return is
locked in and you will benetit from the terms you have chosen,"

14
15

•

"Millennium Bank is not affected by the global tinancial crisis ... "

16
17

•

"Millennium Bank has 'a 100% dient satisfaction record going back close
to ten years when Millennium Bank was founded'"

t8

19

Investors can "invest with confidence in Millennium Bank" because:

•

"Millennium Bank has its own affiliate asset management company with

20

highly seasoned professionals who invest meticulously on a global scale in

2t

carefully selected real estate markets and equities as well as viable private

22

investments."

23

•

Slating Ihat United Trust of Switzerland, SA "provides Millennium Bank

24
25

relationships, decades of knowledge in privacy and confidentiality as well

26

as extensive traming for our customer services professionals." Millennium

27

e

with over 75 years of banking experience, correspondent banking

marketed itself as strong, safe, and secure, and backed by United Trust of

28

Switzerland, SA

L.lI'I CFF"'ES

COTCHETI,

Pr=

& MCCARTHY

CLASS ACTION COMPLAINT

12

1

•

market fluctuations."

2
3

Millenium offers high-yield CDs with "a guaranteed rate of return to avoid

•

Millennium Bank is "the benefactor of Swiss banking ... as well as the vast
global investment network that United Trust of Switzerland SA hO' built
over the last 75 years."

5
6

36.

These misrepresentations were identical and made unifonnly to Plaintiffs

7

and other Class members via a standardized program put together by Wise and his

8

associates.

9

37.

10

Investors in the Millennium Ponzi scheme would receive statements such as

the one attached below:

11

12
13
14

15

16
17

,"'-~-,

Do_... _

ur... Dol<
~.~,

18

,.....,."..I....... ~

'" .".,.

'<nu,l

I ~."\_

"",J',

) J~'

ltolo:.

$oo~l""''''';<

1',Oj",rIi1~.1I'

.__.

',~~_,:_~_r-",r.",:~I~'-~~~

19

_

.1<,000.........

1,_

••0

'~~1

1oI.(O'Q.CJ:t~:'

,_~_~~i.:!Ioii-'

o.J~('"

~! ....",

J:'~ .. i'~;'

-1~Hi-,'

T••• I[,'"..... b ....

.. loIa'lll"'~

__ , _~J:~~,~'t(~,

20
21

r.~---­

._~

. '".".....,

22
23
24
25

26

38.

These statements were completely fictional, pretending to show that Class

27

&l

members. such as Plaintiff Gursahaney, received interest on the money they invested in

28

the MillenniumlUTS CDs.

lAW O',"C£S

COTCHETI.
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

13

39.
2

In addition, Plaintiffs and Class members would receive falsified

Certificates of Deposit from Millennium and DrS, such as the one below:

3

UNITED TRUST OF S"'1TZERLAND SA

4

Q[:e-rtift[llte of

5

~

kP,e.'MtlP.D

Jl~po!lit

•

P 22421

~~Loc.~

--

6
-0,.... & RoY,

7

lu .. """"

Fe: B,

111,.""&,,.,

.1o,",I~ Dot"

8

\"'l

~'O..-_

(.:rx::.L__
.£r'e,. 1'1,

1009 ..,__.

\:I ~ y..,
I:l J

~."

)Q COW>OUffilll'>

a

QU"-RTIlRLY

Cl looOtonl\.Y

,

~""'~ ""'<Jlo~F&.. """,,,..,;) ..10 'l1...u<l y"",,,,s...-eu.,,sa ot.,_-{ 0 IIVl'Ql.~.~

Qt::I..!~J1!,!:\D!20? N,~=rec=NTK~ ......o~, UYN~Rtry bolIM<."

9

"'..,..);"9 .. li.m...... .,.....&o."..,.u.'""~.~"'. """""1"l"""-O{~, ..... fi..-~~
.

10

~S~

.1.J,""""-,"",-."'-'$i:unL,, W qJe,

~'I'W"""""

11

12
13
14
15

\6

40.

The account statements and Certificate of Deposits that were sent to

Plaintiffs and the Class members were on a standardized fonn.

41.

Wise and his associates claimed that Miilennium was a wholly owned

17

subsidiary of United Trust of Switzerland SA. CUTS"). UTS. however, was not

18

registered with Swiss authorities as a bank, trust institution, or other financial services

19

company. In fact, neither Millennium nor urs ever conducted any real banking business.

20

Rather, Wise had established an illegal U.S.-based depository, sales and service operation

21

in Napa, California, managed by the Hoegels, whose singular purpose was to collect

22

investor deposits and, using the accounts established with WAMU, to funnel these funds

23

either offshore or to pay personal expenses of Wise and the Hoegels. This financial

24

services entity was interchangeably referred to as Globalized Services or Global Services

25

("Global").

26

42.

Neither Millennium, urs or Global were licensed or registered anywhere in

27

Sl

the United States to sell securities. This fact was easily verifiable. However, this did not

28

deter Wise from promoting and soliciting the sale ofMiIlenniumlUTS CDs to customers

......... OF'ICU

COTCHETI,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

14

1

in the United State~ and Canada, or collecting and depositing millions of dollars in

2 investor funds into WAMU accounts controlled by Wise and the Hoegels. Investor
3

deposits were collected by Wise and his associates in exchange for Certificates of Deposit

4

ostensibly issued by UTS in Geneva. Wise and his associates claimed that they CQuld

5

offer superior rates ofretum to standard CDs due to UTS' "global investrr,ent network."

6

The truth however was that these fake CDs were in fact created in Napa under the

7

fictional UT of S entity. Investor monies were collected into WAMU accounts controlled

8 by Wise and the Hoegels and from these WAMU accounts, money was then
9 systematically transferred to other accounts Wise held in offshore banking havens,
10

including Switzerland and Trinidad and Tobago. These incoming investor wires and

11

outgoing transfers were all handled by the Napa WAML branch offices at Trancas and

12

Sosco1 Street.
43.

13

Beginning in 2004, the Millennium Internet marketing plan was remarkably

14

successful and the Ponzi scheme soon began bringing in millions of dollars. However,

15

with so much money flowing in, Wise needed the cooperation and assistance of a willing

16

banking institution to manage such a tremendous amount of money flow without raising

17

the suspicions of state and federal banking authorities and securities regulators. Due to

18

federal bank secrecy and money laundering laws, the majority of financial institutions

19

maintain strict compliance procedures to detect money laundering operations. Wise

20

needed a pliant and willing banking accomplice. WAMU provided the solution.

21

B.

22

VARIOUS WAMU ACCOUNTS WERE OPENED FOR THE PONZI
SCHEME AND USED TO LAUNDER INVESTOR MONIES TO
OFFSHORE BANKING ACCOUNTS

23

44.

Based on an interview and information provided by Laurie \\Talton, Wise's

24
25

accounts with WAMU, Wise had utilized not less than three other U.S. banks (BB&T

26

Bank, RBe Bank, North State Bank) to handle the money flow from the Millennium

27

<!)

former personal secretary in Raleigh, North Carlina, it appears that prior to opening bank

POl1zi scheme. Most of these [mandaI institutions were located in the Raleigh area,

28

where Wise resided. However, due to the suspicious nature of the business being

LAWo"",C",,

COTCHETI.
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

15

1 conducted, Wise was eventually informed by these institutions that his business was no
2

3
4

longer welcome and his Millennium accounts were closed.
45.
willing

10

By the middle of2004, Wise needed a financial institution that would be
allow him to move tens of millions of dollars between accounts, transfer tens of

5 millions of dollars to off<;hore banking accounts and withdraw millions for personal use
6 without ever questioning the suspicious nature of these transactions or his unlicensed
7 status. More specifically, he needed to find employees of a financial institution that
8 would provide active assistance in expediting and concealing the Ponzi scheme.
9

46.

In July of2004, Wise and the Hoegels traveled to Las Vegas, Nevada for

10

the specific purpose of forming three different Nevada limited liability companies, UT of

11

S, LLC, United T ofS, LLC and Sterling I.S., LLC ("Nevada LLCs"). Although all three

12 would be Nevada limited liability companies, eaeh would list its principal office c/o

ur of S. LLC and United r

13

Globalized Services in Napa, Cal ifornia.

14

given similar names as United Trust of Switzerland, S.A. so that investors could be

15

tricked into sending money to United States shell companies that would divert money to

16

Wise's offshore banking aeeounts, as opposed to sending money to Switzerland.

17

47.

of S, LLC, were

Upon establishing the Nevada LLCs. Wise and the Hoegels immediately

18 walked into a WAMU Las Vegas branch and opened bank aecounts in thc names of the
t9

Nevada LLCs. WAMU's Las Vegas branch opened the accounts in Nevada even though

20

it knew that the companies purportedly operated from Napa, California where they had

2t

branches in existence.

22

23

48.

WAMU proved to be the ideal banking partner for Wise's fraudulent

schemc. WAMU permitted Wise to open these accounts in the absence of any

24 documentation to show a legitimate business purpose, or any registration to carry on the
2S
26

that the Nevada LLCs were purportedly in the securities transactions business and they

27
<I

activities for which the LLC's had been formed. WAMU had documentation indicating

saw tens ofmitlions of dollars of investor monies flow into the aecounts of the Nevada

28

LLCs. WAMU, however, knew that no money was being spent on invt:stments and that

..-"""~u

COTCHETI,
PITRE
& MCCARTIW

CLASS ACTION COMPLAINT

16

1 none of the Nevada LLCs were registered to do such business. Based on the paperwork
2 submitted to it, WAMU, through its Las Vegas branch, had actual knowledge that the
3

Nevada LLCs were not licensed or registered to promote or sell securities in the U.S. In

4

fact, at the time the accounts were opened, WAMU knew that the Nevada LLCs had no

5 legitimate business purpose.
6
7

THE CENTER OF GRAVITY OF THE SCHEME WAS WAMU'SNAPA
BRANCHES

8

49.

C,

WAMU's branch offices in Napa, California were the center of gravity of

9 WAMU' s involvement in the Millennium Ponzi scheme. All of the banking business
10

involving the UT of S bank aceount where the investor funds had been wrongfully

11

misappropriated, was handled by WAMU's Napa branch offices. It was WAMU's

12 managers and employees at their Napa branches who approved the deposits of hundreds
13

of millions of dollars of innocent investors' monies and allowed Wise and his associates

14

to misappropriate that money, either through international wire transfers to known

15

banking havens or by allowing Wise and his associates to use that money for personal

16

expenses. With the money unlawfully obtained from investors, Jacqueline HoegeI

t 7 purchased property in Napa.
18

50.

The vast majority of checks written by the Plaintiffs and other Class

t9

members were sent to Global's offices at 3432 Valle Verde Drive, Napa, California

20

94558. Jacqueline and Kristi Hoegel, who handled the banking side of the Millennium

21

Ponzi scheme, had the most contact with WAMU, and both reside in Napa, California.

22

5 J.

The managers, agents and employees of WAMU at its Napa branches

23

24

Greeves, were based at WAMU's Napa branch office at 699 Traneas Street, Napa,

26

California 94558. Bianca Greeves also worked out of the Napa branch office at 257

27
&l

\VAMU employees closest to the Millennium Ponzi scheme, Tamara Miller and Bianca

25

LJ,W

actively and knowingly assisted Wise and his associates to commit the fraud. The two

Soscol Avenue, Napa, California 94559. The vast majority of WAMU witnesses and

28

documents related to the Millennium Panzi scheme are likely located at or near the

OFFl~<S

COTCHEIT,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

17

1 W AMU Napa branch offices. While W AMU is a national bank, almost all of W AMU's
2.

involvement in the Millennium Ponzj scheme occurred at its Napa branch.

3 D.
4

WAMU'S NAPA BRANCHES KNOWINGLY PROVIDED SUBSTANTIAL
ASSISTANCE TO WISE AND THE HOEGELS IN THE COMMISSION
AND FURTHERANCE OF THE MILLENNIUM PONZI SCHEME

5

52.

Within weeks after opening the accounts in Las Vegas, the Hoegels used

6 the services of the WAMU branch offices in Napa, California to further the fraudulent
7

enterprise. Checks for large sums were delivered by the Hoegels in bulk to WAMU's

8

Napa branch offices for deposit, to be immediately followed up with international wire

9 transfer requests to known banking and tax havens. These requests were in large sums
10

that most financial institutions would have reported to authorities as suspicious.

11

However, senior WAMU employees. including but not limited to branch manager

12

Tamara Miller and commercial banking officer Bianca Greeves provided substantial,

13

active assistance to Wise and the Hoegels in effectuating both the deposits of large bulk

14

checks and the subsequent suspicious transfers of millions of dollars to offshore banking

15

accounts. WAMU, and in particular its senior Napa employees knew of the fraud and

16 beeame active participants in the fraud WAMU, its bank officers and staff provided
17

substantial assistance to the Millennium Ponzi scheme, including but not limited to

18

committing the following unlawful acts:

19

a.

Napa WAMU branches by the Hoegels;

20
21

Taking receipt of checks in large bulks physically delivered to the

b.

WAMU knew that the money was ostensibly tendered in exchange

22

for bank certificates of deposit based on hand written notations

23

appearing on virtually every check submitted. WAlvlU also had

24

actual knowledge, however that neither Wise, the Hoegels nor the

25

named account holders were registered or licensed to sell or promote

26

securities in the U.S;

27

28

c.

Permitting and assisting the commingling of these funds from
different investors into a single account, and then effecting wire

LAW ""'<;11

COTCHEIT,
PITRE

& MCCARTIlY

CLASS ACTION COMPLAINT

18

transfers of those funds out to various offshore accounts held in
2

names other than those of the Nevada LLCs, including accounts in

3

Switzerland and Trinidad and Tobago;

d.

4

Allowing and facilitating the use of investor funds to effect

5

payments to Wise, the Hoegels and their various family members for

6

large personal expenses, including payment of huge sums due on

7

Wise's credit cards, for expenses relating to Wise's personal jet

8

aircraft, his automobiles and vintage wine collections.

9

53.

WAMU's Napa branches handled and accepted these bulk checks totaling

10

in the millions of dollars, effectuated wire transfers to known offshore banktng havens

11

and otherwise provided substantial assistance to Wise and the Hoegels for over fouf

12 years. Over an approximately four year period, WAMU allowed over $14 million to be
13 transferred to individuals with a known history of securities law violations.
A copy of a sample check that was processed and reviewed by WAMU is

14

54.

15

attached below:

16
17
18

19
20

21

23
24

l)lf;0153379
25

26
27

III

28

i..'.Wo.-",:E"

COTCHEIT,
PITRE
& MCCARTHY

CLASS ACTION COMPLAINT

19

55.
2

In its posiHon, WAMU was able to review the checks that were being

cashed into the UT of S WAMU account. WAMU knew that many of these checks

3 purportedly referenced "CD" accounts with interest rates ranging from 6.75% to 10%,
4

even though WAMU knew that none of the Wise-related entities were registered

5

securities dealers. WAMlJ also knew that none of the monies t10wing into the UT of S

6

WAMU al:l:ount were being used to purchase securities. Instead, it knew that hundreds of

7 millions of dollars ofinvestor funds were flowing into the account and then being wired
8

to known offshore banking havens or being used to pay the personal expenses of Wise

9 and his associates, including payments for the MWennium jet:
10
11

12
13

14
15
16
17

18

56.

19

During that time. WAMU's senior employees, including its Napa

20

branch manager and commercial banking officer, as well as other staff knew of the nature

21

of the illegal activities being undertaken by Wise and his associates. In fact, the

22

significant commitment of time required to service the Nevada LLC's accounts

23

precipitated steps by senior WAMU officials to streamline the process by which the

24 Nevada LLC's could launder money through WAMU while reducing the required
25

oversight of those Nevada TJ .Cs. n,is would eventually lead to WAMU building a

26

remote banking platform for Wise and the Hoegels in UT of S' s Napa offices.

27
(ll

28

1/ I

LAWOFFICEl

CmCHEIT,
PrrR£
& MCCARTIlY

CLASS ACTION COMPLAINT

20

1 E.
2

WAMU'S INSTITUTIONAL FAILURE TO PREVENT MONEY
LAUNDERlNG OPERATIONS VIOLATED FEDERAL BANK SECRECY
AND MONEY LAUNDERlNG LAWS

3

57.

Given the lack of oversight or apparent concern about Wise's suspicious

4 activities, it is no coincidence that in the fall 0[2007, the OTS imposed a Consent Order

5 to Cease and Desist for Affirmative Relief ("Consent Decree") on WAMU for poor,
6 sloppy, inadequate and, in some instances, non-existent controls relating to compliance
7

with the U.S. anti-money laundering statutes, including but not limited to the Bank

8

Secrecy Act, the Money Laundering Control Act and the Patriot Act. The Consent

9 Decree placed various restrictions on WAMU, increased oversight and required the

10

appointment of an outside WAMU Board member to participate on a Compliance

11

Committee tasked to report to the Board and the OTS regarding heightened compliance

12

and vigilance. The Consent Decree went into effect on October 17, 2007.

13

58.

Under the Bank Secrecy Act, banks are trained to spot, and required to

14

report, cash transactions exceeding $10,000 and suspicious activity that might be a sign of

15

money laundering, especially after September II, 200 1, when the passage of the USA

16

Patriot Act required stepped up scrutiny. The International Money Laundering

17

Abatement and Finaneial Anti-Terrorism Act of2001 imposed added due diligence

18

requirements on financial institutions that required them to provide Suspicious Activity

19

Reports ("SAR") if they detected account activity that was suggestive of money

20

laundering activities. The transfers and activities undertaken by Wise and tlis associates

21

with the WAMU accounts had many of the features of money laundering, such as

22

frequent large transfers to offshore banking accounts with no apparent business purpose,

23

and large deposits but few cash withdrawals for daily operations.

24

59.

The primary regulator of national banks, the Office of the Comptroller of

25

the Currency ("OCC"), described the goals ofthe Bank Secrecy Act in its 2000

26

handbook:

27

28
LA'"

Monex laundering is the criminal practice of filtering ill-gotten gains or
"dirty" monev through a maze or series of transactions, so the funds are
"cleaned" to took like proceeds from legal activities.....

O~"CES

COTCHETI,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

21

1

60.

Congress enacted the Bank Secrecy Act to prevent banks and other

2

financial service providers from belng used as intennediaries [or, or to hide the transfer or

3

deposit of money derived from, criminal activity. In particular, the Department of the

4

Treasury warned that investment funds such as Millennium and UTS were prime

5

candidates for money laundering. Upon infonnation and belief, WAMU did not file any

6

SAR relating to the Nevada LLC's WAMU accounts.

7

61.

A financial institution must educate its employees, understand its customers

8

and their businesses, and have systems and procedures in place to distinguish routine

9

transactions from ones that rise to the level of suspicious activity.

10

62.

The acc specifically identifies several "examples of potentially

11

suspicious activities that should raise red flags for further investigation to determine

12

whether the transactions or activities reflect illicit activities rather than legitimate

13

business activities and whether a Suspicious Activity Report should be filed." Many of

14

the following- applied to Wise and the Millennium Ponz! scheme:

15

•

A (;uslomer opens several ac(;ounts for the type of business he or she
purportedly is conducting and/or frequently transfers funds among those
accounts.

•

A customer frequently makes large dollar transactions (such as deposits,
withdrawals, or purchases of monetary instruments) without an explanation
as to how they will be used in the bus mess.

•

A business account history that shows little or no regular, periodic activity;
the account appears to be used primarily as a temporary reyository for funds
that are transferred abroad. For example, numerous depOSIts of cash
followed by lump-sum wire transfers.

16
17
18
19
20

21

The currency transaction patterns of a business experience a sudden and
inconsistent change from nonnal activities.

22

•

Unusual transfer of funds among related accounts or accounts that involve
the same principal or related principals.

•

23

Funds transferred in and out of an account on the same day or within a
relatively short period oftime.

•

A professional service provider, such as a lawyer, accountant, or broker,
who makes substantial deposits of cash into client accounts or in-house
company accounts, such as trust accounts and escrow accounts.

24

25
26
27

&l

28

LA.. QFFlco$

COTCHITT,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

22

63.

1
-2

Many of these red flags were obvious to WAMU, especially to the staff and

senior employees of Napa who devoted considerable time and attention specifically to the

3 Nevada LLC's V/AMU accounts.
64.

4

WAMU, for example, knew that UT of S was a domestic affiliate of

5 Millennium, a bank licensed in St. Vincent and the Grenadines which is on the Financial
6 Action Task Force' 5 list of non-cooperative countries and territories.
7

F.

WAMU VIOLATED FEDERAL BANKING LAWS

65.

8

WAMUviolatedSections 1813,1815,1817,1818,1819,1881-1883 of

9 Title 12 of the United States Code and Sections 5311-5332 of Title 31 of the United
10

States Code because of the following:

a.

11

Failing to adopt and maintain an adequate program to ensure

12

compliance with federal bank secrecy and money· laundering laws

13

and regulations;

14

b.

Failing to adopt a Customer Identification Program;

15

c.

Failing to conduct appropriate Customer Due Diligence or any other

16

enhanced due diligence due to the red flags surrounding the UT of S

17

ViAMU account;

18

66.

Indeed, it is evident that prior to the Consent Decree that WAMU, as an

19

institution, had no methodology or policy in place to prevent or detect money laundering,

20

as required by law. Afterwards, it appears that the Consent Decree and subsequent

21

remedial actions undertaken by WAMU had no effect on WAMUs continued

22

participation with Wise and the Hoegels in their illegal enterprise.

23

G.

24

W AMU PROVIDES THE MILLENNIUM PONZI SCHEME WITH A
REMOTE BANKING PLATFOR.lVI AND PASSES THE PONZI SCHEME
THROUGH TWO DIRECT AUDITS

25

67.

In February 01'2008, a mere four months after the elfective date of the

26
27

<J

Consent Decree. Bianca Greeves, acting in her capacity as a WAMU's Napa commercial
banking officer. specifically recommended and then assisted in the development and

28

provision of a "cash management transfer" software ("CMf") system to pennit the

LAw Dl'f"'-ES

COTCHElT,

Pllll

& MCCARTHY

CLASS ACTION COMPLAINT

23

1 Hoegels to effect outgoing wire transfers to offshore banking accounts directly from their
2 Napa office. WAMU employees personally trained the Hoegels in the use of the CMT
3

system.
68.

4

The CMT system effectively enabled Wise to operate as a private WAMU

5 bank branch, a capability usually reserved for large financial institutions. CMT systems
6

pose risk to banks, as they enable customers to transfer funds in volume and at an

7

extremely fast rate, making tracing difficult. As a matter of policy, it is highly unusual to

8 provide a eMT system to a business with only two or three employees. The CMT system
9

was designed principally for large institutions with multinational operations and

10

providing this system to the Millennium/VTS Ponzi scheme would be an extraordinary

11

step for WAMU. Nevertheless. WAMU made the system available to Wise and the

12 Hoegels, providing them with substantial assistance to the fraud.
13

69.

Upon information and belief, WAMU's Northern California Retail Banking

14

department was responsible fbr the sale or lease of the CMT system to Millennium and

15

the Nevada LLCs some time in early 2008. It is standard banking practice that the bank's

16

retail staff earns a commission or bonus for the placement of such a system with a client.
70.

17

As a precondition of supplying a CMT system to a business customer, it is

18

necessary that an audit of the business take place. In this case, WAMU's Treasury

19

Management Department purportedly conducted such an audit, whose purpose was to

20

assign a compliance "risk rating" to the customer and its business. Notably, in most

21

cases,

22

are assigned a higher risk rating and come under a higher level of scrutiny in thc audit

23

process. With respect to the Nevada LLC's, such an audit would have, at a minium,

24

investigated:

financially~oriented

businesses, such as that engaged in by Wise and the Hoegels,

25

a.

The nature of the business being conducted by the Nevada LLCs;

26

b.

The industry or occupation served by the Nevada LLCs;

27

c.

The financial strength of the Nevada LLCs;

28

d.

The fact that the Nevada LLCs were not registered to sell securities;

......... QfFICU

C01CHETI,

Pmu;
& MCCARTHY

CLASS ACTION COMPLAINT

24

e.

The number of persons employed by the Nevada LLCs;

2

f.

The number and amount of account debits per month: and

3

g.

The number and amount of account credits per month.

71.

4

On infonnation and belief, Jennifer Blevins, WAMU's Seattle based

5 Business Treasury Services Senlor Specialist, was responsible for the performance of the
6 initial audit and specifically authorized the use of the CMT system by Wise and the
I

7

8.

Hocgels.
72.

As a result ofthe Treasury Services Department audit, WAtv[U knew the

9 precise nature of the business being conducted by Wise and the Hoegels, but nonetheless
10

permitted the installation ofthe CMT system. By doing so WAMU not only facilitated

11

the illegal enterprise, WAMU made it easier for Wise and the Hoegels to launder investor

12

monies out of the country and to evade detection from regulators, when WAMU should

13

have taken steps to halt this activity.

14

73.

Nine months after recommending and providing to Wise and the Hoegels

15

the CMT system, in September 0[2008, Bianca Greeves recommended that Wise and the

lG

Hoegels consider acquiring a "remote deposit capture" ("RDC") system, a scanning

17

machine and banking interface, which would permit the Hoegels to deposit investors'

18

checks directly from their Napa office without ever having to step into a WAMU branch

t9

or having any documentation reviewed by any WAMU employee. The RDC system is a

20

piece of hardware and again, WAMU employees specifically trained the Hoegels in the

21

use of this system.

22

74.

Authorization for the provision and installation of an RDe system required

23

24

conducted by WAMUs Treasury Services Department. The second audit was again

25

supervised by Jennifer Blevins in September of 2008. After Blevins completed her audit,

26

WAMU authorized the installation of the RDC system, giving Wise and the Hoegels a

27
6)

a further and more in.depth audit of the Nevada LLCs, and such an audit was again

complete remote banking platform from their Napa office. By authorizing first the CMT

28

system and then the RDC system, WAMU gave Wise and the Hoegels carte blanche to

~OFFlCES

COTCHElT,

PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

25

execute their Ponzi scheme, in that manner knowingly providing substantial assistance to
2

the fraud.

3

H.

4

THE FRAUD IS UNCOVERED AND THE SEC FILES AN ACTION
75.

Six months later, on or about March 25, 2009, the U.S. Securities and

5 Exchange Commission ("SEC") commenced an action in the United States District Court
6

for the District of Northern Texas, C.A. No. 7:09-CV-50-0, alleging that Wise was

7

carrying out a Ponzi scheme. In its press release, the SEC described Wise's actions as

8

follows:

9
1U

tl
12
13

14
15
16

17

t8
t9

On March 25, 2009, the Commission filed an emergencx action in the
United States District Court for the Northern District of Texas to halt an
on-going $68 million Ponzi scheme involving the sale of bogus certiticates
of deposit ("CDs"). The Commission's complaint alleges that Defendants
William J. Wise, 58, of Raleigh, North Carolina and the Caribbean, and
Kristi M. Hoegel, 34, of Napa, California, orchestrated the scheme through
companies they control, including co-defendants Millennium Bank of St.
Vincent and the Grenadines, its Geneva, Switzerland-based parent, United
Trust of Switzerland SA., and its U.S.-based affiliates, UT of S, LLC and
Millennium Financial Group. U.S. District Judge Reed O'Connor granted a
temporary restraining order, asset freeze, and other emergency rehef against
Defendants, including the appointment of a receiver to take control of their
assets.
The complaint alleges that from July 2004 to the present, Millennium Bank,
acting through Wise, Kristi Hoegel, Jacqueline S. Hoegel, 52, of American
Canyon, CalIfornia, Brijesh Chopra, 41, residence unknown, and Philippe
Angeloni, 63, of Raleigh, North Carolina, raised at least $68 million from
over 375 investors. According to the Commission's complaint, the
Defendants solicited the funds for purported investment In selt'stylcd
"CDs" which promised returns up to 321% higher than the national
overnight average rates offered on traditional bank-issued CDs.

20
2\
22
23
24

25
26

The solicitations by the Defendants, which were distributed on the bank's
website. Vo,rww.mlnbankcom, and in advertisements in luxury lifestyle
magazines, were replete with extensive and fundamental misrepresentations
about Millennium Bank and its CDs. according to the Commission's
complaint. For example, Millennium Bank mass marketed its CDs as safe
and secure with guaranteed rates of return. MilleIUlium Bank also claimed
to be "the benefactor of Swiss banking. - . as well as the vast global
.
investment network that United Trust of Switzerland S.A. has built over the
last 75 years." According to the complaint, however, these assurances were
faJse, because neither MIllennium Bank nor UT of S, LLC actually invested
any of the money it received from investors. Moreover, United Trust of
Switzerland S.A, is not a bank. In reality, investor funds were diverted to
the Defendants and used for a variety of il\egitimate purposes.

27

&l

28

The complaint alleges that, in order to create the appearance of a legitimate
offshore lllvestmcnt, Defendants instructed investors purchasing the

LAWOFFICH

COTCHETI,

PITRE
& MCCARTHY

CLASS ACTION COMPLAINT

26

1

2

3

so-called "CDs" to maillFederal Express their checks to the offshore bank.
Once received, the checks were packaged and mailed to UT of S LLC's
office in Napa, California, where they were electronically deposi'ted by a
remote deposit machine into a DI of S, LLC 0yerating account. The
account, which is held at a major U.S. financia institution, also received
tens of millions of dollars in investor funds via wire transfer.

4

5

6

Furthermore, according to the complaint, bank records establish that a vast
majority of the $68 minion raised from investors was misappropriated by
the Defendants, who enriched themselves and paid their personal expenses,
while making small Ponzi payments to investors-satisfying investors'
liquidation requests with recent deposits of new investors.

7

8

76.

On March 26, 2009, Richard B. Roper was appointed as the Receiver for

9 Millennium, UTS, UT of S, Millennium Financial Group, Wise, Kristi Hoegel, Jacqueline
10

Hoegel, Phillippe Angeloni and Brijesh Chopra. In that order, all actions against any of

11

the above-mentioned individuals or entities were enjoined. The order appointing Richard

12 B. Roper as receiver was amended on June 22, 2009. Over the last few months, the
13

receiver has frozen the assets of Millennium, DrS, UT of S, Millennium Financial Group,

14

Wise, Kristi Hoege], Jacqueline Hoegel, Phillippe Angeloni and Brijesh Chopra, and has

15

been in the process of liquidating and selling those assets.

16

77.

Plaintiffs file this class action, individually and on behalf of a class (the

17

"Class" as more fully defined below) of all persons who purchased or acquired

13

certificates of deposits ("CDs") from Millennium and/or UTS or otherwise invested

19

monies in Millennium, UTS or the Nevada LLCs from July], 2004 to the present.

20

78.

WAMU knowingly provided bank accounts for use by Wise, which

21

permitted him, through his Ponzi scheme, to commingle, convert to his personal use and

22

abscond with the investment monies of the Plaintiffs and the other putative Class

23

members.

24

79.

WAMU participated in and aided and abetted the fraudulent and illegal

25

26

knowledge oftbe fraud, WAMU elected to ignore the fact (a) that Wise and his associates

27

m

activities of Wise and his associates and provided them v'lith substantial assistance. With

were promoting and appearing to sell securities in the U.s. without being licensed and

23

registered to do so, and (b) that Wise and his associates were commingling, converting

IJ,W ""'c~s

COTCHETI,

PTIRE

& MCCARTHY

CLASS ACTION COMPLAINT

27

1

and absconding with investor monies. WAMU did this by approving and accepting

2 hundreds of deposits from investors, helping launder that money to Wise's offshore
3 accounts and then building a platform to allow Wise and his associates to effectuate the
4

5

fraud in a more efficient manner with no oversight from regulators.
80.

As a direct and proximate result of WAMU's improper, tortious and illegal

6 conduct, Plaintiffs and the Class members have suffered loss of their investment monies
7 in the millions of dollars, other damages, and WAMU was unjustly enriched.

8

V.

9

CLASS ACTION ALLEGATIONS

10

81.

This action is brought by Plaintiffs, individually and on behalf of all others

11

similarly situated, for violations of Califami a common law and statutory law. Pursuant

12

to Vasquez v. Superior Court (1971) 4 Ca1.3d 800,814-815; Occidental Land. Inc. v.

13

Superior Court (1976) 18 Ca1.3d 355, 362-363, the misrepresentations made to Plaintiffs

14

and Class members were identical and based on a standardized program of fraud,

15

making class certification appropriate. Plaintiffs bring this actio'n pursuant to Federal

16

Ru!e of Civil Procedure 23, on behalf of themselves and others similarly situated. The

17

Class is defined as followed:
All persons or entities in the United States who, between
July 1,2004 to the present, purchased or otherwise
acquired a purported Certificate of Deposit ("CD") from
or through Millennium, UTS and/or one of the Nevada
LLCs

18

19

20
21

Excluded from the Class are governmental entities, Defendant, any entity' in which

22

Defendant has a controlling interest, and Defendant's offLcers, directors, legal

23

representatives, successors. subsidiaries. and assigns. Also excluded from the Class is

24

any judge,justice, or judicial offIcer presiding over this matter and the members of their

25

immediate families and judicial staff.

26

27
28
LAW OFFICER

82.

The standardized misrepresentations made by Millennium in its

advertisements include the following:

•

Offering investors exceptionally high interest rates on its "high-yield CDs."

COTCHEIT,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

28

•

"Once you have invested in one of our accounts, your rate of return is
locked in and you will benefit from the tenns you have chosen."

2

•

3

Investors can "invest with confidence in Mi!lennium Bank" because:
"Millennium Bank: is not affected by the global financial crisis ... "

4

•

5

"Millennium Bank has 'a 100% client satisfaction record going back close
to ten years when Millennium Bank was founded'"

6

•

7

"Millennium Bank: has its own affiliate asset management company with

8

highly seasoned professionals who invest meticulously on a global scale in

9

carefully selected real estate markets and equities as well as viable private
investments."

[0

•

It

Stating that United Trust of Switzerland, S.A."provides Millennium Bank

[2

with over 75 years of banking experience, correspondent banking

13

relationships, decades ofknowledge in privacy and confidentiality as well

14

as extensive training for our customer services professionals." Millennium

15

marketed itself as strong, safe, and secure, and backed by United Trust of

[6

Switzerland, S.A.

•

t7

Millenium offers high-yield CDs with "a guaranteed rate of return to avoid
market fluctuations."

18

•

19

Millennium Bank is "the benefactor of Swiss banking ... as well as the vast

20

global investment network that United Trus[ of Switzerland S.A. has built

21

over the last 75 years,"
83.

23

Plaintiffs reserve the right to modifY the Class description and the Class

Period based on the results of discovery.
84.

24

Plaintiffs seek to recover damages for themselves and the Class under the

25

Unfair Business Practices Act, Business & Professions Code §§ 17200, et. seq. and for

26

violations of Califomia conunon law,

27

I:ll

28

II I

L
......'Of..CU

COTCHETI,

PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

29

85.

Plaintiffs and the Class also bring this action for equitable, injunctive and

2 declaratory reliefpursuantto subdivisions (b)(l), (b)(2) and (b)(3) of Rule 23 oflhe
3 Federal Rules of Civil Procedure.
4

86.

Numerosity of the Class - Federal Rule of Civil Procedure 23(a)(1). The

5 Class is so numerous that joinder of all members is impracticable. According to the SEC
(i

and based on documentation available, there are at least 350 individual investors in the

7 Millennium Ponzi scheme. While the exact number of Class members is unknown at this
8

9

time, Plaintiffs are infonned and believe that the number is in the hundreds.
87.

Existence and Predominance of Common Questions of Law and Fact -

10

Federal Rule of Civil Procedure 23(a)(2) and 23(b)(3). Common questions of law and

11

fact exist as to all Class members and predominate over questions affecting only

12

individual Class members. WAMU has acted, with respect to the Class, in a manner

13

geoerally applicable to the Plaintiffs and eacb Class member. There is a well-defined

14

community of interest in the questions of law and fact involved in this action, which

15

affects all Class members.

16

88.

Typicality - Federal Rule of Civil Procedure 23(a)(3). Plaintiffs claims are

17

typical of the claims of other members of the Class in thaI Plaintiffs and other Class

18

members were similarly hanned by the actions ofWAMU as a knowing participant in the

19

Millennium Ponzi scheme. Plaintiffs are members of the Class they seek to represent and

20 have suffered harm due to the unfair, deceptlve, unreasonable and tmlawful practices of
21
22

the Defendant.
89.

Adequacy of Representation - Federal Rule of Civil Procedure 23(a)(4) and

23
24

interests are coincident with, and not antagonistic to those of the Class they seek to

25

represent. Plaintiffs are represented by experienced and able attorneys, who intend to

26

prosecute this action vlgorously for the benefit of Plaintiffs and all Class members.

27
@

23(g)(I). Plaintiffs will fairly and adequately represent the interests of the Classes; their

Plaintiffs and their counsel will fairly and adequately protect the interests of the Class

28

members.

L.AWl>..OCES

CoTCH£TI,
PITRE
& MceARTHY

CLASS ACTION COMPLAINT

30

90.

Proper Maintenance of Class - Federal Rule of Civil Procedure 23(b)(2) and

2 (c). Defendant has acted or refused to act, with respect to some or all issues presented in
3

this Complaint, on grounds generally applicable to the Class, thereby making it

4 appropriate to provide relief with respect to the Class as a whole.
5

91.

Superiority - Federal Rule of Civil Procedure 23(b)(3) and (c). A class

6 action is the best available method for the eftLcient adjudication of this litigation because
7

individual litigation of Class members' claims would be impracticable and unduly

8 burdensome to the courts, and have the potential to result in inconsistent or contradictory
9

judgments. There are no unusual difticulties likely to be encountered in the management

10 of this litigation as a class action. A class action presents fewer management problems
11

and provides the benefits of single adjudication, economies of scale and comprehensive

12

supervision by a single court.

13

VI.

14

CAUSES OF ACTION

15

FIRST CAUSE OF ACTION

16

Aiding and Abetting Fraud

17

92.

Plaintiffs and Class members reallege and incorporate each and every

18

preceding paragraph stated above, inclusive, as though the same were fully set forth

19

hereafter.

20

93.

Wise and his associates, as discussed above, made material

21

misrepresentations and omissions to Plaintiffs and members of the Class regarding

22

investments in so-called "MilJenniumlUTS Certificates of Deposit." Through the

23

unlawful and illegal sale of these CDs, Wise and his associates defrauded Plaintiffs and

24

the Class members.

25

94.

Wise and his associates knowingly made false and misleading

26
27
IB

representations to Plaintiffs and the Class members about investing in the Millennium and
UTS CDs. These misrepresentations were made in a unifonn manner to Plaintiffs and the

28

Class members through a standardized program of fraud .

....... OFFOcn

COTCHETI,

PrrRE
& MCCARTIiY

CLASS ACTION COMPLAINT

31

1
2;

3
4

5

95.

Wise and his associates intended for Plaintiffs and the Class members to

rely on those misrepresentations to their detriment.
96.

Plaintiffs and the Class members were justified in their reliance on the

misrepresentations made by Wise and his associates.
97

As set forth in the complaint, WAMU had actual knowledge of the fraud

6 being perpetrated on Plaintiffs and the Class members by Wise and his associates.
7 SpeciflCally, WAMU had actual knowledge that included but was not limited to the
8
9

following:
a.

Wise, the Hoegels, Millennium, UTS and the Nevada LLCs had no

10

legitimate business purpose and were not licensed or registered to,

11

sell or promote securities;

12

b.

Wise, the Hoegels, Millennium, UTS and the Nevada LLCs had

13

represented they were involved in thc securities business and were

14

selling investments to PlaintitIs and other Class members;

15

c.

The Hoegels were depositing large sums of monies via suspicious

16

bulk check deposits. These checks were specifically designated by

17

the Plaintiffs and Class members as bcing for the purpose of

18

purchasing CDs from the Nevada LLCs;

19

d.

These deposits from the PlaintifIs and other Class members were not

20

segregated but were being conuningled in WAMU accounts used by

21

the Nevada LLCs;

22

e.

WAMU executed large wire transfers on behalf of Wise, the Hoegels

23

and the Nevada LLCs to various offshore accounts in names other

24

then the Nevada LLCs to offshorc banking havens, such as

25

Switzerland and Trinidad and Tobago;

26

f.

WAMU's Napa branches expended considerable time and resources

27

managing the Nevada LLCs' WAMU accounts, which were amongst

28

the largest accounts handled at the Napa branches. At least one

u-.", ClfII<;U

COTCHETT,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

32

branch manager and commercial banking officer were dedicated to
2

monitoring and assisting in the banking transactions executed by

3

Wise and the Hoegels over a four year period;

g.

4

Numerous aspects of the Nevada LLC's WAMU accounts raised red

5

flags suggesting that the Nevada LLC's WAMU accounts were

6

being used for money laundering operations;
h.

7

misappropriated by Wise and the Hoegels for personal use.

8

9

Funds retained in the Nevada LLC's WAMU accounts were being

98.

As set forth in the complaint, WAMV suhstantially assisted Wise and his

10

associates in perpetrating their fraud upon Plaintiffs and other Class members.

11

Specifically, WAMU assisted in the fraudulent scheme in several ways including but not

12

limited to the following:

13

a.

investor monics via suspicious bulk check deposits;

14
15

b.

Pennirting Wise and the Nevada LLC's to commingle investor
monies in the Nevada LLC's WAMU accounts;

16
17

Opening accounts for the Nevada LLCs and allowing them to deposit

c.

Allowing Wise and the Nevada LLC's to transfer large sums of

18

investor monies via suspicious wire transfers to offshore banking

19

accounts where they could not be traced;

20

d.

Allowing Wise and the Nevada LLC's to utilize large sums of .

21

investor monies to pay for millions of dollars in extravagant personal

22

expenses;

23

e.

Failing to comply with WAMU's obligations under federal bank

24

secrecy and money laundering laws, including, upon infonnation and

25

belief, failing to warn any state or federal authorities of the Ponzi

26

scheme;

27

I:ll

28

f.

Reeommending, approving and serting up a remote banking platfonn
that facilitated the Millennium Ponzi scheme by allowing Wise and

LAw [)ffOl:ES

COTCHETI,

Pmu;
& MCCARTHY

CLASS ACTION COMPLAINT

33

1

his associates to circumvent any procedures for oversight or

2

supervision of the WAMU account;

g.

3

Conducting an inadequate audit of the Nevada LLCs that gave the

4

Nevada LLCs a false sense of legitimacy, as well as access to a

5

banking platfonn that transfonned the Nevada LLCs into a "bank

6

within a bank."

7

99.

Without WAMU's substantial assistance, Wise and his associates would not

8 have been able to defraud plaintiffs and the class members. In fact, WAMU's
9 involvement gave the imprimatur of legitimacy to Wise's fraudulent activity as viewed by
10

11
12

13

Plaintiffs and the Class members.

100.

As a result of Wise's fraud, and WAMU's assistance thereof, Plaintiffs and

the Class members suffered economic losses in an amount to be proven at triaL
101.

The wrongful acts ofWAMU were done maliciously, oppressively, and

14

with intent to defraud, and PlaintiiTs and Class members are entitled to punitive and

15

exemplary damages in an amount to be aseertained according to proof.

16

WHEREFORE, Plaintiffs and tbe Class pray for relief as set forth below.

17

SECOND CAUSE OF ACTION

18

Aiding and Abetting Conversion

19

102.

Plaintiffs and Class members reallege and incorporate each and every

20

preceding paragraph stated above, inclusive, as though the same were fully set forth

21

hereafter.

22

103.

Wise and his associates, through the wrongful conduet alleged above,

23

including the illegal and unlawful "sale" of MillenniumlUTS CDs, misappropriated and

~4

converted funds belonging to Plaintiffs and the Class Members.

25

104.

As set forth in the complaint, WAlyfU had actual knowledge of the

26

27

It

conversion of funds belonging to PlaintifJs and the Class members by Wise and his
associates. Specifically, WAMU had actual know ledge that included but was not limited

28

to the following:

"".... ""fk;ES

COTCHEIT,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

34

1

a.

Wise, the Hoegels, Millennium, UTS and the Nevada LLCs had no

2

legitimate business purpose and were not licensed or registered to

3

sell or promote securities;

4

b.

Wise, the Hoegels, Millennium, UTS and the Nevada LLCs had

5

represented they were involved in the securities business and were

6

selling investments to Plaintiffs and other Class members:

7

e.

The Hoegels were depositing large sums of monies via suspicious

8

bulk check deposits. These checks were specifically designated by

9

the Plaintiffs and Class members as being for the purpose of
purchasing CDs from the Nevada LLCs;

10
11

d.

These deposits from the Plaintiffs and other Class members were not

12

segregated but were being corruningled in WAMU accounts used by

t3

the Nevada LLCs;

14

e.

WAMU executed large wire transfers on behalf of Wise, the Hoegels

15

and the Nevada LLCs to various offshore accounts in names other

16

then the Nevada LLCs to offshore banking havens, such as

17

Switzerland and Trinidad and Tobago;

18

f.

WAMU's Napa branches expended considerable time and resources

19

managing the Nevada LLCs' WAMU accounts, which were amongst

20

the largest accounts handled at the Napa branches. At least one

21

branch manager and conunercial banking officer wcre dedicated to

22

monitoring and assisting in the banking transactions executed by

23

Wise and the Hoegels over a four year period;

24

g.

Numerous aspects of the Nevada LLC's WAMU accounts raised red

25

flags suggesting that the Nevada LLC's WAMU accounts were

26

being used for money laundering operations;

27

Cll
LAW

28

h.

Funds retained in the Nevada LiC's WAMU accounts were being
misappropriated by Wise and the Hoegels for personal use,

"'''~ES

COTCHETI,
PITRE

& MCCARTflY

CLASS ACTION COMPLAINT

3S

1

2

105.

As set forth in the complaint, WAMU substantially assisted Wise and his

associates in the conversion of funds belonging to Plaintiffs and other Class members.

3 Specifically, WAJvfU assisted in the fraudulent scheme in several ways ineluding but not

4 limited to the following:
5

a.

6
7

investor monies via suspicious bulk check deposits;

b.

Pennitting Wise and the Nevada LLC's to commingle investor
monies in the Nevada LLC's WAMU accounts;

B
9

Opening accounts for the Nevada LLCs and allowing them to deposit

c.

Allowing Wise and the Nevada LLC's to transfer large sums of

10

investor monies via suspicious wire transfers to offshore banking

11

accounts where they could not be traced;

12

d.

Allowing Wise and the Nevada LLC's to utilize large sums of

13

investor monies to pay for millions of dollars in extravagant personal

14

expenses;

15

e.

Failing to comply with WAMU's obligations under federal bank

16

secrecy and money laundering laws, including, upon information and

17

belief, failing to warn any state or federal authorities of the Ponzi

1B

scheme;

19

f.

Recommending, approving and setting up a remote banking platform

20

that facilitated the Millennium Ponzi scheme by allowing Wise and

21

his associates to circumvent any procedures for oversight or

22

supervision of the WAMU account;

23

g.

Conducting an inadequate audit of the Nevada LLCs that gave the

2,

Nevada LLCs a false sense oflegitimacy, as well as access to a

25

banking platform that transformed the Nevada LLCs into a "bank

26

within a bank,"

27

&l

2B

LAWO"",E5

COTCHEn,

PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

36

1

106.

Without WAMU's substantial assistance, Wise and his associates would

2 not have been able to convert the funds of Plaintiffs and other Class members. In fact,
3 WAMU's involvement gave the imprimatur oflegitimacy to Wise's misappropriation of
4

5
6
7
8

the funds belonging to Plaintiffs and other Class members.
107.

As a result of Wise IS conversion, and WAMUs assistance thereof, Plaintiffs

and the other Class members suffered economic losses in an amount to be proven at trial.
10&.

The wrongful acts ofWAMU were done maliciously, oppressively, and

with intent to defraud, and Plaintiffs and other Class members are entitled to punitive and

9 exemplary damages in an amount to be ascertained according to proof.
10

WHEREFORE, PlaintitTs and the Class pray for relief as set forth below.

11

THIRD CAUSE OF ACTION

12

Aiding and Abetting A Breach of Fiduciary Duty

13

109.

Plaintiffs and Class members reallege and incorporate each and every

J4 preceding paragraph stated above, inclusive, as though the same were fully set forth
15
16

hereafter.
110.

By virtue of their relationship, activities, and actions, induding but not

17

limited to actively seeking the investment funds of Plaintiffs and other Class members,

18

Wise and his associates set out to create and did in fact create a special relationship of

19

trust and confidence, and thereby owed Plaintiffs a fiduciary duty. By virtue of the

20

investments of Plaintiffs and members of the Class, they placed trust and confidence in

21

the fidelity and integrity of Wise and his associates in entrusting them with their assets,

22

securities and money. Wise and his associates, and each of them, set out to induce and

23

did induce Claimant to rely upon their advice and guidance with respect to financial

24

transactions and investments. A confidential and fiduciary relationship existed at all

25

times herein.

26

Ill.

As set forth in the complaint, Wise and his associates breached that

27
&}

fiduciary duty by misappropriating the funds ofthe Plaintiffs and other Class members,

28

including diverting millions of dollars for their own personal use.

LA." OHOCEa

COTCHETT,

PrrRE
& MCCARTIfY

CLASS ACTION COMPLAINT

37

112.

1

2

As set forth in the complaint, WAMU had actual knowledge of the

breach of fiduciary duty being committed by Wise and his associates. SpecificaUy,

3 WAMU had actual knowledge that included but was not limited to the following:

a.

4

Wise, the Hoegels, Millennium, UTS and the Nevada LLCs had no

5

legitimate business purpose and were not licensed or registered to

6

sell or promote securities;

b.

7

Wise, the Hoegels, Millennium, UTS and the Nevada LLCs had

8

represented they were involved in the securities business and were

9

selling investments to Plaintiffs and other Class members;

c.

10

The Hoegels were depositing large sums of monies via suspicious

11

bulk check deposits. These checks were specifically designated by

12

the Plaintiffs and Class members as being for the purpose of

13

purchasing CDs from the Nevada LLCs;
d.

14

These deposits from the Plaintiffs and other Class members were not

15

segregated but were being commingled in WAMU accounts used by

16

the Nevada LLCs;
e.

17

W AMU executed large wire transfers on behalf of Wise, the Hoegels

18

and the Nevada LLCs to various offshore accounts in names other

19

then the Nevada LLCs to offshore banking havens, such as

20

Switzerland and Trinidad and Tobago;
f.

21

WAMU's Napa branches expended considerable time and resources

22

managing the Nevada LLCs' WAMU accounts, which were amongst

23

the largest accounts handled at the Napa branches. At least one

24

branch manager and commercial banking offLcer were dedicated to

25

monitoring and assisting in the banking transactions executed by

26

Wise and the Hocgels over a four year period;

27

*

28

/1/

lAW D""'5

COTCHITI,
PIThE
& MCCARTHY

CLASS ACTION COMPLAINT

38

g.

1

Numerous aspects of the Nevada LLC's WAMU accounts raised red

2

flags suggesting that the Nevada LLC's WAMU accounts were

3

being used for money laundering
h.

4

Funds retained in the Nevada LLC's WAMU accounts were being
misappropriated by Wise and the Hoegels for personal use.

5
6

operations~

113.

As set forth in the complaint. WAMU substantially assisted Wise and his

7 associates in the breach of their fiduciary duties to Plaintiffs and the members of the
8 Class. Specifically, WAMU assisted in the fraudulent scheme in several ways including
9 but not limited to the following:
10

a.

investor monies via suspicious bulk check deposits;

11

12

b.

Permitting Wise and the Nevada LLC's to commingle investor
monies in the Nevada LLC's WAMU accounts;

13

14

Opening accounts for the Nevada LLCs and allowing them to deposit

c.

Allowing Wise and the Nevada LLC's to transfer large sums of

15

investor monies via suspicious wire transfers to offshore banking

16

accounts where they could not be traced;

17

d.

Allowing Wise and the Nevada LLC's to utilize large sums of

18

investor monies to pay for millions of dollars in extravagant personal

19

expenses;

20

e.

Failing to comply with WAMU's obligations under federal bank

21

secreey and money laundering laws, including, upon information and

22

belief, failing to warn any state or federal authorities of the Ponzi

23

scheme;

24

1'.

Recommending, approving and setting up a remote banking platform

25
26

his associates to circumvent any procedures for oversight or

27

til

that facilitated the Millennium Ponzi scheme by allowing Wise and

supervision of the WAMU account;

28

....WOFACE;S

COTCHElT,

PTIllE
& MCCARTHY

CLASS ACTION COMPLAINT

39

g.

1

Conducting an inadequate audit of the Nevada LLCs that gave the

2

Nevada LLCs a false sense oflegitimacy, as wen as access to a

3

banking platform that transformed the Nevada LLCs into a "bank

4

within a bank."

5

114.

Without WAMU's substantial assistance, Wise and his associates would not

6 have been able to breach their fiduciary duties to Plaintiffs and other Class members. In
7

fact, WA1\1U's involvement gave the imprimatur of legitimacy to Wise's

8

misappropriation of the funds belonging to Plaintiffs and other Class members.

9

115.

As a result of these breaches of fiduciary duty, and WAMU's assistance

10

thereof, Plaintiffs and the other Class members suffered economic losses in an amount to

11

be proven at trial.

12

116.

The wrongful acts ofWAMU were done maliciously, oppressively, and

13

with intent to defraud, and Plaintiffs and other Class members are entitled to punitive and

14

exemplary damages in an amount to be ascertained according to proof.

15

FOURTH CAUSE OF ACTION

16

Conspiracy to Commit Fraud and Conversion

17
18

117.

Plaintiffs and Class members reallege and incorporate each and every

preceding paragraph stated above, inclusive, as though the same were fully set forth

19 hereafter.
20

118.

Defendant entered into an agreement with the unnamed co-conspirators to

21

commit the wrongful acts alleged herein. Defendant and the unnamed co-conspirators

22

identified in this complaint engaged in a common purpose to unlawfully defraud investors

23

such as Plaintiffs and the Class members and to unlawfully convert their monies.

24 Defendant engaged in conduct in furtherance of that conspiracy. That eonduct ineludes
25

WA..MU's participation in the Millennium Ponzi scheme. A few of the acts conunitted by

26

WAMU in furtherance of the conspiracy are identified below:

27

28

a.

Opening accounts for the Nevada LLCs and allowing them to deposit
investor monies via suspicious bulk check deposits:

....w O~~",Es
COTCHETT,

PITRE
& MCCARlHY

CLASS ACTION COMPLAINT

40

b.

1

Permitting Wise and the Nevada LLC's to commingle investor
monies in the Nevada LLe's WAMU accounts;

2

c.

3

Allowing Wise and the Nevada LLC's to transfer large sums of

4

investor monies via suspicious wire transfers to offshore banking

5

accounts where they could not be traced;
d.

6

Allowing Wise and the Nevada LLC's to utilize large sums of

,,

investor monies to pay for millions of dollars in extravagant personal

8

expenses;

e.

9

Failing to comply with WAMU's obligations under federal bank

10

secrecy and money laundering laws, including, upon information and

11

beliet~

t2

scheme;
f.

13

failing to warn any state or federal authorities of the Ponzi

Recommending, approving and setting up a remote banking platform

14

that facilitated the Millennium Ponzi scheme by allowing Wise and

15

his associates to circumvent any procedures for oversight or

16

supervision of the WAMU account;
g.

17

Conducting an inadequate audit of the Nevada LLCs that gave the

18

Nevada LLCs a false sense of legitimacy, as well as access to a

19

banking platform that transformed the Nevada LLCs into a "bank

20

within a bank."

21

119.

The individuals and entities acted in concert by joint ventures and by acting

22

as agents for principals, in order to advance the objectives of the conspiracy to increase

23

false revenues. Defendant was aware of the fraud being committed by Wise, the Hoegels

24

and the other unnamed co-conspirators and the fact that they were converting the monies

25

of Plaintiffs and other Class members. Defendant agreed with Wise, the Hoegels.

26

Millennium, UIS, UT of S and the other unnamed co-conspirators, and intended that the

-, wrongful acts alleged herein be committed. The conduct described in this complaint was
"
<l)

28

intended to promote the conspiratorial objectives.

"""'OFFICES

COTCHEIT,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

41

t

120.

As a result ofthe conspiracy, Plaintiffs and the other Class members

2 suffered economic losses in an amount to be proven at trial.
3

121.

The wrongful acts of WAMU were done maliciously, oppressively, and

4 with intent to defraud, and Plaintiffs and other Class members are entitled to punitive and
5 exemplary damages in an amount to be ascertained according to proof.
6

FIFTH CAUSE OF ACTION

7

Violation of Business and Professions Code §§ 17200 et seq,

B

Unlawful, Fraudulent, and Unfair Business Acts and Practice

9

122.

Plaintiffs and Class members reallege and incorporate each and every

10

preceding paragraph stated above, inclusive, as though the same were fully set forth

11

hereafter.

12

123.

WAMU's acts and practices as described herein constitute unlawful,

13

fraudulent, and unfair business practices, in that (1) the justification for WAMU's

14

conduct is outweighed by the gravity of the consequences to Plaintiffs and members of

15

the Class, (2) WAMU's conduct is illegal, immoral, unethical, oppressive, unscrupulous,

16

unconscionable or substantially injurious to Plaintiffs and members of the Class, and/or

17

(3) the uniform conduct ofWAMU had a tendency to deceive Plaintiffs and other

18

members of the Class.

19

124.

As set forth in the complaint, WAMUs unlawful, unfair and fraudulent

20

business acts and practices include, but are not limited to, providing substantial assistance

21

to Wise and his associates. WAMU's violation of federal bank secrecy and money

22

laundering laws constitutes unlawful business acts and practices that is evidenced by the

23

Consent Decree imposed on WAMU by the OTS. In addition, WAMU's following

24

actions constitute unlawful business acts and practices pursuant to California Business &

25

Professions Code §§ 17200, et. seq.:

26
27

1II

a.

Opening accounts for the Nevada LLCs and allowing them to deposit
investor monies via suspicious bulk check deposits;

28

........ ""'.,US
COTCHETI,

PITRE

& MCCARTIlY

CLASS ACTION COMPLAINT

42

b.

t

Permitting Wise and the Nevada LLC's to commingle investor
monies in the Nevada LLC's WAMU accounts;

2

c.

Allowing Wise and the Nevada LLC's to transfer large sums of

4

investor monies via suspicious wire transfers to offshore banking

5

accounts where they could not be traced;
d.

6

Allowing Wise and the Nevada LLC's to utilize large sums of

7

investor monies to pay for millions of dollars in extravagant personal

8

expenses;
e.

9

Failing to comply with WAMU's obligations under federal bank

10

seerecy and money laundering laws, including, upon information and

11

belief, failing to warn any state or federal authorities of the Ponzi

12

scheme;
f.

Recommending, approving and setting up a remote banking platform

14

that facilitated the Millennium Ponzi scheme by allowing Wise and

15

his associates to circumvent any procedures for oversight or

16

supervision of the WAMU account;
g.

17

Conducting an inadequate audit of the Nevada LLCs that gave the

18

Nevada LLCs a false sense oflegitimacy, as well as access to a

19

banking platform that transformed the Nevada LLCs into a "bank

20

within a bank."

21

125.

Plaintiffs and the other Class members have been injured in fact and

22

suffered a pecuniary loss as a result of spending monies to purehase or acquire CDs from

23

Millennium, UTS and/or the Nevada LLCs, or otherwise investing in Millennium, UTS

24

and/or the Nevada LLCs.

25
26

126.

WAMU's conduct violates Business and Professions Code §§ 17200 ef seq.,

and other similar state unfair eompetition and unlawful practices statutes.

27
til

28

III

,-OI'fICES

COTCHETT,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

43

1

127.

Pursuant to Business and Professions Code §§ 17200 and 17203, Plaintiffs,

:2

on behal f of themselves and all other similarly situated. seek relief as prayed for below.

3

WHEREFORE, Plaintiffs and the Class pray for relief as set forth below.

4

VII.

5

PRAYER FOR RELIEF

6

WHEREFORE, Plaintiffs and all Class members pray for judgment against

7

Defendant as follows:
I.

8

An order oertifying the proposed Class and appointing Plaintiffs and their
counsel of record to represent the Class;

9

10

2.

A judgment awarding Plaintiffs and members of the Class actual damages

11

in an amount according to proof under all causes of action herein entitling

12

Plaintiffs and members of the Class to actual damages;
3.

13

Ajudgrnent awarding Plaintiffs and members of the Class restitution,

14

including, \\'ithout limitation, disgorgement of all profits and unjust

15

enrichment obtained by Defendant as a result of its unlawful, unfair, and

16

fraudulent business practices and conduct alleged herein;
4.

17

A judgment awarding Plaintiffs and members of the Class exemplary

18

damages for Defendant's knowing, willful, and intentional conduct, as

19

alleged herein;
5.

20

For an order awarding Plaintiffs and members of the Class pre-judgment

21

and post-judgment interest, as well as their reasonable attorneys' and

22

expert-witness fees, and other eosts;
6.

23

An order that Defendant be pennanently enjoined from its improper
conduct and deceptive practices alleged herein; and

24
25
26
27

til

28

/1/

<J"WOFFICU

COTCHETI,

PITRE
& MCCARTHY

CLASS ACTION COMPLAINT

44

7.

For such addilional or further relief as the Court [mds just and appropriate.

2

Dated: November 5, 2009
3

COTCHETT, PITRE & McCARTHY
BERK LAW PLLC
KEITH L. MILLER

4

5

By:

-di/s'\;/+N!fiag,
~I_';PCi.",U~c~C~a:!;Jrtwh:¥,v~

NIALL P. McCARTHY

_

6
7
8

9
10
11

NIALL P. McCARTHY (Cal. SBN 160175)
runccarthy(a]cpmlegal.com
ANNE MA.RfE MURPHY (Cal. SBN 202540)
[e-mail]
ARON K. LlANG (Cal. SBN 228936)
aliang({iJ,cpmlegal.com
COTClIETT, PITRE & McCARTHY
840 Malcolm Road, Suite 200
Burlingame, CA 940 I 0
Tel: [phone]
Fax: [phone]

12
13
14

15

STEVEN N. BERK (pro hac vice pending)
steven(cV,berklawdc.com
BERKLAW PLLC
1225 15th Street, N.W.
Washington D.C. 20005
Tel: [phone]
Fax: [phone]

16

19

KEITH L. MILLER (pro hac vice pending)
[e-mail]
Twenty One School Street
Boston, MA 02108
Tel: [phone]
Fax: [phone]

20

Attorneys for Plaintiffand the Putative Class

17

18

21
22
23

24
25

26
27

*

LAW OI'~ICES

28

COTCHETI,
PITRE

& MCCARTHY

CLASS ACTION COMPLAINT

45

JURY TRIAL DEMAND

1

2

Plaintiffs, pursuant to Federal Rule of Civil Procedure 38, individually and on

3

behalf of all others similarly situated, demand a trial by jury of all issues which are

4

subject to adjudication by a trier of fact.

5

6
7

Dated: November 5, 2009

COTCHETT, PITRE & McCARTHY
BERK LAW PLLC
KEITH L. MILLER

8

9
10
1]

12

13
14

15

16
17

18
19

20
21
22

By:

"fj/s"/tN"ia",i5-i..,P",."M",cc\:C",a:;,rt\j!hy\fv
NIALL P, McCARTHY

_

NIALL P, McCARTHY (Cal. SBN 160175)
nmccarthy(tV,comlegal.com
ANNE MARrE MURPHY (Cal. SBN 202540)
amurphy@cpmlegal,com
ARON K, LIANG (Cal. SBN 228936)
aliang((i)cpmlegal.com
COT
ClIETT, PITRE & McCARTHY
840 Malcolm Road, Suite 200
Burlingame, CA 94010
Tel: [phone]
Fax: [phone]
STEVEN N, BERK (pro hac vice pending)
stcven@'berklawdc.com
BERKLAW PLLC
1225 15th Street, N,W,
Washington D,C. 20005
Tel: [phone]
Fax: [phone]
KEITH L. MILLER (pro hac vice pending)
klm4law(aJ,aol.com
Twenty cJne School Street
Boston, MA 02108
Tel: [phone]
Fax: [phone]

23

Attorneys for Plaintiffand the Putative Class
24
25

26
27

III

28

LJo,W OFfiCES

COTCHETI,

PITRE

&MCCARTIIY

CLASS ACTION COMPLAINT

46