Faughn et al v. JPMorgan Chase Bank, NA

Filing 1

COMPLAINT against All Defendants filed by Rick D. Holtsclaw on behalf of All Plaintiffs. Filing fee $400, receipt number 0866-3874608. Service due by 7/14/2014. (Attachments: # 1 Exhibit A - Oct. 8, 2008 Report, # 2 Exhibit B - Hunter Declaration, # 3 Exhibit C - Stein Declaration, # 4 Civil Cover Sheet )(Holtsclaw, Rick) Modified on 3/14/2014 to correct receipt number (Jones, Robin). Modified on 3/14/2014 to restrict complaint and exhibits to case participants pending ruling on emergency motion (Jones, Robin).

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
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MARK FAUGHN, TERRIE FAUGHN,
MARVIN L. GLASS, CAROLYN S.
GLASS, THOMAS MCINTYRE,
DEBORAH MCINTYRE and ROGER
SPARKS,
Plaintiffs,
v.
JPMORGAN CHASE BANK, N.A.,
Defendant

Case No. 4:14-cv-00245

COMPLAINT
COME NOW Plaintiffs, and for their cause of action against defendant JPMorgan Chase
Bank, N.A. (“JPMorgan”), state as follows:
PARTIES
1.

Plaintiffs Mark and Terri Faughn are citizens of Butler County, and reside at 71

County Road 454, Poplar Bluff, Missouri.
2.

Plaintiffs Marvin L. and Carolyn S. Glass are citizens of Butler County, and

reside at 60 Hawkeye Lane, Harviell, Missouri.
3.

Plaintiffs Thomas and Deborah McIntyre are citizens of Dent County and reside

at 19816 E. Highway 32, Salem, Missouri.
4.

Plaintiff Roger Sparks is a citizen of Jackson County and resides at 524 N.E. Oaks

Ridge Drive, Lees Summit, Missouri.

5.

Defendant JPMorgan is a subsidiary of JPMorgan Chase & Co., a Delaware

corporation, with its principle place of business at 270 Park Avenue, New York, NY. JPMorgan
may be served through its registered agent, CT Corporation System, at 111 Eighth Avenue, 13th
Floor, New York, New York 10017.
JURISDICTION AND VENUE
6.

This Court has personal jurisdiction over defendant by reason of defendant’s

contacts within this judicial district.
7.

This Court has subject matter jurisdiction of this action pursuant to 28 U.S.C. §

1332(a)(1) based on total diversity with an amount in excess of $75,000.00 in controversy.
8.

Venue is proper pursuant to 28 U.S.C. § 1391(a)(2) because the Plaintiffs are all

residents of the State of Missouri and forwarded all issued payments to Millennium from the
State of Missouri.
9.

Divisional venue in Kansas City, Missouri is proper because defendants are non-

residents and Plaintiff Roger Sparks is a resident of counties of the Western Division.
ALLEGATIONS COMMON TO ALL COUNTS
10.

William Wise (“Wise”) orchestrated a Ponzi scheme which involved using the

internet to advertise the sale of Certificates of Deposit (“CDs”) with unusually high rates of
interest. Investors’ money was then laundered and moved to offshore accounts controlled by
Wise.
11.

The CDs were fake and were worthless.

12.

Plaintiffs collectively paid a total $1,878,500.00 for the CDs Wise and the

Hoegels purported to sell.
13.

William Wise (“Wise”) orchestrated the scheme.

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14.

Jacqueline Hoegel and her daughter, Kristi Hoegel, (collectively, “the Hoegels”)

assisted Wise with the scheme.
15.

In 1999, Wise established Millennium Bank (“Millennium”) in St. Vincent and

Grenadines in the Caribbean.
16.

Millennium purported to be a subsidiary of a Swiss bank known as the United

Trust of Switzerland (“UT of S”).
17.

Wise and the Hoegels opened accounts at Washington Mutual Bank (“WAMU”)

in Las Vegas, Nevada for several Las Vegas limited liability companies, including UT of S,
LLC, United T of S, LLC and Sterling I.S., LLC (collectively, “Millennium Accounts”). All used
the same business address in Napa, California.
18.

Investors, including Plaintiffs, mailed checks to Napa, California, where the

Hoegels operated an office, or wired funds directly to bank accounts in the United States that
were designated by Wise and the Hoegels.
19.

The Hoegels took the investors’ checks to two WAMU retail bank locations on a

frequent basis, depositing hundreds of checks in the Millennium Accounts.
20.

Employees at WAMU, including a branch manager, Tamara Miller (“Miller”),

and a commercial banking officer, Bianca Greeves (“Greeves”), actively assisted the Hoegels
with the bulk deposits.
21.

Miller, Greeves and other WAMU employees helped Wise and the Hoegels to

wire funds from the Millennium accounts out to bank accounts which were in off-shore banking
locations and were controlled by Wise.

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22.

WAMU was one of several banks Wise used for money laundering. The other

banks, however, terminated banking services after becoming suspicious of Wise and his
activities.
23.

WAMU ignored the suspicious activities of Wise and the Hoegels.

24.

Miller and Greeves offered the Hoegels the ability to make deposits remotely and

to remotely wire funds off-shore.
25.

Given remote access, the Hoegels began moving investor monies in and out of the

Millennium Accounts from their own office.
26.

The rapid movement of money in and out of the Millennium Accounts activated

an alert of WAMU’s internal monitoring system.
27.

The alert resulted in multiple investigative audits of the Millennium accounts and

an investigation of Wise and the Hoegels.
28.

JPMorgan acquired WAMU’s assets, including the Millennium accounts, from

the Federal Deposit Insurance Company on September 25, 2008, following WAMU’s failure.
29.

The audits of the WAMU accounts generated investigative reports for specific

review periods, one of which ran from May 31, 2008 to October 8, 2008, bridging the date of
JPMorgan’s acquisition of WAMU.
30.

The report for the May 31, 2008 to October 8, 2008 review period was prepared

on or after October 8, 2008, so the entity that prepared the investigative report was JPMorgan,
which had already acquired WAMU.
31.

The October 8, 2008 report (Exhibit A to this Complaint) included a detailed

narrative, summarizing the suspicious activities related to Wise, the Hoegels and the Millennium
Accounts.

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32.

The October 8, 2008 report demonstrates that by October 8, 2008, JPMorgan had

specific and actual knowledge of the fraudulent activities of Wise and the Hoegels.
33.

The October 8, 2008 report reveals that the bank, after its acquisition by

JPMorgan, had elected not to report these illegal activities to law enforcement authorities.
34.

JPMorgan’s Anti-Money Laundering Operations Unit, located in San Antonio,

Texas, conducted an investigative audit for the period from October 8, 2008 to February 20,
2009, and created an investigative file, summarizing the suspicious activities for that period.
35.

On March 25, 2009, the Securities and Exchange Commission (“SEC”) filed an

enforcement action in U.S. District Court for the District of Northern Texas, SEC v. Millennium
Bank, et al, N.D.Tex, Wichita Falls Division, Case No. 7:09-cv-00050-O (“SEC Action”),
seeking injunctive and other relief to shut down the Millennium fraud. See Exhibit B, “Hunter
Declaration,” filed in support of the SEC’s motion.
36.

In response to a request from the SEC, a compliance manager for JPMorgan’s

Anti-Money Laundering Operations Unit, Casey Stein (“Stein”), signed a sworn declaration
dated March 23, 2009, which summarized the results of his unit’s investigation of the
Millennium Accounts (“Stein Declaration”, Exhibit C). The Stein Declaration was also filed in
support of the SEC’s motion for a restraining order against Millennium.
37.

The Stein Declaration demonstrates that no later than February of 2009, Stein, and

therefore JPMorgan, knew that Wise and the Hoegels were laundering money.
38.

Stein and JPMorgan had specific knowledge of the Millennium fraud as far back

as September 25, 2008, the date of JPMorgan’s acquisition of WAMU.
39.

During the six-month period from JPMorgan’s acquisition of WAMU and the

filing of the SEC action, JPMorgan took no action to shut down the Millennium Accounts.

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40.

During the six-month period from JPMorgan’s acquisition of WAMU and the

filing of the SEC action, JPMorgan continued to provide uninterrupted banking services to Wise.
41.

JPMorgan was legally required to notify a law enforcement agency of the illegal

activity that was discovered during the audit and investigation of the Millennium accounts.
42.

During the six-month period from JPMorgan’s acquisition of WAMU and the

filing of the SEC action, JPMorgan did not notify law enforcement of the illegal activities
discovered during the audit and investigation of the Millennium accounts.
43.

During this six month period, over $16 million passed in and out of the bank, and

ended up in overseas accounts beyond the reach of U.S. law enforcement authorities.
44.

JPMorgan, by its acts and omissions, knowingly aided and abetted the

Millennium fraud, causing investors, including Plaintiffs, to lose their investment monies.
45.

The loss of Plaintiff’s investment monies was a reasonably foreseeable result of

JPMorgan’s failure to notify law enforcement of the Millennium scheme.
COUNT ONE
AIDING AND ABETTING COMMON LAW FRAUD
Come now Plaintiffs, and for their cause of action against Defendant under Count One of
this Complaint, state and allege as follows:
46.

Plaintiffs incorporate Paragraphs 1 through 45 of this Complaint as though fully

set forth herein.
47.

Wise and the Hoegels represented to the public and to the Plaintiffs that

Millennium was a St. Vincent & Grenadines bank offering Certificates of Deposit for sale, and
that Millennium was a subsidiary of a Swiss bank, UT of S.
48.

These representations were false and intended to deceive potential investors so

that Wise and the Hoegels could collect and steal investor funds.
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49.

The Plaintiffs relied on Wise and the Hoegels’ representations in electing to

forward monies to them in exchange for fake certificates of deposit issued to them, which were
worthless.
50.

JPMorgan knew that Wise and the Hoegels were not conducting any banking

business, but were rather collecting and moving investor monies to accounts that Wise and the
Hoegels had established outside of the U.S.
51.

No later than October 8, 2008, JPMorgan had detailed information about the true

nature of the Millennium fraud, as more particularly described in the narrative contained in
Exhibit A.
52.

JPMorgan provided substantial assistance to Wise and the Hoegels, including, but

not limited to the following acts and omissions:
a.

Allowing Wise and the Hoegels to use JPMorgan bank accounts
for laudering and stealing investor monies;

b.

Providing remote deposit and wiring services to Wise and the
Hoegels, which facilitated the theft of investor funds;

c.

Failing to close the Millennium Accounts after the bank’s internal
investigation revealed suspicious activity; and

d.

Failing to notify law enforcement about the ongoing illegal
activities by Wise and the Hoegels.

53.

Wise and the Hoegels were able to steal sums in excess of $16 million during the

period from September 25, 2008 to March 25, 2009, including monies invested by the Plaintiffs,
as the direct and proximate result of JPMorgan’s failure to act on its specific knowledge of the
Millennium fraud.

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WHEREFORE, Plaintiffs respectfully request judgment against Defendant under Count I
of this Complaint for such damages as are fair and reasonable together with their costs and fees,
for interest, and for such other and further relief as the Court deems just and proper under the
circumstances.
COUNT TWO
CONSPIRACY
Come now Plaintiffs, and for their cause of action against Defendant under Count Two of
this Complaint, state and allege as follows:
54.

Plaintiffs incorporate Paragraphs 1 through 53 of this Complaint as though fully

set forth herein.
55.

Defendant JPMorgan engaged in a civil conspiracy with Wise and the Hoegels

through the acts and omissions alleged herein.
56.

The purpose of the conspiracy was to profit from the Millennium fraud.

57.

Defendant, Wise and the Hoegels had a unity of purpose and common design.

58.

Defendant profited from the funds that Wise and the Hoegels funneled through

the Millennium Accounts.
59.

Defendant deliberately elected not to report the money laundering to law

enforcement.
60.

Defendant kept its knowledge and evidence of money laundering by Wise and the

Hoegels a secret until Defendant was approached by the SEC.
61.

By keeping the money laundering by Wise and the Hoegels a secret, Defendant

permitted Wise and the Hoegels to move the funds in the Millenium Accounts beyond reach of
recovery by U.S. law enforcement.

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62.

As the direct and proximate result of Defendant’s participation in the conspiracy,

Plaintiffs were damaged.
WHEREFORE, Plaintiffs respectfully request judgment against Defendant under Count
II of this Complaint for such damages as are fair and reasonable together with their costs and
fees, for interest, and for such other and further relief as the Court deems just and proper under
the circumstances.

Respectfully submitted,
/s/ Rick D. Holtsclaw
Rick D. Holtsclaw, MO#32866
HOLTSCLAW FIRM
2029 Wyandotte, Suite 100
Kansas City, Missouri 64108
Telephone: [phone]
Facsimile: [phone]
[e-mail]
ATTORNEY FOR PLAINTIFF

REQUEST FOR TRIAL BY JURY
COMES NOW the plaintiff and hereby respectfully requests trial by jury of all issues so
triable in the above-captioned cause.

/s/ Rick D. Holtsclaw
ATTORNEY FOR PLAINTIFF70

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