Some of you may be interested in this.

http://blogs.sacbee.com/capitolalertlatest/FEINSTEIN%20FINAL%20COMPLAINT%20DATED%209-22-2011.pdf

The plaintiffs probably would have better luck if they had attorneys that knew what they were doing.

It appears (if I am reading it correctly) to accuse the bank of among other things for failing to monitor and file a SAR. How do they know if a SAR was filed or not? How does the Bank defend such an accusation, without violating SAR confidentiality? I guess OCC will need to step in.

This is scary! The OCC will definitely step in on the SAR deal, but the part about violating OCC expectations on kiting?! Yikes! If not following general guidelines from regulators is now subject to litigation from customers - we're all in for a world of hurt.

Table of contents

A. KINDE DURKEE & DURKEE & ASSOCIATES WERE TRUSTED
AND WELL-REGARDED

Reading this brings to mind the new authentication guidance, where prior cases were cited with the statement that the bank should have realized that the activity was unusual for the account. With the regulators having said that publicly, I think we will see more of this. Makes it that much more important for banks to identify suspicious transactions where funds can leave the bank up front, not afterwards.

This thing is full of holes. First of all, this is a state nonmember bank, not an OCC regulated bank. Also see #88 on page 28. Is this a new rule?

How would they even know if there was a "violation)"
of section 90?

Eventhoug 90 is an advisory letter.

I agree this is sloppy and shows a lack of in depth understanding of actual banking regulation. Doesn't change my comment that I think we will see more of this kind of thing given the new authentication guidance.

Thanks Retread - I was just going to comment on that CTR referece. These people have no idea about BSA, SARs or what a CTR is.

It's hard to tell from this what was really going on, but it's very frightening the way this reads. Aside from the attorney's apparent lack of knowledge of BSA, they've taken standard sections from disclosures that say the bank "may" close your account for fraud and turned it into the bank is "required to" close your account for fraud. Banks have things in place to identify, prevent and detect fraud yes, but you can't protect people from trusting the wrong people and not having controls in place to independly review your accounts aside from the people that have signing authority. This person was so trusted by the Feinstein people, yet the bank was supposed to discover this fraud and shut it down?

Good catch, I had to read line 88 it a few times to see that Cash was missing

No matter what the outcome of this case is, it will cost a fortune to defend it.

Almost makes me wonder if the lawsuit was filed just to reach a plea?

These political campaign accounts are often associated with dangerous rule bending...they surely aren’t worth the hassle

Now that I have had time to look at this a little closer, I have decided that I could defend the bank without ever having spent a day in law school.

On page 17, #72, the state nonmember bank is charged with violating 12 CFR 208.62 which is the Fed's SAR regulation.

On page 25, the state nonmember bank is charged with failing to follow an OCC advisory on check kiting.

On page 27, #86, the bank is charged with failing to file a FinCEN Form 109 which is the SAR Form for MSBs.

On page 28, #88, counsel says the bank is required to file a CTR for any transaction over $10,000.

Counsel did a nice job for the Senator! Hope she isn't paying them much.

Counsel did a nice job for the Senator! Hope she isn't paying them much.


She could just take it out of the campaign fund.

Whoops no funds left.

In practice, complaints like the poorly-researched and crafted example we've been attacking often get amended (if the court allows it) after filing to clean up garbage like Retread has listed. Unhappily, the bank is likely still going to have to defend itself against failing to act on knowledge of wrongdoing by its customer, and, if half of what the complaint alleges is proven, pay up. Thus, the bank may decide to settle.

The only thing that makes me think someone in the bank was involved was that they denied access to the funds. Why would you not allow a victim access to what little funds they have left?

I believe the 'victim' was not a signer on the account.

Also, it mentioned that the bank stated that it believed that other entities funds had been comingled into the account and that they couldn't asertain that the funds in the account at that time were truly funds that belonged to the campaign.

Generally, they put as many lies and distortions in a complaint as they want to. This is an excellent example.

Depending on the bank's will to fight and the quality of its representation, they will sort it out in the court room, but responding to this unadulerated [censored] is going to run up the tab.

Note that, if true, the transfers between unrelated accounts are highly problematic for the bank. (Posts asking " Where does it say we can't do this? are frighteningly common here.) I too think its intriguing that they are insisting that the bank did not file SARs, but am even more fascinated by their assertions that if the bank had filed SARs something would have been done about it.

Here is an interesting development in the Feinstein case.

https://s3.amazonaws.com/s3.documentcloud.org/documents/253582/first-california-bank-lawsuit.pdf

Wasn't the 'victim' and I use that word very loosely, the Senator's campaign accounts? Itneverends has a valid point about the comingling of the funds.

Random thoughts:

1. FICAL is trying to wash its hands of the matter.

2. FICAL regrets ever having known Durkee and having held any of the Durkee accounts.

3. 100 or more of the account may be for fictitious parties. What happened to CIP?

4. The common theme here is commingling of funds. How many times have bankers asked in Threads about the pros and cons of allowing transfers among and between unrelated parties? How many times has the conventional wisdom -- it ain't a good idea; you shouldn't even consider it; the customer doesn't call the tune in such matters -- been shared?

5. Apparently, the good people at FICAL weren't paying attention to the conventional wisdom.

6. Apparently, Feinstein and/or her reelection committee staff (and others) didn't have the first clue about establishing controls over third parties handling their funds.

And the bank has the deep pockets (in the public view, i.e., juries) and should always be looking to protect itself when customers want to do things that put the bank at risk.

That's quite a list of accounts.

Gary Horgan and his law firm (bank's attorney) are very experienced in banking law. I think the bank is gonna need all the help it can afford.