Bank of America: “Bank of Opportunity” for Convicted Felons?by Jacob Zamansky on February 2nd, 2009 at 12:09 pm :
The New York Times last week published an investigative story questioning JPMorgan Chase’s connection to the Bernie Madoff scandal. Similarly, I’m looking for answers about Bank of America’s connection to two other Ponzi schemes that were concocted by known felons. While these schemes pale in comparison to Madoff’s $50 billion fraud, the possibility that America’s biggest banks were potentially involved in allowing sizeable Ponzi schemes is most disturbing.
My office, on behalf of clients, is still in the early stages of investigating Agape World, Inc., a $380 million Ponzi scheme allegedly carried out by Nicholas Cosmo. We have learned that Agape World on its contracts listed Bank of America as its “banking agent” and that all monies to the fund were wired to a BofA branch on Long Island.
We haven’t yet determined exactly what functions BofA provided Agape World. “Banking agent” functions often include performing back-office operations, which presumably would have given the branch a bird’s eye view of transfers to and from Agape World’s account. Agape World required a minimum investment of $20,000, and given the reported size of Cosmo’s Ponzi scheme, the account likely generated considerable activity (and, no doubt, lucrative fees).
Under the Patriot Act, banks are required to be on the outlook for suspicious or fraudulent activity and report wire transactions of $10,000 or more. Most banks typically are very diligent about complying with the law: The Fed’s uncovered Eliot Spitzer’s proclivity for prostitutes when the former New York governor’s bank reported the transfer of funds to the company that arranged his illicit liaisons.
Given that Cosmo had previously been convicted of securities fraud and ordered to undergo gambling therapy, BofA had plenty of reason to closely monitor his account.
Earlier this month, BoA was sued by a group of investors for being complicit in an Internet “ad package” Ponzi scheme. According to the lawsuit, a small Bank of America branch in Florida was the conduit for the scheme operated by Andy Bowdoin, who also was previously convicted for securities fraud. The lawsuit claims that at least one other financial institution closed accounts related to Bowdoin’s fraud, VISA would not process charges relating to his scheme and PayPal allegedly rejected efforts by Bowdoin and his perpetrators to use its popular payment system.As evidenced by its hasty and misguided acquisition of Merrill Lynch, it’s already known that due diligence isn’t one of BofA’s core competencies. And perhaps it’s merely a coincidence that two securities fraudsters chose to orchestrate their Ponzi schemes through BofA branches. But this matter is worthy of close and aggressive examination. Given that JP Morgan Chase and BofA are now wards of the government, Congress and regulators should be fast demanding some answers.
Clearly at the top of the Obama administration’s agenda is securities industry reform. Given the rash of Ponzi Schemes of late, they would be wise to consider the role of banks in monitoring such activity.Filed under Bernard Madoff, Peter Dawson, WexTrust Capital and Agape World, Nicholas Cosmo, Ponzi Schemes
*Special thanks to Diana for the posting
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