New lawsuit filed against Umpqua Bank related to $330M Marin County Ponzi scheme

While a class-action lawsuit involving 1,267 investors in a $330 million Marin County real estate Ponzi scheme awaits a trial date in federal court, a new legal complaint was filed Friday in San Francisco accusing Umpqua Bank of assisting in the fraudulent operation that bilked 11 investors out of their life savings.

This latest round of investors, who bought into the real estate scheme by “purchasing tenancy in common investments,” claim they lost a total of $4.2 million, plaintiff attorney Linda Lam of Gibbs Law in Oakland confirmed.

Among them, Mary Michaels of Point Reyes said she and her husband lost about $494,000 in retirement funds and income. The encounter transpired when a longtime friend introduced them to Professional Financial Investors and Professional Investors Securities Fund founder Ken Casey with an investment proposal that involved a Corte Madera building at 1441 Casa Buena Drive.

The tenancy-in-common agreement was intended to pay 6% interest per year, along with the building’s appreciation value.

“It was a time I was feeling tremendous vulnerability,” she said, referring to her husband’s medical condition. “It seemed like a Godsend, but it turned into the opposite. In retrospect, I could see it was a predatory process.”

Casey died in May 2020, setting off an audit that revealed accounting irregularities occurring between September 2015 until Casey’s death and led to investigations by the U.S. Securities and Exchange Commission and law enforcement. It also resulted in over $436 million in Bankruptcy Court sales of the investor properties and in a 12-year prison sentence for company CEO Lewis Wallach of Encino on fraud. Before that, the two men lived lavish lifestyles that included the purchase of Judy Garland’s Malibu mansion, jewelry and luxurious vacations.

Michaels said she feels a sense of betrayal and anger.

“I’ve had a full range of emotions,” she said, also taking consolation in sharing the horrendous experience with others who were also caught up in a “web of deceit,” she added. “I would love to see justice done.”

A major component to that mission involves accountability from the bank the firms used — Umpqua Bank in Novato. Plaintiffs accuse the bank of knowingly allowing Casey and Wallach to transfer investor funds into their personal bank accounts, court records indicate. Other transfers involved new investor money to make payments on older, existing accounts, with not enough money to cover the financial commitments-- a classic Ponzi scheme, law enforcement has indicated.

Lam contends the plaintiffs and her firm learned a lot from testimony covered in the class action case filed in August 2020, including from account manager June Weaver, who had worked “closely with PFI for nearly 15 years,” the new complaint read. “Umpqua’s records show that between 2012 and 2020, Weaver exchanged at least 1,600 emails with PFI.”

Weaver, who no longer works at Umpqua Bank, “acknowledged that she did in fact know that PFI was using new investor money to cover shortfalls in other accounts,” the complaint added.

Notably, Weaver and her colleagues at the bank’s Novato branch personally made transfers totaling $5.2 million on 179 occasions to one of Casey’s or Wallach’s personal account from a PFI account where new investor money was regularly deposited, Gibbs Law contends in a statement. One transfer amounted to $40,000.

Instead of reporting the frequent overdrafts, Weaver went out of her way to cover” for the company, the complaint read.

When asked why a bank employee would go to that extent, Lam claimed it was part of the bank’s “culture” to remain competitive in the market.

“The two complaints aim to prove Umpqua knew about the fraud,” Lam said.

Regarding both cases, Umpqua Bank — which operates 11 branches in the North Bay — has denied wrongdoing and issued a statement in response to the latest complaint: “We are aware of additional pending litigation involving a former customer, PFI. Similar to the other PFI-related lawsuit, we will continue to defend our company against these allegations and look forward to responding in court.”

The cases point out how the bank should have considered Casey’s history when deciding to do business with him. In 1997, Casey pleaded guilty in an unrelated case to 21 counts of bank fraud as well as five counts each of tax evasion and filing false tax returns and another to defraud the U.S. government. He was sentenced to 18 months in prison and lost his CPA license.

Susan Wood covers law, cannabis, production, tech, energy, transportation, agriculture as well as banking and finance. She can be reached at 530-545-8662 or susan.wood@busjrnl.com