The Wells Fargo Fraud Wagon
From fake accounts to mortgage abuses, this bank keeps rolling through scandals. Its latest delivery: $50 million settlement over claims it enabled a Ponzi scheme.
“O-ho the Wells Fargo Wagon is a-comin’ down the street; I wish, I wish I knew what it could be.” – The Music Man
Here comes another stop on the Wells Fargo Fraud Wagon: A proposed $50 million payout over claims it enabled a $460 million Ponzi scheme that duped more than 1,000 investors.
It’s a pittance for a bank with more than $2.2 trillion in assets and it pales beside the $3 billion it shelled out in 2020 to resolve criminal and civil investigations into its fake-accounts scandal.
Indeed, a mere $50 million for a bank where billion-dollar settlements are a cost of doing business barely makes headlines.
The proposed settlement received initial court approval Tuesday, the legal publication, Law360 reported.
“Wells Fargo and its employees substantially assisted the Scheme's fraud … enabling the Ponzi Scheme to reach catastrophic levels,” the lawsuit alleges.
Most of the victims were senior citizens investing their nest eggs with an alleged Las Vegas attorney named Matthew Wade Beasley. He now faces up to 20 years in prison after reaching a plea deal with th Feds in October.
Beasley peddled his Ponzi to Church of Jesus Christ of Latter-day Saints members. He claimed he would use the money to make high-interest-rate loans to lawyers and plaintiffs who were waiting on personal injury settlements to be paid, but Business Blunders readers know the drill. He mostly used new money to pay old investors while spending lavishly on himself.
Oh, and just to highlight what kind of fine, upstanding client he was for Wells Fargo, Beasley was charged with assault after pulling a firearm when federal agents came to his home to arrest him in 2022.
And Beasley's scheme wasn't exactly groundbreaking. South Florida attorney Scott Rothstein built a nearly identical fraud around fictitious legal settlements. New York lawyer Marc Dreier sold bogus promissory notes backed by imaginary deals.
At some point, “I’m a lawyer with a special investment opportunity” should become a red flag. But not for Wells Fargo.
According to the lawsuit, the bank:
Knew the account activity was inconsistent with an attorney trust account, operating more like an investment fund, with enormous transactions flowing in and out for years.
Ignored repeated anti-money-laundering red flags, including several third-party investors and repeated transfers unrelated to ordinary legal work.
Allowed the attorney trust account to become a marketing tool, lending big bank credibility to the scheme.
“Wells Fargo nevertheless accepted hundreds of millions of dollars into the account … And Wells Fargo consistently processed thousands of dollars to pay off car loans and millions more to pay title companies for real estate. The bank also allowed Beasley to withdraw over a million dollars in cash, even though cash withdrawals are perhaps the most widely recognized indication that an attorney is misusing client funds.”
Since the 2008 financial crisis, Wells Fargo has agreed to nearly $16 billion in major settlements, penalties, restitution and consumer relief.
The Wells Fargo Wagon never stops making deliveries.
