Bank being sued for its role in financial fraud


Wachovia Bank may be on the hook for their role in a massive fraud. Suntasia Marketing Inc. was shut down by the Federal Trade Commission in July. They say it was a scheme that used telemarketers to offer "free" memberships to discount buying groups and travel clubs. The problem was that victims gave the telemarketers their banking information, and the scam artists took money out of their bank accounts without authorization.

And here's where it gets really interesting. Promoters of the fraud scheme used bank accounts at Wachovia to commit their frauds and steal millions from the victims. Now Wachovia is being sued for playing an active role in the fraud by providing their banking services. Wachovia even invited the scam artists to bank with them!

The authorities say Wachovia knew that the fraudulent telemarketers were committing crimes, but that they didn't do anything about it because they were profiting from the business. Ultimately, the fraudsters stole about $400 million, and Wachovia essentially "helped" them do it because the bank charged Suntasia a large fee each time a victim disputed a fraudulent transaction.

It will be interesting to see how this case plays out because I wonder what the courts will decide about companies playing a side role in a fraud they're aware of. Technically, I don't think Wachovia committed a fraud. But it seems that they allowed known fraudsters to use their systems and services to carry out the fraud. That doesn't seem right.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.