Judge denies bank’s bid to toss lawsuit over $330M Marin County Ponzi scheme
Investors who allege Umpqua Bank aided and abetted a $330 million Ponzi scheme by a Novato real estate investment firms owner received a legal victory.
U.S. District Judge Richard Seeborg in San Francisco denied on Friday the Portland-based bank’s motion for summary judgment that essentially would have halted the class action lawsuit filed in August 2020 from proceeding.
The judge also granted “class certification” to the case, allowing it to move toward trial, eyed for next year. About 1,267 investors “suffered losses” from investing in the late Ken Casey’s Marin County companies — Professional Financial Investors and Professional Investors Securities Fund. Those firms purchased over 1.4 million square feet of apartment, office and commercial properties in Sonoma and Marin counties.
“This was a big hurdle we just went through,” Linda Lam, the plaintiff’s attorney at Gibbs Law in Oakland, told the Business Journal on Tuesday.
Four investors — Shela Camenish, Dale Dean, Luna Baron and Eva King — allege in the lawsuit that they lost more than $600,000 from the scheme that involved fraudulent bank transfers between business and personal accounts and Umpqua Bank was aware of it, a claim its officials deny.
The suit also contends Umpqua was aware that, 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. The plaintiffs state the bank should have considered Casey’s history when deciding to do business with him.
Umpqua Bank — which operates 11 branches in the North Bay — issued a statement expressing its “disappointment” in the ruling and added executives “believe the central facts of this case are clear.” Bank officials contend “no one at Umpqua knew about the scheme” and PFI and PISF executives “worked hard to actively hide” it from the bank.
“If Umpqua found out, it would have immediately shut them down,” the statement adds.
Casey died of a heart attack in May 2020, which set a series of legal wheels in motion.
Casey’s death prompted an audit called by his widow, and that 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 PFI and PISF properties and in a 12-year prison sentence for company CEO Lewis Wallach of Encino on fraud charges.
According to a court transcript, Wallach was asked about the bank’s knowledge in testimony: “Did anyone at Umpqua know about the scheme?”
He replied: “Not that I know of.”
Susan Wood covers law, cannabis, production, tech, energy, transportation, agriculture as well as banking and finance. For 27 years, Susan has worked for a variety of publications including the North County Times, Tahoe Daily Tribune and Lake Tahoe News. Reach Wood at 530-545-8662 or susan.wood@busjrnl.com.
