Millennium Bank Scam – Federal Judge Denies JPMorgan Motion to Dismiss Investor Class Action

May 10, 2010 – Victims of the Millennium Bank Ponzi scheme have survived a motion to dismiss filed by Defendant JPMorgan Chase Bank in their class action lawsuit. The complaint alleges that the bank aided and abettedThumbnail image for Thumbnail image for jpmorgan_logo.jpg the perpetrators of a $200 million Ponzi scheme which operated out of offices located in Napa, California. U.S. Magistrate Judge Edward Chen refused to dismiss four out of five of the counts, which will now proceed into a discovery phase requiring JPMorgan to produce documents and answer questions about its banking activities.

JPMorgan is the successor of failed Washington Mutual Bank (“WAMU”), which had branches in Napa, where Millennium’s mastermind, William Wise and his associates, carried out their banking activities. Wise lured over 250 investors by offering certificates wamu_logo.jpgof deposit (CDs) with unrealistically high interest rates. Millennium Investors were instructed to mail checks to Napa, which were presented for deposit at the WAMU branches. Millions were commingled and then either transferred offshore or used by Wise and his cohorts for personal expenses, including payments for a private jet, an extensive wine collection, and to support Wise and his family’s extravagant lifestyle.

The complaint alleges that WAMU continued to conduct business with Millennium even though it knew that investor monies were being siphoned away. Judge Chen determined that the allegations in the Complaint, if proved, would state a cause of action. Specifically, he permitted the claims of aiding and abetting fraud, aiding and abetting conversion, breach of fiduciary duty, and violation of California Business Code to proceed. However, he found no evidence to support the claim that there was a conspiracy to commit fraud.

The judge’s decision appears below:

As stated in Judge Chen’s decision, a claim of aiding and abetting fraud requires proof that (1) WAMU had actual knowledge of the illegal activity being committed, and also (2) that the bank substantially assisted the scheme. The judge noted allegations in the complaint that WAMU knew Millennium was purporting to sell CDs, but was not registered to sell securities. If the bank had such knowledge and then indeed provided Millennium with a remote banking platform, allowing Wise and his staff to make deposits and wire funds without leaving their Napa office, then, according to the judge, this could constitute substantial assistance.
This Decision and Order represents a significant step for the class, and permits the case to move forward toward trial. The Law Offices of Keith L. Miller of Boston and Washington D.C. based Stephen Berk, in conjunction with Cotchett, Pitre & McCarthy of San Francisco, will continue to represent the plaintiffs in this matter.
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