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Wells Fargo being sued by law firm for inadequate fraud checks

Milavetz, Gallop & Milavetz says it lost $400,000 in international scam

12 April 2012

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By Manju Manglani, Editor (@ManjuManglani)

Milavetz, Gallop & Milavetz (MGM) has filed a lawsuit against Wells Fargo for US$400,000 in losses that it alleges were caused by the bank falsely representing that a fraudulent cashier’s cheque had cleared.

In its 6 April 2012 suit, the Minnesota firm says it was initially contacted by a 40-year-old Korean woman named Hira Shio, who claimed to have been injured while in the state. She requested the firm’s help in receiving a $400,000 settlement and in transferring funds to her bank account in Hong Kong.

The bank allegedly represented to MGM that the cheque had cleared and that the funds were available to be wired, made a transfer of $396,500 to Shio’s specified HK account from MGM’s trust account funds, and subsequently informed MGM that the cheque was forged.

According to the suit, the computer programme that Wells Fargo used for the “robotic approval of payment of funds from customers’ accounts” was partly to blame.

“Wells Fargo relied upon the number of days that had elapsed from the day of deposit, upon the available balance in MGM’s trust account, and upon MGM’s credit worthiness, instead of ensuring that the forged cashier’s check had actually cleared and that the outgoing funds from the cashier’s check were in MGM’s trust account,” MGM claims in the suit.

The cheque, which was purportedly payable by Citibank, had an identical account number to that given in other fraudulent cheques allegedly issued by a group led by Nigerian Emmanuel Ekhator.

At the time, Ekhator was under federal investigation for defrauding 70 lawyers and firms of $29 million; he has since been indicted (see United States of America v. Emmanuel Ekhator and Yvette Mathuran, 3 November 2010, 1:10-CR-244).

MGM claims that, had Wells Fargo contacted Citibank or FinCEN to determine if the cashier’s cheque was valid, the bank would have learnt that it was forged.

The firm alleges that “Wells Fargo failed to follow reasonable security, anti-fraud and anti-money laundering procedures, and customary practices of financial institutions, to protect its customer from collection scams”.

In a brief statement, Wells Fargo said it believes the suit has no merit and that it expects to prevail.

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