U.S. Bancorp (NYSE:USB)’s unit sued for embezzlement, Wells Fargo & Co (NYSE:WFC)

Posted by sara Frank June 19, 2013 0 Comment 980 views

On Wednesday, United States regulators sued a U.S. Bancorp (NYSE:USB) unit for allegedly having facilitated embezzlement of customer funds by Peregrine Financial Group Inc, the collapsed futures brokerage’s jailed founder. Commodity Futures Trading Commission filed civil charges against the unit. The allegation is that the bank did not notice the accounts that had been used by Russell Wasendorf Sr, Peregrine’s founder and chief executive, to skim client funds from the firm for over two decades.

The CFTC alleged that the bank knowingly allowed and also facilitated Wasendorf’s transfers of literally millions of dollars in customer funds from the account. As per the complaint that was filed in Northern District of Iowa’ U.S. District Court, these funds were used to pay for his restaurant, private jet as well as his divorce settlement. The complaint also stated that the funds were used as collateral on various loans to fund Peregrine’s Cedar Falls, Iowa headquarter building, worth $20M.

In a statement, U.S. Bancorp (NYSE:USB) said that the charges had no merit and that it had been a victim of the very same fraud that has eluded the CFTC gaze.

When banks falter

Another bank that has been dragged into court over misrepresentation is Wells Fargo & Co. (WFC). On June 18th, a Blue Cross Blue Shield of Minnesota lawyer, in his opening statement said that Wells Fargo & Co. (WFC) marketed a risky securities-lending program as being safe. Consequently, institutional investors incurred losses of millions of dollars. Mike Ciresi, the lawyer for the Blue Cross as well as 11 plaintiffs said in his opening statement at the St Paul federal court that WFC represented securities lending as being a minimal or a no-risk investment. This is one of at least five cases against WFC over its securities lending.

The suits have been brought in Minnesota, which is where the bank’s securities-lending program was situated. In 2010, the bank lost the first case that went to trial, when Minnesota Workers’ Compensation Reinsurance Association as well as three charitable foundations were awarded around $30M by a state court jury. That judgment had been upheld on appeal. Of late, big banks have been dragged into the limelight for misdemeanours and have also been paying a heavy price for it.

About sara Frank

Sara Frank is our chief congressional correspondent, Sara has covered the presidential campaign, Congress and congressional campaigns. Prior to that, she covered the U.S. House. Sarahas also worked covering the House, Senate and campaign finance. Among the numerous honors she has received for his reporting, Sara is the recipient of an Emmy Award from The National Academy of Television Arts and Sciences. She was also nominated four times for a national Cable Ace Award.

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