Sunday, April 17, 2016

Dozens Of Victims Fleeced For Over $11 Million By Suicide-Committing Lawyer Go After Three Financial Institutions To Recover Losses; Banks Accused Of Aiding/Abetting Fraud & Conversion By Turning Blind Eye To Attorney's Suspicious Transactions

In Dauphin County, Pennsylvania, The Legal Intelligencer reports:
  • Nearly 70 victims of an alleged Ponzi scheme are seeking more than $11 million from three financial institutions for their alleged roles in a scam they claim was perpetrated by a Dauphin County attorney who committed suicide in 2014.

    Sixty-nine plaintiffs have filed suit against Ameriprise Financial Services, Fulton Bank National Association and Riverview Bank for allegedly turning a blind eye to suspicious transactions that should have tipped the banks off to the Ponzi scheme, in which attorney Jeffrey Mottern allegedly lost $11.3 million of his clients' money.

    According to the complaint, filed in Dauphin County by McCausland Keen & Buckman attorney Glenn S. Gitomer, the banks disregarded numerous "red flags" that allowed the alleged scheme to continue from 2004 until 2014.

    "The defendants named in this action provided Mottern with the means to perpetrate the scheme and willfully and/or recklessly disregarded extensive red flags and other evidence at their disposal that placed them on notice that Mottern was perpetrating a fraud on the plaintiffs and others," the complaint said. "Had the defendants acted appropriately and not provided Mottern with the means to perpetuate the scheme, the harm to plaintiffs, which is estimated to exceed $11.3 million, would have been avoided or considerably lessened."

    The plaintiffs in Agostino v. Ameriprise Financial Services are pursuing claims for breach of fiduciary duty, violation of the state Unfair Trade Practices and Consumer Protection Law, and aiding and abetting in fraud and conversion.

    According to the complaint, many of the victims had entrusted Mottern with their savings, believing they were setting up trust ­accounts; however, instead of using the money on low-risk investments, Mottern either spent the money on himself or lost it through "reckless, senseless, highly leveraged, ­excessive trading" in his Ameriprise account.

    The victims did not learn about the ­alleged scheme until after Mottern killed himself in 2014, the complaint said. According to a report from Pennlive.com, Mottern committed suicide in March 2014, three days after agents from the FBI and IRS executed a search warrant on his office.

    Records from the Disciplinary Board show that Mottern was admitted to the bar in 1977 and was disbarred on consent in October 2013. The records do not indicate why he was disbarred.

    The complaint said Mottern allegedly sold interests in fake, high-yield certificates of deposit to the plaintiffs, and told the investors he was commingling their funds with other investors to get them competitive interest rates on their money.

    However, according to the complaint, the investment fund did not exist. Instead, he allegedly funneled the money between the two banks and the Ameriprise accounts.

    The plaintiffs contended Mottern ­regularly spoke with an Ameriprise adviser, who then executed the investments, but the firm failed to heed numerous red flags.

    "Because of the extraordinary number of trades and the turnover in the account, the senseless trading, Mottern's seemingly endless capacity to incur massive losses and meet huge margin calls, repeated suspicious wire transfers in and out of the Ameriprise account, and material discrepancies in the unverified information provided to Ameriprise by Mottern about his financial condition, Ameriprise knew or recklessly disregarded the numerous red flags indicating that the source of his funds were highly suspicious and lacked any reasonable, legitimate explanation," the complaint said.

    Mottern also kept Interest on Lawyer Trust Accounts (IOLTA) funds in a Riverview Bank account, and a small business checking account through Fulton Bank. The complaint further alleged that transfers to and from these accounts were also suspicious, but went unheeded by bank officials.

    The complaint said Mottern treated the IOLTA funds as a personal "piggy bank," and said a trail of checks from the account to himself and his wife should have led Riverview to become suspicious of his activity.
Source: Victims of Lawyer’s Alleged Ponzi Scheme Sue Banks for $11M (may require paid subscription; if no subscription, GO HERE, then click the appropriate link for the story).

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:
  • This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.

    There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.

    This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression.

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