Wachovia Bank accused of facilitating Ponzi scheme

In my books, Wachovia is a poster child for banking malfeasance and fraud.  In a previous post, I discussed Wachovia's involvement in laundering drug money from Mexican gangs.  This particular situation forced the bank to forfiet $110 million dollars in profit associated with the money laundering operations and pay another $50 million in fines to the government.

McClatchy press has an article, where one,

George Theodule lured hundreds of people to invest with him, using his heritage, a network of churches and his radio show as bait, the bank through which he operated his massive Ponzi scheme looked the other way, according to a lawsuit filed in federal court this month.

Between 2007 and 2008, Theodule manipulated investors from Florida, Georgia, and New Jersey to deposit money in so-called investment clubs.  The majority of those duped out of their investments were "working-class Haitian Americans who lost everything on the promise they would be guaranteed returns."

The lawsuits are pursued by a Miami based firm on behalf of Mr. Thoedule's clients.  The basis of their lawsuits is that Wachovia should have "determined that the transactions Theodule was conducting were inconsistent with any legitimate business."  The article points out that WaMu, Mr. Thoedule's former bank, discerned that his activities were not proper.

Federal regulations require banks to know the true identities of their customers and their customers' businesses, and banks must have systems in place to counter money laundering, said Kevin Mukri, spokesman for the Office of the Comptroller of the Currency. The regulations are extensive...

Banks must verify the source of money coming into accounts, monitor transactions and determine if they are suspicious -- and report them and if necessary close down the accounts.

This isn't a matter of managerial oversight or the incompetence of employees within Wachovia.  This was standard operating procedure for this bank, which has shown on multiple occassions it was more than happy to deal with criminal enterprises as long as they were getting part of the action.