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Bank to Face Ponzi Scheme Claims

January 15, 2003|From Bloomberg News

UnionBanCal Corp. must face claims by six investors in Reed Slatkin's Ponzi scheme who claim that California's third-largest bank conspired to conceal the EarthLink Inc. co-founder's fraud.

UnionBanCal will have to go to trial on three of four claims over Slatkin's scheme, including aiding and abetting a breach of fiduciary duty and conspiracy to commit fraud, U.S. District Judge Margaret Morrow ruled.

Slatkin, who has filed for bankruptcy protection, last year pleaded guilty to orchestrating a Ponzi scheme that solicited $593 million from about 800 investors. In a bid to get their money back, investors have sued banks used by Slatkin for allegedly facilitating his operation.

"The court finds these allegations, taken together, to be sufficiently specific," Morrow wrote in her order, issued last week.

A UnionBanCal spokeswoman declined to comment, citing the San Francisco firm's policy on pending litigation.

Investor Jo Anne Christensen sued on behalf of herself and five other investors who also held accounts at UnionBanCal. The bank, along with Comerica Inc. and the Bank of Orange County, has also been sued by the trustee of Slatkin's bankruptcy estate, on behalf of all Slatkin investors.

Both suits claim that the banks knowingly participated in Slatkin's fraud by providing him with credit, allowing him to commingle personal and investor funds and lending their name and prestige to his operations.

UnionBanCal is two-thirds owned by Mitsubishi Tokyo Financial Group Inc.

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