Last spring, Wachovia bank was accused in a lawsuit of allowing fraudulent telemarketers to use the bank's accounts to steal millions of dollars from unsuspecting victims. When asked about the suit, bank executives said they had been unaware of the thefts.
But newly released documents from that lawsuit show that Wachovia had long known about allegations of fraud and that the bank, in fact, solicited business from companies it knew had been accused of telemarketing crimes.
Internal Wachovia e-mail, for example, shows that high-ranking employees at the nation's fourth-largest bank frequently warned colleagues about telemarketing frauds routed through its accounts.
Documents also show that Wachovia was alerted by other banks and federal agencies about ongoing deceptions, but that it continued to provide banking services to multiple companies that helped steal as much as $400 million from unsuspecting victims.
"YIKES!!!!" wrote one Wachovia executive in 2005, warning colleagues that an account used by telemarketers had drawn 4,500 complaints in just two months.
However, Wachovia continued processing fraudulent transactions for that account and others, partly because the bank charged fraud artists a large fee every time a victim spotted a bogus transaction and demanded their money back. One company alone paid Wachovia about $1.5 million over 11 months, according to investigators.
"We are making a ton of money from them," wrote Linda Pera, a Wachovia executive, in 2005 about a company that was later accused by federal prosecutors of helping steal up to $142 million.
Pera left Wachovia in 2006.
Lawyers pursuing the lawsuit against Wachovia, which was filed in a Pennsylvania federal court on behalf of a woman named Mary Faloney and other apparent victims, have asked a judge to declare the case a class action, which could expand it to as many as 500,000 plaintiffs.
The lawsuit alleges that Wachovia accepted fraudulent, unsigned checks that withdrew funds from the accounts of victims, often elderly. Wachovia forwarded those checks to other banks that were unaware of the frauds, which in turn sent money to the swindlers.
A judge is expected to rule on the class action request by this summer. Wachovia has denied the allegations and declined to comment on the suit.
However, Wachovia's senior vice president for risk management, Alan Chudoba, said that the bank introduced reforms aimed at telemarketing frauds last summer. Those changes, which came about after an article in The New York Times last May reported that thieves had used Wachovia accounts, include greater scrutiny of accounts used by telemarketers and stronger fraud protections.
A Wachovia spokeswoman said the bank was not currently working with any telemarketers, would review any future clients who do work with telemarketers, and would reject any client solely focused on telemarketing.
