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McNamara v. Wells Fargo & Co.

Case Number: 21-CV-1245-LAB-WVG

Date Filed: 7/29/2022 State: California

  • Background : The plaintiff in this case is Thomas W. McNamara who was the court-appointed receiver for Triangle Media Corporation, Apex Capital Group, LLC, and their successors, assigns, affiliates, and subsidiaries. The defendants are Wells Fargo & Company and Wells Fargo Bank, N.A. According to the plaintiff, the defendants knew about the “risk-free” trial schemes and knowingly aided and abetted them. The enterprises would conduct the scheme by paying unrelated individuals a monthly fee to front shell companies and opening bank accounts to accept consumers’ credit/debit card payments. They were able to maintain access to the accounts while concealing the identities of their wonders which is an illegal practice known as “credit card laundering”. The companies would market products such as personal care products and dietary supplements and would offer customers “risk-free” trials for the products so the customer only pays for the shipping and handling. However, the trial would include the full price of the product and enroll the customer in programs that would charge them $90 a month and making cancellation and receiving a refund extremely difficult.

  • Plaintiff Argument : According to the plaintiff, Wells Fargo was aware that the bank accounts were not controlled or owned by the listed owners and were instead owned and controlled by the enterprise and even opened more than 150 bank accounts for the seek companies and straw owners. Wells Fargo also provided substantial knowing assistance to both companies by allowing millions of dollars to be deposited into the accounts and allowing the companies to transfer the money to third-party accounts that included some outside of the United States. - Fraud - Breach of fiduciary duty - Conversion - Fraudulent transfers - Civil conspiracy

  • Defendant Argument : The defendants object to the request for proposals 23 through 26 that seek to obtain documents and communications involving the defendants' compliance and reporting efforts, due diligence or investigation of any actual or potential suspected suspicious activity involving the enterprises, and suspected violation of the Patriot Act, FinCEN regulations, Customer and Enhanced Due Diligence rules, Customer Identification Program requirements, and/or AML or KYC policies or laws. The defendants assert the Suspicious Activity report (“SAR”) privilege to object to the production of documents responsive to the RFP 23 through 26. According to the defendants, the Bank Secrecy Act (“BSA”) makes it so that it is prohibited the defendants from discovering any information that involves filing or not filing a suspicious activity report. The Anti-Money Laundering Act makes it so that banks are required to report suspicious transaction activities through a SAR. The SAR cannot be disclosed or have any information revealed that would show the existence of a SAR (31 U.S.C §5318(g)(2)(A)(i)). The defendants object to RFPs 34 through 38 stating that they are only relevant to uncovering employees’ motives to meet sales goals rather than effectuate fraud. The defendants also object to RFP 45 stating that it is extremely broad and would implicate hundreds of employees who have immaterial interactions with the enterprises and are invasive to the employees privacy. They also object to RFPs 46 and 47 since they are premature and disproportionate to the needs of the case. It may be readily obtained through the discovery of the lower-ranked employees. Finally, the defendants object to RFPs 54 and 55 because the receiver is not entitled to take discovery on discovery.

  • Judge Verdict : The court denies objections to RFPs 23 through 26, overruled the defendants' objections to RFPs 34 through 38, sustains and denies in part to defendants’ overbreadth and relevance objections to RFPs 45, sustains the defendants’ objection to RFP 46, overruled defendants’ objection to RFP 47 and overrules RFPs 54 and 55.

  • Negative Option Scheme : A contractual agreement whereby the seller periodically sends to its subscribers an announcement that identified merchandise they propose to send to the consumer. The products are automatically delivered to the consumer unless they affirmatively indicate that they do not want them. Companies may offer “free trials” requiring the consumer to spend little to no money on shipping and handling fees to try out a product, but they may be signing up for monthly shipments and recurring charges to their credit cards unless they are canceled. However, the cancellation terms of the agreement will make it nearly impossible to stop the charges.

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