IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT …stmedia.startribune.com/documents/MilavetzGallopMilavetzvWellsFargo4_6_12.pdflegal matters, including settlements, awards and

© 2012 Milavetz, Gallop & Milavetz, P.A. 1

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MINNESOTA __________________________________________________________________ Milavetz, Gallop & Milavetz, P.A., Plaintiff, v.

Wells Fargo Bank, N.A.,

Defendant.

Case No. COMPLAINT JURY TRIAL DEMANDED

TABLE OF CONTENTS Page NATURE OF ACTION ...................................................................................................... 2

JURISDICTION AND VENUE ......................................................................................... 4

PARTIES ............................................................................................................................ 5

FACTS ................................................................................................................................ 6

FIRST CAUSE OF ACTION ............. (Violation/18 U.S.C. § 1343) .............................. 27

SECOND CAUSE OF ACTION ........ (Negligence) ........................................................ 28

THIRD CAUSE OF ACTION ............ (Negligent Misrepresentation) ............................. 35

FOURTH CAUSE OF ACTION ........ (Misrepresentation/Suppression) ......................... 37

FIFTH CAUSE OF ACTION ............. (Negligent Hiring, Training) ............................... 38

SIXTH CAUSE OF ACTION ............ (Promissory Estoppel) ......................................... 39

SEVENTH CAUSE OF ACTION ...... (Undertaking Of Special Duty) ........................... 41

EIGHTH CAUSE OF ACTION ......... (Breach Of Fiduciary Duty) ................................ 42

NINTH CAUSE OF ACTION ........... (Breach Of Customary Practices) ........................ 44

TENTH CAUSE OF ACTION ........... (Violation/Minn. Stat. § 336.4-202) .................... 46

ELEVENTH CAUSE OF ACTION ... (Violation/Minn. Stat. § 336.4A-202) ................. 47

CONSEQUENTIAL DAMAGES .................................................................................... 48

PRAYER FOR RELIEF ................................................................................................... 48

JURY TRIAL DEMANDED ........................................................................................... 49

CASE 0:12-cv-00875-SRN-SER Document 1 Filed 04/06/12 Page 1 of 50


Plaintiff Milavetz, Gallop & Milavetz, P.A. (“MGM”), as and for its Complaint

against Defendant, Wells Fargo Bank, N.A. (“Wells Fargo”) hereby states and alleges as

follows:

NATURE OF ACTION

1. This action arises as a result of a number of acts and omissions by Wells Fargo in

November 2009, in connection with a wire transfer of clients’ funds to a foreign

country from MGM’s trust account (which is also known as an IOLTA account),

which caused a loss to MGM in excess of $396,500.00.

2. At all times material herein, MGM was working with, and receiving specialized,

personal advice from, two customer service representatives employed by Wells

Fargo. One of these customer service representatives, WL, worked under the

supervision of EM. Her card stated that she was a “Banking Sales Associate.”

EM’s card states he is a “Vice President.” WL promised and assured MGM that

she would watch MGM’s trust account.

3. WL agreed that she would not issue the wire transfer until a purported official

check, drawn on Citibank in the amount of $400,000.00 (a copy is attached hereto,

marked Exhibit A, and incorporated by reference), was deposited into MGM’s law

firm trust account and had “cleared.” She agreed that after these events occurred,

the “outgoing funds” would then be wire-transferred.



4. MGM, on multiple occasions, prior to the wire transfer, notified Wells Fargo that

its outgoing wire transfer was contingent on the $400,000.00 check (Exhibit A),

clearing MGM’s trust account.

5. Wells Fargo knew that the $400,000.00 check MGM had deposited into its trust

account was fraudulent at least three days prior to the wire transfer, and MGM did

not receive notice of this information until approximately one week after Wells

Fargo sent the wire transfer.

6. Prior to the wire transfer, Wells Fargo falsely represented to MGM that the

fraudulent check (Exhibit A), had “cleared” and issued the “outgoing wire

transfer,” even though Wells Fargo and their customer service representatives

working with MGM knew, or should have known, that the cashier’s check was

fraudulent.

7. As a result of Wells Fargo’s officers’ and employees’ materially false, fictitious,

fraudulent statements, representations and omissions, as set forth with particularity

below, and their willful, or negligent, illegal misapplication of clients’ funds held

in MGM’s trust account in the custody and care of Wells Fargo, MGM has

suffered substantial losses, as set forth herein.

8. MGM brings this action against Wells Fargo for willful violation of 18 U.S.C.

§ 1343, negligent misrepresentation, fraudulent misrepresentation, negligent

hiring, training and supervision of its employees, promissory estoppel, undertaking

of special duty, breach of fiduciary duty, breach of customary practices of



financial institutions, and violations of Minn. Stat. § 336.4-202, and Minn. Stat.

§ 336.4A-202.

JURISDICTION AND VENUE

9. This Court has jurisdiction under 28 U.S.C. § 1332 in light of the fact that MGM’s

principal place of business is in the state of Minnesota, and Wells Fargo’s

principal place of business is in California and Wells Fargo is incorporated in the

State of Delaware. The amount in controversy exceeds the jurisdictional

minimum. Venue for this action is proper in this Court based upon 28 U.S.C.

§ 1391 (b), because the events alleged herein occurred in this district, MGM

resides in this district, and Wells Fargo transacts business in this district.

10. Personal jurisdiction in this Court is proper because (i) Wells Fargo regularly and

generally conducts business in the state of Minnesota; (ii) the events at issue in

this litigation occurred in the state of Minnesota and are governed by the laws of

the state of Minnesota and federal law, and (iii) the wrongful conduct committed

by Wells Fargo occurred in substantial part in the state of Minnesota.

11. Pursuant to 28 U.S.C. § 2201-02, the Federal Declaratory Judgment Act, the

United States District Court for the District of Minnesota has jurisdiction over this

claim.

12. This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over the state

law claims pleaded herein because the state law claims originate from the same

nucleus of operative facts as do the federal claims.



13. This Court has jurisdiction under 18 U.S.C. § 1343 in light of the existence of a

controversy arising under the laws of the United States, provided by Article 3,

Section 2, of the United States Constitution.

PARTIES

14. At all times material herein, MGM was and still is a law firm and a Minnesota

professional association whose officers and employees include attorneys licensed

by the Minnesota Supreme Court. MGM’s employees also include law clerks,

paralegals and legal assistants. MGM is incorporated in Minnesota, as a domestic

corporation under Minn. Stat. § 319B, the Minnesota Professional Firms Act, with

its principal place of business at 6500 France Avenue South, Edina, Hennepin

County, Minnesota.

15. MGM provides professional legal services to clients from all over the United

States and foreign countries. MGM has had a long-term banking relationship with

Wells Fargo and has maintained several accounts with Wells Fargo, including its

business operating account and a law firm trust account.

16. At all times material herein, Wells Fargo was and still is a large banking

institution, which frequently holds money in IOLTA/trust accounts for law firms.

Wells Fargo is aware that the deposits in lawyers’ trust accounts are received in

trust for the benefit of lawyers’ clients.

17. At all times material herein, Wells Fargo employed EM as a Vice President of

Twin Cities Business Banking and WL as Banking Sales Associate of the



Specialty Markets Group. At all times material herein, EM represented the legal

specialty group of Wells Fargo, which claims to be dedicated to serving the

financial needs of law firms, lawyers, and other legal professionals.

18. At all times material herein Wells Fargo was and still is regulated by the Federal

Reserve Board of Governors, pursuant to 12 U.S.C. § 248, and the Office of the

Comptroller of Currency, a division of the United States Treasury, pursuant to

12 U.S.C. § 93a.

FACTS

19. MGM receives large sums of clients’ money for professional services for various

legal matters, including settlements, awards and verdicts in personal injury cases.

These funds are deposited into MGM’s trust account, pursuant to Rule 1.15 of the

Minnesota Rules of Professional Conduct.1

20. After the deposited funds have cleared, MGM transfers from its trust account to its

operating account its attorneys’ fees and costs for its reimbursement, pays any

subrogation claims or outstanding charges authorized by the client, and remits the

client’s portion of the funds as instructed by the client. At any one time, MGM

may have a large sum of money in its trust account, which is not immediately

available to disburse because MGM is waiting for the deposited funds to clear its

trust account.

1 Rule 1.15 Subsection A states, “All funds of clients or third persons held by a lawyer or law firm in connection with a representation shall be deposited in one or more identifiable trust accounts …. No funds belonging to the lawyer or law firm shall be deposited therein except as follows….” Subsection B states, “A lawyer must withdraw earned fees and any other funds belonging to the lawyer or the law firm from the trust account within a reasonable time after the fees have been earned or entitlement to the funds has been established….”



21. At all times material herein, WL was an assistant to EM. At all times material

herein, EM and WL maintained a personal banking relationship with MGM and

acted within the scope of their employment at Wells Fargo.

22. Wells Fargo held out to MGM that WL and EM were MGM’s customer service

representatives; that they were responsible for answering MGM’s banking

questions and concerns; and that they would provide banking and financial advice

that MGM could rely upon. They were held out by Wells Fargo to MGM as being

knowledgeable of the banking needs of law firms, including IOLTA accounts and

wire transfers from IOLTA accounts in large amounts to banks in foreign

countries.

23. At all times material herein, EM and WL had apparent, implied and actual

authority to make the promises and representations alleged herein.

24. Wells Fargo is vicariously responsible for the acts and omissions of its officers

and employees alleged herein, under the doctrine of respondeat superior and under

federal banking regulations.

25. Wells Fargo and its customer service representatives, at all times material herein,

assumed an undertaking of special duties to MGM and had information greater

than MGM of many material matters. These matters included check clearing, wire

transfers to foreign countries, validity of available balance in account, whether

payment is final, financial fraud schemes and fraud prevention.

26. At all times material herein, Wells Fargo was aware of the circumstances of

MGM’s trust account and MGM’s legal and ethical responsibility to safeguard



funds for its clients, and additional duties to other agencies that are due reimburse-

ment from its claims such as, e.g., Medicare and Medicaid. Wells Fargo was

aware of MGM’s professional and business practices described herein.

27. At all times material herein, Wells Fargo participated in the National Money

Laundering and Financial Crimes Strategy provided for in 31 U.S.C. § 5341

relating to combating money laundering and related financial crimes. Major

purposes of the program are to detect and prosecute money laundering and related

financial crimes, and the seizure and forfeiture of proceeds and instrumentalities

derived from such crimes.

28. At all times material herein, Wells Fargo’s activities to combat money laundering

and related financial crimes for the purposes of prosecuting and convicting certain

criminals, and seizures and forfeitures, may have impacted its responsibilities to

its customers, including MGM.

29. At all times material herein, Wells Fargo, its officers and employees, never

disclosed to MGM its role in the National Money Laundering and Financial

Crimes Strategy.

30. At all times material herein, MGM, its officers and employees believed that they

were receiving honest, independent, good-faith advice from Wells Fargo.

31. At all times material herein, MGM, its officers and employees, did not believe that

they were receiving injurious advice to accept and deposit into their MGM trust

account a fraudulent check and make an outgoing wire transfer for federal law

enforcement purposes.



32. At all times material herein, the United States offered informant rewards to

individuals up to $150,000.00 under 31 U.S.C. § 5323. The rewards went to

individuals who provided original information, such as certain wire transfers

involving money laundering and terrorist financing, leading to a recovery of a

criminal fine, civil penalty, or forfeiture, which exceeds $50,000.00, for violation

of said statute.

33. At all times material herein, no officer or employee of Wells Fargo disclosed to

MGM that the performance standards and review procedures of its officers and

employees, with respect to the National Money Laundering and Financial Crimes

Strategy, which could have impacted the advice its officers and employees gave to

its customers, including MGM.

34. At all times material herein, no officer or employee of Wells Fargo disclosed to

MGM that their employees could be eligible for an informant reward under

31 U.S.C. § 5323, in the event Wells Fargo performed the wire transfer from

MGM’s trust account to the criminal conspirators.

35. The possible reward, pursuant to 31 U.S.C. § 5323, caused a potential conflict of

interest to Wells Fargo’s officers and employees to secretly participate in and

cause the illegal wire transfer referred to herein.

36. At all times material herein, Wells Fargo failed to disclose to MGM its potential

conflict of interest.



37. Had Wells Fargo’s officers and employees disclosed their potential conflict of

interest, MGM would not have relied upon their promises and representations, and

would not have engaged in the transaction referred to herein.

38. At all times material herein, Wells Fargo failed to have necessary policies,

practices, procedures, training and oversight to avoid the possible conflict of

interest of its officers and employees, or to notify its customers of this potential

conflict of interest.

39. At all times material herein, criminal conspirators portraying to be real clients,

engaged in a fraudulent scheme, also known as a “collection scam,” “Nigerian

scam” and a “419 scam,” against law firms throughout Minnesota and the nation,

with the purpose of stealing, wire-transferring and concealing money.

40. Some of the criminal conspirators have since been indicted for criminal conspiracy

to commit money laundering, mail fraud, and wire fraud in violation of 18 U.S.C.

§ 371, 18 U.S.C. § 1341 and 1343.

41. The criminal conspirators’ scheme resulted in $29 million in actual loss from over

70 victim lawyers and law firms and more than $100 million in attempted loss

from approximately 300 additional victim lawyers and law firms.

42. In November 2008, the United States Government began a secret investigation of

collection scams, which involved forged cashier’s checks, and the theft and wire

transfer of funds held in bank accounts, in violation of anti-money laundering and

terrorist-financing laws. The secret investigation included, upon information and

belief, a sting operation involving lawyers’ trust accounts.



43. On August 12, 2010, United States Postal Inspector Louis DiRienzo filed a

Criminal Complaint against Emmanuel Ekhator in the United States District Court

for the Middle District of Pennsylvania, Harrisburg, Pennsylvania, Case

No. 1:10-MJ-63, before U.S. Magistrate Judge Martin C. Carlson, alleging

violations of 18 U.S.C. § 371 (Criminal Conspiracy), 18 U.S.C. § 1341 (Mail

Fraud), and 18 U.S.C. § 1343 (Wire Fraud). Said Criminal Complaint, United

States of America v. Emmanuel Ekhator, (a copy is attached hereto, marked

Exhibit B, and incorporated by reference). The investigation leading to this

Criminal Complaint began in November of 2008. The Criminal Complaint

documents were unsealed on September 27, 2010. The Criminal Complaint cites a

number of fraudulent checks sent to law firms purportedly payable by Citibank but

were actually part of an international criminal conspiracy to commit money

laundering, mail fraud, and wire fraud.

44. The Criminal Complaint against Emmanuel Ekhator alleged that on or about

August 8, 2008, attorney Richard Gan of Carlisle, Pennsylvania received a

fraudulent check allegedly payable from Citibank with a routing number of

031100209, and account number of 38768924. The Criminal Complaint does not

mention a phone number on this fraudulent check.

45. The Criminal Complaint against Emmanuel Ekhator alleged that on January 12,

2009, attorney Anthony McBeth of Harrisburg, Pennsylvania, received a

fraudulent check allegedly payable from Citibank with routing number

028000082, account number 38762924, and phone number (888)211 9789.



46. The Criminal Complaint against Emmanuel Ekhator alleged that on February 9,

2009, attorney Gene Goldenziel of Scranton, Pennsylvania received a fraudulent

check allegedly payable from Citibank with routing number 031100209, account

number 38762924, and phone number (888)211 9789.

47. The Criminal Complaint against Emmanuel Ekhator further describes additional

counterfeit checks seized by the United States Customs and Border Protection in

April of 2010 each with routing numbers of 031100209, account numbers of

38762924, and cited phone numbers of (888)211 9789. At least one of these

additional checks had a law firm as an intended recipient. Each of the checks was

allegedly payable from Citibank.

48. The federal investigation into the initial Criminal Complaint in the matter of

United States of America v. Emmanuel Ekhator led to additional defendants and a

superseding indictment, filed on November 3, 2010, file number 1:10-CR-244,

United States of America v. Emmanuel Ekhator, Yvette Mathurin, Ezeh Matthew

Okechukwu, Kingsley Osagie, Nicholas Jonah Uangbaoje, and Maxwell Nosa

Omorere.

49. The criminal conspirators concealed their real identities and used forged cashier

checks, fraudulent wire transfers, and the Internet. The criminal conspirators

caused stolen funds to be transferred from lawyers’ trust accounts held by

American banks to banks in foreign countries, usually in Asia. The criminal acts

were enabled by American banks, such as Wells Fargo.



50. At all times material herein, Wells Fargo failed to follow reasonable security, anti-

fraud and anti-money laundering procedures, and customary practices of financial

institutions, to protect its customer from collection scams.

51. Law firms, such as MGM, would receive forged checks or official checks from

criminal conspirators, which they deposited into their trust account. The forged

checks appeared to be genuine to a nonbanker. The forged checks contained

inaccuracies that an experienced banker should have noticed. These checks were

deposited into the law firms’ trust accounts for disbursement. The forged checks

were to be used for payment of claims after the checks cleared. These checks were

drawn as “cashier’s” or “official” checks. The check would also have a false

telephone number for the drawer; when the victim called this number, one of the

conspirators would answer and falsely verify the legitimacy of the check and the

underlying transaction.

52. The fraudulent cashier’s checks were altered photocopies of a Citibank cashier’s

check.

53. In order to delay recognition that the checks were forged, the criminal conspirators

made the forged “official check” appear to be issued by a bank from a different

Federal Reserve region, distant from the victim, and contain routing numbers on

the bottom of the check for a different Federal Reserve region than the victim’s

location and the location of the victim’s bank.

54. The criminal conspirators had knowledge of United States law regarding funds

availability, as well as banking practices. The criminal conspirators designed their



scam to take advantage of the “float,” i.e., the time between funds from a

deposited check being made provisionally available to the depositor, and the time

the check actually clears the drawee bank.

55. Criminal conspirators, as part of their scheme, contacted attorneys through the

Internet and, particularly, lawyers.com. Beginning on October 25, 2009, e-mails

from the criminal conspirators were read by MGM associate attorney CS, who

accepted the case for MGM and was the responsible attorney. The criminal

conspirators thereafter followed the usual modus operandi of the scheme.

56. The initial e-mail, received at MGM by associate attorney CS from the criminal

conspirators, claimed to be from a 40-year-old Korean woman named “Hira Shio.”

The e-mail claimed that Shio was injured while in Minnesota and requested

MGM’s help in receiving a $400,000.00 settlement.

57. Several days later, on November 4, 2009, MGM received an official cashier’s

check, purportedly from Citibank, in the amount of $400,000.00. The check

appeared to have been received in settlement of the Hira Shio injury claim.

58. On that day, November 4, 2009, MGM associate attorney CS gave MGM legal

assistant JH the purported Hira Shio settlement check, to be included in that day’s

deposit into Milavetz, Gallop & Milavetz, P.A.’s IOLTA account at Wells Fargo’s

Bloomington, Minnesota, branch.

59. JH first went to the legal-medical business banking area, where EM and WL had

their offices, to speak with them about the deposit and to show them the Hira Shio

check. She was told that EM and WL were not in. JH then proceeded to the teller



area and made a deposit transaction, which contained the Hira Shio settlement

check (Exhibit A), into the MGM IOLTA account.

60. The Hira Shio purported settlement check contained a routing number of

021272655, an account number of 38762924, a cited telephone number of

(888)211 9789, and was allegedly payable from Citibank. The account number

and telephone number cited on this purported Hira Shio settlement check were the

exact same account number and telephone number used in checks made as the

basis in the aforementioned Criminal Complaint United States of America v.

Emmanuel Ekhator. All of the checks were allegedly payable from Citibank.

They were all part of an international money laundering, terrorist financing, mail

fraud and wire fraud scheme that the United States Postal Inspector, as stated in

the Ekhator Criminal Complaint, began investigating in November of 2008.

61. On November 5, 2009, the criminal conspirators, who were being investigated by

the Government, e-mailed wire-transfer information of the purported Hira Shio

settlement funds. This information included a bank in China, Bank of

Communication Company LTD Hong Kong. The e-mail included the receiving

bank’s address, the bank account number, and the bank’s unique identifier code

(known as a “SWIFT Code”). The e-mail also identified Hira Shio as the

beneficiary of the wire transfer.

62. Later that same day (November 5, 2009), JH called WL and told her that MGM

had made a large deposit the day before. JH told her that this check was a result of

a case that was handled entirely over the Internet and would be involving a wire



transfer out of the country from the November 5th deposit. JH told WL that MGM

would need assistance from her and EM for the wire transfer. WL requested

information on the wire transfer and the deposit.

63. JH provided information to WL regarding the proposed wire transfer. JH requested

information as to Wells Fargo’s requirements, direction and advice concerning the

cashier’s check and the proposed wire transfer.

64. In response to WL’s request on November 5, 2009, JH faxed WL a copy of the

check and a copy of the wire-transfer information from “Ms. Shio.” JH asked WL

how long it would take for the check to clear. JH requested that they (WL and

EM) assist MGM with monitoring when the check will clear.

65. To JH “clear” meant that a check is good and the transaction is complete. Neither

WL nor EM ever explained what they meant by “clear.” They failed to tell JH that

Wells Fargo’s policy is, that there is no defined “end point” at which the bank ever

considers a check to be finally settled. Further, they failed to tell JH or any other

employee of MGM that the concept of “the check has cleared,” is meaningless.

66. WL responded via e-mail that same day, November 5, 2009, at 4:25 p.m. Her

e-mail was addressed to MGM associate attorney CS. The e-mail was copied to

JH. WL stated:

Hi

[JH] has asked that I send you a note with our requirements regarding the above referenced cashier’s check and the outgoing wire transfer to Mouton Graeme Paul



The cashier’s check was deposited into the IOLTA account of Milavetz Gallop and Milavetz on 11/5/09

We need to watch the account to be assured this check has cleared the account. The check could take up to 5 business days to clear the account Once cleared we will be able to process the wire I will be in contact with [JH] as to when the wire can be processed. . . [WL] Banking Sales Associate [612-xxx-xxxx] – phone [612-xxx-xxxx] – FAX [Additional emphasis added.] (A copy is attached hereto, marked Exhibit C, and incorporated by reference)

67. Shortly thereafter (on November 5, 2009), at 4:26 p.m., WL sent another e-mail to

JH advising her that the previous e-mail did not go through to CS and requesting

that JH pass it on.

68. On the same date, November 5, 2009, WL sent another e-mail to JH. This e-mail

contains the same language as the previous e-mail from WL of that day, but

adding some additional language:

Hi

[JH] has asked that I send you a note with our requirements regarding the above referenced cashier’s check and the outgoing wire transfer to Mouton Graeme Paul The cashier’s check was deposited into the IOLTA account of Milavetz Gallop and Milavetz on 11/5/09



We need to watch the account to be assured this check has cleared the account. The check could take up to 5 business days to clear the account Once cleared we will be able to process the wire in the amount of $396,500.00 [BN] will need to come into the bank to sign the wire transfer form / once this document is signed the wire will be sent

I will be in contact with [JH] as to when the wire can be processed . . . [WL] Banking Sales Associate [612-xxx-xxxx] – phone [612-xxx-xxxx] - FAX (A copy is attached hereto, marked Exhibit D, and incorporated by reference)

69. On November 6, 2009, JH telephoned EM and told him that MGM’s wire transfer

to the purported client was contingent on the funds in the purported settlement

check clearing at Citibank, N.A.

70. Neither EM nor WL communicated to anyone at MGM that it was foreseeable that

a serious problem would occur if funds were not available to cover the outgoing

wire transfer from MGM’s trust account.

71. Due to Wells Fargo’s representations made during their longstanding relationship

with MGM, MGM relied on WL’s promises that Wells Fargo would “watch the

account to be assured this check has cleared the account” and to “be in contact

with [JH] as to when the wire can be processed.” WL’s e-mails, JH’s November

5, 2009, conversation with WL, and JH’s November 6, 2009, conversation with



EM, made clear to MGM that Wells Fargo understood the outgoing wire transfer

was contingent on the funds in the purported official check clearing the Wells

Fargo trust account, and that Wells Fargo understood that the outgoing wire

transfer was not to be sent until Wells Fargo was assured those funds had

“cleared.”

72. Wells Fargo, through its authorized agent WL, intended that MGM rely on the

statements that Wells Fargo would “watch the account to be assured this check has

cleared the account,” and to “be in contact with [JH] as to when the wire can be

processed,” and knew or should have known, based on the inquiries made by

MGM, that MGM was depending on Wells Fargo to watch the trust account and

advise MGM as to whether the check was “good,” and when the purported official

check had cleared.

73. On November 12, 2009, at the request of WL, MGM legal assistant JH went to the

Wells Fargo branch where MGM routinely transacted business and where EM and

WL worked. JH brought with her an Outgoing Wire Transfer Request, which had

been provided by Wells Fargo, bearing the signature of an attorney. JH spoke to

WL and was told that EM was out. JH asked WL whether the check had cleared

and everything was ready for the wire transfer to be sent. WL responded “Yes”

and indicated two other banking personnel had to sign off on it.

74. In reliance on the e-mails of WL and statements of WL and EM, JH believed that

WL’s response meant that the Citibank cashier’s check was “good” and not

manufactured for the purpose of perpetuating the crime and funding criminal



conspirators. WL told JH that the wire transfer would happen sometime later that

day (November 12, 2009). JH then returned to the MGM office.

75. At all times material herein, Wells Fargo had a policy that they would not be liable

or admit liability for return of any deposited item. At all times material herein, as a

result of this policy, officers and employees of Wells Fargo did not believe their

representations to MGM that “Exhibit A . . . has cleared” would be legally

binding. At no time was this policy mentioned to MGM employees.

76. On or about November 12, 2009, Wells Fargo wrongfully proceeded to wire-

transfer, and willfully misapply MGM’s trust account funds; even though Wells

Fargo knew that the forged cashier’s check deposited into its trust account had not

cleared the trust account and had already been returned as “S” coded. Wells Fargo

knew that the “S” code meant that the forged cashier’s check may not have had a

genuine signature. Wells Fargo relied upon the number of days that had elapsed

from the day of deposit, upon the available balance in MGM’s trust account, and

upon MGM’s credit worthiness, instead of ensuring that the forged cashier’s check

had actually cleared and that the outgoing funds from the cashier’s check were in

MGM’s trust account.

77. As early as November 6, 2009, and at the latest November 9, 2009, Wells Fargo

had received at its Arden Hills, Minnesota, operating center notice of the dishonor

of the forged Citibank cashier’s check. MGM was not, however, notified by Wells

Fargo that the forged cashier’s check had not cleared and was returned by Citibank

until November 18, 2009.



78. At all times material herein, prior to November 18, 2009, MGM, its officers and

employees believed that the check (Exhibit A) was genuine.

79. At the time of its wire transfer, Wells Fargo knew that MGM did not wish to

wire-transfer funds from its IOLTA account that were held in trust by MGM from

the settlements of its other clients’ cases, as MGM had a fiduciary duty to

safeguard such funds for the benefit of those other clients.

80. Wells Fargo failed to properly debit MGM’s trust account after the purported

official check from Citibank was returned “S” coded, to show that the credit for

the $400,000.00 deposit was rescinded and charged back to MGM. Had Wells

Fargo properly debited MGM’s trust account, anyone watching the trust account

would be aware that the $400,000.00 credit given by Wells Fargo to MGM’s trust

account was rescinded and charged back to MGM.

81. At all times material herein, Wells Fargo, its officers and employees, knowingly

engaged in the transaction involving criminal activity referred to herein and/or in

willful blindness to the facts and law, within the meaning of 18 U.S.C. § 1957.

82. At all times material herein, Wells Fargo officers and employees willfully or

negligently misapplied its bank’s trust account funds by proceeding to wire-

transfer funds from the trust account, despite actual or imputed knowledge of the

invalidity of the forged check (Exhibit A), deposited.

83. Wells Fargo did not issue the wire transfer in good faith, as required by the

Minnesota Uniform Commercial Code (UCC), Minn. Stat. § 336.4-202, and Minn.

Stat. § 336.4A-202, for several reasons. First, Wells Fargo did not timely notify



MGM of the dishonored and returned check. Second, Wells Fargo did not issue

the wire transfer in good faith because it failed to notice numerous red flags

surrounding the circumstances of the transaction and the appearance of the check.

84. One of the major red flags surrounding the circumstances of the transaction was

MGM’s prior limited wire activity. The large amount of the wire transfer, the

destination to an Asian country, and the identity of the beneficiary of the funds

should have raised additional red flags. Numerous scams involving Asian

countries are known to Wells Fargo. At all times material herein, Wells Fargo had

knowledge of wire fraud schemes targeting lawyers, and should not have wire-

transferred money contingent on a check, containing numerous red flags, that had

been dishonored three days previously.

85. The numerous red flags should have caused Wells Fargo to believe that the

cashier’s check may not be genuine, and that they should not have issued the wire

transfer from MGM’s IOLTA account.

86. At no time prior to the issuance of the wire transfer did Wells Fargo follow any of

the required procedures to safeguard MGM’s funds. No one at Wells Fargo

verified the identity of the attorney or spoke with an attorney to verify the

documentation submitted and verify that it was okay to go forward with the wire

transfer on November 12, 2009. Further, Wells Fargo did not ask the attorney for

any identification documents or even attempt to communicate with the attorney on

November 12, 2009.



87. In reasonable reliance on WL’s promises by telephone and e-mail that Wells Fargo

would “watch the account to be assured this check has cleared the account” and to

“be in contact with [JH] as to when the wire can be processed,” JH personally

delivered wire-transfer paperwork to WL and left the bank.

88. On November 12, 2009, despite Wells Fargo’s knowledge that the purported

official check (Exhibit A), was fraudulent, officers and employees of Wells Fargo

approved and executed the outgoing wire transfer from MGM’s trust account to a

bank in Hong Kong.

89. At the time the wire transfer arrived at a bank in Hong Kong, on November 12,

2009, the outgoing funds were promptly withdrawn. Upon information and belief,

all or a portion of the wire-transferred funds have been irretrievably lost.2

90. On November 18, 2009, MGM received from Wells Fargo, via regular mail, a

copy of the fraudulent check (Exhibit A), with a notice that the check had failed to

clear and had been dishonored by Citibank. The notice stated that Wells Fargo

was notified on or before November 9, 2009, three days before the wire transfer

was sent, that the purported official check (Exhibit A), had been dishonored code

type “S.”

91. Wells Fargo failed to immediately notify MGM by telephone, e-mail, or any other

feasible communication method to promptly inform MGM that the check had been

dishonored, in order to comply with its responsibilities as set forth herein and

2 Some of the stolen funds and property of the conspirators have been seized by the Government. The property is held pursuant to 18 U.S.C. 3771 and 18 U.S.C. 3664. All of the $396,500.00 of clients’ funds that had been wire-transferred may not be paid over to MGM by the Government, and MGM may suffer damages, including loss of the use of $396,500.00, in excess of this sum as set forth herein.



safeguard the trust account funds. Had Wells Fargo done so, the wire transfer

would not have been allowed by MGM.

92. MGM has since discovered that the entire transaction with the conspirators was a

fraud, that the purported official check (Exhibit A), was counterfeit, and that Wells

Fargo, its officers and employees, willfully or negligently facilitated the transfer of

MGM’s trust account funds to the criminal conspirators.

93. At all times material herein, Wells Fargo knew that such schemes to defraud its

customers existed. Wells Fargo had been advised on multiple occasions, by Office

of the Comptroller of the Currency Bulletins and Manuals, of these and similar

schemes to defraud customers.

94. In early 2009, in a joint release to financial institutions, an enhanced warning was

published by the Financial Crimes Enforcement Network (FinCEN), the Board of

Governors of the Federal Reserve System, the FDIC, the National Credit Union

Administration, the Office of the Comptroller of Currency, the Office of Thrift

Supervision and the Securities and Exchange Commission. The enhanced warning

raised strong concerns about comprehensive customer due diligence (CDD) on the

part of financial institutions to protect against money laundering, terrorist

financing, criminal risks to financial institutions, failing to comply, and

proactively assisting law enforcement with investigation and prosecutions.

95. Under FinCEN’s regulations Wells Fargo must establish and maintain a CDD

program that includes policies, procedures, and controls reasonably designed to

detect and report known or suspected money laundering or suspicious activity



conducted through or involving private banking accounts. Failure to follow

reasonable steps to establish and maintain a CDD program is viewed as a violation

of the requirements of 31 C.F.R. § 103.78.

96. Office of the Comptroller of the Currency Bulletin 2008-12 gave Wells Fargo risk

management guidelines for avoiding violations of the Bank Secrecy Act and Anti-

Money Laundering Act (BSA/AML). In this bulletin, the Office of the

Comptroller of the Currency warned that high-risk transactions should be

monitored for suspicious or unusual patterns of activity. The methods include

initial due diligence and ongoing account monitoring for both bank safety and

soundness and consumer protection. Wells Fargo is required to have BSA/AML

compliance programs and appropriate policies, procedures and processes to

monitor and identify unusual activity. The Financial Crimes Enforcement

Network (FinCEN) administers the Bank Secrecy Act and works with financial

institutions and law enforcement agencies in law enforcement and gathering and

sharing information.

97. Office of the Comptroller of the Currency Interpretive Letter #1094 footnote 9

states:

In recent years, the Office of the Comptroller of the Currency has recognized an increasing risk to consumers and banks involving fraudulent check cashing schemes. In 2007 alone, the Office of the Comptroller of the Currency issued dozens of alerts concerning scams involving fraudulent cashier’s checks and other official checks. In addition, we issued guidance to national banks and consumers concerning fraudulent cashier’s checks.



98. Office of the Comptroller of the Currency Bulletin 2007-2 (January 8, 2007)

discusses factual and legal issues related to fraudulent cashier’s checks, including

associated risks for depositary banks, and provides recommendations to national

banks for managing these risk and protecting their customers; and Office of the

Comptroller of the Currency Consumer Advisory on Avoiding Cashier’s Check

Fraud, CA 2007-1 (January 16, 2007) provides consumers information on

common cashier’s check scams and steps consumers can to take to avoid

becoming victims of these scams. At all times material herein, Wells Fargo

ignored its obligation to protect banking customers, including MGM, from

fraudulent check cashing schemes, money-laundering and terrorist-financing

activities, fraudulent cashier’s checks and other criminal activities.

99. At all times material herein, Wells Fargo failed to properly use anti-money

laundering and anti-fraud software to safeguard MGM’s trust account funds. This

software application should, if used properly, effectively monitor bank customer

transactions on a daily basis. By using a customer’s historical information, and

account profile, this software provides a whole picture to the bank management.

Transaction monitoring can include deposits of cash and cashier’s checks, and

wire-transfer activity.

100. At all times material herein, Wells Fargo has held itself out to the public, including

to MGM, and has advertised on its website that it can assist its customers

regarding check fraud. No such assistance was made available to MGM.



101. At all times material herein, Wells Fargo’s knowledge regarding check fraud,

including “collection scams,” “Nigerian scams” and “419 scams,” and their

recognition and prevention, was at all times material herein superior to that of

MGM’s.

102. At all times material herein, Wells Fargo had access to law enforcement officials

involved in banking crimes, such as FinCEN, superior to that of MGM’s.

103. At all times material herein, Wells Fargo had access to information from Citibank

that was not available to MGM.

104. The advice given by Wells Fargo’s customer service representatives was not in

conformance with the requirements and the regulations of the Federal Reserve and

Office of the Comptroller of the Currency.

105. At the time of the wire transfer, pursuant to Minn. Stat. § 336.3-411, Wells Fargo

could have refused to execute the wire transfer.

COUNT I

WILLFUL VIOLATION OF 18 U.S.C. § 1343

106. Paragraphs 1 through 105 are hereby re-alleged in their entirety, as if they were

specifically set forth herein.

107. MGM states, on information and belief, that Wells Fargo’s wire transfer of

$396,500.00 of clients’ funds from MGM’s trust account on November 12, 2009,

from Minneapolis to Kowloon, Hong Kong, was a willful violation of 18 U.S.C. §

1343 and federal regulations, and, as a result of Wells Fargo’s wire transfer, MGM

has been damaged as set forth herein.



COUNT II

NEGLIGENCE



109. In the event this honorable Court does not find that Wells Fargo’s wire transfer of

$396,500.00 of clients’ funds from MGM’s trust account on November 12, 2009,

from Minneapolis to Kowloon, Hong Kong, was caused by Wells Fargo’s willful

violation by 18 U.S.C. § 1343 and federal regulations, in the alternative, MGM

states and alleges that Wells Fargo’s acts and omissions were negligent and

Plaintiff is entitled to damages from Wells Fargo for its negligence.

110. At all times material herein, Wells Fargo negligently ignored warnings that

cashier’s checks have been increasingly used to commit fraud. When a cashier’s

check is used in a check scheme, a bank may improperly release the funds

immediately after a one or two-day hold, falsely believing the check has cleared.

MGM waited a substantially greater amount of time and verified with Wells Fargo

that the check had cleared the trust account and the funds could be wire-

transferred.

111. At all times material herein, Wells Fargo’s customer service representatives,

including WL and EM, were negligently and inadequately trained and supervised

in that they were apparently unaware of, unconcerned with, or willfully blind to

the fact that cashier’s checks may be used in a fraud described herein. Even when

Wells Fargo realized that cashier’s checks were being used in scams, it kept this



information of important public interest secret from MGM and failed to alert

MGM of the scam in this case.

112. At all times material herein, customer service representatives of Wells Fargo were

negligently and inadequately trained to know the red flags of cashier’s check fraud

to avoid scams that could affect their customers, and to comply with federal law.

This is especially true when the bank has trust accounts containing lawyers’

clients’ funds. Where the victim’s presenting bank provisionally credits the

victim’s account, before the funds have actually arrived from the drawee bank, it

appears to the victim the funds have cleared and may be drawn upon by the victim.

Nevertheless, even if the funds have cleared the drawee and presenting banks,

weeks later the presenting bank can debit the customer’s account when the when

the drawee bank determines that the check is forged. After Wells Fargo learns

from the presenting bank that the check is dishonored, it will then debit the

customer’s account and may withdraw funds from the customer’s accounts or sue

the customer for the amount of the forged check.

113. At all times material herein, Wells Fargo’s customer service representatives failed

to recognize and promptly and properly act upon obvious red flags, well known to

financial institutions.

114. As part of their duty to monitor the validity of the purported cashier’s check,

Wells Fargo’s customer service representatives, including WL and EM,

negligently failed to make reasonable use of the “Financial Institutions Hotline,”

1-866-556-3974. This number was published by FinCEN on September 28, 2001,



and is widely known by banking officers and employees. It is operational 7 days a

week, 24 hours a day, and it is free for bankers to call in order for them to comply

with federal regulations. FinCEN has over 300 employees, many of whom are

available to handle suspicious activities involving possible financial crimes. Wells

Fargo remained willfully blind to the criminal nature of their wire transfer.

115. Had Wells Fargo contacted FinCEN with the check description, they could have

been notified that the Citibank cashier’s check was a forgery. They could have

learned that at least three other law firms had already been victims of the “419

scam” involving a Citibank official check with routing number 028000082,

account number 38762924, and phone number (888)211 9789, and realized that

the check was not genuine.

116. Further, as part of their duty to monitor the validity of the purported cashier’s

check, EM, WL or another Wells Fargo officer or employee should have called

Citibank’s actual telephone number or otherwise contacted an officer at Citibank

to determine whether Citibank had issued a $400,000.00 cashier’s check with the

date, check number and routing number, or to otherwise verify the validity of the

check.

117. At that time, Citibank anti-money laundering and anti-fraud officers and

employees must have known that the Citibank cashier’s checks, which had been

deposited into the trust accounts of lawyers Richard Gan, Anthony McBeth and

Gene Goldenziel, were forged, and that the check MGM was calling about was

also forged. Wells Fargo could have and should have learned the instrument



purporting to be a Citibank official check was a part of an international 419 scam

being committed against American lawyers involving forged Citibank cashier’s

checks deposited into their trust accounts with outgoing wire transfers sent to

foreign countries.

118. At the time EM and WL received the facsimile of the purported “official check”

from JH, they were in a superior position to recognize that the irregularities were

caused by the criminal conspirators to delay detection of the forged check until

sometime after the money was paid to the criminal conspirators or their

accomplices. This should have been apparent, where, as here, the check was

returned “S” coded.

119. Despite the red flags, Wells Fargo negligently neglected to present the paper check

or transmit images of the check directly to the paying bank or advise MGM to do

this, or tell MGM that they neglected to do this. Further, Wells Fargo failed to

forward the paper checks or images of the checks to a Federal Reserve Bank for

collection. The most obvious red flag may have been that the branch address

written on the purported official check (Exhibit A), was misspelled. MGM was

misled to believe that Wells Fargo was verifying the validity of this check, when

in fact, this was not the case.

120. Wells Fargo customer service representatives should be trained, among other

things, to assist customers in answering banking questions. The Office of the

Comptroller of the Currency and the Federal Reserve Board require bank-

employee training to properly advise customers in questions of banking



procedures, policies, account balances, availability of funds, check fraud and wire

transfers.

121. Wells Fargo negligently causes customers; including MGM, to rely on its

customer service representatives and trust them as fiduciaries that act in their

customers’ best interests.

122. Although Wells Fargo negligently led MGM to believe it was watching the check,

it did not inform MGM that the purported official check (Exhibit A), was forged

until after wire-transferring funds to criminal conspirators. When there were red

flags, Wells Fargo should have verified the validity of a purported official check

before funds were wire-transferred to a foreign country.

123. Wells Fargo negligently failed to make a reasonable inquiry of FinCEN or of

Citibank to determine whether or not the purported official check (Exhibit A), was

valid. At that time, Citibank and FinCEN were already aware the forged Citibank

checks were used in “419 scams.” Had they done so, they would have learned that

the purported official check (Exhibit A), was forged and used in connection with

the “419 scams” against lawyers.”

124. Wells Fargo negligently failed to advise MGM that it had not verified whether the

purported official check (Exhibit A), was forged, and negligently failed to advise

MGM to verify that the purported official check was not forged. Further, Wells

Fargo misled MGM into believing the purported official check (Exhibit A), was

not forged. The Department of Treasury, Office of the Comptroller of the

Currency, had warned Wells Fargo that the depository bank must verify the funds



deposited with the bank before these funds on deposit are wired to a foreign

country.

125. Wells Fargo failed to recognize faulty digital characters on the bottom edge of the

fraudulent check (Exhibit A), containing the issuing bank’s ABA transit number

(bank identifier) and check routing symbol (denoting funds availability.) The first

two digits are 01–12 denoting the Federal Reserve district. The second two digits

are the branch/city designation and clearing. The next four digits represent the

bank number. These numbers are followed by the party check digit for reading

error control. The next digits are the customer’s account number. On the right

bottom edge of the paper check is a space for encoding.

126. Upon information and belief, MGM states and alleges that Wells Fargo

negligently applied an authorization of wire-transfer procedure through a

computer process to MGM’s outgoing transfer of funds. The Wells Fargo

computer process that was applied allowed robotic authorization. The computer

process is sometimes referred to as robo-signing. MGM states, on information and

belief, that this process applies an algorithm, which includes the balance of the

customer’s account and the customer’s creditworthiness. Further, if a particular

check is involved, the computer may look at the date of the check’s deposit and

also base it on the number of business days that have elapsed since the deposit of

the check. In the case of Wells Fargo’s wire transfer involving the $400,000.00

forged check (Exhibit A), deposited by MGM, the authorization negligently

utilized a computer program without adequate human oversight.



127. The computer program authorizing the wire transfer failed to take into account the

special undertaking that Wells Fargo agreed to with MGM, or the red flags that

had existed with respect to the purported official check and wire transfer.

128. At all times material herein, Wells Fargo negligently placed a greater value on

efficiency in releasing funds and the use of computers for efficiency and

profitability, instead of due diligence by responsible officers and employees. The

robotic approval of payment of funds from customers’ accounts, including

MGM’s trust account referred to herein, increased the revenue that Wells Fargo

received from lucrative service charges.

129. Wells Fargo was negligent in advising MGM on November 12, 2009, that the wire

transfer could be sent, without verifying whether the purported official check,

(Exhibit A), was “good” and whether it had had cleared. The purported official

check was not “good” because it was returned marked “S.” Wells Fargo knew that

the wire transfer was contingent on the purported official check being “good” and

had specifically promised to watch MGM’s trust account for the specific purported

official check (Exhibit A), to clear. Wells Fargo had already received notice from

Citibank that the Citibank purported official check had not cleared and was coded

“S.” Wells Fargo was negligent in failing to inform MGM of such failure. Neither

WL, EM, the two unidentified bankers who signed off on the wire transfer, nor

any other Wells Fargo officer or employee, took the time to check for information

that was already in Wells Fargo’s possession on or before November 9, 2009.



130. Wells Fargo was negligent in sending the wire transfer on November 12, 2009,

without verifying whether the purported official check was “good” and had

cleared. Wells Fargo and its agents promised to watch the trust account and failed

to act upon the notice from Citibank that the $400,000.00 purported official check

was not honored. Neither WL, EM, the two unidentified bankers who signed off

on the wire transfer, or any other Wells Fargo employee, took the time to check

for information that was already in Wells Fargo’s possession on or before

November 9, 2009.

131. As a direct and proximate result of Wells Fargo’s negligence, MGM has suffered

damages as set forth herein.

COUNT III

NEGLIGENT MISREPRESENTATION



133. Wells Fargo owed a duty of reasonable care in conveying information to MGM

regarding the cashier’s check and wire transfer.

134. Wells Fargo, through its authorized agent, WL, intended that MGM rely on the

statements that Wells Fargo would “watch the account to be assured this check

has cleared the account.” Wells Fargo agreed to be in contact with MGM legal

assistant JH, as to when the wire can be processed, and knew or should have

known, based on the inquiries made by MGM, that MGM was relying on Wells



Fargo to watch the trust account and advise MGM as to when the purported

official check was “good” and had cleared.

135. MGM relied on WL’s promises that Wells Fargo would “watch the account to be

assured this check has cleared the account” and to “be in contact with [JH] as to

when the wire can be processed.”

136. Wells Fargo was negligent in advising MGM on November 12, 2009 that

everything was ready for the wire transfer to be sent, without checking to

determine whether the purported official check was “good” and had cleared, when

Wells Fargo knew that the wire transfer was contingent on the purported official

check clearing and being “good.”

137. MGM relied on Wells Fargo’s representation that everything was ready for the

wire transfer to be sent, and authorized the transfer on November 12, 2009 on the

basis of that representation. In light of Wells Fargo’s previous representations that

it would “watch the account to be assured this check has cleared the account,” and

its agreement to be in contact with JH as to when the wire can be processed, and in

light of MGM having specifically advised Wells Fargo that the wire transfer was

contingent on the check being “good” and on the purported official check clearing,

MGM understood the statement that the check had cleared, to mean that the

purported official check was “good” and the wire transfer could be sent.

138. On November 12, 2009, when Wells Fargo made the representation that the check

had cleared, Wells Fargo knew and should have known that the purported official

check had not cleared and was forged.



139. On November 12, 2009, when it made the representation that the wire transfer

could be sent, Wells Fargo knew, or should have known, that no one at Wells

Fargo had checked to determine whether the purported official check was “good”

and whether it had cleared.

140. At all times material herein, on November 12, 2009, when it made its

representation to MGM, Wells Fargo knew or should have known that the

purported official check had already been dishonored by the drawee bank on or

before November 9, 2009. MGM did not receive notice that the purported official

check had been dishonored until it received Wells Fargo’s notice of the dishonor

by ordinary mail on November 18, 2009.

141. As a direct and proximate result of Wells Fargo’s negligent misrepresentations,

MGM has suffered damages as set forth herein.

COUNT IV

FRAUDULENT MISREPRESENTATION AND SUPRESSION OF MATERIAL FACTS



143. Wells Fargo intentionally, willfully and recklessly misrepresented to MGM, and

suppressed material facts from MGM. Specifically, Wells Fargo represented to

MGM that the purported official check (Exhibit A), had cleared and that the funds

were available to be wired.



144. At the time Wells Fargo made false representations about the purported official

check, (Exhibit A), Wells Fargo knew that it was forged.

145. Wells Fargo fraudulently made these misrepresentations and suppressions with

knowledge that the representations were false or with reckless disregard for

whether they were true or not.

146. MGM relied and acted on Wells Fargo’s fraudulent representation about the

purported official check, (Exhibit A).

147. As a direct and proximate result of Wells Fargo’s fraudulent misrepresentations

and suppressions, MGM has suffered damages as set forth herein.

COUNT V

NEGLIGENT HIRING, TRAINING, MONITORING AND SUPERVISION



149. At all times material herein, Wells Fargo negligently and/or intentionally hired

and/or contracted with EM, WL, and other Wells Fargo officers and employees by

failing to ensure that they were qualified, trained, supervised and/or otherwise fit

to carry out the duties for which they were charged.

150. At all times material herein, Wells Fargo negligently and/or intentionally

disregarded the consequences of such failure to hire, train, supervise and/or

contract with qualified employees and staff.



151. At all times material herein, Wells Fargo negligently, willfully and/or intentionally

failed to supervise and train EM, WL, and other Wells Fargo officers and

employees who were involved in the transaction that is subject of this Complaint.

152. At all times material herein, Wells Fargo served as the employer and/or master of

their employee EM, WL and other Wells Fargo employees who negligently and/or

intentionally subjected MGM to unlawful conduct.

153. At all times material herein, Wells Fargo negligently supervised EM, WL and

other Wells Fargo employees who were involved in the transaction that is subject

of this Complaint and failed to prevent the unlawful conduct as alleged above by

its action and inaction.

154. At all times material herein, Wells Fargo should have known about the improper

conduct of EM and WL and other Wells Fargo officers and employees, or should

have known that such conduct was improper, and failed to take adequate steps to

remedy the situation.

155. As a direct and proximate result of Wells Fargo’s negligent hiring, training,

monitoring and supervising its officers and employees, MGM has suffered

damages as set forth herein.

COUNT VI

PROMISSORY ESTOPPEL





157. Wells Fargo promised MGM that it would “watch the account to be assured this

check has cleared the account” and promised to be in contact with MGM legal

assistant JH as to when the wire can be processed.”

158. At all times material herein, Wells Fargo knew and acknowledged that MGM had

specifically advised Wells Fargo that the outgoing wire transfer was contingent on

the funds in the purported official check clearing. By its words and actions, Wells

Fargo indicated it knew that MGM was detrimentally relying on its promises to

“watch the account to be assured this check has cleared the account” and to “be in

contact with [JH] as to when the wire can be processed.”

159. At all times material herein, in making these promises, Wells Fargo knew, or

reasonably should have known, that these promises would induce MGM to

authorize the wire transfer, when advised by Wells Fargo that everything was

ready for the outgoing funds from the check deposited into MGM’s trust account.

160. MGM relied on Wells Fargo’s promises, to its detriment, and on WL’s

representation that everything was ready to go with respect to the wire transfer.

Injustice can only be avoided by enforcement of these promises.

161. As a result of Wells Fargo’s failure to perform according to its promises, Wells

Fargo is estopped from:

a. Claiming that the cashier’s check (Exhibit A), was not genuine.

b. Claiming that MGM’s trust account is not credited the sum of $400,000.00.

c. Debiting the sum of $400,000.00 from MGM’s trust account.



162. MGM has suffered damages as set forth herein of $400,00.00, and Wells Fargo

should restore to MGM’s trust account the said sum.

COUNT VII

UNDERTAKING OF SPECIAL DUTY



164. At all times material herein, Wells Fargo assumed a special responsibility and duty

to MGM, including the duties to “watch the account to be assured this check has

cleared the account,” to “be in contact with [JH] as to when the wire can be

processed,” by its representations and promises to do so, as set forth in the e-mails

from WL to MGM on November 5, 2009.

165. At all times material herein, Wells Fargo recognized or should have recognized

that its undertaking was necessary to protect MGM’s property, specifically, the

funds in MGM’s attorney trust account.

166. At all times material herein, Wells Fargo breached its special responsibility and

duty through its failure to exercise reasonable care in performance of its

undertaking, specifically, by failing to check whether the purported official check

had cleared, and failing to discover that Wells Fargo had already received notice

that the purported official check had been dishonored by the payor bank, before

advising MGM that everything was ready for the wire transfer to be sent. Wells

Fargo’s failure to exercise reasonable care increased the risk of harm to MGM.



167. MGM relied on Wells Fargo to carry out its undertaking with reasonable care and

sustained harm as a result of its reliance on Wells Fargo’s undertaking.

168. As a direct and proximate result of Wells Fargo’s breach of its special duty, MGM

has suffered damages as set forth herein.

COUNT VIII

BREACH OF FIDUCIARY DUTY



170. On November 5, 2009, the day after the purported official check was deposited

into MGM’s trust account at Wells Fargo, MGM made known to Wells Fargo,

through the fax sent to Wells Fargo by JH to WL, that it was relying on the bank

to counsel and inform MGM as to when the outgoing funds would be available

from the purported official check so that the wire transfer could be sent.

171. 12 C.F.R. § 229.2 Definitions. Federal Reserve Regulation C.C. provides:

“Available for withdrawal with respect to funds deposited means available for all

uses generally permitted to the customer for actually and finally collected funds

[emphasis added] under the bank’s account agreement or policies, such as for

payment of checks drawn on the account, certification of checks drawn on the

account, electronic payments, withdrawals by cash, and transfers between

accounts.”

172. A reasonable understanding of the communication between MGM and Wells

Fargo’s employees was that the wire transfer would be made from “actually and



finally collected funds,” and not the understanding that the status of the funds, as

represented by the purported cashier’s check deposited, could change in the future.

173. At no time did Wells Fargo, its officers or employees, describe the credit given to

MGM by the deposit as a provisional credit, as provided for in Title 4 of the UCC.

Wells Fargo, its officers and employees never explained that it intended to reverse

the credit on the deposit, in the event the check failed to clear the drawee bank and

deny liability.

174. The policy, practice and procedure by Wells Fargo regarding the final settlement

of a check deposited, is unreasonable and makes it impossible for any customer to

ever know when funds represented by a check are actually available for use and

are finally cleared and settled.

175. As a result of the above-referenced communications made by MGM, and Wells

Fargo’s promises to “watch the account to be assured this check has cleared the

account,” and to “be in contact with [JH] as to when the wire can be processed,”

Wells Fargo knew or had reason to know that its customer, MGM, was placing its

trust and confidence in Wells Fargo and was relying on it so to counsel and inform

MGM.

176. At all times material herein, Wells Fargo’s knowledge that MGM was placing its

trust and confidence in it and was relying on it to counsel and inform MGM,

constituted special circumstances giving rise to a fiduciary duty to MGM on the

part of Wells Fargo.



177. At all times material herein, as a fiduciary, Wells Fargo owed MGM a duty of

scrupulous good faith, trust, confidence, candor, undivided loyalty and an

obligation to act in the best interests of MGM.

178. At all times material herein, Wells Fargo breached its fiduciary duty in a number

of instances, as set forth herein. A breach occurred by Wells Fargo’s failure to

fulfill its promises to “watch the account to be assured this check has cleared the

account” and to “be in contact with [JH] as to when the wire can be processed.”

Furthermore, it breached its duty by failing to exercise reasonable care in

performance of its undertaking to watch the trust account and make sure the

purported official check was “good” and had cleared before sending the wire

transfer, and it breached its fiduciary duty by failing to advise MGM that its policy

is to hold MGM responsible if the check deposited is not “good.”

179. As a direct and proximate result of Wells Fargo’s breach of fiduciary duty, MGM

has suffered damages as set forth herein.

COUNT IX

BREACH OF CUSTOMARY PRACTICES OF FINANCIAL INSTITUTIONS



181. At all times material herein, Wells Fargo knew or should have known MGM was

placing its trust and confidence in the bank and was relying on the bank to follow

customary practices of financial institutions regarding fraud detection and



consumer protection in connection with official check deposits and wire-transfer

procedures.

182. At all times material herein, Wells Fargo failed to follow the customary practices

of financial institutions associated with the Patriot Act and the Bank Secrecy Act.

Wells Fargo owed MGM a duty of scrupulous good faith, trust, confidence,

candor, undivided loyalty and an obligation to act in the best interests of MGM

under the Patriot Act, Anti-Money Laundering ACT (AML) and Bank Secrecy Act

with regard to its undertakings regarding the wire transfers.

183. At all times material herein, Wells Fargo failed to follow customary practices of

financial institutions by wire-transferring funds from MGM’s trust account that

were proceeds of a crime. Wells Fargo’s wire transfer was in violation of anti-

money laundering law, the Patriot Act, Regulation CC, Bank 21 Act,

18 U.S.C. 656 and 1343, and other federal regulations.

184. At all times material herein, Wells Fargo breached its duty through its failure to

adhere to the customary practices of financial institutions to the detriment of

MGM.

185. As a direct and proximate result of Wells Fargo’s breach of customary practices of

financial institutions, MGM has suffered damages as set forth herein.



COUNT X VIOLATION OF MINN. STAT. § 336.4-202

(FAILURE TO SEND TIMELY NOTICE OF DISHONOR) 186. Paragraphs 1 through 185 are hereby re-alleged in their entirety, as if they were


187. Upon information and belief, and based on the fact that MGM did not receive

Wells Fargo’s mailed notice that the check had been dishonored until

November 18, 2009, Wells Fargo failed to send timely notice to MGM of the

dishonor of the purported official check by the payor bank, Citibank, prior to

Wells Fargo’s midnight deadline, as required by Minn. Stat. § 336.4-202. The

notice indicated that Wells Fargo had notice on or before November 9, 2009—

three days before the wire transfer was sent—that the purported official check had

been dishonored and had charged back MGM’s trust account that same day. Had

Wells Fargo timely notified MGM of the dishonor, MGM would not have

authorized the wire transfer which was contingent on clearance of the funds in the

purported official check.

188. As a direct and proximate result of Wells Fargo’s violation of Minn. Stat.

336.4-202, Wells Fargo is liable to MGM for its damages as set forth herein.



COUNT XI VIOLATION OF MINN. STAT. § 336.4A-202

(FAILURE TO ACCEPT PAYMENT ORDERS IN GOOD FAITH) 189. Paragraphs 1 through 188 are hereby re-alleged in their entirety, as if they were


190. At all times material herein, Wells Fargo knew that MGM's wire transfer

instructions were contingent on the purported official check clearing, and, Wells

Fargo, acknowledging this requirement, agreed to monitor MGM's trust account

for this specific check to clear.

191. On November 12, 2009, Wells Fargo solicited erroneous wire-transfer instructions

from MGM by purporting to the firm that the check in question had cleared, even

though Wells Fargo knew the check had been returned “S” coded.

192. The wire transfer referenced above was not effective as payment orders by MGM

under Minn. Stat. § 336.4A-202, as Wells Fargo did not accept the payment orders

issued on November 12, 2009 in good faith, as defined in Minn. Stat. § 336.1-201

(b)(20), or in compliance with MGM's instruction restricting when said order

should be complete.

193. Wells Fargo cannot prove that it acted in good faith in accepting MGM’s payment

orders under Minn. Stat. § 336.4A-202.

194. As a direct and proximate result of Wells Fargo’s violation of Minn. Stat.

§ 336.4A-202, Wells Fargo is liable to MGM for its damages as set forth herein.



CONSEQUENTIAL DAMAGES



196. As a direct and proximate result of Wells Fargo’s acts and omissions alleged

herein, MGM has suffered consequential and incidental damages in excess of

$75,000.00 to cover deficiencies in MGM’s trust account, stock-liquidation taxes

and stock losses, together with interest, costs, disbursements and attorneys’ fees.

PRAYER FOR RELIEF

197. WHEREFORE, Plaintiff prays for the following relief: a. A declaratory judgment against Wells Fargo, declaring the wire transfer

performed by Wells Fargo on November 12, 2009, from Minneapolis to Kowloon, Hong Kong in the amount of $396,500.00 of clients’ funds from MGM’s trust account, was a willful violation of 18 U.S.C. § 1343.

b. In the event this honorable Court does not find that the wire transfer performed by Wells Fargo on November 12, 2009, from Minneapolis to Kowloon, Hong Kong in the amount of $396,500.00 of clients funds from MGM’s trust account, was a willful violation of 18 U.S.C. § 1343, then the Court declare that Wells Fargo was negligent in performing the wire transfer.

c. A judgment, specifically restoring the wrongfully wire-transferred funds to MGM.

d. A judgment against Wells Fargo, in excess of $75,000.00 for damages, including loss of the use of MGM funds from the time of the illegal wire transfer to the time that the funds are restored to MGM, expenses for legal and factual investigation, attorneys’ fees, interest, costs and disbursements, and such other equitable relief as determined by this Court.

e. MGM reserves the right to amend the Complaint, and be awarded punitive damages pursuant to Minn. Stat. §549.191.



f. MGM reserves the right to amend the Complaint prior to trial of this lawsuit, to name additional defendants who have willfully committed acts and omissions alleged in this Complaint, including officers and employees of Wells Fargo.

g. Such other and further relief this Honorable Court in its discretion deems just and appropriate.

JURY TRIAL DEMANDED

198. Pursuant to Federal Rule of Civil Procedure 38(b), MGM hereby demands a trial by jury on all issues triable by jury.

Milavetz, Gallop & Milavetz, P.A. April 6, 2012 By: /s/ Robert J. Milavetz Robert J. Milavetz, Esq., #72989 Milavetz, Gallop & Milavetz, P.A. 6500 France Avenue South Edina, Minnesota 55435 Phone: 952-920-7777 Fax: 952-920-6869 [email protected]



ACKNOWLEDGMENT The undersigned hereby acknowledges that costs, disbursements, and reasonable

attorney and witness fees may be awarded to the opposing party or parties pursuant to

Minn. Stat. § 549.21, subd. 2.

Robert J. Milavetz Dated: April 6, 2012 By: /s/ Robert J. Milavetz Robert J. Milavetz, Esq., #72989 6500 France Ave. South Edina, MN 55435 Phone: 952-920-7777 Fax: 952-920-6869 [email protected]


CASE 0:12-cv-00875-SRN-SER Document 1-1 Filed 04/06/12 Page 1 of 14














JS 44 (Rev. 09/11) CIVIL COVER SHEETThe JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as providedby local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiatingthe civil docket sheet. (SEE INSTRUCTIONS ON NEXT PAGE OF THIS FORM.)

I. (a) PLAINTIFFS DEFENDANTS

(b) County of Residence of First Listed Plaintiff County of Residence of First Listed Defendant(EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY)

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE TRACT OF LAND INVOLVED.

(c) Attorneys (Firm Name, Address, and Telephone Number) Attorneys (If Known)

II. BASIS OF JURISDICTION (Place an “X” in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an “X” in One Box for Plaintiff)(For Diversity Cases Only) and One Box for Defendant)

’ 1 U.S. Government ’ 3 Federal Question PTF DEF PTF DEFPlaintiff (U.S. Government Not a Party) Citizen of This State ’ 1 ’ 1 Incorporated or Principal Place ’ 4 ’ 4

of Business In This State

’ 2 U.S. Government ’ 4 Diversity Citizen of Another State ’ 2 ’ 2 Incorporated and Principal Place ’ 5 ’ 5Defendant (Indicate Citizenship of Parties in Item III) of Business In Another State

Citizen or Subject of a ’ 3 ’ 3 Foreign Nation ’ 6 ’ 6 Foreign Country

IV. NATURE OF SUIT (Place an “X” in One Box Only)CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES

’ 110 Insurance PERSONAL INJURY PERSONAL INJURY ’ 625 Drug Related Seizure ’ 422 Appeal 28 USC 158 ’ 375 False Claims Act’ 120 Marine ’ 310 Airplane ’ 365 Personal Injury - of Property 21 USC 881 ’ 423 Withdrawal ’ 400 State Reapportionment’ 130 Miller Act ’ 315 Airplane Product Product Liability ’ 690 Other 28 USC 157 ’ 410 Antitrust’ 140 Negotiable Instrument Liability ’ 367 Health Care/ ’ 430 Banks and Banking’ 150 Recovery of Overpayment ’ 320 Assault, Libel & Pharmaceutical PROPERTY RIGHTS ’ 450 Commerce

& Enforcement of Judgment Slander Personal Injury ’ 820 Copyrights ’ 460 Deportation’ 151 Medicare Act ’ 330 Federal Employers’ Product Liability ’ 830 Patent ’ 470 Racketeer Influenced and’ 152 Recovery of Defaulted Liability ’ 368 Asbestos Personal ’ 840 Trademark Corrupt Organizations

Student Loans ’ 340 Marine Injury Product ’ 480 Consumer Credit (Excl. Veterans) ’ 345 Marine Product Liability LABOR SOCIAL SECURITY ’ 490 Cable/Sat TV

’ 153 Recovery of Overpayment Liability PERSONAL PROPERTY ’ 710 Fair Labor Standards ’ 861 HIA (1395ff) ’ 850 Securities/Commodities/ of Veteran’s Benefits ’ 350 Motor Vehicle ’ 370 Other Fraud Act ’ 862 Black Lung (923) Exchange

’ 160 Stockholders’ Suits ’ 355 Motor Vehicle ’ 371 Truth in Lending ’ 720 Labor/Mgmt. Relations ’ 863 DIWC/DIWW (405(g)) ’ 890 Other Statutory Actions’ 190 Other Contract Product Liability ’ 380 Other Personal ’ 740 Railway Labor Act ’ 864 SSID Title XVI ’ 891 Agricultural Acts’ 195 Contract Product Liability ’ 360 Other Personal Property Damage ’ 751 Family and Medical ’ 865 RSI (405(g)) ’ 893 Environmental Matters’ 196 Franchise Injury ’ 385 Property Damage Leave Act ’ 895 Freedom of Information

’ 362 Personal Injury - Product Liability ’ 790 Other Labor Litigation Act Med. Malpractice ’ 791 Empl. Ret. Inc. ’ 896 Arbitration

REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS Security Act FEDERAL TAX SUITS ’ 899 Administrative Procedure’ 210 Land Condemnation ’ 440 Other Civil Rights ’ 510 Motions to Vacate ’ 870 Taxes (U.S. Plaintiff Act/Review or Appeal of ’ 220 Foreclosure ’ 441 Voting Sentence or Defendant) Agency Decision’ 230 Rent Lease & Ejectment ’ 442 Employment Habeas Corpus: ’ 871 IRS—Third Party ’ 950 Constitutionality of’ 240 Torts to Land ’ 443 Housing/ ’ 530 General 26 USC 7609 State Statutes’ 245 Tort Product Liability Accommodations ’ 535 Death Penalty IMMIGRATION’ 290 All Other Real Property ’ 445 Amer. w/Disabilities - ’ 540 Mandamus & Other ’ 462 Naturalization Application

Employment ’ 550 Civil Rights ’ 463 Habeas Corpus -’ 446 Amer. w/Disabilities - ’ 555 Prison Condition Alien Detainee

Other ’ 560 Civil Detainee - (Prisoner Petition)’ 448 Education Conditions of ’ 465 Other Immigration

Confinement Actions

V. ORIGINTransferred fromanother district(specify)

(Place an “X” in One Box Only)’ 1 Original

Proceeding’ 2 Removed from

State Court’ 3 Remanded from

Appellate Court’ 4 Reinstated or

Reopened’ 5 ’ 6 Multidistrict

Litigation

VI. CAUSE OF ACTIONCite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity): Brief description of cause:

VII. REQUESTED IN COMPLAINT:

’ CHECK IF THIS IS A CLASS ACTIONUNDER F.R.C.P. 23

DEMAND $ CHECK YES only if demanded in complaint:JURY DEMAND: ’ Yes ’ No

VIII. RELATED CASE(S) IF ANY (See instructions): JUDGE DOCKET NUMBER

DATE SIGNATURE OF ATTORNEY OF RECORD

FOR OFFICE USE ONLY

RECEIPT # AMOUNT APPLYING IFP JUDGE MAG. JUDGE


http://jnet.ao.dcn/img/assets/7010/ojpsd181.pdf

JS 44 Reverse (Rev. 09/11)

INSTRUCTIONS FOR ATTORNEYS COMPLETING CIVIL COVER SHEET FORM JS 44

Authority For Civil Cover Sheet

The JS 44 civil cover sheet and the information contained herein neither replaces nor supplements the filings and service of pl eading or other papers as requiredby law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for theuse of the Clerk of Court for the purpose of initiating the civil docket sheet. Consequently, a civil cover sheet is submitted to the Clerk of Court for each civilcomplaint filed. The attorney filing a case should complete the form as follows:

I. (a) Plaintiffs-Defendants. Enter names (last, first, middle initial) of plaintiff and de fendant. If the plaintiff or defendant is a governm ent agency, use onlythe full name or standard abbreviations. If the plaintiff or de fendant is an official within a government agency, identify first the agency and then the official, givingboth name and title.

(b) County of Residence. For each civil case filed, except U.S. plaintiff cases, enter the name of the county where the first listed plaintiff resides at thetime of filing. In U.S. plaintiff cases, enter the name of th e county in which the first listed defendant resides at the time of filing. (NOTE: In land condemnationcases, the county of residence of the “defendant” is the location of the tract of land involved.)

(c) Attorneys. Enter the firm name, address, telephone number, and attorney of record. If there are several attorneys, list them on an attachment, notingin this section “(see attachment)”.

II. Jurisdiction. The basis of jurisdiction is set forth under Rule 8(a), F.R.C .P., which requires that jurisdictions be shown in pleadings. Place an “X” in oneof the boxes. If there is more than one basis of jurisdiction, precedence is given in the order shown below.United States plaintiff. (1) Jurisdiction based on 28 U.S.C. 1345 and 1348. Suits by agencies and officers of the United States are included here.United States defendant. (2) When the plaintiff is suing the United States, its officers or agencies, place an “X” in this box.Federal question. (3) This refers to suits under 28 U.S.C. 1331, where jurisdicti on arises under the Constitution of the United States, an amendment to theConstitution, an act of Congress or a treaty of the United States. In cases where the U.S. is a party, the U.S. plaintiff or defendant code takes precedence, and box1 or 2 should be marked.Diversity of citizenship. (4) This refers to suits under 28 U.S.C. 1332, where parties are citizens of different states. When Box 4 is checked, the citizenship ofthe different parties must be checked. (See Section III below; federal question actions take precedence over diversity cases.)

III. Residence (citizenship) of Principal Parties. This section of the JS 44 is to be completed if divers ity of citizenship was indicated above. Mark this sectionfor each principal party.

IV. Nature of Suit. Place an “X” in the appropriate box. If the nature of suit cannot be determined, be sure the cause of action, in Section VI below, issufficient to enable the deputy clerk or the statistical clerks in the Administrative Office to determine the nature of suit. If the cause fits more than one nature ofsuit, select the most definitive.

V. Origin. Place an “X” in one of the seven boxes.Original Proceedings. (1) Cases which originate in the United States district courts.Removed from State Court. (2) Proceedings initiated in state cour ts may be removed to the district courts under Title 28 U.S.C., Section 1441. When the petitionfor removal is granted, check this box.Remanded from Appellate Court. (3) Check this box for cases remanded to the district court for further action. Use the date of remand as the filing date.Reinstated or Reopened. (4) Check this box for cases reinstated or reopened in the district court. Use the reopening date as the filing date.Transferred from Another District. (5) For cases transferred under Title 28 U.S.C. Section 1404(a). Do not use this for within district transfers or multidistrictlitigation transfers.Multidistrict Litigation. (6) Check this box when a multidistrict case is transferred into the district under authority of Title 28 U.S.C. Section 1407. When thisbox is checked, do not check (5) above.Appeal to District Judge from Magistrate Judgment. (7) Check this box for an appeal from a magistrate judge’s decision.

VI. Cause of Action. Report the civil statute directly related to the cause of action and give a brief description of the cause . Do not cite jurisdictional statutesunless diversity. Example: U.S. Civil Statute: 47 USC 553

Brief Description: Unauthorized reception of cable service

VII. Requested in Complaint. Class Action. Place an “X” in this box if you are filing a class action under Rule 23, F.R.Cv.P.Demand. In this space enter the dollar amount (in thousands of dollars) being demanded or indicate other demand such as a preliminary injunction.Jury Demand. Check the appropriate box to indicate whether or not a jury is being demanded.

VIII. Related Cases. This section of the JS 44 is used to reference related pending cases, if any. If there are related pending cases, insert the docket numbersand the corresponding judge names for such cases.

Date and Attorney Signature. Date and sign the civil cover sheet.


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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT …stmedia.startribune.com/documents/MilavetzGallopMilavetzvWellsFargo4_6_12.pdflegal matters, including settlements, awards and