Alleged Ponzi victims file $30 million lawsuit against PNC Bank

Federal class action suit contends bank should have seen illegal activity.

The class action lawsuit filed by Dr. Rafael M. Cruz, Dr. Gloria Cruz and Dr. Rafael F. Cruz in Dayton’s U.S. District Court seeks at least $30 million in damages.

The suit involving Ohio’s Securities Act ultimately could include 100 to 300 plaintiffs and that the Cruz family lost “north of $5 million” in the scheme, according to their attorney.

William and Connie Apostelos’ federal criminal trial on 27 indicted counts related to running an alleged Ponzi scheme that cost hundreds of investors to lose tens of millions of dollars is set for February 2017.

“When the bank agreed to open numerous accounts for Apostelos and his affiliated companies, the bank has certain obligations that it has to monitor banking activity,” attorney Toby Henderson said Wednesday. “It seems clear to us that from almost the beginning, the kinds of banking activities that Apostelos was engaging in indicated fraudulent activity.

“There simply is no way for a Ponzi scheme this large to survive without the banking infrastructure, the banking system has to be part of it. Otherwise, people don’t think that the investment is legitimate.”

Fred Solomon in PNC’s corporate communications office said Wednesday the company’s usual practice is to not comment on litigation. PNC’s attorneys have not filed a response.

Apostelos’ sister and niece each pleaded guilty to one count of conspiracy this year and will be sentenced in March 2017. Apostelos’ former attorney, Steven Scudder, was charged with aiding and abetting in wire fraud related to the Ponzi-scheme. Scudder’s arraignment and plea hearing has been continued several times.

The suit said PNC Financial, which operates more than 2,500 PNC Bank branches in 19 states and Washington, D.C., had about $358 billion in assets as of Dec. 31, 2015.

The suit lists 18 items of information PNC had about Apostelos’ businesses. Those included multiple business and personal accounts being opened in a short period of time out of the same office, millions of dollars being transferred to related accounts for no apparent legitimate reason, payments being made in implausible whole-dollar amounts and multiple cash withdrawals in amounts just under what would trigger mandatory reporting requirements.

Henderson also wrote that PNC Bank employees at the Kettering and Springboro branches knew Apostelos and that his companies’ accounts were valued.

“Rather than investigating Apostelos, PNC was primarily concerned about maintaining a relationship with Apostelos and the Apostelos Entities and collecting fees from the banking activity generated,” Henderson wrote. PNC assigned at least two senior employees – branch managers – to the task of monitoring and assisting in various banking transactions executed by Apostelos and his associates over a four-year period.

“These senior employees supervised and effectuated daily deposits, withdrawals and transfers of large sums of money on behalf of Apostelos.”

Henderson said one or two PNC Bank employees actually recommended Apostelos’ businesses to bank customers.

The $30 million number could make whole the investors who likely won’t see a dime otherwise, Henderson said. A possible class certification is a major threshold in the case, Henderson added.

“If the bank is going to be asleep at the wheel, so to speak, if it’s not going to satisfy its obligations, then the bank needs to be held responsible,” he said. “There’s lots of folks out there who have been decimated through this Ponzi scheme, and that money’s not going to come back from Apostelos.”

Henderson said this suit shouldn’t be delayed by Apostelos’ numerous criminal, civil and bankruptcy cases because Apostelos isn’t a defendant.

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