Investors who claim Umpqua Bank aided and abetted a $300 million Ponzi scheme perpetrated by one of its northern California borrowers have won a key legal battle.
U.S. District Court Judge Richard Seeborg denied the bank’s motion for summary judgment, which keeps the case alive. He also certified the case as a class action, which increases the number of plaintiffs and potential damages.
Linda Lam, the Oakland attorney leading the plaintiff’s case, said the trial should get underway in 2023, she said.
With nearly $30 billion in assets, Umpqua is the largest bank headquartered in Oregon. It has grown swiftly over the years through a rapid-fire series of acquisitions.
The bank said it was “disappointed” in the ruling adding that the bank was misled by its borrower.
The controversy centers around a company called Professional Financial Investors, which invested in commercial real estate in Marin and Sonoma counties. Umpqua Bank inherited PFI as a customer in 2012 when it acquired Circle Bank, a tiny six-branch commercial bank based in Novato, California.
The company was revealed as a fraud in 2020 after the death of Kenneth Casey, PFI founder and top executive. An attorney hired by Casey’s widow “immediately recognized PFI was insolvent,” the judge stated in his ruling, and could not repay its investors as promised.
The U.S. Securities and Exchange Commission and the Department of Justice opened investigations. Lewis Wallach, Casey’s second in command, admitted to…
