Bank of America Sued For Millions in Losses
Branch Official Helped Cash Fake Checks

By David Nakamura
Washington Post Staff Writer
Saturday, November 1, 2008

The District government filed a $105 million lawsuit against Bank of America yesterday, seeking damages and penalties from the institution that cashed fraudulent checks through accounts controlled by Harriette Walters and others in the D.C. tax scam.

The bank should "make the District whole for losses suffered because of the Defendant Bank's wrongful hiring, inadequate training and inadequate supervision," stated the suit submitted in Superior Court by Acting D.C. Attorney General Peter J. Nickles.

Walters, who worked in the D.C. Office of Tax and Revenue, processed $48 million in bogus property tax refund checks over 20 years and sent them to friends and relatives. Walters and 10 others have pleaded guilty in the scheme.

One of the conspirators was Walter R. Jones Jr., who worked as an assistant branch manager at Bank of America, where he helped facilitate cashing the checks. All told, 116 fraudulent checks worth $34 million flowed through Bank of America accounts controlled by Walters and others in the scam, according to the lawsuit.

Citing Jones's complicity, the District is seeking triple damages under the False Claims Act, which provides federal and local governments protection from fraud.

"It made no sense to have these large checks being cashed and nothing adding up," Nickles said. "It sounds like a bank that would be in Disneyland. The proof is in the pudding. As soon as they tried to do what they were doing for years at another bank, SunTrust Bank, a very low-level person said, 'What's going on here?' and the whole process came tumbling down."

Federal authorities have recovered about $10 million in cash and property. D.C. Council member Mary Cheh (D-Ward 3), who last spring had pushed Nickles to consider suing the bank, said she was "delighted" that he has done so.

"The bank has a high duty to have their employees trained to see the bank is being used as a laundering operation," Cheh said.

Bank of America spokeswoman Shirley Norton declined to comment on the lawsuit, saying the company's lawyers need time to review it.

"We cooperated fully with authorities," she said of the federal criminal investigation.

The lawsuit states that Walters met Jones in the mid-1990s and began paying him for his assistance in cashing the checks.

"Some of these fraudulent refund checks were cashed despite the fact that the payee's name on the check did not match the account holder's name," the lawsuit states.

Jones later received $145,000 from Walters's niece Jayrece Turnbull, another co-conspirator, according to the suit.

Jones, who has pleaded guilty to conspiracy, handled at least $17 million in fraudulent checks from 2000 to 2006, charging documents state; he was fired in early 2007 after questions about his dealings with Turnbull emerged. But federal authorities did not catch on to the scam until several months later, when SunTrust Bank raised questions about a large check handled by Turnbull.

Patrick O'Connell, a former deputy in the Texas attorney general's office who specializes in False Claims Act cases, said the law provides "a bigger stick for the government" that can force defendants into settlements to avoid larger losses.

"This is exactly what the law was intended to do," said O'Connell, who works in private practice. "If you do business with the government, you better do it right."

Nickles has said that he negotiated with Bank of America to attempt to reach a financial settlement. But "they did not make a proposal that seemed to me to fit the seriousness of the charges. Now they can see how serious we are," he said.

Nickles was asked how the city can convince the court that the bank should be liable, even though District officials failed to uncover Walters's scam for 20 years.

"One might want to believe the District should have picked it up," he said. "But the hints the District had at high levels were much less clear-cut than the hints, more than hints, that the bank had, which were these very large checks."