[Author: Emily Rubino]

On December 16, 2022, the U.S. District Court for the Northern California denied Umpqua Bank’s motion for summary judgment and granted class certification in a case asserting investors’ claims that certain bank employees “directly participated” in aiding an alleged $300 million Ponzi scheme. In 1983, Kenneth Casey founded the real estate investment firms Professional Investors Security Fund, Inc. (PISF) and Professional Financial Services, Inc. (PFI). Plaintiffs, investors in PISF and PFI, claim that Casey carried out a Ponzi scheme through these companies. Both firms are now in bankruptcy, and Casey is deceased. Investors brought a putative class action against Umpqua Bank, which handled all PISF and PFI’s accounts, for allegedly aiding and abetting Casey’s scheme.

The Bank sought summary judgment on the ground that the investors lacked evidence that it, or its bank employees, had actual, not just constructive, knowledge of the alleged scheme. The court found that the plaintiffs’ evidence was “sufficient to permit a reasonable jury to infer that Umpqua must have known – i.e., had actual knowledge – of the fraud.” The plaintiffs produced evidence that (1) Umpqua Bank was aware that Casey, who was managing both firms, was previously convicted of bank and tax fraud, and (2) the Bank’s employees used accounts with new investor funds to cover shortfalls in other accounts. The court held that the Bank was not entitled to summary judgment because the plaintiffs showed evidence of direct participation “well outside the bounds of ordinary banking transactions” by certain bank employees. The court also certified a class of individual investors.

The case is Camenisch v. Umpqua Bank, No. 3:20-cv-05905 (N.D. Cal. Dec. 16, 2022). The class is represented by Gibbs Law Group LLP and Silver Law Group. Umpqua Bank is represented by McGuireWoods LLP and Reed Smith LLP. The opinion is available here.