Attorneys

Highlights

  • Based on his trial expertise and experience with banking law, James Wakefield secured a victory for his client when Wells Fargo agreed to pay a substantial settlement to an Orange County company that was the victim of fraudulent business transactions.
  • Mr. Wakefield’s skilled cross-examination of a bank teller exposed inconsistencies in her statements regarding the procedures she followed when processing withdrawals from the company’s account, supporting arguments that Wells Fargo was negligent and therefore responsible for the unauthorized account activity.
  • Though Wells Fargo offered only $5,000 during pre-trial discussions, $80,000 was recovered pursuant to the judge’s final ruling.

Case Study

James Wakefield of Cummins & White, LLP successfully represented a small Orange County-based company after an associate from a separate business made fraudulent withdrawals from the company’s checking account held at Wells Fargo Bank. The withdrawals occurred over several months and totaled nearly $80,000.

During a civil trial, Mr. Wakefield demonstrated that Wells Fargo failed to exercise ordinary care while processing the transactions, and was therefore responsible for the unauthorized withdrawals and transfers from the company’s account. As a result, the court rendered an award against Wells Fargo in the amount of $80,000.

Background

During a five-month period, a man impersonating the chief executive officer of Orange County-based Paradigm Industries, Inc. fraudulently withdrew significant amounts of money from Paradigm’s checking account at Wells Fargo Bank. The man, Kevin Yang, was an associate of a separate company held by Paradigm’s owner. Through this relationship, Mr. Yang gained access to Paradigm’s banking information, which he used to perpetrate his fraud.

Mr. Yang set his scheme in motion when he established a working relationship with a young and inexperienced Wells Fargo teller, selecting her to handle all of his transactions, beginning with fraudulent deposits into the Paradigm account, and then progressing to over-the-counter withdrawals and transfers. During each transaction, Mr. Yang falsely identified himself as Paradigm’s chief executive officer and was allowed to withdraw funds without presenting identification or having his signature verified. As a result, Mr. Yang was allowed to make fraudulent withdrawals and illegal transfers from Paradigm’s checking account, totaling almost $78,000.

Paradigm Industries retained James Wakefield of Cummins & White to pursue a civil case against Wells Fargo, charging the bank with negligence, conversion, and recovery of funds pursuant to the California Commercial Code. The complaint sought nearly $78,000, plus interest. Kevin Yang and Floucci U.S.A. (the shell company that received funds via the fraudulent transfers) also were named in the suit. Prior to trial, Paradigm Industries offered to settle its claim with Wells Fargo for $61,000. Wells Fargo, however, offered only $5,000, and the matter proceeded to trial.

Legal Strategy

Paradigm concentrated its claim against Wells Fargo, as Mr. Yang and Floucci U.S.A. failed to respond, and a default judgment was entered against them (though not paid). At trial, Mr. Wakefield presented evidence showing that Wells Fargo negligently allowed Mr. Yang to fraudulently withdraw or transfer significant amounts of money from Paradigm’s Wells Fargo account.

Specifically, he demonstrated that the Wells Fargo teller failed to properly request identification from Mr. Yang when making withdrawals in accordance with the bank’s policies and procedures, and also failed to compare Mr. Yang’s forged signature to the signature of Paradigm’s chief executive officer, which was on file with the bank. (Enlarged copies of the real and forged signature, which were strikingly dissimilar, were presented as evidence during the trial.)

Citing case law, Mr. Wakefield established that a bank has a duty to exercise ordinary care when handling and paying an item, and that ordinary care can be established by a bank as long as it processes transactions in accordance with both the bank’s procedures and general banking policies. According to Mr. Wakefield, in this case, Wells Fargo failed to exercise ordinary care because its employee failed to follow Wells Fargo’s identification procedures when cashing the counter checks presented by Mr. Yang.

Furthermore, testimony from the teller confirmed that Wells Fargo procedures were violated. In describing the policy, the teller explained that a customer must provide positive identification and sign the withdrawal slip in her presence before she can process a withdrawal, and that the signature on the withdrawal slip must match the signature on record with the bank. According to the teller, the only time positive identification is not required is if she knows a customer.

The teller further testified that she examined Mr. Yang’s identification on all transactions over a period of two months and confirmed that he was the chief executive officer of Paradigm, as he fraudulently claimed to be. However, when Mr. Wakefield confronted her with bank records proving that she never checked Mr. Yang’s identification, the teller admitted that,in violation of Wells Fargo procedures, she did not inspect his identification or confirm his identity.

Result/Implication

During the three-day civil trial in Orange County Superior Court, Wells Fargo did not offer any evidence showing that the transactions were approved by Paradigm Industries, quietly conceding that none of the withdrawals or transfers were authorized. Consequently, the court ruled in Paradigm’s favor, awarding $80,000 in damages.

Mr. Wakefield said that he was pleased with the outcome, as he sought to prove that Wells Fargo failed to protect its customer—Paradigm Industries—from fraud and unauthorized transactions by disregarding its own procedures and policies. “Our client was very satisfied with the outcome of the trial because it recovered all funds fraudulently withdrawn from their checking account, as well as all banking fees and charges associated with the unauthorized transactions.”

Lou Chase, chief executive officer for Paradigm, said he was more than pleased with Cummins & White and the outcome of the trial. “Wells Fargo knew the teller made a mistake but did not believe that we (a small business tired of being picked on by a big bank) would find a firm willing to to go to trial against them,” Chase said. “However, Cummins & White took up our case, and it was victorious” This was a true David versus Goliath fight.”