Copyright held by The John Cooke Fraud Report. Reprint rights are granted with attribution to The John Cooke Fraud Report with a link to this website.
What really happened depends upon whom you ask.
It began with San Diego Trust & Savings and a file memo that suggested a “massive kite,” estimated by some to be in the neighborhood of a whopping $540 million. The kite was alleged to be occurring in one of the bank’s branches as well as at five other local banks. It was charged that the bank knowingly allowed the kite to continue for over a year in order to keep Pioneer Mortgage alive so it could pay down its debt.
Pioneer’s successor, Pioneer Liquidating Corp (PLC), has been attempting to recoup some of the massive losses suffered by investors. Five of the six banks involved have settled. San Diego Trust and Savings is the lone holdout.
When the comptroller requested the banks supply supporting documents in response to the deep-pockets suits filed by former investors, Wells Fargo, San Diego Trust & Savings’ successor, failed to reveal the existence of the memo. In fact, it wasn’t until the author of the memo was asked in deposition if such a memo existed that the file copy was produced.
PLC did not view this kindly, interpreting the news of the unrevealed memo and other computer evidence as spoilation and concealment of evidence. When PLC sought sanctions against the bank, the bank returned the favor, seeking sanctions against PLC. Although the judge chided both sides for “reluctant and grudging compliance,” PLC came out smelling a little better than the bank. The judge denied the bank’s request for sanctions against PLC but partially allowed the PLC request for sanctions against the bank.
PLC is still seeking $70 to $90 million in damages from the bank. The US District Judge has denied an additional $44 million that PLC had sought earlier. The case is far from over.
© Copyright 1996 Alikim Media