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City National Bank Aiding of ATM Ponzi Scheme Class Action

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City National Bank Building

Two men, Joel Barry Gillis and Edward W. Wishner, are now in prison for running NASI, a company that operated a Ponzi scheme purporting to sell ATMs to investors in return for “rentals” from ATM fees. How did they get away with it for fifteen long years? According to the complaint for this class action, they were aided and abetted by a bank Senior Vice-President who used his position as well as the bank’s credibility and resources on their behalf in exchange for profiting from the scheme.

The class for this action is all non-California persons and entities who bought ATMs from NASI an sustained net losses, calculated as the total principle paid minus the total rents received, plus other damages.

Californians are excluded because other cases have been filed on their behalf. Still, losses sustained by approximately 500 to 600 investors in thirty-six other states total roughly $45 million.

NASI (Nationwide Automated Systems, Inc.) banked at City National Bank (CNB) in Woodside, California. Its accounts were overseen by Brian Fitzwilliam, a Senior VP.

NASI actually owned about 250 ATMs from which it received modest rentals, but it pretended to sell investors thousands of other machines. It used income from more fake sales to send investors lulling “rentals” from these fictional machines. No money went out to buy any new machines; very little money came in as ATM fees.

By the end of January 2008, the complaint alleges, Fitzwilliam could see that investors had deposited over $9 million into the NASI accounts to buy ATM machines, but ATM service providers had deposited only a little over $100,000. At one point, it says, Fitzwilliam asked Gillis, “[W]here is the money?” and insisted there must be other money coming in from the service providers. According to the complaint, Wishner admitted that there was no other money.

The complaint therefore alleges that Fitzwilliam knew that NASI was operating a Ponzi scheme when he invested to “buy” some of its fictional ATMs so that he could share in its proceeds. Fitzwilliam should have disclosed his involvement to CNB, but that would have meant the assignment of someone else to oversee NASI’s accounts and the potential discovery of the fraud. Instead, the complaint says, he asked Gillis to conceal the relationship and bought his fictional ATMs through a fictional entity tellingly named “Bribet Services.”

Fitzwilliam performed many services to help keep NASI in business, according to the complaint, such as granting it immediate loans to cover shortfalls to make lulling payments to investors; writing promotional letters vouching for NASI as its banker; and talking to investors who were beginning to get suspicious and assuring them that NASI was legitimate. Since all of these supportive actions were undertaken in the regular scope of his employment at CNB, the complaint claims, the bank is liable for his actions.

As the scheme began to fall apart, the complaint claims, Fitzwilliam cashed out his investment in it, which had earned him over $250,000.

The complaint charges the bank with aiding and abetting fraud and conversion, negligent supervision, and other violations of the law. 

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