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Thursday, May 17, 2012

First Republic Bank Discouraged Internal Investigations Into Customers' Suspicious Activities, Lawsuit Claims

Posted By on Thu, May 17, 2012 at 5:15 PM

The former employees claims bank protected shady customers with lots of money.
  • The former employees claims bank protected shady customers with lots of money.

First Republic Bank instructed compliance officers not to investigate clients' suspicious activity, two former employees charge in a lawsuit. The employees, Frederick Casissa and Elizabeth Riggins, claim that the bank fired them because they pursued the investigations.

The lawsuit, filed in the U.S. District Court of Northern California in 2010 and scheduled for trial this August, cites two instances in which the compliance officers' supervisor, bank Vice President Edward Dobranski, told them to "take no action" after they discovered that a client was involved in legal trouble. Casissa and Riggins also accuse the San Francisco-based bank of deliberately withholding "loan files and other documentation necessary" once the investigation eventually began.

Riggins, of Newark, worked as an anti-money-laundering analyst. Her immediate supervisor was Casissa, of Corte Madera, who worked as the "Bank Secrecy Act/Anti-Money Laundering and compliance officer." Their job at the bank was to report any evidence of money laundering or other suspicious activities by customers and to file a "Suspicious Activity Report" with U.S. Department of Treasury.

In late October 2007, the suit states, a colleague sent Riggins a Bloomberg article about a First Republic customer possibly involved in illegal activity.

That customer, according to the October 31, 2007 article, was Lawrence Salander, a New York art dealer who was "accused in about two dozen lawsuits of defrauding customers and failing to repay tens of millions of dollars of debt."

Salander was one of the bank's top customers. An image of him and his daughter was featured on a billboard above First Republic's Upper Eastside branch and in one of the bank's annual reports.

According to Bloomberg, "First Republic has lent a total of $59 million to Salander and his wife, Julie, his Upper East Side gallery and to an investment fund that said it arranged to buy all of Salander-O'Reilly's Renaissance art." Stemming from the fraud, $40 million worth of those loans went into default. (In 2010, Salander pleaded guilty to 29 counts of felony grand larceny and was sentenced to six years in prison.)

According to the complaint, though, Dobranski "instructed Casissa and Riggins to take no actions." So the pair then informed executives at First Republic's parent company, Merrill Lynch. The executives instructed them to initiate the investigation. But, the suit states, "during this investigation, loan files and other documentations necessary to plaintiffs' investigation were deliberately withheld [by First Republic] to impede and impair" the investigation.

Five months later, in March 2008, a co-worker named Edwin Irizarry told Riggins that in August 2007 the New York County District Attorney's office served the bank with a criminal grand jury subpoena seeking records from another one of the bank's customers. Once again, the complaint claims, Dobranski "instructed Casissa and Riggins 'not to worry'" about the subpoena.

For the next year, the suit goes on, the bank "engaged in a series of acts of retaliation" against Casissa and Riggins, including "imposing unnecessary and punitive administrative duties" and creating a new position called "Chief Risk Officer" to become Casissa's immediate supervisor. In late May 2009, both Casissa and Riggins were fired, according to the suit. A First Republic Bank spokesman said the bank would not comment on the lawsuit.

The pair is suing the bank for unlawful termination and seeking damages.

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Albert Samaha


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