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PNC Bank Asks 6th Circ. To Back $70M Ponzi Suit Dismissal

PNC Bank Asks 6th Circ. To Back $70M Ponzi Suit Dismissal

PNC Bank Asks 6th Circ. To Back $70M Ponzi Suit Dismissal

PNC Bank Asks 6th Circ. To Back $70M Ponzi Suit Dismissal

By Jon Hill of

PNC Bank NA has urged the Sixth Circuit to uphold the dismissal of a proposed class action brought by investors in an Ohio couple’s alleged $70 million Ponzi scheme, arguing the lower court was correct to toss the suit because the investors never claimed the bank did anything more to participate in the scheme than provide the couple with normal banking services.

The bank said on Tuesday that such services did not fall under the scope of Section 1707.43 of the Ohio Securities Act, which investors claimed the bank violated when it allowed William and Connie Apostelos to use PNC accounts for making deposits and payments that ultimately facilitated their scheme.

“Because liability under Section 1707.43 is limited to conduct connected to the sale or marketing of securities, Ohio courts have held, for the last 40 years, that banks do not participate in the sale of unregistered securities, and are therefore not liable, by providing depository services to the seller,” the bank told the Sixth Circuit in its brief.

PNC also rejected the investors’ claim that the bank’s accommodation of the Apostelos accounts’ “fluid turnover of funds” was unusual enough to push its services out of the realm of normal banking.

“A depository account exists so that deposits and debits can flow into and out of the account,” the banks said. “That’s why banks are required to have ample liquidity.”

And PNC said it was irrelevant whether it “acted with negligence or blindness” to the scheme, arguing instead that the Ohio Securities Act was only concerned with whether the bank had “participated in or aided the seller” with the actual sales transactions that defrauded the investors.

“Because the appellants do not — and cannot — allege that PNC performed any act related to the sale of securities, the district court correctly dismissed the complaint,” the bank said.

Prosecutors in 2015 accused the Apostelos couple of convincing investors that William Apostelos was a successful businessman, promising them that their funds would be invested in real estate, stock and precious metals or be used in high-risk loans for farmers and businesses, according to court documents.

But the money was instead funneled into a Ponzi scheme that paid earlier investors fake returns from the cash handed over by later investors, the government said. William Apostelos also used the money for personal expenses, such as gambling, the U.S. Securities and Exchange Commission said in 2015.

William Apostelos pled guilty in February to embezzlement and conspiring to commit mail and wire fraud as part of a sealed agreement with prosecutors, and he faces sentencing in June. Connie Apostelos pled guilty in April to money laundering and will be sentenced in August.

The putative class of investors hit PNC Bank last year with a single-count lawsuit over the sale of unregistered securities. They alleged the duo couldn’t have pulled off the scheme without the bank facilitating their transfer of $84 million of investor funds to other accounts or allowing them to utilize its banking infrastructure to sell promissory notes.

Counsel for the investors was not immediately available for comment.

Representatives for PNC declined to comment and counsel could not be reached for comment.

The investors are represented by Toby K. Henderson and Scott S. Davies of Sebaly Shillito & Dyer, and Gary A. Gotto of Keller Rohrback LLP.

PNC is represented by Thomas D. Warren of BakerHostetler.

The case is Rafael M. Cruz et al. v. PNC Bank NA et al., case number 17-3091, in the U.S. Court of Appeals for the Sixth Circuit.


The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.