On page 7/57, there are some conflicting statements you might want to fix:
Betty Saleh would never unknowingly
invest in a Ponzi scheme. Betty Saleh would knowingly invest in a Ponzi
scheme. Fitzwilliam and Betty Saleh knowingly invested in the NASI Ponzi
scheme and made a handsome profit.
On page 8/57, there it is, the reason new banks accounts were set up and a flurry of checks sent out in the final days:
Fitzwilliam made a substantial profit on his
investment in the Ponzi scheme, and received a final preferential $60,000 return
of principal days before NASI collapsed.
... it was the banker making sure he got as much as he could, not Joel/Ed
Starting at numbered paragraph 88 on page 38 of 57, the story is told about compliance personnel at CNB attempting to verify that NASI was not a scam:
88. On or about May 19, 2010 (and annually, according to Fitzwilliam),
the CNB compliance personnel requested that Fitzwilliam obtain for the NASI
account under Fitzwilliam’s supervision:
Documents establishing ownership of the ATMS; and
Documents showing the number and locations of client’s ATMs
89. Based on the language in the request for documents, it appears as
though CNB compliance believed NASI owned all of the ATMs from which it
derived the income it deposited at the bank. In Exhibit 24, Fitzwilliam transmits
Gillis’ email response to compliance and, thereby knowingly approves, endorses
and ratifies Gillis’ false representations that NASI installs and purchases ATMs,
when Fitzwilliam knows NASI sells ATMs to investors and then leases them
back, including, at the time, at least 20 machines still allocated to Fitzwilliam’s
The complaint goes on to describe how it's obvious that Fitzwilliam knew he was helping to deceive the bank's internal compliance regulators, BUT,... (now, again, I'm not a lawyer so take my criticisms/comments accordingly), I think I would have added a paragraph stating that it seems patently obvious that the compliance regulators were pretty negligent in just accepting NASI's assertions through Fitzwilliam that 'everything is fine'. In fact, in the next paragraph this is stated:
Therefore, according to
Fitzwilliam in Exhibit 24, all of NASI’s thousands of ATMs – the ATMs it owns
outright and the ATMs it sells to investors – are processed by the ATM
processing companies utilized by NASI. Therefore, if compliance needs evidence
of NASI’s ownership of ATMs, the documents sent to NASI each month by the
processors, as independent third parties, would be the natural source of unbiased
information on the issue.
Here is where I would have injected the obvious: the banking regulators should have told Fitzwilliam "wait a minute, we're not in the business of just taking people's word for it, we want to see the actual processor paperwork at least". It's the regulator's job to ask those questions and scrutinize paperwork for authenticity, correctness (dates, numbers, etc.), and if need be, follow up him/herself by contacting 3rd parties independently.... How do I know this? Because I do a VERY similar thing in the technical world. I am not in the business of just taking somebody's word that they've calculated or tested something properly, I have to see ACTUAL, OBJECTIVE, UNBIASED EVIDENCE. Now, I KNOW it has to work the same way in the money world. I know they take all the same math classes I did, and there is a lot at stake in both worlds. This is just my half-baked, non-lawyer opinion, but, it seems to me that this is a real smoking gun in terms of CNB liability. After reading exhibit 23, I think it's even more obvious that the bank's internal regulators absolutely did NOT do anything close to what they were REQUIRED to do. That points to management and supervision as well as the other things that are already spelled out in the complaint.
It will be very interesting to see the bank's side of the story (rebuttal), if they don't just settle instantly....
Exhibit 26 at the very end of the amended complaint is one of the best. Joel/Ed collected ~$15M(!) in cash in the last 2 months AFTER the SEC subpoena, but the net bank balance went from $4M to ~$190k. So, basically, they kicked in the NO2 and burned the motor out sucking up all the money they could while sending it out...