The $1.2 billion Ponzi scheme that federal authorities charged luxury developer Woodbridge Group of Companies with running has spawned numerous lawsuits.
In the latest, lawyers tasked with recovering funds for defrauded investors are going after Comerica Bank, which held accounts belonging to Sherman Oaks-based Woodbridge.
The suit also comes two weeks after federal agents arrested Robert Shapiro, the former head of Woodbridge and the alleged mastermind behind the scheme. In November, Shapiro agreed to pay the federal government $120 million for his role in the scheme, while Woodbridge and its dizzying array of 281 related entities agreed to pay $892 million.
The federal lawsuit filed last week alleges alleges Comerica turned a “blind eye” to Woodbridge’s suspicious activity in order to profit from the fees Woodbridge paid out. Michael Goldberg, a California attorney the SEC appointed to help recover funds for Woodbridge investors, filed the suit.
The suit alleges that Shapiro “could not have carried out this scheme without either using a complex array of accounts at different banks so that no single bank would be able to detect the ongoing fraud, or having a single bank [Comerica] turn a blind eye” to what it called his “highly irregular banking activities.”
Those activities, the suit alleges, included a high volume of transactions and paying existing investors using new investor cash, which moved through Comerica, the suit alleges. Money from the scheme was used to buy various investment properties in Los Angeles, including a number of high-profile residential properties.
Comerica should have raised alarm bells, the suit claims.
Comerica did not return requests for comment.
It’s the third suit filed against Comerica related to the scandal. Investigators said Sherman Oaks-based Woodbridge and 250 Shapiro-controlled shell companies pulled off the fraud, misleading investors by promising high returns on luxury spec homes. Instead investor money was moved into different entities Shapiro controlled, and new investments were used to pay off older ones.
A group of investors filed a class action suit in California early last year, and a separate class action suit was settled in Florida, also last year.
The latest suit also claims Shapiro spent at least $3.7 million on luxury items for himself, around $1.2 million in alimony to his ex-wife, and paid off $9 million in personal credit card debt with Woodbridge funds. He also transferred an unspecified amount of money to his wife’s company, called Schwartz Media.
The SEC first charged Woodbridge in December 2107, but in December, charged 13 people on related fraud counts.