Bank sues state treasurer over 2010 fraud incident

CHARLESTON – West Virginia Treasurer John Perdue has been named in a lawsuit related to a 2010 fraud scheme that resulted in the state sending about $1.5 million to bogus Kenyan corporations.

Wells Fargo Bank, formerly known as Wachovia Bank, filed the complaint against Perdue in Kanawha Circuit Court. Wells Fargo acquired Wachovia in 2008.

In 2003, Perdue’s office entered into an agreement with Wachovia to provide processing for the state’s Automated Clearing House (ACH) banking transactions.

In 2009, the state auditor’s office was the victim of a criminal scheme to divert funds into fraudulent bank accounts.

“The scheme resulted from Kenyan fraudsters sending information to the state auditor requesting that the state change its method of payment to electronic transfer for two of the state’s legitimate vendors, and providing bank routing and account information for bank accounts set up by the Kenyan fraudsters,” the complaint states. “Without making any attempt to verify the change with the state’s legitimate vendors, the state auditor’s office accordingly changing the bank routing and account information and forwarded that information to the state treasurer’s office for processing.”

In 2010, State Auditor Glen B. Gainer III filed a complaint against Wachovia in Lincoln County for breaching that 2003 agreement by failing to indemnify the state for certain losses incurred by the state as a result of a criminal scheme. Wachovia provided a notice of intent to file an action for declaratory judgment against Perdue concerning the contract.

Wachovia filed a third-party complaint in the Lincoln County case, seeking a declaration that Wachovia has no obligation to indemnify the state under the agreement. Perdue sought to dismiss Wachovia’s third-party complaint on the basis that suits against state officers be brought only in Kanawha Circuit Court.

“Accordingly, because the State Treasurer has elected to invoke his statutory right to have this action heard in Kanawha County, Wachovia files this complaint,” the action states.

Wachovia seeks declaratory relief because it was provided inaccurate data by the state and has “no legal obligation to indemnify the state.” It also seeks recoupment if Gainer prevails in his action against Wachovia in Lincoln County because the company will have suffered a loss “arising out of or related to” the agreement.

Wachovia also claims that, if it is found liable for the losses incurred, it is entitled to recoup those losses from the state treasurer.

Attorneys Robert B. Allen, Rebecca A. Betts and Pamela C. Deem of Kay Casto & Chaney are representing the plaintiffs. According to documents in the state Attorney General’s office, attorneys from Bowles Rice will represent Perdue in this case, which has been assigned to Kanawha Circuit Judge Duke Bloom.

Kanawha Circuit Court case number: 14-C-756