Sovereign Bank should have heeded "red flags" suggesting confessed swindler Bradford C. Bleidt was using business accounts at a branch in Boston's North End to run a multimillion-dollar Ponzi scheme, a Boston lawyer argued on behalf of Bleidt's former clients yesterday.
In closing arguments in a case charging that Sovereign aided and abetted Bleidt's breach of fiduciary duty to his investors, attorney David J. Fine said money clearly intended for investment was being deposited in a sham Sovereign account Bleidt had set up for his former business, Allocation Plus Asset Management Co., and used for other purposes.
"It would not have taken much investigation at all to see that what was going on was highly irregular and suspicious," Fine told jurors in US District Court in Boston. The jurors began deliberating yesterday but adjourned without reaching a verdict. They are scheduled to reconvene this morning.
Defense attorney Patrick T. Voke, representing Sovereign, contended employees of the branch at 125 Causeway St., which it acquired from the former Fleet Bank in 2000, had no evidence that Bleidt was misappropriating money from his clients that was deposited in his accounts there between 2000 and 2004.
"This is Monday morning quarterbacking, not on the Monday after," Voke said. "This is Monday morning quarterbacking four years later."
Bleidt, a former investment adviser, was sentenced in 2005 to 11 years in prison for money laundering and mail fraud. He admitted to defrauding 125 clients of $32.6 million, using funds from would-be investors to pay personal expenses, including his sons' private school tuition, and using funds from new clients to pay off older clients whose money hadn't been invested.
In the lawsuit, filed in 2006, several of Bleidt's clients charged the bank should be held liable for not detecting the fraud and should compensate the victims.
Of the named plaintiffs, Nancy and Langdon F. Lombard lost more than $1.6 million, Donna Brandt Lawrence lost more than $1.6 million, and Bessie Panos lost more than $128,000, according to the complaint. In each case, the losses "caused extraordinary financial difficulties, and great and continuing emotional distress," the complaint said.
Fine argued on behalf of the plaintiffs and other defrauded investors in his capacity as court-appointed ancillary receiver of Bleidt's former company. Bleidt's clients are hoping to recover some of the money they lost if Sovereign is found liable. "If the banks are not paying attention, then a very important protection from the Brad Bleidts of this world is removed," Fine warned.
Voke, however, said procedures at Sovereign are designed to protect the financial institution and its customers, not to sniff out a Ponzi scheme it had no way of detecting.
"They were taken advantage of by Mr. Bleidt," Voke told the jurors. "Their money was stolen by Mr. Bleidt, not Sovereign Bank."
Robert Weisman can be reached at email@example.com.