UNITED STATES DISTRICT COURT for the NORTHERN DISTRICT OF TEXAS DALLAS DIVISION R. Lance Flores, Vicki Clarkson, Plaintiffs, v. Scott Anthony Koster, et al. Defendants. A 9 CIVIL ACTION ¹ 3:11-cv-00726-M -BH In the matter of: Defendant Wells Fargo Bank, N.A. f/k/a Wachovia Bank National Association ("Wells Fargo") REPLY TO NOMINAL DEFENDANT’S MOTION TO DISMISS, MOTION TO STRIKE AND MEMORANDUM OF LAW Now comes the Plaintiffs, Vicki Clarkson and R. Lance Flores (“Plaintiffs”) in their individual capacities and in behalf of the Nation’s economic system and public interest, First Amended Complaint thence pled, and file their Reply to the Motion to Dismiss Nominal Defendant Wells Fargo (the “Defendant” or the “Nominal Defendant” or “Wells Fargo” inclusive of its wholly owned subsidiaries). Plaintiffs move the Court to STRIKE Nominal Defendant’s Motion to Dismiss for redundant, immaterial, impertinent, scandalous matter and particularly those parts where there clearly is no bona fide issue of fact or law. Plaintiffs further move the Court to DENY Defendant’s Motion to Dismiss and any and all relief pled appertaining thereto. In support of the aforesaid, Plaintiffs incorporate by reference Plaintiffs' First Amended Complain, and show: 20120826070235 Resp Mtn Dismiss, &c.- WELLS FARGO.wpd Page 1 Case 3:11-cv-00726-M-BH Document 182 Filed 08/27/12 Page 1 of 23 PageID 2899
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Doc. 182 -- Plaintiffs' Motion to Dismiss Wells Fargo Wachovia Bank
United States District Court for the Northern District of Texas, Dallas Division No. 3:11-cv-726-M-BH
R. Lance Flores and Vicki Clarkson v. Scott A. Koster, et al.
REPLY TO NOMINAL DEFENDANT’S MOTION TO DISMISS, MOTION TO STRIKE AND MEMORANDUM OF LAW The Nominal Defendant’s motion is frivolous upon its face and is wholly without merit as none of Wells Fargo’s arguments nor its conclusion has validity and makes false assumptions as if they were a traditional defendant. They are not. They are a nominal defendant. The Nominal Defendant’s motion is abutor argumentum ad hominem maledictio and exemplifies an egregious example of the worst kind of abuse of the judicial system.
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UNITED STATES DISTRICT COURT
for the
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
R. Lance Flores,Vicki Clarkson,
Plaintiffs,
v.
Scott Anthony Koster, et al.Defendants.A 9
CIVIL ACTION
¹ 3:11-cv-00726-M -BH
In the matter of:Defendant Wells Fargo Bank, N.A.f/k/a Wachovia Bank NationalAssociation ("Wells Fargo")
REPLY TO NOMINAL DEFENDANT’S MOTION TO DISMISS, MOTION TO STRIKE AND MEMORANDUM OF LAW
Now comes the Plaintiffs, Vicki Clarkson and R. Lance Flores (“Plaintiffs”) in their
individual capacities and in behalf of the Nation’s economic system and public interest,
First Amended Complaint thence pled, and file their Reply to the Motion to Dismiss
Nominal Defendant Wells Fargo (the “Defendant” or the “Nominal Defendant” or “Wells
Fargo” inclusive of its wholly owned subsidiaries). Plaintiffs move the Court to STRIKE
Nominal Defendant’s Motion to Dismiss for redundant, immaterial, impertinent,
scandalous matter and particularly those parts where there clearly is no bona fide issue
of fact or law. Plaintiffs further move the Court to DENY Defendant’s Motion to Dismiss
and any and all relief pled appertaining thereto. In support of the aforesaid, Plaintiffs
incorporate by reference Plaintiffs' First Amended Complain, and show:
Case 3:11-cv-00726-M-BH Document 182 Filed 08/27/12 Page 1 of 23 PageID 2899
§ I. Introduction
Plaintiffs’ Preliminary Statement
1. Nominal Defendant Well Fargo is not accused of any RICO violation and do
not provide the Court with subject matter jurisdiction over a separate cause of action
against them. No such cause of action is pursued against Well Fargo. The Plaintiffs’
claims are against the RICO Defendants; the Nominal (Relief) Defendant(s) are brought
into the suit as nominal defendants only. Wells Fargo is brought into this action as a
holder of assets identified for the recovery of funds enmeshed in the RICO Defendants’
acts of, inter alia, money laundering, transportation of stolen securities and monies, sale
and receipt of stolen securities, and monies, as well as non-RICO predicate crimes
including but not limited to the RICO Defendants’ tax evasion. It appears RICO
Defendants may have selected Wells Fargo for its well-know vulnerability for money
laundering of funds derived from criminal activity. 1
Afore considered, Plaintiffs may seek injunctive relief for the benefit of the general
See, OIG-06-034, BANK SECRECY ACT: OCC Did Not Take Formal Enforcement Action Against Wells1
Fargo Bank for Significant BSA Deficiencies August 18, 2006 Office of Inspector General Department of theTreasury, passim; http://www.treasury.gov/about/organizational-structure/ig/Documents/oig06034.pdf ; also, Wachovia and U.S. Settle a Money Laundering Case By REUTERS Published, March 17, 2010: “ MIAMI (Reuters) — The Wachovia Bank, a unit of Wells Fargo & Company, has agreed to pay $160 million tosettle accusations that it laundered Mexican drug money.
Under the agreement, Wachovia will forfeit $110 million, representing the proceeds of illegal narcoticssales that were laundered through the bank, the United States attorney’s office in the Southern District ofFlorida said.
The bank will pay an additional $50 million fine to the Treasury.A deferred prosecution agreement with the Justice Department resolved charges that the bank had
willfully failed to establish a program to guard against money laundering. It also resolved Wachovia’sadmitted failure to identify, detect and report suspicious transactions in third-party payment processoraccounts.
A Wachovia representative was not immediately available for comment …”
If Plaintiffs obtain injunctions, they do so not for themselves alone but also as a “private attorney2
general,” vindicating a policy that Congress considered of the highest priority. The United States Congress has passed laws with "private attorney general" provisions that provide for the enforcement of laws prohibitingRICO predicate crimes.
HOLMES v. SECURITIES INVESTOR PROTECTION CORPORATION et al., 503 U. S. 258 (1992) at 283Opinion of O’Connor, J. :
Obviously there is no requirement that the Government be party to a sale before it can bring a RICOprosecution predicated on "fraud in the sale of securities." Accordingly, any argument that the offense itselfembodies a standing requirement must apply only to private actions. That distinction is not tenable, however.By including a private right of action in RICO, Congress intended to bring "the pressure of ‘private attorneysgeneral' on a serious national problem for which public prosecutorial resources [were] deemed inadequate."Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U. S. 143, 151 (1987). Although not everyone canqualify as an appropriate "private attorney general," the prerequisites to the role are articulated, not in thedefinition of the predicate act, but in the civil action provisions of § 1964(c)—a plaintiff must allege "injur[y]in his business or property by reason of " a RICO violation.
Case 3:11-cv-00726-M-BH Document 182 Filed 08/27/12 Page 5 of 23 PageID 2903
Agreement (Pla. Ex. 269) and proposed Notice of Dismissal to Clerk (Pla. Ex. 269).
8. Within the proposed Dismissal Agreement, Plaintiffs
provided the following:
§1 Introduction¶ b. “WHEREAS, Wells Fargo has no liability for compensatory damages,actual damages, special damages, general damages, exemplary damages,punitive damages, nor statutory damages as no cause of action isasserted against Nominal Defendant Wells Fargo Bank.¶ c. “WHEREAS, Wells Fargo is named in this suit as a relief defendantexclusively as the holder of assets that must be recovered from RICODefendant Bruce H. Haglund (“Haglund”) or Dale Briggs & Associates(“Briggs”) assets related to entities Haglund or Briggs controlled, namelyNominal Defendants iBalance LLC, Shillelagh Capital Corp., MaureenO’Flanagan Wilde, and, inter alia, RICO Defendants Francis E. Wilde,Mark Alan Gelazela, Steven E. Woods, Jon Divens in order to affordcomplete relief to the Plaintiffs; ”6
[FN6] ““‘[A] nominal defendant is part of a suit only as the holder of assets that must
be recovered in order to afford complete relief; no cause of action is asserted against
a nominal defendant.’ CFTC v. Kimberlynn Creek Ranch, Inc., 276 F.3d 187, 192 (4th Cir.
2002) (citation omitted), cited in Janvey v. Adams, 588 F.3d 831, 835 (5 Cir. 2009).” th
ORDER – Janvey v Alguire, et al., Case 3:09-cv-00724-N Document 469 Filed
06/24/10 Page 1 of 3 PageID 5036, U.S. Dist. Ct. ND Tex., Dallas.
9. No response to Plaintiffs attempt to settle this matter amicability was made
by Defendant Counsel.
10. On August 6, 2012, Nominal Defendant Well Fargo through Counsel filed
WELLS FARGO BANK, N.A.'S MOTION TO DISMISS PURSUANT TO FEDERAL RULE OF
CIVIL PROCEDURE 12(b )(6) AND BRIEF IN SUPPORT THEREOF.
Case 3:11-cv-00726-M-BH Document 182 Filed 08/27/12 Page 6 of 23 PageID 2904
§ II. Facts Related to Financial Transactions of the RICO Defendants
Relevant History Related to the Associated Money Laundering, Financial InstitutionalFraud, Engagement in Monetary Transactions in Property Derived from Specified
Unlawful Activity, Transportation of Stolen Goods, Securities, Monies, etc., and Sale orReceipt of Stolen Goods, Securities, Monies, etc.
1. “Upon information and belief, in or about late July and early August 12, 2009,
Divens and IDA opened securities brokerage account number CM2-303194 13 with
CISC entitled "Law Office of Jon [Aubrey] Divens Associates LLC" (the "Account"). CISC
is a broker-dealer that carries brokerage accounts and assists customers with respect to
investments and trading in securities.” Chase Investment Services Corp. v. Law Offices of
Jon Divens & Associates, LLC., et al., 2:09-cv-09152-SVW-MAN (U.S. Dist. Ct. WD Cal.
12/14/09) Doc. 1 at 5.
2. “On or about February 3, 2009, BGI and BGGE transferred the CW Capital
Bond to Divens in trust, at the request of Up Right Holdings, LLC, that Divens act as
escrow while Up Right arranged the financing to buy the CW Capital Bond … Divens's
February 2009 account statement at UBS Financial Services will confirm that he
received the CW Capital Bond in his account on February 3, 2009.” Id. Doc. 99 at 3.
Case 3:11-cv-00726-M-BH Document 182 Filed 08/27/12 Page 7 of 23 PageID 2905
Stolen Cobalt CMO Interest Payments
3. “The interest generated by the CW Capital Bond from February 2009 through
April 2010 was $396,763.54, broken down as follows: 5
February 2009 24,117.71 March 2009 24,087.06 April 2009 30,657.93 May 2009 24,002.04 June 2009 30,557.22 July 2009 23,926.76 August 2009 30,444.08 September 2009 30,387.14October 2009 23,800.49November 2009 30,264.31December 2009 23,711.89January 2010 23,663.60February 2010 23,622.43March 2010 23,582.93April 2010 29,937.95
Chase, supra, Doc. 99 at 5.
Unlawful Transfer of Cobalt CMO – JP Morgan Series CMO & FNMA CMO (Fannie Mae)
4. “Initially, the Account [account number CM2-303194 13 ] held no assets.
However, after two transfers in September 2009, the Account held securities
representing interests from three Collateralized Mortgage Obligations (collectively, “the
Transfer of the fifteen (15) stolen interest payments not all individually are accounted for, nor5
accumulated in the First Amended Complaint (doc. 36) predicate crimes claims: 18 U.S.C. §1344. FinancialInstitution Fraud; 18 U.S.C. §1956. Laundering of Monetary Instruments; 18 U.S.C. §1957. Engaging inmonetary transactions in property derived from specified unlawful activity; 18 U.S.C. § 2314. Transportationof stolen goods, securities, moneys, &c.; and 18 U.S.C. § 2315. Sale or receipt of stolen goods, securities,moneys, &c.; as well as, other overt criminal acts in furtherance of the conspiracy & racketeering including: 18U.S.C. § 1343 Aggravated Wire Fraud (affecting a financial institution, max fine $1MM, max 30 yearsimprisonment, or both); 26 U.S.C. § 7201 Tax Evasion; 26 U.S.C. § 7206(4) Tax - Removal or Concealment withIntent to Defraud; 26 U.S.C. § 7206(5) Tax - Compromises & Closing Agreements. (see also, doc. 36 at 175-82)
Case 3:11-cv-00726-M-BH Document 182 Filed 08/27/12 Page 10 of 23 PageID 2908
January 2010 $13,960.47February 2010 $13,712.60TOTAL $213,605.70Id. at 22
9
9. “The majority of investors' funds [identified in the SEC lawsuit only] in thetrust account were transferred as follows:
• Approximately $2,170,000 was paid to over 30 different intermediaries,advisors, and business consultants for the purpose of 20 acquiring purported bankinstruments. None of the monies were used to purchase any legitimate bankinstruments;• Over $1,500,000 went to pay for Wilde's personal expenses, including:
N Approximately $800,000 to the bank account of Wilde's wife, MaureenWilde;N $323,500 to Shillelagh Capital Corporation, another corporate entity underWilde's control;N $200,000 to Wilde's bank account in Europe;N $152,500 to law firms that represented Wilde and/or other Defendants;N $55,000 to the assisted living facility of Wilde's parents;
• $1,150,000 in fees to Gelazela (to a bank account in the name of IBalance LLC, acorporate entity for which Gelazela serves as a managing member);• $565,000 in fees to Woods, which equaled roughly half of the total investormoney Woods brought in to the scheme; and• $472,500 in fees to Haglund.”United States Securities and Exchange Commission v. Wilde, et al.,
10. ¶103. “Instead of disassociating himself with such activities, Haglundcollaborated with Wilde and used much of the $472,500 he took from the trust accountin 2009 and 2010 to repay investors from the failed 2007 scheme that had led to thelodging of the State Bar complaint against him.
¶104. Further, Haglund knew that amounts representing a substantialportion of the investments flowing into the trust account were being paid out in fees,not for purchases of financial instruments.
¶105. Haglund was aware that his own $472,500 take, purportedly for ‘legalfees,’ bore no rational relationship to the value of services he was rendering (setting upan account and wiring funds from it).
Case 3:11-cv-00726-M-BH Document 182 Filed 08/27/12 Page 11 of 23 PageID 2909
¶106. For instance, Haglund transferred $35,000 in fees to himself forsending out seven wire transfers (mostly to Wilde, Woods and Gelazela) on a single day(October 30, 2009).
¶107. Wilde knew he was being paid to give an attorney's imprimatur to theprogram, helping the Defendants to mask the fraud.
¶108. Haglund has admitted he knowingly wired funds to old investors usingnew investor money in March 2010, a practice he conceded was typically called, in hiswords, ‘[a] Ponzi scheme.’ Haglund made these transfers even after having received asubpoena from the SEC in connection with the investigation that led to this Complaint.”id.
“The international private placement program incorporated financialtransactional funding with an estimated twenty or more principals20
according to Koster. The said transactional funding platform andrelated financial instruments were created within anassociation-in-fact business enterprises in which Defendants Woods,Linder, Gelazela, Reynolds, Koster, Childs, Emre and others includingMelissa Shapiro presented security for investment funds based on astated written bank guarantee on a Deutsche Bank SBLC instrumentand monetization of that SBLC through HSBC Hong Kong. Koster’sAlicorn Capital Management LLC company was used as a funnelingtool overseen by Koster to move funds into the IDLYC/BMWinvestment platform. The Defendants used a complex network of theircompanies and other indirect network resources to accomplish theirtheft of money, frauds and criminal activities.” (doc. 36 ate 41, PID839)
11. Haglund held or handled the majority of the high-end cash transactions for
the enterprises funneling most of the stolen monies including investment monies for
purchases of the Private Placement Programs and Profit Sharing Programs involved, in
and out of Wells Fargo bank accounts to and from other banks and financial institutions.
The vast amount of money involved in the RICO Defendants’ criminal activities
was moved through Wells Fargo for the purpose of money laundering, tax
evasion, and secreting the monies from investors and federal authorities. RICO
Defendants exploited Wells Fargo’s known weak anti-money laundering policies and