West Virginia Suing Banks Over Kenya-Based Scam

West Virginia’s elected auditor hopes a criminal that case wrapped up this week targeting an international fraud scheme will aid his lawsuit seeking to recover the $1.5 million that the fraud conspiracy cost the state.Auditor Glen Gainer is suing three banks that handled the transactions involved in the Kenya-based conspiracy. The scheme tricked Gainer’s office and officials in several other states last year into rerouting payments meant for legitimate businesses.Gainer’s Lincoln County Circuit Court lawsuit was filed in March against the state’s banker Wachovia, as well as SunTrust and TCF banks. The conspirators opened accounts at those two banks for corporations they registered under names nearly identical to that of the actual government vendors.

Gainer also faults the state agencies where the conspirators registered their dummy corporations, though they are not named in the lawsuit.”There were breakdowns there, that without question aided these individuals,” Gainer said Wednesday. “When you’re talking about the electronic movement of funds, it becomes interdependent. Everyone in the chain has to have adequate controls.”The banks have denied any wrongdoing, and seek to have Gainer’s lawsuit dismissed. It appears to be the only pending court case arising from the scam in the wake of the recent sentencings of six Kenyan nationals on federal charges.

The five men and one woman received terms ranging from time served to six years. Angella Chegge-Kreszeski was the last to be sentenced, on Tuesday, for acting as the Kenya-based masterminds’ lieutenant in the U.S.Married to a North Carolina resident, the 34-year-old will spend another 20 months behind bars after getting credit for time served. She and the others also face deportation once they complete their sentences.The conspirators set up some of their accounts at a TCF Bank branch in Minnesota; the five men convicted lived in the Minneapolis area. The sentencing hearings revealed they knew someone at that that branch whom they sought out when trying to wire scammed funds out of the country.

“It was brought forth during the sentencings that there was possible involvement by bank officials in aiding this,” Gainer said. “We have what we believe are solid grounds for pursuing this. I believe we will be successful.”A lawyer representing TCF in the civil case and a company spokesman did not immediately respond to requests for comment Wednesday regarding the sentencing hearing evidence.The federal charges covered around $772,000 wired to Kenya from West Virginia’s diverted payments, which were meant for Deloitte Consulting. The charges also alleged $2.6 million defrauded from that state as well as Kansas, Massachusetts and Ohio. Those funds were recovered.

But the criminal case did not extend to another $1.07 million rerouted from a second West Virginia vendor, Sedgwick Claims Management Services, during the same time and by identical means. The state recovered around $334,000 of that.The $1.5 million sought by Gainer’s lawsuit reflects the portions of the money owed Deloitte and Sedgwick that were not recovered, but which the state’s insurer ended up paying to those vendors.Gainer also said that his office has changed some of its internal controls, aided by a consultant hired in the wake of the scam.

“We continue to review those changes,” Gainer said. “But everyone’s controls have to be adequate, including banks.”