B of A Sues Businessman to Recoup Loss : Claims That He Cheated Bank Out of $10 Million, Funneled Cash Overseas

Bank of America has filed suit against Covina businessman Marvin H. Weiss, alleging that he cheated the bank out of more than $10 million and funneled the ill-gotten money to secret accounts in the Caribbean.

The suit is the latest move in the bank’s legal effort to recover the $95 million that it lost in what it describes as a “massive fraud” involving mortgage-backed securities on overvalued properties.

The bank previously filed suit against three firms, five former employees and two insurance firms in an effort to recoup its losses.

The current suit, filed this week in Los Angeles County Superior Court, adds another piece to the intricate puzzle that began as a tax-shelter scheme for individuals but grew into an alleged fraud that federal authorities say could cost dozens of banks, thrifts and insurance companies as much as $500 million.

A team of local, state and federal law enforcement officials is investigating the case for possible criminal action, while more than two dozen civil suits have been filed against individuals and firms seeking the recovery of hundreds of millions of dollars lost in the B of A and related cases.

Fraudulent Appraisals

B of A’s suit names Weiss and his wife, Pauline Weiss, accusing them of conspiring with Encino insurance agent John N. Wain to inflate the value of properties through fraudulent appraisals and then place phony mortgage loans in investment pools administered by the bank.

The Weisses, through their attorney, declined to comment on the case.

The suit also asks that a $177,000 B of A account in Pauline Weiss’ name be frozen to prevent the funds’ disappearance.

According to the suit, Weiss tried to withdraw the money last week in $100 bills, telling a bank officer that he wanted the money because the IRS was “looking over my shoulder.” The bank refused to release the funds, claiming that they were part of the proceeds from the mortgage fraud, the suit said.

According to the B of A suit, the Weisses previously withdrew $295,000 in 32 separate cashier’s checks from a different account and attempted to transfer the money to an account in the Caribbean island of Curacao.

The 32 checks were all for between $8,000 and $9,500, according to the suit. U.S. law requires banks to report all foreign transfers of $10,000 or more to U.S. Customs.

B of A officials would not elaborate on the allegations in the complaint. A court hearing on the bank’s bid to freeze the Weiss account is set for Sept. 6.

Weiss has been described by an acquaintance as “a real flashy guy, a Damon Runyon type of character. If you wanted a watch, he probably had three on his arm.”

He and Wain traveled in a chauffeur-driven stretch limousine registered to one of the companies that they controlled, said the acquaintance, who works for one of the firms linked to the investment program.

The investment pools attracted more than $200 million from 19 small East Coast banks and savings and loans, with much of the money placed by loan brokers hired to find high-yield investments in distant markets. When the program collapsed, B of A was forced to write off $95 million when it repaid the investor banks $133 million for properties worth, by current estimates, only $38 million.

May Have Faked Death

The British-born Wain, described in the suit as a key figure in the alleged conspiracy, died last September, according to death records on file in Los Angeles County. The FBI and other investigators said they believe that Wain faked his death and is in hiding. Wain’s doctor, family and associates insist that he is dead.

Wain was the California agent of Glacier General Assurance, based in Missoula, Mont. The insurance firm wrote an estimated $280 million worth of bonds guaranteeing repayment of the mortgage-pool loans, even though it had barely $30 million in capital and was not authorized to write such bonds in California, according to California insurance regulators. The firm has been shut down by Montana regulators and is now in receivership.

According to the suit, Wain and the Weisses, doing business through 11 shell corporations, bought and sold homes and apartment buildings in Southern California. Through what the bank described as “self-dealing and secret profits,” the group documented phony loans based on fraudulent appraisals and used them to support withdrawals from the B of A pools.

Later appraisals showed that the properties were grossly overvalued, the suit alleges.

For example, a home in Newport Beach was appraised by an agent hired by the alleged conspirators at $2.96 million, while later bank appraisals put its value at between $600,000 and $750,000.