Comerica Bank Named in Another Class Action Over Alleged Shapiro-Run Woodbridge Ponzi Scheme

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Comerica Bank is staring down more legal action filed on behalf of a proposed class of possibly thousands who invested upward of $1.2 billion in a series of investment vehicles managed by Robert Shapiro under the Woodbridge moniker. Echoing the allegations of a similar case filed in December 2017, the lawsuit claims that with proposed class members’ funds purportedly paying for “short-term, high-interest loans to third-party commercial real estate buyers” who couldn’t get loans anywhere else, Shapiro promised Woodbridge investors a five to eight percent rate of return, primarily coming from lofty interest rates charged to third-party buyers. It wasn’t until later on, the case says, that Woodbridge’s true nature was revealed:

The Woodbridge investments were a classic Ponzi scheme, masterminded by Shapiro. The third-party commercial real estate buyers who took ‘mortgages’ from Woodbridge investors were, in fact, hundreds of shell LLCs owned and controlled by Shapiro. The LLCs had no sources of income or bank accounts, and never made any loan payments to Woodbridge. Shapiro kept the operation afloat by pursuing a continuous infusion of new-investor funds, which he would then use to make interest and principal payments to earlier investors, pay commissions to his sales agents, and fund his extravagant lifestyle. When [First Position Commercial Mortgage] investors’ twelve- to eighteen-month promissory notes would come due, Woodbridge would encourage them to roll their investments over into one of his five-year term fund offerings or sign another short-term promissory note, thus postponing the date on which Woodbridge would be required to pay the principal balance of the investors’ ‘loans.’”

Where defendant Comerica Bank fits into the equation is its alleged role in managing Woodbridge’s bank accounts, the complaint says, the same accounts through which Shapiro “ran thousands of transactions” and more than $1 billion to run his fraudulent operation. The Ponzi scheme fell apart in December 2017 after nearly five years, the lawsuit notes, an event quickly followed by Shapiro’s companies being placed into Chapter 11 bankruptcy.

The scheme itself could not have gone undetected for so many years without Comerica’s “knowing and substantial assistance,” the lawsuit alleges. Despite reportedly apparent indications of fraud—including Shapiro’s insistence on serving as the lone signatory on accounts covering thousands of transactions and the use of Comerica-held funds to buy “almost 200 properties in the Los Angeles and Aspen areas”—Comerica allegedly failed to speak up and continued to execute transfers necessary to continue the Ponzi scheme.