People For the American Way

Confirmed Judges, Confirmed Fears: Trump Circuit Judge Writes Opinion and Casts Deciding Vote to Excuse Bank from Liability for Fraud

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Confirmed Judges, Confirmed Fears: Trump Circuit Judge Writes Opinion and Casts Deciding Vote to Excuse Bank from Liability for Fraud

“Confirmed Judges, Confirmed Fears” is a blog series documenting the harmful impact of President Trump’s judges on Americans’ rights and liberties. 

Trump Judge Steven Grasz of the Eighth Circuit was the author and deciding vote in a 2-1 decision in January 2019  to affirm a lower court order that granted summary judgment in favor of a bank that was accused of aiding and abetting in a Ponzi scheme that “swindled investors” out of over $100 million. In that case,  Zayed v. Associated Bank, Judge Jane Kelly dissented, explaining that there were clearly disputed issues of material fact and that the claims against the bank should have been brought to trial.

Five individual scammers were convicted and sent to prison for a Ponzi scheme that defrauded investors out of over $100 million between 2006 and 2009. A court appointed R.J. Zayed as a receiver to try to collect funds to repay the victimized investors and, among other actions, Zayed filed suit against Associated Bank. He contended that the bank did more than provide routine banking services to the scammers, and that in particular through one bank employee, the bank “knew about and assisted in the scheme.”

The Minnesota district court, however, ruled in favor of the bank on summary judgment, and Grasz wrote a 2-1 decision that affirmed the ruling. The majority claimed that the evidence against the bank was “circumstantial” and that the bank did little more than provide ordinary banking services to the scammers.

Judge Kelly strongly disagreed in dissent. Deciding what conclusions to draw from circumstantial evidence, she explained, is “a function for the jury,” not for a judge on summary judgment. She recounted numerous examples of disputed facts that could have led a jury to conclude that the bank and its employee knew about the scammers’ improper conduct and  “substantially assisted them.” For example, she noted, the record indicated that the employee was “intimately aware” of the scammers’ business, opened accounts for them without proper documentation,  “personally assisted” one of the scammers in “improperly transferring millions of dollars from investor accounts” to the scammer’s account, and did much more than simply provide “ordinary banking services” to the scammers. As a result of Grasz’s decision, however, the receiver could not even present the investors’ claims to be decided by a jury at trial.