PNC Bank has reached a settlement with a group of Chinese investors who claimed it conspired with a developer to defraud them of millions of dollars they collectively provided to back a now-shuttered Miami Beach hotel with the hopes of securing immigration visas.
The deal, which is confidential, covers claims against Pittsburgh-based PNC Bank NA and bank employee Ruben Ramirez, according to a notice filed Thursday with a federal court in Miami. The investors had brought claims accusing PNC and Ramirez of aiding and abetting breach of fiduciary duty, fraud in the inducement and conversion by Palm Beach County-based developer Joseph Walsh Sr. and his associates, as well as several counts of conspiracy, including under the federal and Florida Racketeer Influenced and Corrupt Organizations acts.
The settlement comes on the heels of U.S. District Judge Darrin P. Gayles permanently dismissing the RICO claims and dismissing the remaining claims with leave for the investors to amend. On Friday, he granted the investors an extension until Feb. 2 to file their second amended complaint.
“The matter was amicably resolved with PNC and we are full speed ahead against the other defendants. The court just provided us an extension to file our amended complaint and that is our focus going forward.” the investors’ counsel Jordan Shaw of Zebersky Payne LLP told Law360 on Friday.
According to the latest version of the complaint, the investors each put about $500,000 toward the Greystone Hotel project. They made their investments through a regional center run by Walsh that coordinated the funds under the federal EB-5 program, which allows foreign investors in U.S. enterprises that create American jobs to obtain visas to live in the U.S.
The investors allege that Walsh duped them out of their money, however, by getting them to deposit their funds into a fake escrow account at PNC Bank and then transferring the money to personal accounts for his own benefit.
With the help of one of his employees who previously worked for PNC Bank, Walsh set up a meeting with PNC representatives, including Ramirez, a business banker and vice president for PNC at a Boynton Beach, Florida, branch, according to the complaint.
The investors allege that PNC and Ramirez ultimately accommodated Walsh’s request to set up escrow account services free of the typical restrictions on such an account. The bank allowed him to open a business checking account with elements that gave it the appearance of an escrow account and even changed the name of the account to suggest it was an escrow account, the complaint said.
The fake escrow account played a key part in Walsh being able to carry out the alleged fraud, the investors claimed.
“Once the workaround was fully implemented, there were no further impediments to convincing plaintiffs that their EB-5 investment monies and administrative fees were being wired into a legitimate escrow account and would be kept safe and untouched pending the processing of their I-526 applications,” they said. “The creation of the fake escrow account became the conduit that fed the defendants’ fraud machine and was a proximate cause of plaintiffs’ losses.”
The suit also alleges that Walsh’s agreement with PNC violated the bank’s internal rules, regulations and policies, but the bank and Ramirez benefited by increasing profits through service fees and the ability to invest the plaintiffs’ millions that the bank was holding.
A representative for PNC Bank did not immediately respond to a request for comment Friday.
Counsel for the Greystone entities said he had no comment on the settlement.
The investors are represented by Jordan A. Shaw, Candace Phillips and Steffani M. Russo of Zebersky Payne LLP and Kevin Qi of SMS Law Group APC.
PNC is represented by Peter D. Hardy, Aliza Karetnick, Mary K. Treanor, Mansi G. Shah and Nicholas A.R. Kato of Ballard Spahr LLP and Nina Stillman Mandel of Mandel & Mandel LLP.
The Greystone entities are represented by Stephen A. Mendelsohn of Greenberg Traurig LLP.
The case is Feng et al. v. Walsh et al., case number 1:19-cv-24138, in the U.S. District Court for the Southern District of Florida.
–Editing by Bruce Goldman.