[…]
Mark S. O’Dell, of Morrisville, filed the class action lawsuit last week against Berkshire Bank, alleging it knew Marshall was running an investment scam commonly known as a “Ponzi” scheme prior to Marshall’s bankruptcy filing in 2023.
For decades, Marshall promised to pay investors 8% interest on unsecured promissory notes, telling investors he would use the money to buy rental properties in Hamilton, the Madison County village that is home to Colgate University.
Many of the people who invested in Marshall’s fund were clients of his tax preparation service in Hamilton. Others were friends and acquaintances.
Marshall filed for protection from creditors under Chapter 11 of U.S. Bankruptcy Law in April 2023, reporting more than $90 million in debts and a little more than $20 million in assets, mostly his rental properties. He acknowledged in court that in some cases he used money from new investors to pay prior investors.
Marshall is under investigation by New York Attorney General Letitia James and the U.S. Securities and Exchange Commission. He has denied any wrongdoing and has not been charged with any crime. But the U.S. trustee overseeing his bankruptcy case has said Marshall’s promissory note fund had “all the hallmarks of a Ponzi scheme.”
In the lawsuit filed May 13 in U.S. District Court in Syracuse, O’Dell alleges that Marshall commingled investors’ money with his own in a personal checking account at a Berkshire Bank branch in Oriskany Falls, and later at the bank’s office on Seneca Turnpike in New Hartford when the Oriskany Falls office closed in 2021.
It alleges the bank knew Marshall was conducting “fraudulent activity” through the Berkshire checking account.
“Berkshire monitored and knew of Marshall’s colossal commingling of investor funds in the Berkshire Checking Account from the multitude of deposits Marshall made of new investor money, and because Marshall quickly withdrew new investor funds to pay distributions to prior investors as well as to pay various personal and business debts and expenses,” the lawsuit says.
It alleges Berkshire’s employees must have observed that many incoming checks and wire deposits in Marshall’s checking account contained such payor descriptions and designations as “investment,” “investment note,” “promissory note,” “8%,” and “Note,” according to the lawsuit.
“Berkshire must have known that investors in the Marshall Fund did not receive any accompanying offering documents, and that Marshall did not utilize any legal counsel, auditors or any other third party professionals that typically would be involved in securities offerings,” it says.
The lawsuit seeks restitution from the bank for investor losses in the fund.
Scott Silver, one of the attorneys representing O’Dell, cited “circumstantial evidence” that Berkshire knew about the alleged scam.
“This is not a case where the bank should have caught one suspicious transaction,” he said. “We’re talking about thousands of checks over the years.”
O’Dell said he invested $60,000 with Marshall in 2021. He is being represented by the Silver Law Group, of Coral Springs, Florida, and Peiffer Wolf Carr Kane Conway & Wise, which has an office in Rochester. The law firms specialize in representing victims of negligence, fraud or misconduct.
Silver said O’Dell is retired and planned to use the interest he earned on the money invested with Marshall to help fund his retirement. Now, he faces losing a substantial portion of his investment, Silver said.
While O’Dell is the lead plaintiff in the lawsuit, Silver said his law firm represents several dozen other Marshall investors who are in the same position.
Bankruptcy trustee Fred Stevens recently hired the Fox Rothschild law firm as special counsel to, among other things, investigate any financial institutions that did business with Marshall and determine what potential claims, if any, should be pursued against them. He also transferred all of Marshall’s funds to another bank.
It is not unusual for plaintiff lawyers and bankruptcy trustees to go after financial and other institutions as part of efforts to recover money for the victims of alleged fraud.
The Silver Law Group says on its website that it has recovered $44 million from such lawsuits for the victims of Ponzi schemes alone.
Stevens estimated in February that investors in Marshall’s promissory note fund may only get back 8 to 10 cents on the dollar after an auction of the businessman’s rental properties.
Full Story: Syracuse.com May 23 2024
