On September 28, 2017, the United States Attorney’s Office for the Eastern District of Pennsylvania (USAO) announced it entered a $3.6 million settlement agreement with a Utah Bank and its affiliated payment processor to settle allegations that the bank and its processor committed fraud by illegally debiting money for specific telemarketing and Internet marketing merchants (Merchants).
The USAO’s settlement is the third resolution related to the Merchant’s purported fraud. First, in 2008, the Merchants were sued by the Federal Trade Commission (FTC). In March of 2013, a federal district judge entered summary judgment in favor of the FTC in the underlying cases. Second, in January 2010, a plaintiff filed a Racketeer Influenced and Corrupt Organizations Act (RICO) against the Merchants, as well as the Utah bank and the payment processor. In November 2016, a federal district judge approved a settlement in the RICO action.
The USAO subsequently conducted an investigation of the Merchants, and alleged that the Utah bank and its processor knew of, or were willfully blind to, the Merchants using their services to commit fraud, or to the fact that the debits violated the Automated Clearing House (ACH) payment rules. The USAO further claimed that the conduct violated the Financial Institutions Reform, Recovery and Enforcement Act,12 U.S.C. § 1833a (FIRREA). To settle the allegations, the bank will pay a civil penalty of $3.6 million, in addition to the class action settlement that had already been reached.