Business
By Patrick Danner, San Antonio Express-News
The Bank of San Antonio disclosed today that it uncovered a $13.2 million “Ponzi-style fraud scheme” involving a former employee of a subsidiary who induced the bank to purchase worthless accounts receivable from various businesses.
Bank officials alerted the FBI in May and said in a statement they expect to recoup all losses from the alleged scheme.
The bank and its subsidiary, Texas Express Funding LLC, Tuesday sued the former employee, five other individuals and four entities for fraud, civil conspiracy and other claims. The suit, filed in Comal County, seeks unspecified punitive damages.
Texas Express Funding is a factoring firm that advances cash to companies based on their receivables. Bank Chairman J. Bruce Bugg Jr. said earlier this year that the firm is an extension of the bank’s commercial lending.
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“The Bank of San Antonio remains well-capitalized, even taking into account this loss without any recovery, but I am highly confident that ultimately we will be made whole on the fraud losses,” Bugg said in a statement.
The bank has a $10 million insurance policy to compensate it for losses related to the alleged scheme. The lawsuit seeks more than $1 million in damages.
In their complaint, Bank of San Antonio and Texas Express Funding identify Ronald Wayne Schroeder of New Braunfels as the alleged rogue employee.
Schroeder, 47, created a “bogus and fraudulent entity named ‘Republic Logistics’” to which the bank and TEF wired nearly $2.9 million, the suit says.
In addition, the bank and TEF say $10.4 million went directly to Southwest Bank Factoring LL and/or Southwest Bank.
The bank and TEF say the money went to purchase the accounts receivable of various businesses from Southwest Bank Factoring and/or Southwest Bank.
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“Unbeknowst to (the bank and and TEF) the overwhelming majority of all of the customer invoices they purchased were either fraudulently prepared, hopelessly aged and uncollectible,” the suit says.
It couldn’t immediately be determined if criminal charges have been filed against Schroeder or any of the other defendants.
The Bank of San Antonio and two affiliated banks, Texas Hill Country Bank of Bandera and the Bank of Austin, last month agreed to merge. The combined institutions will have almost $1.5 billion in assets.
Patrick Danner Patrick Danner covers banking, insurance, business litigation and bankruptcies. pdanner@express-news.net | Twitter: @AlamoPD