Trustee Files Suit against AmSouth and MACC
A lawsuit seeking to recover millions of dollars from two financial institutions which once did business with Barry Stokes and 1Point Solutions has been filed in the U. S. Bankruptcy Court for the Middle District of Tennessee.
The defendants are Regions Bank, as Successor in Interest by merger to AmSouth Bank and Mid-Atlantic Capital Corporation. AmSouth was 1Point’s bank. Mid Atlantic is a securities dealer in Pittsburg, PA that was supposed to invest 401(k) funds for 1Point at the direction of Barry Stokes.
This lawsuit has the potential to be the largest single assets in the 1Point/Stokes bankruptcy. The losses suffered by 1Point customers are in excess of $20 million. The suit does not seek a specific amount from the Defendants. In its prayer for relief the Court is asked to “Award judgment in favor of the Plaintiff and against each of the Defendants for all losses incurred.” The exact amount of those losses will be a matter of proof at trial. The Court is asked to determine the damages.
There are some assets other than this suit left to be liquidated. The 1Point office building in Dickson, TN will be sold at auction as soon as the Trustee’s suit to quiet title has been concluded in the Dickson County Chancery Court. The sale in Chicago of the Japanese woodblock prints is continuing. The Trustee now knows that between 200 and 300 of Barry Stokes best prints are still missing. A search is underway. The value of these real estate and personal property assets are small in comparison to the lawsuit’s potential.
A copy of the complaint is available on this webpage. It is 26 pages long and alleges both Defendants either violated or ignored provisions of ERISA (the Employee Retirement Income Security Act), federal money laundering laws, the Bank Secrecy Act and the U. S. Patriot Act.
The basic idea woven into the fabric of the suit is that both AmSouth Bank and Mid Atlantic Capital knew they were holding funds that belonged to 1Point’s customers, not to 1Point and allowed those funds to be misappropriated. Mid Atlantic received almost $13.8 million in cash which it was supposed to invest in mutual funds at Barry Stokes’ direction. Only 17% of that money was ever used to buy securities. And, at Barry Stokes’ instruction the securities were sold. Of the total funds processed by Mid Atlantic, $8.4 million was transferred to the 1Point 401(k) account at AmSouth in Dickson, TN and $5.5 million was transferred to other unauthorized recipients. The entire $13.8 million was misappropriated.
AmSouth Bank opened more than 50 accounts for 1Point some of which were in the names of the specific employers from whom contributions were received, yet it allowed the funds in the accounts to be indiscriminately churned from one account to another and regularly allowed overdrafts in these fiduciary accounts. In addition Barry Stokes frequently wrote checks to “Cash” on the 1Point 401(k) account, presented the checks at AmSouth’s Dickson Branch and walked out with currency in his pocket always in amounts less than $10,000. When he did not want cash, he used the same account to purchase cashier’s checks.
The Trustee has alleged both Mid Atlantic Capital and AmSouth Bank exercised a standard of care far less than what should have been used when dealing with the accounts of 1Point, a company known to be holding funds in trust for its clients.
It should be obvious, there is no way to tell how long it will take to bring this case to trial in the Bankruptcy Court. Nonetheless many will ask. We do know that the Court will set the case for pretrial conference during the next 45 days. Attorneys for both sides will meet with the Judge in chambers, establish the issues to be tried, set discovery deadlines, set motion deadlines and perhaps even set a trial date. This information will be posted on this webpage as it becomes available.
A tremendous amount of work has gone into researching the law and gathering the facts necessary to bring this suit. This complaint would not have been filed if the Trustee did not believe the customers of 1Point were wronged by these institutions. Now the battle begins.
