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TelexFree lawsuit names Bank of America, Pricewaterhouse Coopers

On Behalf of | Apr 7, 2016 | Ponzi Schemes, TelexFree

A lawyer representing victims of the alleged TelexFree Inc. fraud in a class-action lawsuit has named numerous defendants in the case, including Bank of America Corp. and the audit firm PricewaterhouseCoopers.

According to the lawsuit, which consolidated the civil complaints of at least 780,000 alleged victims, Bank of America and PricewaterhouseCoopers did business with TelexFree even after learning the company had been shut down in Brazil under allegations it was conducting a pyramid scheme.

TelexFree purported to be a seller of cheap long-distance phone service, out of an office in Marlborough. But prosecutors allege that in reality, the company took in more than $1 billion from participants in 18 months by promising them quick investment returns in exchange for promoting the company.The company’s two US principals are facing criminal charges and allegations by securities regulators that they defrauded as many as 1 million people around the globe. It is believed to be the largest fraud in history in terms of the number of victims.

Robert Bonsignore, a Belmont, N.H., lawyer who is lead counsel in the civil case, alleged that TelexFree and its principals and top promoters “knowingly, maliciously, and willfully conspired to perpetrate, and did perpetrate, the TelexFree pyramid Scheme with full awareness of its unfair, deceptive, and unlawful nature.”

In addition, the 200-page complaint alleges that a number of service providers, including banks and accountants, “were negligent or reckless in providing advice, directly participated in,” or provided “essential substantial assistance” to TelexFree, despite knowing it was an illegal pyramid scheme.

A spokeswoman for PricewaterhouseCoopers, based in New York, declined to comment. A spokesman for Bank of America, headquartered in Charlotte, N.C., also declined to comment.

Lawyers for TelexFree and its Massachusetts principals, James Merrill of Ashland and Carlos Wanzeler, formerly of Northborough, have denied wrongdoing. Both men face up to 20 years in prison if found guilty.

Merrill is at home awaiting trial. Wanzeler fled to his native Brazil last April, just after TelexFree filed for bankruptcy protection and as agents from Homeland Security Investigations and the FBI raided its office.

Among the numerous service companies named in the complaint, Bank of America and PricewaterhouseCoopers are the largest. According to the complaint, TelexFree affiliates urged recruits to make walk-in deposits at a Bank of America branch in Shrewsbury in early 2013.

In the spring of that year, Bank of America questioned TelexFree about its business, according to the complaint. It also “had exchanges with TelexFree about terminating their relationship and discontinuing the service of their accounts, but never did,” the complaint says.

The complaint, filed in federal court in Worcester, says PricewaterhouseCoopers “negligently provided accounting and consulting services” to TelexFree during the scheme. It alleges that TelexFree hired PricewaterhouseCoopers in January 2014, several months after the company had been shut down in Brazil.

The complaint also alleges that PricewaterhouseCoopers “negligently advised” TelexFree to prepare inaccurate and unfair 1099 tax forms to participants who had in fact lost money with the company.

Massachusetts Secretary of State William F. Galvin last year secured a $3.5 million settlement with Fidelity Bank of Fitchburg for allegedly allowing TelexFree to open accounts without thoroughly vetting its business.

Fidelity Bank, which is run by Merrill’s brother, John Merrill, neither admitted to nor denied the allegations.

Previous coverage:

  • Bankruptcy trustee offers details on alleged TelexFree fraud
  • TelexFree trustee faces daunting task of distributing claims payments
  • TelexFree victims may have trouble settling claims
  • Fitchburg bank will pay $3.5m in TelexFree case
  • Accountant denies knowing of alleged TelexFree fraud
  • TelexFree co-owner pleads not guilty in alleged fraud
  • TelexFree execs’ homes searched
  • TelexFree owners charged with fraud, conspiracy
  • Stunned, friends rally behind TelexFree cofounder
  • Fervor for TelexFree swayed thousands

Beth Healy can be reached at [email protected] 

Source: http://www.bostonglobe.com/business/2015/04/06/telexfree-class-action-names-bank-america-pricewaterhousecoopers/LGQBfWYD2qKzUvLLI6UhtN/story.html