Regal Financial Bank (Regal Financial), a local community bank, announced that it has settled a lawsuit accusing it of defrauding a group of Indonesian investors in a Ponzi scheme. The settlement was announced through a June 27 press release.
The lawsuit alleged that the bank helped promote the Ponzi scheme using two investment funds operated through Dressel Investments, Ltd. (Dressel), a company incorporated in the British Virgin Islands, resulting in an estimated $600 million total loss from investors. Of that amount, Indonesian investors in the lawsuit claim losses of $175 millions.
Although all claims against the bank, its officers, and its directors have been dismissed, the lawsuit remains shrouded in mystery, as the terms of the settlement remain confidential. The bank declined to comment on the settlement for this story.
The settlement comes after a lawsuit was filed in the U.S. District Court of Western Washington on behalf of 4,200 Indonesian investors against the board of the Seattle-based bank. The lawsuit, filed in 2009, claimed losses of $175 million against the bank and its founder, president and CEO Jesse Tam. Tam was also on the bank’s board of directors at the time. He is no longer president or CEO of Regal Financial. However, he still owns Regal Financial stock.
The investors claimed in the lawsuit that the directors of Dressel had promised them returns of 24 to 28 percent, but instead used about $30 million of their money to purchase helicopters, personal cars, and homes. Some of the money was even invested in an Alaskan gold mine owned by one of Dressel’s directors, as well as a seaweed-processing facility in the Kingdom of Tonga in the Pacific Islands.
The rest for the funds were used to repay other investors.
According to the lawsuit, Danny Wong, a Dressel director and former advisory board member of the bank, and others began raising funds for Dressel Investments in 2001. Attorneys for the investors claim that Tam traveled to Indonesia with Wong, who allegedly owned nearly $1 million in bank stock. They claim that Tam used funds Wong had garnered through the scam to create the bank. Regal Financial was founded in 2001, the same year that Dressel began raising capital.
“Danny Wong, the Dressel entities, and affiliates had to have been among the most important customers, if not the most important customers, of Regal Financial Bancorp and Regal Financial Bank,” stated the complaint filed by the Indonesian plaintiffs. The lawsuit goes on to state Tam, “had full and complete knowledge that Danny Wong and the Dressel entities were operating the Ponzi scheme.” Dressel continued to be an important client at the bank until 2006, when the alleged Ponzi scheme began to collapse.
Once the lawsuit was settled, Tam denied the plaintiffs’ claims. According to seattlepi.com, Tam explained, “We were doing what we were supposed to be doing as bankers. We take deposits, we make loans,” he added, “We weren’t working with investments.” Though he is no longer employed at the bank, Tam expressed relief after the settlement was reached, saying, “It’s good to have this go away.”
While Tam and Regal Financial walked away relatively unscathed, the same cannot be said for others implicated in the Ponzi scheme. An Interpol arrest warrant has been issued for Wong, and three employees at Dressel have already been convicted in Indonesia and sentenced to prison terms ranging from eight to 13 years.
The attorneys for the plaintiffs note the tragic effect of the Ponzi scheme. “The vast majority of these Indonesians were middle-class citizens who could ill afford to lose their life savings to an American-operated criminal enterprise,” said Craig Werner, a New York attorney involved in the litigation. “It’s bad enough when Americans get defrauded, but when citizens of a developing nation get defrauded, I’d say it’s even worse.”
In early 2010, Regal Financial was one of 25 banks in Washington issued with a cease-and-desist order from federal and state regulators citing its practices as “unsafe or unsound.” As a result, Regal Financial has had to make an effort to come up with a clear plan for improvement. Randy James replaced Tam as Regal Financial’s current chair and CEO.
Under new management, the bank continues to target the Asian American community as its clientele. Four of the nine members of its board of directors are Asian. They are Andy C. F. Chen, Omar Lee, Hank Lo, and Basant Singh. Singh is the President and Director of Regal Financial and Regal Financial Bancorp, Inc.
Regal Financial looks to put its legal problems behind itself. Jeanne Chang, the director of corporate affairs at Regal Financial stated in an email, “[T]here are some positive things happening … stay tuned!” ♦
Jean Wong can be reached at email@example.com.