Wells Fargo scammed out of $2.1 million held in Merced hospital's escrow account

Hong Kong con artists send series of fraudulent requests for funds

February 28, 2012 

After sending a series of fraudulent faxes, a scammer successfully duped Wells Fargo Bank into wiring $2.1 million to a Hong Kong bank account from a Merced County and Catholic Healthcare West escrow account.

After Wells Fargo officials realized they'd fallen for a scam, authorities were alerted and a lawsuit was filed by the U.S. District Attorney's Office to recover whatever money may still be in the fraudulent account, according to the complaint for forfeiture.

The scam, first reported Tuesday by Janet Novack of Forbes, started in late 2011 with a fax to a Wells Fargo location in San Francisco requesting that $445,000 be transferred from the escrow account to a New York bank account held by "HUGE International T. Ltd."

However, when Wells Fargo tried to wire the money, the New York bank rejected the transaction because the account couldn't be found, according to the lawsuit.

A Wells Fargo escrow agent who was supervising the escrow account contacted, through an unverified phone number, the man who supposedly sent the transaction request, reaching his voicemail. When the agent got a call back, the man -- claiming to be an executive with Catholic Healthcare West, which operates Mercy Medical Center -- told the agent to disregard the wire transfer request.

A similar wire transfer was requested Dec. 14, but was again rejected since the Hong Kong bank account the money was supposed to go into couldn't be found, according to the complaint. Wells Fargo did, however, try to wire $445,000 to the nonexistent account from the escrow account.

Then on Dec. 19, Wells Fargo got a request to wire $989,000 to another Hong Kong bank account under the name of "Textil Trading UK Limited," according to the case. This time, Wells Fargo successfully sent the money.

The request for the transfer, like others, was apparently signed by Merced County's director of public health and an executive for CHW, but it was later discovered that a scammer had taken the two signatures from an earlier escrow agreement posted on the county's website.

Neither of the officials had authorized any of the transfers, according to the lawsuit.

Eventually, the scammer managed to get Wells Fargo to wire another $1,132,000 from the escrow account, according to the complaint.

Finally, another request to wire $2,248,000 raised suspicion with the Wells Fargo agent, who called CHW, which informed him that no one from the organization had made any wire transfer requests and that all the requests were fraudulent.

Other requests to transfer money were made, but failed for various reasons.

Since the scam was discovered, Wells Fargo has reimbursed the escrow account, said Julie Campbell, a spokeswoman for Wells Fargo.

Campbell didn't go into detail over the phone about the case or circumstances of the scam since it's part of an ongoing investigation, but she did say that the company is constantly enhancing procedures to ensure security.

"In December, Wells Fargo's Corporate Trust division and one of its customers were the victims of a sophisticated fraud," according to a statement sent by Campbell. "Wells Fargo has made its customer whole and is working with law enforcement to recover the funds and to identify and prosecute the fraudsters. We are constantly enhancing our procedures for protecting customer assets."

Attorneys from the Merced County Counsel's office said the scam won't negatively affect the county, and added that the county is also looking into ways to enhance security while protecting the public's right to access government information.

A spokesman for the Department of Justice said the organization doesn't comment on pending litigation.

Catholic Healthcare West, which changed its name to Dignity Health in January, operates Mercy Medical Center.

Bob McLaughlin, spokesman for Mercy Medical Center, said patient care won't be affected in any way by the scam.

Reporter Mike North can be reached at (209) 385-2453 or mnorth@mercedsunstar.com.

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