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Karl A. Racine
Office of the Attorney General for the District of Columbia

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DC Court of Appeals Rules for the District, Permitting Trial against Bank of America in Embezzlement Scheme

Monday, December 2, 2013

Ted Gest
Public Information Officer
[email protected]

WASHINGTON, D.C. – The D.C. Court of Appeals has paved the way for the District of Columbia to pursue at trial in Superior Court its $117 million treble damage False Claims Act suit against the Bank of America arising out of the embezzlement scheme perpetrated by former Office of Tax and Revenue employee Harriette Walters and her co-conspirators, D.C. Attorney General Irvin B. Nathan announced today.

In a unanimous, 73-page decision issued last week, the Court agreed with the District‘s arguments that D.C.’s claims against the bank were not subject to arbitration and were properly filed in D.C. Superior Court, which will retain jurisdiction under the District’s False Claims Act, and conduct the trial.

The lawsuit arose out of a conspiracy led by Ms. Walters, who created fraudulent tax return checks that her co-conspirators cashed at the Bank of America, using a District account. In 2008, the District filed an eight-count complaint against the bank, including claims of negligence, fraud, breach of common law fiduciary duty, and violations of the District’s False Claims Act. The District alleged that the scheme could not have succeeded without the participation of Bank of America’s employees.

The bank sought to compel arbitration, citing a 2000 internal booklet that had been referenced in signing authorization forms, even though the District and the bank entered into a formal written contract in 2005 that contained no arbitration clause.

Among other findings, the Court of Appeals ruled that, as the District argued, relevant District officials lacked authority under the Procurement Practices Act to agree to arbitrate claims involving fraud, and that the parties’ 2005 contract provisions governing dispute resolution and contract modification superseded any clauses the bank could invoke for its arbitration request.

The decision was written by former Chief Judge and now Senior Judge Annice M. Wagner, joined by Associate Judges Phyllis D. Thompson and Anna Blackburne-Rigsby.

Attorney General Nathan said, “The decision is a significant victory for the District and allows it to move forward with its efforts to recoup sizable losses for the benefit of all District taxpayers. We intend to move expeditiously and to do all we can to bring to an end the delaying tactics of the bank.”

The  Attorney General commended Senior Assistant Attorney General Stacy Anderson for her handling of the appeal, working with Solicitor General Todd S. Kim and Donna M. Murasky of the Solicitor General’s office, as well as the trial team of Deputy Attorney General Ellen Efros, and Assistant Attorneys General Jane Drummey and Thomas Koger.