More suits filed in currency case

A currency investment program under investigation by regulators and a federal grand jury in Minneapolis has begun to spin off lawsuits against some "third-party" companies that allegedly facilitated the investments.

The program, which was promoted by several Twin Cities firms, imploded in July, leaving hundreds of investors wondering what happened to their money and whether they were victims of a Ponzi scheme. Lawsuits and investigators initially targeted several Twin Cities firms that promoted the investment strategy and had Oxford, Universal Brokerage or "UB" as part of their names.

But court filings in recent weeks have named as defendants Associated Bank in Wisconsin; Tanren Corp., in Ontario, Canada; and Entrust Midwest, a Plymouth firm that provides accounting services for retirement plans.

Associated Bank and Entrust denied wrongdoing Monday and said they would fight the cases filed against them. Tanren Corp. did not return calls seeking comment.

The most inflammatory allegations against these third-party defendants came from six Canadians who had sunk nearly $10 million into the currency investment strategy. They filed two lawsuits, one against Associated Bank, in Brown County, Wis., and the other against Tanren Corp., in Toronto.

Associated Bank accounts were used to move investor funds and Tanren had marketed the currency strategy along with Oxford Global Advisors of Minneapolis.

The Canadian investors, two of whom live in Arizona, allege that Associated Bank failed to comply with anti-money laundering rules enacted in the wake of the Sept. 11, 2001, terrorist attacks against the United States.

According to their lawsuit, "Associated Bank ignored obvious red flags symptomatic of fraud or other illicit activity. For example, even though one of the accounts was established in the name of a fictitious business entity using a fictitious [Minneapolis] address, Associated Bank stood idly by while millions of dollars were deposited into that account by investors and funneled out of the account by the perpetrators of the illegal scheme.

"If Associated Bank had complied with customer identification regulations and procedures in opening the accounts, and had responded properly to many obvious red flags associated with the accounts, millions of dollars in investor losses ... could have been prevented."

After the currency investment collapsed and made headlines last summer, Associated Bank fired Lien Sarles, a vice president "who was responsible for the business banking relationship" with at least one of the firms that promoted the currency investment, the suit says. Sarles could not be reached for comment.

Eric Wilson is one of the attorneys with Godfrey and Kahn in Milwaukee who represents the Canadians. Wilson, a former federal prosecutor in Chicago, said the complaint speaks for itself.

Janet Ford, public relations director for Associated Banc-Corp., declined to comment on the specific allegations in the lawsuit. But she said in a statement, "Associated Bank has reviewed the Minnesota and Wisconsin complaints and has determined that they are without legal merit. Accordingly, the bank intends to defend itself vigorously against both actions."

Brian Bellmore, who represents the Canadians in the lawsuit against Tanren Corp., could not be reached Monday. The newspaper has been unable to obtain a copy of the suit against Tanren, but according to the Wisconsin lawsuit, the firm marketed the currency investment with Oxford Global as a "sub advisor," creating a fiduciary responsibility.

Oxford was supposed to invest the plaintiffs' funds through Crown Forex SA, a brokerage that Swiss regulators forced into liquidation proceedings in May, the suit says. But the money was sent instead to an Associated Bank account in the name Crown Forex LLC, from which it disappeared. That entity was not registered as a business in Minnesota and the address on its account does not exist, the suit notes. Burnsville radio talk show host Patrick Kiley, who promoted the currency investment, is one of the signatories on the account.

Grant Brown, Tanren's chairman and CEO, did not respond Monday to messages seeking comment, nor did Tanren's attorneys.

Meantime, back in Minneapolis, a federal lawsuit with 107 plaintiffs who have about $35 million in the currency investment has added Green Bay, Wis.-based Associated Bank and Entrust to its list of defendants.

"As part of our ongoing investigation we are looking at any and all individuals or entities who we feel may be responsible for the losses incurred by our clients," said Jack Harper, an attorney with Messerli and Kramer in Minneapolis who represents the plaintiffs.

As for Associated Bank and Entrust, Harper said both were negligent in the handling of investor funds. "Had Associated Bank done what we believe the regulations and their own procedures require them to do ... the fraud would have been uncovered at an early stage and our clients would not have lost their money. And, in effect, the same would also relate to Entrust," he said.

Todd Grill, owner of Entrust Midwest, said Harper is "barking up the wrong tree."

"We are a neutral third-party administration and record-keeping company for alternative investments. We sell no investments. We do no due diligence in any shape and form," Grill said.

"Here's what happened: We got wire instructions from the clients' investment advisory brokerage that said [send the money to] Crown Forex SA under a bank account at Associated Bank. Now, to our understanding after the fact, it went into Crown Forex LLC at Associated Bank," he said. "We had no clue of that."

Dan Browning • 612-673-4493