Court Denies Motion to Dismiss Heartland Bank From Ponzi Scheme Suit

Berger Montague is pleased to share that on February 10, 2021, an Illinois federal court largely denied Heartland Bank’s motion to dismiss Plaintiffs’ claims in a class action lawsuit alleging that Heartland and PNC Bank knowingly and negligently enabled and facilitated a Ponzi scheme perpetrated by Today’s Growth Consultant Inc. (“TGC”) and owner Kenneth Courtright. The lawsuit is captioned PLB Investments LLC, et al. v. Heartland Bank & Trust Company, et al. and is currently pending before the Honorable Judge Sara L. Ellis of the Northern District of Illinois.

Berger Montague represents a proposed class of investors that collectively lost more than $75 million to TGC and Courtright. TGC is in receivership and Courtright has been indicted. The suit names as defendants TGC and Courtright’s banks, Heartland Bank and PNC Bank, and alleges that the banks permitted TGC’s fraudulent scheme by allowing TGC to steal millions of dollars from hundreds of victims across the country and misuse, divert, and misappropriate the investors’ proceeds, all through TGC and Courtright’s Heartland and PNC bank accounts. TGC operated the scheme from the time it first began maintaining a bank account at Heartland in 2015 through September 2018, when Heartland terminated the account. TGC moved its accounts to PNC, continuing until December 2019, when the SEC filed suit against TGC and Courtright.

In its motion to dismiss denial, the Court held that Plaintiffs adequately alleged that Heartland had actual knowledge that TGC was misappropriating investor funds through its accounts, sufficient to support their claims for damages under the Illinois Fiduciary Obligations Act (“FOA”), as well as their claims alleging that Heartland aided and abetted TGC’s fraud and breach of fiduciary duties perpetrated on members of the proposed class after Heartland terminated the TGC accounts and TGC moved its accounts to PNC.

The Court also credited a theory of liability advanced by Plaintiffs under Section 7 of the FOA, which provides that banks may be held liable for the fraudulent transactions of their accountholders where the accountholder misappropriates investor funds to make personal loan payments, even if the bank did not have actual knowledge that the payments were in violation of the accountholder’s fiduciary duties to investors. Plaintiffs allege that Courtright used funds from TGC’s accounts to pay his personal loan balances to Heartland, thereby subjecting Heartland to liability.

The Court granted dismissal of PNC Bank, which oversaw TGC and Courtright’s accounts for the final year of the Ponzi scheme, but left open the possibility that Plaintiffs could file an amended complaint adding PNC as a Defendant after Plaintiffs obtain discovery regarding PNC’s knowledge of the scheme and related SEC investigation into TGC and Courtright.

The lawsuit will now proceed to the discovery stage of the case.

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Michael Dell’Angelo

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Barbara A. Podell

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