MASS. ATTORNEY GENERAL: Former Middlesex County Banker Was Ponzi Schemer Who Scammed For 12 Years And Created Bogus CD Receipts And 1099s

A Massachusetts woman formerly employed at Bank of America ran a Ponzi scheme on the side, forged withdrawal slips and stole millions of dollars from family and friends over a period of 12 years, the state’s attorney general said.

Elaina Patterson, 53, of Wilmington, has been indicted on charges of Larceny over $250 from a Person over Sixty (15 counts) and Larceny over $250 (16 counts).

Bank of America discovered the fraud during an internal investigation in 2011 and alerted the office of Attorney General Martha Coakley, Coakley’s office said.

Patterson allegedly offered customers “fake” investment products and created bogus receipts for certificates of deposit and 1099 tax forms as part of the fraud. The scheme allegedly began in 1999, prior to Bank of America’s ownership of the bank.

“We allege that this defendant used her position as a banker to garner trust from friends and family, and then pushed fake investment opportunities that promised high rates of interest,” Coakley said. “Once this scheme began to unravel, we allege that she began to steal from customers in order to fund withdrawals from investors and cover her illegal activity.”

Patterson was indicted by a grand jury in Middlesex County. She had worked at a branch bank in the small city of Reading, Mass.

From a statement by Coakley’s office (italics added):

Authorities allege that between July 1999 and September 2011, Patterson made approximately $6 million in fraudulent transactions involving 31 investors and customers.

At the beginning of the scheme, Patterson allegedly persuaded family and friends to invest their money in accounts that she characterized as offering high interest rates, normally between 10 and 15 percent. Authorities allege that she regularly portrayed these accounts as being exclusively for high-level investors and corporations, but said that due to her position at the bank, she was able to set up these accounts for family and friends.

The investigation allegedly revealed that Patterson convinced 15 family members and friends to invest nearly $4.5 million as a part of this scheme, and that she issued fake certificate of deposit receipts and Form 1099s on bank forms to make the investments appear legitimate. Authorities allege that, in a number of instances, Patterson set up accounts in the investors’ names without their knowledge, put her own address on the accounts, deposited the investors’ funds, and used the money both to fund payments to other investors and to funnel money into her personal accounts.

Further investigation allegedly revealed that beginning in 2009, Patterson began stealing money from the accounts of customers, many of them elderly, in order to conceal her previous theft from investors. Authorities allege that Patterson stole almost $1.5 million from 16 different customers by forging signatures on withdrawal slips. She allegedly used approximately $400,000 of this amount to repay customers stolen from earlier in the scheme and the majority of the balance of that stolen money to fund “interest payments” and other payments to the investors. 

In the end, investigators uncovered a total of approximately $6 million in alleged fraudulent transactions. Patterson made payments back to customers and investors of almost $3.8 million, leaving the total alleged net theft at more than $2.1 million.