December 19, 2014

Elyria
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Judge rules banks not liable for money stolen by investor

Richard Zakarian

Richard Zakarian

A federal judge has twice rejected a bid by some of imprisoned Lorain tax consultant Richard Zakarian’s victims to hold two banks and a brokerage firm liable for the money Zakarian stole from his clients.

But in court orders filed in December and last week, U.S. District Judge Patricia Gaughan dismissed the lawsuit filed on behalf of Spitzer Management Inc. and 11 other fraud victims against Fifth Third Bank, Lorain National Bank and Chicago-based Interactive Brokers.

Zakarian was sentenced last year to 17½ years in prison after pleading guilty to mail fraud, wire fraud and tax evasion charges.

He stole nearly $4.5 million over the past decade from about 100 clients, although his lawyers had argued that he made a series of bad investment decisions rather than deliberately stealing the money entrusted to him.

According to the lawsuit against the financial firms filed last year, Zakarian had accounts with the banks and made investments through Interactive Brokers.

It was their duty, the lawsuit had argued to have recognized that Zakarian was taking money from accounts he had labeled “Tax” and using it for investments.

Investigators concluded that Zakarian lost most of the money — which was supposed to cover his clients’ tax liabilities — on the commodities exchange in Chicago.

Gaughan ruled that the banks did not have a duty to the victims in the case to have flagged the transfers under laws requiring banks to report suspicious circumstances.

There also was no agreement between Zakarian and the banks that the funds in his accounts were supposed to be limited to certain purposes.

“Absent an agreement between the bank and its customer, the presumption is that the deposits are general not special,” the judge wrote in her December decision.

Likewise, Gaughan concluded that the banks weren’t negligent in their monitoring of Zakarian because they had no relationship with the victims and thus no financial duty to them.

Anthony Giardini, the attorney for Spitzer and the other victims named in the lawsuit, had asked Gaughan to reconsider her decision or allow him to file an amended lawsuit.

But Gaughan rejected that request last week, noting that the request was an effort to reargue the case and there wasn’t any justification in granting the request.

Spitzer employees discovered the thefts by Zakarian and reported the matter to Lorain County Prosecutor Dennis Will, who turned the investigation over to federal authorities.

Contact Brad Dicken at 329-7147 or bdicken@chroniclet.com.