By Jessica Corso – Reporter, San Antonio Business Journal
Jul 30, 2020, 6:55pm EDT
The Bank of San Antonio is suing the former head of one of its subsidiaries, accusing him and others of defrauding the bank out of a "shocking" amount of money in a Ponzi-like scheme.
Wayne Schroeder — former president of bank subsidiary Texas Express Funding LLC, or TEF — is accused in a Comal County lawsuit of buying outdated and, in some cases, fake invoices in an effort to defraud the bank of $13.2 million. The Bank of San Antonio became aware of the alleged fraud on May 6, less than a year after Schroeder was brought on board to head the newly created subsidiary, according to the lawsuit. He has since been fired, Bank of San Antonio attorney Andy Taylor told the Business Journal.
Schroeder declined to comment.
TEF buys customer invoices at a discount from companies seeking quick cash. The line of business, known as factoring, often earns more money for banks than loans do, Taylor said. Prior to working for TEF, Schroeder worked at the factoring subsidiary of Odessa-based SouthWest Bank.
It was from that subsidiary that Schroeder allegedly bought the outdated debt, recording in TEF's books false dates for the invoices. He also stands accused of writing fake invoices for TEF to buy and using that money to repay some of the previously purchased debt. Though the lawsuit doesn't use the term, Taylor said Schroeder's activities amounted to a Ponzi scheme.
"It's blatant, it's bold, and frankly, it's shocking how much fraud he engaged in," Taylor said.
The rules of factoring require that banks sell overdue invoices back to the companies that created them or else write the losses down in their federally mandated financial reports, Taylor said. An invoice becomes outdated when it is 120 days overdue, according to the lawsuit. The suit alleges that some of the invoices Schroeder bought and falsified were more than a year past due.
Besides Schroeder, seven others were named as alleged co-conspirators to the fraud. SouthWest Bank wasn't accused of fraud but is accused of breach of contract and negligent misrepresentation for selling the old invoices. Taylor said he plans to find out what executives at SouthWest Bank knew about the scheme.
"I’m going to take depositions of top officials at that bank and find out, under oath, once and for all, whether they were in on this fraudulent Ponzi scheme or not," he said.
SouthWest Bank said it hadn't heard anything about the allegations until the San Antonio Express-News wrote about the case on Wednesday. The accused bank hasn't been served with a lawsuit or been contacted by The Bank of San Antonio, SouthWest Bank CEO Dewey Bryant said.
"The allegations made against our bank by the plaintiff’s attorney in the San Antonio newspaper article are outrageous, and we categorically deny them," Bryant said in a statement. "The matter will be reviewed by our attorneys when we receive the suit, and hopefully our attorneys will allow us to comment further at a later date. Until that review, we will have no further comment
