Wachovia Accused of Aiding Telemarketing Fraud

By Jonathan Stempel

NEW YORK (Reuters) - Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz), the fourth-largest U.S. bank, is fighting a lawsuit accusing it of letting fraudulent telemarketers use its accounts to bilk millions of dollars from consumers, court papers show.

Documents filed last month in the U.S. District Court in Philadelphia detail accusations the bank and its lawyers knew about the fraud allegations for years. These were also reported in the Wednesday edition of The New York Times.

The plaintiffs accused Wachovia of allowing some "payment processors" to create unsigned checks on behalf of telemarketers to withdraw funds from victims between 2003 and 2006, court papers show.

They also accused Wachovia of trying to win or retain business from companies that it knew were accused of telemarketing fraud, despite being alerted by other banks about the deceptive activity, the papers show.

The original complaint was filed last April. Plaintiffs are seeking class-action status on behalf of at least 346,000 victims they say lost millions of dollars, the documents show.

Wachovia has sought to dismiss the complaint.

Bank spokeswoman Christy Phillips-Brown declined to comment on the lawsuit, but said: "We took this issue very seriously, and senior management, led by CEO Ken Thompson, was actively involved in directing aggressive steps to correct the processes related to the situation."

She also said the Charlotte, North Carolina-based bank has taken steps to implement new risk management for third-party payment processors and telemarketers. She said Wachovia "does not have customers who are strictly telemarketers, or who are third-party payment processors to telemarketers."