TD Bank loses Nigerian scam lawsuit
2007-08-24 14:00 ET - Street Wire
by Mike Caswell
Everyone has seen the e-mails. A con artist in Nigeria needs help moving millions of dollars out of his country. The messages, usually in broken English, spell out bizarre circumstances in which the sender has happened upon a large sum of money. An oil company was "double invoiced," a "bequest" was left in a will or a "hidden cache of gold" turned up.
The scammer promises generous commissions, usually in the millions, to any sucker who replies. This is commonly known as a Nigerian scam (although the messages often originate from countries other than Nigeria).
Who answers these dubious e-mails? Todd Merenick, a former salesman with Investors Group in Kelowna, responded to one, and it ultimately cost his bank $82,000. (All figures are in U.S. dollars.)
Mr. Merenick's misfortune was made public in a B.C. Supreme Court decision released on Tuesday, Aug. 21. The Toronto-Dominion Bank sued Mr. Merenick after he deposited a counterfeit $82,000 cheque from a Nigerian e-mail scammer.
By the time the bank realized the cheque was phony, Mr. Merenick had wired the $82,000 to an account in Hong Kong. The bank sued on the grounds that Mr. Merenick did not disclose his communications with Nigerian scammers.
As soon as he learned what happened, Mr. Merenick resigned from Investors Group, reported the situation to police and declared bankruptcy. He acknowledged that he owed the bank the full amount of the cheque.
At trial, the bank had to show that Mr. Merenick made false statements concerning the cheque or that his failure to alert the bank to the "suspicious circumstances" surrounding it amounted to fraudulent misrepresentation.
The bank ultimately lost.
The e-mail arrives
In early 2004 Mr. Merenick received an e-mail from a Dr. Chris Martins, purportedly the head of the department of clinical pharmacology at the University of Lagos. Dr. Martins explained that the university had an unused balance of $8.3-million on a $12.5-million research grant. He wanted to transfer the money out of the country on a confidential basis to pay for the researchers' retirements and needed an outsider's help.
For most people, the scam would have ended there; the e-mail would have gone to the electronic equivalent of a trash bin as fast as the recipient's finger could have clicked the mouse.
However, Mr. Merenick replied, albeit skeptically at first. He said he was "suspicious" of the transaction and that he and his supervisor were concerned its purpose was to launder money.
The communications continued. The purported Dr. Martins and then a Dr. Ahman Rehman exchanged e-mails with Mr. Merenick over many months; Mr. Merenick even talked with at least one of the con artists on the phone.
The purported Dr. Rehman "politely but persistently" asked Mr. Merenick to help him move money out of Nigeria. Without help, Dr. Rehman said he would gain nothing from his 25 years of service to the government.
Like all Nigerian scams, the con artists tried to lure Mr. Merenick with a large commission. "Please remember I have offer you 20% for any assistance which you will give to successful delivary [sic] and claearance [sic] in canada [sic]," a Dec. 5, 2004, e-mail read.
Merenick "suspicious"
The judge, B.C. Supreme Court Justice Heather Holmes, said there is "no doubt that Mr. Merenick knew that the chances of the proposed transaction being authentic were slim." On Jan. 17, 2005, Mr. Merenick told Dr. Rehman that "Nigeria is notorious for scams similar to the idea you are using with me and fortunately most Canadians do not fall for them but once in awhile one does and they sure lose lots of money."
Still, Mr. Merenick kept talking with the con artists. Late in the correspondence, Dr. Rehman purportedly introduced Mr. Merenick to a "Reverend" friend in Nigeria. Mr. Merenick talked to the "Reverend" on the phone and remarked that he sounded remarkably like Dr. Rehman.
Merenick falls prey
Mr. Merenick eventually agreed to assist Dr. Rehman (or "fell prey" as the judge wrote).
The scam did not entirely follow the script of a typical Nigerian scam. Normally, the victim is induced to send a relatively small amount of money to cover transaction fees.
In return, he expects to receive a percentage of the main money when it arrives. However, once the victim sends the "transaction fees" the con artist disappears and the victim never hears from him again.
In this case, Mr. Merenick received a counterfeit cheque to cover the transaction fees; Dr. Rehman told him an "investor" had agreed to cover the costs. All Mr. Merenick had to do was deposit the investor's money into his own bank account and then wire it to Hong Kong.
"As soon as you receive the check, you quickly pay it into your bank and wait for your bank to tell you the day it will clear and due for withdrawal. If your bank tells you the date the check will clear, please get back to me immediately so that I can forward to you the account where you will pay in the money to enable us settle all the bank charges here so that the US$8.3 Million be transferred into your bank account in Canada," Dr. Rehman wrote.
Mr. Merenick deposited the counterfeit cheque at a TD branch in Vernon. The next day he arranged for a wire transfer of $82,466 out of his account.
Unhappy bank
The bank contended that when Mr. Merenick deposited the cheque, he falsely told the teller that it represented retirement funds for a client. The teller consulted her manager, who looked at the cheque and reviewed Mr. Merenick's financial history with the bank. The manager also noted that Mr. Merenick worked for Investors Group.
Based on the "strength of this information" the manager cleared the cheque with no hold period. A hold, of course, would have prevented the money from being released until the cheque cleared.
By the time TD discovered that the cheque was a counterfeit, it was unable to recover the money from the Hong Kong account.
Merenick was "careless"
The judge had to decide whether Mr. Merenick's debt to the bank would survive his bankruptcy. If he deposited the counterfeit cheque under fraudulent circumstances, then he would still owe the bank the full $82,466. Otherwise, the bank would be dealt with in bankruptcy proceedings, where creditors routinely receive much less than full payment.
Judge Holmes ruled that because the bank did not prove any fraudulent misrepresentation, the debt will not survive Mr. Merenick's bankruptcy.
"Fraud is a serious allegation, and evidence to prove it must meet a high standard," she wrote.
B.C. Securities Commission records indicate that Mr. Merenick worked at Investors Group Financial Services Inc.'s Kelowna branch from June, 2004, to August, 2005. Investors Group changed its name to IGM Financial Inc. in 2004.
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Todd Merenick, a former salesman with Investors Group...
This scam is so old, so well known, I am amazed that this guy fell for it. I'll sure be on the look-out for his name when doing any due diligence - but probably won't need to, as I do very little research into what goes into the burgers at Rotten Ronnie's.
Posted by Dubious_Dan @ 2007-08-24 14:15
Those Nigerians are good, Im surprised Howe St. doesn't have a recruitment office there.
Posted by Du-Rag @ 2007-08-24 14:22
The judges ruling was correct. The bank went against their own rules for the sake of making some "fee" money. Sad for Mr Merenick, who should have known better. My question to both the bank and Merenick, is simply why not wait for cheque to clear?????? When it does or does not, proceed accordingly.
Posted by Marshall @ 2007-08-24 14:23
we all make errors and who really cares about the bank the banks have been messing with the cdn. public for generations and i recall my dad and mom loosing out farm in medicine hat so some fat banker could get fatter am glad someone beat the bank thanks ernest-----a farmer who knows what the banks are like
Posted by hope @ 2007-08-24 14:36
This is laughable to say the least. When you consider that this fellow worked as "Todd Merenick, a former salesman with Investors Group in Kelowna" but the article says later they changed their name to IGM Financial Inc., one has to wonder about the knowledge, of the people they hire, to do what was it, give other people financial advice????? Now their is a company I want to deal with and hand over my money to! Did they say he discussed it with his supervisor! Is this dumb and dumber or what? I just hope Todd wasn't the best sales guy they had, and it would be interesting to have listened to his advice from time to time. If this were not a true story, it would have to be a joke.
Posted by Eric Freeman @ 2007-08-24 15:43
Todd is such a disgrace. I think he had in on it. Anyways anyone want to buy my 10 million dollar winning lottery ticket?
Just wire $100,000 to me.. and i'll mail you the ticket. I cant claim the ticket becuase im not of legal age...
Posted by DGL @ 2007-08-24 17:16
I wonder if the guy owns CMKX too.
Posted by goLEEgo @ 2007-08-24 19:30
Warren Buffett said in effect that guys like this will lose your money. Guys who give you money advice and charge a substantial sum - whether you make money or not. None of us will ever believe Todd Merenick or anyone that is in such a position of giving investment advice could be so brain dead.
I have a friend who lost $500K to a guy he trusted here in Canada with a similar type of scenerio...investing in someone else's problem.
If someone's got a problem, make sure your money is not their solution.
Posted by Andrew C @ 2007-08-24 20:19
If the banks cannot run a proper fraud alert system within their group, how really safe is your money in their hands?
They just take, and blame the rest.
Just like the credit card fraud. That is an easy fix.
They just don't do it because of the high interest money cards.
Banks are just a legal "Money milking business."
Posted by Dave Hesler @ 2007-08-25 01:57
Just another example of human greed linking scammers, sucker and bank. It is impossible for me to believe that Todd did not know what was going on - especially if he remained 'suspicious' for such an extended time. Everything that transpired seems to have been carefully orchestrated. Though not accustomed to defending banks, I do feel that at the minimum, misrepresentation was used by Todd to clear the cheque quickly. He obviously knew the funds were suspect and as such should have informed the bank so that they could practice their due diligence. What I find truly interesting is how he thought he would survive once the cheque proved false!
Posted by Rob @ 2007-08-25 11:47
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The sender of this email was a partner in the FIRST COMMERCIAL ISP in Canada, Wimsey.com.
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