transaction or let's start with the solicitation of investors in two thousand and five by the bank on behalf of our m g whereby the bank brought investors to provide to i'm g and their money was to be used solely to purchase clubs in asia for domestic resale in the united states let's reinforce that fact with the additional fact that the bank is the one i just mentioned it's that it's the knowledge by the bank that it knows investors are providing cash that's supposed to be used only by clubs in asia and those allegations can be found ye so these are the paragraphs is i understand where you allege the bank knows that investor funds were only to be put into loves right correct your honor ok that's important ok and that gloves were being purchased in asia or resold domestically so let's start with i've got to preface this this statement with the admission by the bank which i think is important and it's responsive brief page nineteen that it owed a duty to investigate i am g in relation to its lending obligations not its depository relationship with i m g which is what the district court focused on and what its shareholders the bank admits that it was nineteen of its but not to your folks not just a duty to investigate and understand because the district court was saying hey banks don't owe a duty to police deposit but this is a lending relationship which carries a whole different set of obligations on the part of the bank and the bank admits that includes investigating i am so getting to the fact that now where the bank realizes money is not being s misled how would it know i mean i i'm now getting right there how what is the allegations what are the allegations in your plate that suggest they know that no what is the allegation that suggests that they knew that there was no funds being sent to buy the gloves ok and if i can i can walk through a series i mean i'm  i can find in there where the bank who should have known that it was being repaid with investor funds now i'm nuts to be clear your honor this is not a should have known this is the bank n it was being repaid with investor funds because of mine or the accounts i can say that they solicited clients to invest in i am she then i handle the investment paperwork which seems to me that let them know that there was this was supposed to be put in for and loves i can say they obtained an assignment of g h m as payments for importing latex gloves requiring that all of them to be deposited in a lockbox of the bank i mean the banks control to pay down the interest and principal i can see where you are doing it monitored the accounts and actually trace to source the loan payments to if you will the different investors all of that before granting extensions they conduct audits and due diligence but again i'm trying to figure out where do i find it worth your allegation that they knew there was no money going outside to buy gloves ok i have the same question i might add casey there is dumb enough just so the ban knowledge of plate of smush come forward with facts to support the end friends of knowledge and benson points to the closeness of the relationship the longevity of the relationship the investigation and audit which is exactly what we have alleged here  and and i do want to get very quickly and run through some facts that i think her dressing like what i think i really think you have to respond to judge gray that's what i want because i'm giving you credit for stuff he would have made you go through your playin but there is one part i did never find i don't know where you get this idea that you played they knew that funds were not going ok i liked it so so let's let's let's look at this and  duty to investigate and then we have facts that demonstrate the bank elated lee did investigate after it had lent the money and it realized my goodness we let twenty million dollars to a fraud the bank face the right that's that's what they're audit shows now that other investor may be making a bridging loan it doesn't tell the bank that there are no gloves being bought  when the bank does its investigation you can see the accounts no money is going overseas not there are no gloves being purchased overseas and here's another fact that plays with that c b n t was the beneficiary of nine separate standby letters of credit pursuant to which it was supposed to provide financing to overseas glove manufacturers or their asian banks but the bank knew by two thousand and nine what you're saying is that there is an allegation the compl i mean the problem that you have i guess the judge bay is trying to focus on here is that you can suggest that the bank knows its get paid getting paid by investor funds because it has an account where the funds it's getting paid with their from the investor funds but the bank is not is not culpable for not going to find out what resource these funds are coming from especially when there is a if you will fund that is exactly at some of the end come fund outgo fund it's a big fund it's a great big account now i understand that there's a j m h m s payments it's in a certain lock spock account and i understand that it knows there that funds coming out of that have to go for interest and principal and no plame and sever came from there but that's the best you got well that's the allegation that there's no gloves actually doing resold which is which it knows is what investors are being told investors are being told you provide task we're going to use your cash to bring to purchase your marks shipments and loves overseas we're going to resell them no you're sas delegation you have is that they have an assignment of a j h m s account which is for the cash importing latex gloves and all of the money made from that have to go in this lock box account and because of this lock box account  and address the actual knowledge argument i want to rate you raise one issue which is raised in the brief which the court the district court cannot address but this court because de novo review can rule on any issue i want to raise an issue that i think is very  not think about it so all of the statutes limitations are three years or less and the securities fraud has a specific statute mutation which i'll trust in a second the complaint in this case was filed may twenty sixth two thousand and seventeen thus the claim ha that therefore the three years back is is may twenty sixth two thousand and fourteen but if the complaint was filed may twenty sixth two thousand and seventeen if you look at the facts in this case you had mr or mrs evans let alone fifty thousand dollars january twenty first  two thousand and thirteen mr want to quote he was arrested february twenty first two thousand and fourteen and he pled guilty may ninth may eighth two thousand and fourteen all of that is in the record specifically if you look at pages four forty nine to four sixty five of the in the record in this in the appendix so he pled guilty to wire fraud and there is nothing in the pled guilty now all of the statue of limitations are outside of that because that's that's may eighth so at that point plaintiffs will put on inquiry notice and under the norgate verses of john case which is twenty one cal forth three eighty three three page three ninety eight a plaintiff discovers a cause of action when he or she at a minimum quote suspects that someone has done something wrong to him or her so i understand where you're going it seems to me that now i have reviewed this what are you going to do with this delay discovery rule well the delay seems to me that this is the exact place to a question of fact and of we're going to go on to summary jeff summary judgment on the statue of limitations we are just back to district court to look very carefully your honor if you look at  the banks the all the bank accounts of stephen t are specifically identified this information was readily available to them they could have gone out and sought this information the fact that the bankruptcy was filed the fact that i'm g file bankruptcy so i think it's seven zero seven of the bankruptcy code they have an affirmative the trustee is affirmative obligation to provide them documents as creditors number two they could have taken a two thousand and four examination to inquire and information they knew there is none of that there's no facts whatsoever to c v t did anything after may of two thousand and fourteen and as to the securities fraud it's an absolute bar there's two statute  limitations applicable to the second claim for securities fraud one is a two year bar is no equitable tolling it's involved the date of the sale of the securities so january fourteenth as general twenty first two thousand and fourteen was when this the evans invested that means the statute would have run as a matter of law january twenty first two thousand and sixteen and the same thing with mr treadway his last investment was made december thirt would argue that same analysis applies on that you have any cases of say the statue of limitations on a fraud claim runs as to a plea of claiming to be defrauded if his fraudster has pleaded guilty also attached articles as well publicized the fact that he pled guilty and in this gentleman was a well known person in the community here on the sacramento capitals that type of thing this was not something that was that was kept from them what about the other pla pointed out j c you must have actual knowledge of the specific wrong that you have to have intentional participation with knowledge of the object to be obtained and there's two elements jeff to show knowledge and intent you have to know that representations they knew they were false they have to show in terms of the breach of fiduciary duty they have to show that the bank knew of the fiduciary status and knowledge that counterpart there is and are there is an allegation that your your client knew was being repaid with investor funds because of monitor the accounts there is an allegation that your client knew of the misconduct and the misconduct being that they were using these investor funds to buy good playtex gloves now overseas because your clients list  bank clients to invest in i am g your client handled the investment paperwork your client obtained an assignment of the j h m s of payments for importing the l wiring all of them to be deposited into this lockbox and under your control that the interest and principal only thing that would come out of that lockbox but never got any payments your client monitored the accounts and actually traced the source of the loan repayments of twelve point two million specific to the deposits by investors and before granting extensions claim client conducted audits and due diligence to demonstrate there was an actual evidence that the ob ago or possessed resources sufficient to provide all of the payments and that even your client traced one of the payments made by i m g to investor funds deposited in the wholesale account which then came on november fourth two thousand and nine then you accepted facially bogus purchase orders to get your nine million dollars immediately after the bank of america decided that the j m h m s line would expire then you presented those but purchase orders to the bank of america so you could get the nine million in credit and then as soon as you could get your loans repaid the end that says that those are his allegations now that doesn't say anything about you have to monitor anything that just says based on what you know about what's going in the counts to pay you and you know ing what is spose to be paying you and it was never that it was just investor funds now tell me why then i should dismiss count five a couple points first of all you have to look at this in terms of the context of these plaintiffs high understand that because mr mrs evans made their payments and two thousand and fourteen a month before mr want to point it was arrested at that point the bank's only depository institution there's no allegations that we did anything in two thousand and fourteen than if you look at mr trevor way he made he made deposits from september two thousand and seven until two thousand and fourteen and if you look at the math almost all that about one point six million out of his two million is after the bank is repaid so i think in terms of these particular plan is in terms of these actions you have to start with that well in terms of i guess i guess the problem i have is but there is already on the banks records enough allegations here to suggest they know there's no money coming into this to pay the bank because of what this guy says he's doing it's all coming from investor funds and none of that was done because you already duty to your deposit or all of that is simply because of the duty you old to yourselves that you wanted to make sure you got repaid and after wanting to be sure you got repaid it just mattered you got it and you knew very well it wasn't supposed to be out investor funds it was supposed to be out of latex gloves funds your own i don't know how one can say on this standard and we're talking about why how in the bank i mean that the district court said on this standard i mean i guess i'm trying to figure out  all i'm looking at now is it seems to me with casey what i'm looking at is do i know where the money's coming from if i don't there can be a lot of fishy stuff going on and there's no no duty required but if i know where the money's coming from then casey says i can go forward he says you have to have specific knowledge of the specific wrong well  funds coming from any gloves not at all coming from investor and you know the investor sales are supposed to be getting clubs outside the united states what is the specific wrong wholesale depository account open and long enough until two thousand and fourteen for the bank to get fully repaid and then long enough to hide the evidentiary connection between the knowledge of the ponzi scheme and repayment from it that's the allegation that you are that's a conclusion that's not facts what do you mean you look at if you get all these facts and you put them behind that allegation it makes a pretty specific your honor  actually think the tracing released of what one point nine million dollars which is doesn't there's not even detail about what that tracing is the solicitation of the bank customers alleged lists of haitian was in two thousand and five and the preparation of documents i believe the referring to the simply fact that the loan the bank gave a loan to the person to make the investment that doesn't constitute knowledge of a ponzi scheme that was before the loans were even made i mean it doesn't make any sense why he was running a ponzi scheme i think that's a jump in logic well that's only because they have an account that says all of money was supposed to come in to pay you is in this locks box account and therefore we know if you get any money and we're going to get it and no money ever came in and they never got it so the only thing they ever could have got was investment funds and they know why the investments are being made your honor with all due respect i believe the deposit margret's one transaction that's not the general account that they're talking about the forty for one deposit account as a general deposit account but i understand what you're talking about so if the bank received money in the pockets were made how is the bank supposed to know if it received payment if it was from investor money i understand there's an allegation that one point nine million was traced but how does the bank know that that investor didn't authorize the payment how do they know th specific payment was not allowed to be paid but i again we're on a motion to dismiss but but they have to plead facts they're your honor it is not for fraud claim to get to the courtroom door they have to meet minimum pleading requirements they have to plead fraud and stuff that dizzy because it is not enough to plead a fraud claim and say will discover it and plead facts later it is their burden to come before this identifies paragraphs two twenty six twenty nine i want to go to one of three one of those point two they point to october the october two thousand and nine letter and what does that say it just simply says i'm not going to renew their line of credit because a line of credit  amount it goes it's it's it's being repaid in other words here the money is drawn but there is that balance it's not going down it's not revolving it's a bank and it's common banking term but that doesn't mean that the bank knew that there was a lonely more money with the balances going down and no hoop in a revolving line of credit typically someone barrels of money so you buy a hundred or one hundred dollars and you your brow the hundred dollars and you keep making payments and that balance goes down it goes down to say ten dollars and then they decide they need to borrow more money so they borrow another ninety dollars and it goes back up to one hundred it's revolving going to try to briefly address the question about paragraphs and i do want to respond to a comment counsel just made paragraph one zero two of the complaint states due to its intimate connections with  how by the underwriting that that it owed in relation to the twenty plus million dollars that it had loaned to the bank when the bank realized that the security behind the nine million dollar loan in two thousand nine was disintegrating and that security is the reason the bank was lax in its diligence to begin with the bank let the money without knowing there was a fraud i just want to point that out he made that case i agree with it the bank did not lend knowing i and she was a knowledge on the part of the bank so the bank see the security of the federal government going away in two thousand and nine and the bank says oh we never really looked at this now we may not get repaid let's take a look they look at the accounts they can see no money going overseas that's the underwriting i'm talking about in paragraph one zero two same in paragraph one thirteen where i say based on c b and t s knowledge of i am g s quote unquote business it's knowledge that no wholesale gloves were being imported and it's knowledge that the jamie g h m s was not paying for any purported sales because the lockbox account remained empty that paragraph what we're describing is a situation where the bank twenty million dollars without doing the due diligence so it didn't know there was a fraud but then when the securities started to evaporate the bank said oh we've got a problem they look into it they can see two hundred million dollars plus of investor money coming in none of that going overseas all that being reorganized and redistributed back to californians a ponzi scheme that's in two thousand and nine the bank immediately sends the letter the council mentions which he says where they cut off their landing three days after they get repaid the nine million dollars so let's look at what happened in that three days the bank goes to want equality goes i have g e desperate because it knows that the federal government guarantee of the largest loan that nine million dollars loan is falling apart and the bank says we're in trouble give us your purchase orders and the bank already knows from looking at the accounts that no money is going overseas the bank takes pieces of paper that purport to represent purchases of gloves overseas that the bank knows did not happen gives those pieces of paper to bank of america to draw down how do i know you dollars on the stand by letter of credit  gave due to his intimate connection with i m g as well as his underwriting and diligence in relation to its own financing correct you're not telling me the facts conclusions the inferences are not stated maybe what i should have done is written a complaint stating the inference is that i don't think that's what benson required me to do but i can do that and i do think it was an abuse by the court to dismiss without a grant of leave to met to a when it had in the record before it the seventy nine page declaration from f b i agent artley and the bankruptcy trustee information which details the financial shenanigans the bank went through in order to get repaid and i do want to comment that well out so says hey it's no big deal if we got paid a little bit with investor funds they have no claim based on that i take big issue with that the bank knew that investor funds were supposed to go to asia and only to asia  gloves the bank traces back repayments of its own loans to investors i don't care if it's a dollar off if the bank is taking money that it knows wasn't trusted to i m g to buy gloves how can the bank turn a blind eye and and those those are statements that the banks underwriting i i just want to be clear the first and easiest step that the bank could take in its underwriting was a look at the accounts that control it can see all this money that he may have sent otherwise then the bank knows the laws are not being bought when i was not sure i understood that but what i'm saying is the bank can look at the account see two hundred million dollars coming in from investors in the bank as he concedes new in two thousand and five all that money was to go overseas you can see none of it going over so you're going back here in the morning and your unspoken premise is that it knows the money is not going overseas because the man who pleaded guilty is taking it out of the bank they doesn't know what he's doing with it but they know it's not going to go overseas i was really gave the push those two things together if it goes to mr want to go to me one point two million it is paying attention what did the purchase orders show the purchase order showed turner ok good question because the bank has in in the complaint it details the materials that the bank has including the operating agreement which specify the way that glove purchases were supposed to happen and they included certain terms bills of lading and those were not tracking it all with the glove purchase orders that the bank handed off to b of a get repaid its nine million dollars no no no it was apples and oranges also the bank knows that the nine slots in its favor were supposed to be used by it to buy gloves overseas and it wasn't doing that so the bank knows not only is investor funds coming in a huge increment switch it knows are supposed to buy i mean we're talking containers shipment containers and i'm going to couple of boxes of clothes these people are putting in millions of dollars and all of that money is supposed to go to buy a ship full of gloves that's going to come over the united states of be sold to the v a instead thousand dollars to mr smith twenty five hundred dollars to di keating or you know just making up names thousands of tiny checks back to californians the bank is doing its due diligence because it sees the security that it was relying on when it made these loans is disintegrat that's two thousand and nine it then recruits all of its money from that moment in time all the way up until two thousand and eleven it then leaves the accounts open for three additional years which counsel claims is exposed to tori he points to that says oh we wouldn't have left the account open for another three years if we had known it was a fraud that must mean we didn't know it was a fraud know that suppose that inference is totally incompatible with the other known facts of the case the much more reasonable in ence under benson is that the bank knew like all ponzi schemes would collapse and it was just hoping that the thing would ride out long enough so that the distance in time between its misconduct and the inevitable bankruptcy would be big enough so the trustee would not connect the dots and come back to the bank seeking to claw back the money thank you very much was the counsel for the interesting presentation we conclude our calendar for the day we will stand in recess until nine o'clock to morrow morning