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Wells Fargo must pay $1.15 million to woman wrongly arrested by FBI

11/19/2002

San Diego Union Tribune

Paula Whitsell was at her desk in Wells Fargo’s branch in Chula Vista when the FBI burst in, put her in handcuffs and led her past a line of stunned customers and bank clerks.

Five years later – long after federal prosecutors dropped their charges – arbitrators with the National Association of Securities Dealers last week awarded Whitsell $1.15 million after finding that Wells Fargo had made the mistake that led to her arrest.

“I’m elated,” Whitsell said. “The first order of business is to pay off all our bills, since we’ve been living a lot on credit cards since all this happened. The money will be very welcome.”

Wells Fargo spokeswoman Joanne Licausi said it is against corporate policy to discuss litigation.

Whitsell’s problems began in October 1997 as the Federal Bureau of Investigation was cracking down on insurance fraud along the border. In a broad sweep, the agency tabbed 17 doctors and five associates in Tijuana and San Diego County for allegedly defrauding U.S. insurance companies.

Convinced that bankers were helping doctors launder their ill-gotten cash, an FBI agent posed as a doctor, making large deposits in border banks. The agent deposited more than $10,000 with Whitsell – a securities consultant at the Chula Vista branch – and Minerva McGregor, a teller.

Due to a filing error, the deposit was not reported to federal authorities, as required by law for such large deposits. So Whitsell and McGregor were arrested on money-laundering charges.

“The FBI treated us like we were criminals and the bank refused to help us, even though we knew it had to have been some mistake that the bank had made,” Whitsell said. “Between crying nonstop and trying to figure out what happened, the whole thing was a nightmare.”

After being subjected to half a dozen strip searches, the two middle-aged mothers were tossed into jail for two days, sharing a cell with a tattooed murderer who boasted how she and her boyfriend had just bludgeoned to death an elderly couple in Ensenada.

Over the next two months, Whitsell determined how the mistake had been made. The deposit form had become separated from the IRS slip, which had been misfiled. After the bank found the slip, prosecutors dropped all charges against the women.

But the story did not end there.

For the next 13 months, Wells Fargo kept Whitsell on administrative leave, paying her $1,500 a month – a fraction of her previous salary. She could not find securities work elsewhere, because the bank had written a notation on her U-4 form – which authorizes securities work – blaming her for the filing mistake.

Wells Fargo rehired Whitsell 15 days after she filed an arbitration claim with the NASD. But, she says, the bank “put me through the wringer, putting me in a branch that was half the size of my other branch, cutting me off from my clients, putting me under constant supervision.”

After a few months, Whitsell was officially fired. Unable to find work in the securities field, she now writes mortgages for a living.

Last Friday, the NASD arbitrators assessed $900,000 in damages against Wells Fargo, as well as $250,000 in attorneys’ fees. In addition, the bank was ordered to put a new notation on Whitsell’s U-4 form: “Paula Whitsell was arrested and indicted because of an error caused by Wells Fargo Bank and because of no fault of her own.”

McGregor, the Chula Vista teller, has also won an undisclosed settlement from the bank, said Philip Aidikoff, Whitsell’s attorney. She is now working at Mexico’s Banco Popular, where many of her clients had migrated after her arrest.

Despite her victory, Whitsell is afraid the money-laundering charge will continue to haunt her. In an Internet search for her name, the first item that comes up is an FBI press release boasting of her arrest. No press release was issued when the charges were dropped.


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