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A Circuit Court civil fraud suit involving defunct Smith Advertising, filed earlier this year by Regions Bank against investor Marvin Kaplan, has been transferred to federal court in Tampa.
Federal Judge Elizabeth A. Kovachevich, who presided over a massive real estate flipping fraud trial earlier this year, is slated to oversee the case, which now involves RICO — racketeering, influence and corrupt organization — allegations, court records show.
Federal prosecutors have used RICO charges to stymie and dismember organized crime groups.
Regions’ lawsuit involves more than $24 million in high-yield I.O.U.s issued by North Carolina-based Smith in return for capital raised by local investor groups.
In January, Regions filed suit against Kaplan, a Sarasota entrepreneur, alleging he kited checks by making withdrawals on an account that lacked sufficient funds.
Kaplan was among those who lent Smith money at high interest rates.
Those loans resulted in the flow of millions of dollars between Smith’s Bank, Bridgeview Bancorp, of Illinois, and Kaplan’s account at Regions.
The alleged check kiting occurred when Kaplan wired money to Smith’s account based on Smith checks, which bounced. Kaplan maintains the bank had granted him special withdrawal privileges and that he did not kite funds.
In the spring, Regions added Smith as a defendant.
Kaplan countersued in May, alleging fraud, conspiring to commit fraud, racketeering and corruption. His lawsuit listed Regions, Bridgeview, Charles L. “Larry” Starr III, Smith, and its principals, G. Todd Smith and Gary T. Smith.
Bridgeview was served with lawsuit papers on Aug. 6, which prompted Regions to attempt to shift the case’s venue. Federal court allegations can include racketeering, which cannot be considered at a local level.
Meanwhile, a second Sarasota-based investment group that raised money for Smith, Receivable Management Funding, has filed its own lawsuit against the ad firm.
Both Regions and Receivable have already won default judgments totaling $24 million from Sarasota judges. Receivable, which includes Starr, won a judgment for $17.6 million against Smith; Regions obtained a payment order for $6.4 million, plus interest.
Smith has thus far not responded to any of the complaints or orders against it, which form the basis for the federal case.
Smith closed its Fayetteville headquarters in March, ending three decades of business on behalf of a hospital and regional tourism promotion agencies, including one in Charlotte County. Almost a decade ago, the firm also was the “agency of record” for Sarasota County’s convention and visitors bureau.
The U.S. Secret Service seized computers and files from the office shortly after Smith closed.
In Regions’ federal lawsuit, Kaplan is listed as a defendant, along with the Smiths and Bridgeview.
Wells Fargo is listed as a defendant, too, because Kaplan transferred some of the questionable funds there from Regions.
This week, Kovachevich granted more time for defendants to respond to Regions’ complaint.