On April 5, 2019, Cohen Milstein and Co-Lead Counsel filed an amended complaint in the Northern District of Illinois, Eastern Division, on behalf of Lead Plaintiff, Norfolk County Retirement System and all others similarly situated who, from February 11, 2014 through November 8, 2018, inclusive, purchased shares of MoneyGram International, Inc., in Khong Meng Chew v. MoneyGram International, Inc., a putative securities class action filed under the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. The Lead Plaintiffs opposed MoneyGram’s motion to dismiss and are awaiting a decision from the Honorable Martha M. Pacold.
On February 12, 2019, Cohen Milstein was appointed Co-Lead Counsel in this class action. Cohen Milstein’s client, Norfolk County Retirement System, was appointed as a Lead Plaintiff.
MoneyGram International, Inc. (NASDAQ: MGI) provides money transfer services in the United States and internationally through a network of approximately 350,000 agent locations. Consumers send funds through transactions initiated online or at a self-service kiosk at agent locations.
In October 2009, MoneyGram resolved FTC allegations that it had assisted fraudulent telemarketers by failing to take appropriate measures to refuse fraudulent money transfers. As part of the resolution, the FTC issued an order requiring MoneyGram to establish and maintain a comprehensive anti-fraud program. Similarly, in November 2012, MoneyGram entered into a deferred prosecution agreement (“DPA”) with the DOJ after it admitted to “criminally aiding and abetting wire fraud and failing to maintain an effective anti-money laundering program.” According to the DOJ, corrupt MoneyGram agents engaged in “mass marketing and consumer fraud phishing schemes.” Under the DPA, MoneyGram agreed to heightened compliance obligations, including anti-fraud programs.
Plaintiffs allege that despite years of assurances that MoneyGram was building a successful anti-fraud compliance program, including appropriate training for agents and employees, the Company failed to meet its obligations under either the 2009 Order or the DPA. On November 8, 2018, the FTC announced a $125 million settlement with MoneyGram based on the Company’s violations of the 2009 Order. As the FTC detailed, MoneyGram failed to implement key provisions of the 2009 Order. “As a result, MoneyGram’s system continued to be used by fraudsters around the world to obtain money from their victims.” Specifically, the FTC charged:
- MoneyGram knew certain agents were engage in “high levels of fraud and suspicious activities,” but failed to conduct reviews or take actions to suspend or terminate such agents,
- MoneyGram’s computerized fraud monitoring system malfunctioned for 18 months in 2015 and 2016;
- MoneyGram failed to properly vet its agents or train its employees to detect and prevent fraud; and
- MoneyGram failed to record data on fraud-induced money transfers and share it with the FTC.
On November 9, 2018, investors learned the financial implications of MoneyGram’s anti-fraud failures. Announcing third quarter 2018 financial results, the Company reported a 15 percent decrease in money transfer revenue due to “the impact of higher compliance standards and newly implemented corridor specific controls.”
MoneyGram shares fell from $4.47 on November 8, 2018 to $2.27 on November 9, 2018, representing a decline of 49 percent.
Case Name: Khong Meng Chew v. MoneyGram International, Inc., Case No.: 1:18-cv-07537, United States District Court Northern District of Illinois, Eastern Division.