Declaration of Michael J. Letson in Support of Defendants Memorandum — In re BofA Unemployment Litigation (Dkt. 350-7)

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U.S. District Court for the Southern District of California · No. 3:21-md-02992-GPC-MSB · Doc. 350-7 · 2024-10-24 · Docket on CourtListener

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EXHIBIT 6
FILED 
PROVISIONALLY 
UNDER SEAL WITH 
REDACTIONS 
PURSUANT TO 
STIPULATED 
PROTECTIVE ORDER
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JAMES W. MCGARRY (pro hac vice) 
JMcGarry@goodwinlaw.com 
GOODWIN PROCTER LLP 
100 Northern Avenue 
Boston, MA 02210 
Tel.: +1 617 570 1000 
Fax: +1 617 523 1231 
 
SABRINA M. ROSE-SMITH (pro hac vice) 
SRoseSmith@goodwinlaw.com 
MATTHEW L. RIFFEE (pro hac vice) 
MRiffee@goodwinlaw.com 
GOODWIN PROCTER LLP 
1900 N Street, NW 
Washington, DC 20036 
Tel.: +1 202 346 4000 
Fax: +1 202 346 4444 
Attorneys for Defendant  
BANK OF AMERICA, N.A. 
 
UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF CALIFORNIA  
SAN DIEGO DIVISION 
IN RE: BANK OF AMERICA 
CALIFORNIA UNEMPLOYMENT 
BENEFITS LITIGATION, 
 
Case No. 3-21-md-02992-GPC-MSB 
DECLARATION OF MICHAEL J. 
LETSON IN SUPPORT OF 
DEFENDANT’S MEMORANDUM 
IN OPPOSITION TO PLAINTIFFS’ 
MOTION FOR CLASS 
CERTIFICATION  
Date: January 17, 2025 
Time: 1:30 p.m. 
Ctrm: 2D – 2nd Floor  
Judge: Hon. Gonzalo P. Curiel  
 
FILED PROVISIONALLY UNDER SEAL 
PURSUANT TO STIPULATED PROTECTIVE 
ORDER 
 
 
 
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I, Michael J. Letson, hereby declare as follows: 
1. 
I am employed by Bank of America, N.A. (“BANA”) as Managing 
Director in Global Financial Crimes (“GFC”) leading Detection and Complex 
Investigations, and have served in this role since May 2023.  Prior to that, I served as 
Head of GFC’s Financial Crimes Analytics from February 2019 through May 2023.  
2. 
I make this declaration based upon personal knowledge and belief, upon 
BANA’s records maintained in the ordinary course and scope of business, and upon 
information gathered from other BANA employees within the scope of their 
responsibilities.  If called to testify as to any of the matters set forth in this declaration, 
I could and would competently testify thereto. 
3. 
In my role as Managing Director, I manage the GFC business operations 
group at BANA whose mission is to lead the efforts of the institution to detect and 
deter criminal misconduct and fraud and support compliance with the Bank Secrecy 
Act and anti-money laundering (“BSA/AML”) obligations.  Based on my various 
positions at BANA, especially my current and prior roles with GFC, I am familiar 
with—and in many instances developed, directed, or implemented—BANA’s fraud 
detection capabilities and efforts, including its use of anti-fraud strategies.  Through 
2020 to early 2023, I was directly and personally involved in BANA’s response to 
fraud, money laundering, and other crimes specifically targeting BANA’s prepaid 
cards issued as part of State unemployment insurance (“UI”) programs, including 
California’s Employment Development Department (“EDD”) UI program. 
4. 
In my role at BANA, I am familiar with BANA’s BSA/AML 
responsibilities, including BANA’s obligation as a national bank to detect, to report, 
and to take reasonable steps not to permit fraud or attempted fraud using BANA’s 
products and systems.   
 
 
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BANA’s Fraud Prevention Responsibilities and Strategies 
5. 
As a national bank, BANA has a statutory and regulatory obligation to 
take efforts not to permit BANA’s products and systems—including BANA UI 
prepaid cards—from being used as instruments of fraud, money laundering, other 
criminal activities.  Under the BSA and other anti-money laundering laws, 
regulations, and guidance, this includes the requirement to monitor transactions and 
to report on suspicious financial activity.  BANA’s Fraud Operations Team, as well 
as GFC, which is under my supervision, exercises responsibility in this area, and part 
of their function is to design and implement affirmative strategies to identify and 
deter likely fraud while the abuse is being attempted. 
6. 
 
 
 
 
 
 
 
 
 
. 
7. 
Any fraud strategy can impact persons whose card activities or 
observable characteristics appear to be fraudulent or suspicious but are not, in fact, 
fraudulent for a particular cardholder.  In my experience, it is never BANA’s 
intention to inconvenience valid benefits recipients; however, no fraud strategy is 
100% effective at identifying only fraudulent activity.  That is in the nature of 
reasonable strategies (like the Fraud Filter described below), which are an important 
tool used for fraud deterrence across the American economy. 
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8. 
At all times when assessing and implementing fraud strategies across all 
of BANA’s products (including UI prepaid cards), BANA’s goal has been to protect 
legitimate consumers while not permitting the Bank to be used as an instrument of 
fraud 
 
.  To strike 
this balance, 
 
 
. 
9. 
As a reasonable control to help keep the Bank from being used as a 
means of fraud, BANA has historically used and continues to use tactics to 
 
 
 
 
 
 
 
 
 
.   
BANA’s Observations of Fraud During the Pandemic 
10. 
Throughout the pandemic, in compliance with its obligations under the 
BSA, BANA reported to and watched for guidance from Financial Crimes 
Enforcement Network (“FinCEN”), and took efforts to prevent fraud, money 
laundering, and other criminal activity using BANA’s financial instruments and 
government relief funds.  FinCEN is a bureau of the Department of the Treasury.  
FinCEN is the primary federal authority responsible for safeguarding the financial 
system from fraud and other forms of illicit use; for collecting, and analyzing and 
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disseminating financial intelligence; and for implementing and enforcing BSA and 
AML requirements.  FinCEN is the United States partner with other countries’ 
similar agencies that coordinate in the detection and investigation of financial crimes 
worldwide.  BANA also worked closely with federal and State law enforcement, 
counter-terrorism agencies, financial regulators, and other stakeholders as part of 
those antifraud efforts.   
11. 
BANA’s efforts were commended by FinCEN and other law 
enforcement agencies on a number of occasions, in which the agency wrote to BANA 
to recognize its contributions to reporting and investigations, including investigations 
specifically “related to fraud associated with COVID-19 relief programs.”  
12. 
Starting in Spring 2020, BANA observed, and was informed by law 
enforcement agencies and other third-party sources of massive fraud and illegality in 
UI programs and affecting BANA prepaid cards issued to distribute benefits for UI 
programs in 12 states.  The fraud was different in type and in scale from anything 
BANA had seen previously in its UI prepaid programs.  In my professional 
experience, the scale of this fraud and misuse was unprecedented.  These sentiments 
appear to be shared by law enforcement: the then-chief of Secret Service 
investigations Jeremey Sheridan pronounced that pandemic-era unemployment 
benefit abuse was “the largest fraud scheme that I’ve ever encountered.”  ‘Easy 
money’: How international scam artists pulled off an epic theft of COVID benefits, 
NBC, Aug. 15, 2021, https://www.nbcnews.com/news/usnews/easy-money-how-
international-scam-artists-pulled-epic-theft-covid-n1276789.  This was not a 
situation where fraud was more common simply because the programs had grown 
larger. Instead, the pandemic created opportunities for benefits eligibility and 
unauthorized transaction claims (“Error Claims”) fraud types that had not been 
prevalent before and, in the case of benefits eligibility fraud, was not even possible 
on a wide scale before. 
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13. 
Beginning in May 2020, the volume of events generated by BANA’s 
Anti-Money Laundering Prepaid Card Monitoring model increased significantly.  In 
total, 
 
 
  
14. 
Also in May 2020, BANA was first alerted to benefits eligibility fraud 
when the U.S. Secret Service issued an alert about massive fraud being perpetrated 
against state unemployment programs.  BANA also began to receive information 
from federal, state, and local law enforcement alerting it to 
 
 
 
 
 
 
15. 
Ultimately, law enforcement uncovered criminal conduct stretching 
across the globe, and domestic networks of “money mules” who occupied themselves 
all day long with applying for unemployment or making cash withdrawals using 
wrongfully obtained BANA UI prepaid cards.  PUA fraud also occurred within 
California’s state prison system, as BANA observed (and California’s State Auditor 
and various news organizations later reported) that an estimated $810 million in 
benefits was fraudulently obtained by prisoners making fraudulent unemployment 
claims.  As of January 2021, California’s State Auditor estimated nearly $10.4 billion 
in fraudulent claims.  Subsequent reports have estimated in excess of $32 billion of 
unemployment benefits were stolen and illegitimately issued in California. 
16. 
The GFC team immediately met and spoke dozens of times with federal, 
state, and local law enforcement to understand the burgeoning problem and how it 
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could impact UI prepaid cards and conducted its own investigation of fraud across 
all of the State UI Programs.  
17. 
Despite BANA’s best efforts, 
 
 
 
 
 
 
 
 
 BANA nonetheless worked hard to 
tailor its fraud detection and prevention strategies to the activity and behaviors it 
could observe. 
18. 
As part of its response to the significant increase in suspicious activity 
seen in the first six months of the pandemic, the GFC team analyzed 
 
 
 
 
 
 
 
 
 
 
 
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19. 
GFC looked beyond just data. BANA also reviewed 
 
 
 
 
 
 
  Others were brazen enough to put out detailed instructions on YouTube 
and various social messaging platforms (e.g., What’s App) detailing how to file 
fraudulent benefits claims with EDD.  Still others made music videos on YouTube 
bragging about having defrauded EDD, including one waiving EDD envelopes and 
describing submitting fraudulent claims until their account was frozen, and another 
set entirely in front of a BANA financial center and ATM terminal bragging about 
“cracking EDD” and committing fraud against “BA”.  See “Bandemic (E.D.D.)” by 
Shoreline Mafia, available at https://www.youtube.com/watch?v=vut-17KzZJk (last 
accessed Oct. 17, 2024); “EDD” by ShotOff & Nuke Bizzle, available at 
https://www.youtube.com/watch?v=K0ck7hTsug8 (last accessed Oct. 17, 2024). 
20. 
These sources of information, 
 
 demonstrated 
concerning patterns and characteristics of cards, cardholders, and transactions 
indicative of an extremely concerning level of benefits enrollment fraud in the EDD 
program.  
21. 
GFC’s and law enforcement’s investigations in the first six months of 
the pandemic yielded 
 
 
 
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22. 
To combat the staggering levels of UI fraud, BANA 
 
 
 
 
 
 
 
 
 
 
23. 
BANA soon came to realize that 
 
  
 
 
  Public reports also began to emerge that 
EDD was unable to manage the avalanche of unemployment claims.  As a report 
issued by the United States House Committee on Oversight and Accountability 
recently explained: 1 
 
1 H. Comm. on Oversight and Accountability Majority Staff, Examining 
Widespread Fraud in Pandemic Unemployment Relief Programs (Sept. 10, 2024), 
https://oversight.house.gov/wp-content/uploads/2024/09/UI-Report-FINAL.pdf. 
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EDD staff under Su’s leadership adopted a ‘pay and chase’ 
model and processed incoming claims quickly; EDD staff 
understood that less time should be spent on checking 
eligibility of claimants as this would slow down paying out 
benefits. This led to many bad actors like international 
organized crime and individual criminals cashing in while 
eligible claimants were unable to obtain their benefits. 
By mid-September 2020, the Governor shut down EDD so it could take two weeks 
to implement a new process to fight fraudulent applications for benefits and clean a 
backlog of pending applications.  See EDD Announces Reset in Response to Strike 
Team Recommendations to Process Claims Faster, Reduce Fraud and Tackle 
Backlog 
Issue, 
EDD, 
New 
Release 
No. 
20-49, 
Sept. 
19, 
2020, 
https://edd.ca.gov/About EDD/pdf/news-20-49.pdf. 
24. 
To further combat the staggering level of UI fraud and to meet its 
responsibilities under BSA/AML laws, BANA has 
 
 
 
 
25. 
BANA’s fraud strategies for these UI programs, developed in the 
pandemic, have 
 
 
 
 
 
 
 
 
 
 
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BANA’s Research, Development, and Implementation of the Fraud Filter 
26. 
Beginning in June 2020, Error Claims submitted on UI prepaid cards 
generally, and EDD prepaid cards specifically, began to climb significantly, 
 
 
27. 
Around that time, 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
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28. 
GFC also identified 
 
 
 
 
 
  
 
 
 
 
 
 
29. 
BANA’s experienced fraud detection specialists concluded that the 
 
 
 
 
 
30. 
In the late summer of 2020, the GFC and GIS teams were jointly tasked 
with 
 
 
  At the time, these teams and 
I were concerned that BANA’s cards and systems were being misused to commit 
fraud and money laundering and anticipated that an effective strategy could greatly 
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assist BANA in meeting its BSA/AML responsibilities, while at the same time, trying 
to minimize the number of legitimate cardholders impacted. 
31. 
GFC’s and GIS’s joint assessment concluded that 
 
 
 
 
 
 
 
 
 
 
32. 
To identify and combat fraud that could be identified at the point of a 
claim, BANA developed and implemented the “Fraud Filter.”  The Fraud Filter is a 
 
 
  
 
 
  
33. 
 
 
 
 
   
34. 
At the time the Fraud Filter was implemented, in late September 2020, 
it was our belief and judgment that 
 
 
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35. 
 
 
 
 
36. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
37. 
 
 
 
 
 
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38. 
As of June 9, 2021, BANA discontinued using the Fraud Filter to close 
Error Claims. 
 
I declare under the penalty of perjury that the foregoing is true and correct.  
 
Executed on this 23rd day of October, 2024. 
 
By:  ________________________ 
MICHAEL J. LETSON 
  
 
 
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