A former compliance executive at the bank sued Alessandro DiNello, saying the ex-CEO knew of a client’s money laundering and discussed sensitive information while a “junior employee sat on his lap.”

Reported by Rajashree Chakravarty

(Excerpt show below. To read full report, go to: https://www.bankingdive.com/news/ex-flagstar-ceo-alessandro-dinello-accused-of-illegal-conduct/756595/)

Former Flagstar CEO Alessandro DiNello is accused of allegedly being aware of a client’s money laundering activities and discussing sensitive company transactions over a virtual conference while a “junior employee sat on his lap.”

The complaint was filed Tuesday by Ross Marrazzo, the one-time enterprise chief compliance officer at the bank who was terminated before he could conclude an investigation related to money laundering and insider trading allegations and report the findings to the appropriate government entities, according to the lawsuit.

“While Marrazzo investigated and raised many clear ethics complaints as part of his role, his termination was a brazen attempt to block an investigation into DiNello,” Marrazzo’s lawyers wrote in the lawsuit filed in the U.S. District Court of Eastern District of New York.

Marrazzo, a 40-year veteran in the regulatory compliance field, worked at New York Community Bank, which merged with Flagstar in 2022 and adopted the Flagstar name last year.

At NYCB, he monitored the lender’s ethics program and was involved in reviewing ethical violations and breaches related to federal laws and regulations.

In March 2023, NYCB bought a large segment of the failed Signature Bank for nearly $2.7 billion. In March 2024, as NYCB faced financial problems, the bank’s CEO resigned and the board installed DiNello as chief executive. (Since the NYCB/Flagstar merger, DiNello had been serving in a non-executive capacity.) But DiNello’s tenure as NYCB’s CEO was short-lived. He stepped down in April 2024, when Joseph Otting took the helm.

Following the leadership changes, Marrazzo – who had previously led remediation efforts for Signature Bank’s regulatory issues – headed multiple investigations involving DiNello, the lawsuit noted.

In February 2024, the bank’s anti-money laundering system flagged a client for illegal “structuring” of deposits. After Marrazzo’s investigation confirmed at least three instances of the activity, he informed DiNello that the account needed to be closed. DiNello urged Marrazzo to keep the account open and suggested informing the client about the investigation – a violation of federal regulations, the complaint noted.

Marrazzo closed the account, but later discovered DiNello had personally contacted the client about their “gambling problem,” according to the lawsuit. This communication may have constituted illegal “tipping,” according to the suit, and violated the Bank Secrecy Act.