[ by Melanie Gretchen ]

Royal Bank of Scotland Group Plc's NatWest unit won a lawsuit in which a former hedge fund manager held the group responsible for his loss of £20 million ($31.3 million) in a Ponzi scheme.  Jeremy Stone, a former portfolio manager at Marble Bar Asset Management LLP, alleged the bank and an employee, Paul Aplin, were negligent for not spotting suspicious activity.

In his lawsuit, Mr. Stone sought as much as £26 million ($40.7 million) against the unit, which operated accounts used in the fraud.  However, Judge Philip Sales did not sympathize with his plight or that of his family members who were employed by his investment firm, Jeremy D. Stone Consultants Ltd.  Their testimony was biased by "a strong impulse to think" someone else must be to blame, the judge wrote in a ruling today.  Contrary to Mr. Stone's claims, Mr. Sales said Mr. Alpin is an honest man and the bank is not at fault for using automated systems to detect fraud.

The Financial Services Agency, the U.K.s financial regulator, continues to investigate the alleged Ponzi scheme.  Mr. Stone alleged that Jolan Saunders, 36, and Michael Strubel, 50, carried out the fraud through companies that said they sold electrical equipment to hotels.  Their firms made as much as £300 million ($469 million).  Saunders, who is facing criminal charges, allegedly funneled money from company investors to pay back loans and interest to other investors.  To date, the Serious Fraud Office made 5 arrests 2010, with no charges made, and continues its investigation into the company at the center of the allegations, Essex-based Saunders Electrical Wholesalers Ltd.

The case: Jeremy D. Stone Consultants Ltd., Jeremy Stone v. National Westminster Bank Plc, Paul Aplin; High Court of Justice, Chancery Division; HC11C00276.

For further details, go to [Bloomberg, 2/11/13] and [Bloomberg, 6/12/13].