Ex-bank CEO tipped off client on money-laundering probe, talked sensitive info — as underling sat on his lap during video call: suit

The former CEO of Flagstar bank allegedly tipped off a client to a money-laundering probe and discussed sensitive company information — as an underling sat on his lap and rubbed his head during a video conference call, according to a federal whistleblower lawsuit.

Alessandro DiNello, who headed Flagstar after it merged with New York Community Bancorp in 2022, was accused of engaging in the bizarre behavior during the Zoom call with lawyers from the prestigious firm Skadden Arps in early 2024, the lawsuit filed last week in US District Court of Eastern District of New York claims.

Ross Marrazzo, who worked as enterprise chief compliance officer at what is now Flagstar Financial, claims claims he was fired by the bank after investigating DiNello for allegedly engaging in financial crimes, including money laundering and insider trading.

According to court documents, another executive who witnessed the video call reported the incident to Marrazzo as a whistleblower complaint and provided screenshots as evidence.

The lawsuit states that DiNello, whose stint as CEO lasted just a few months before he stepped down in April of last year, had “a clearly-visible junior NYCB employee sitting on his lap and rubbing his head” during a sensitive legal discussion.

Marrazzo alleges in the lawsuit that he reported the troubling incident to the bank’s audit committee chair, triggering an investigation by outside counsel from law firm Cravath Swaine & Moore.

However, the compliance officer claims DiNello faced no discipline because board members dismissed the episode as merely a “misdemeanor,” according to the complaint.

When Marrazzo questioned why no action was taken, he was told that outside lawyers advised management there wasn’t a company policy prohibiting such behavior, the lawsuit claims.

He was also allegedly informed that DiNello “would have sued” the bank “and it would be a mess” if he was terminated.

“The Complaint alleges behavior ranging from alarming to brazenly illegal,” Michael J. Willemin, an attorney from the firm Wigdor LLP representing Marrazzo, told The Post.

“Financial institutions may not be permitted to operate above the law, nor should employees be punished for trying to uphold it.”

The Post has sought comment from DiNello, Skadden Arps and Cravath Swaine & Moore.

The lap-sitting allegation is just one of several explosive claims in Marrazzo’s lawsuit, which paints a picture of a bank executive who allegedly flouted regulations and retaliated against those who tried to hold him accountable.

The complaint also alleges that DiNello interfered with money laundering investigations and threatened to fire Marrazzo for following federal banking laws.

In one instance, when the bank’s monitoring systems flagged suspicious transactions involving illegal deposit structuring, DiNello allegedly pressured Marrazzo to keep the account open and even suggested warning the client about the investigation.

“I would do it again,” Marrazzo allegedly told DiNello during a private meeting, referring to his decision to close the suspicious account in compliance with federal regulations.

DiNello’s response, according to the lawsuit: “I would fire you if you did.”

The legal filing claims DiNello had spoken directly to the client whose account was under investigation, potentially violating federal “tipping” rules that prohibit banks from alerting customers to suspicious activity reports.

Marrazzo was fired last September as he was conducting a sensitive investigation into DiNello’s own financial dealings.

The compliance officer had been examining suspicious transfers involving DiNello’s personal accounts, including a $5 million payment to another individual followed by a $1.7 million return payment.

The lawsuit alleges these transactions raised red flags about possible money laundering or insider trading violations. Marrazzo was terminated before he could complete the investigation and potentially notify government authorities about his findings.

According to court records, DiNello claimed he had simply “lent” the money to an “old friend” with no documentation for the multi-million-dollar transaction.

The money initially went to a limited liability company’s bank account, but DiNello received the return payment from his friend’s personal account, raising additional concerns about the transaction’s structure.

Flagstar Financial, formerly known as New York Community Bancorp, has faced significant regulatory challenges in recent years. The bank acquired both Flagstar Bank and assets from failed Signature Bank between late 2022 and early 2023.

Signature Bank had been taken over by federal regulators due to regulatory issues and criminal activity in its portfolio.

Marrazzo, who has over 40 years of experience in regulatory compliance, joined the bank in 2022 and initially received positive reviews and bonuses for his work addressing the institution’s compliance challenges.

He was even asked to take on additional responsibilities as Interim Chief Risk Officer in early 2024.

The lawsuit seeks damages under the Sarbanes-Oxley Act’s whistleblower protections, claiming Marrazzo was fired in retaliation for his compliance efforts.

He is also pursuing breach of contract claims, alleging the bank owes him $333,333 in unpaid severance payments.

Marrazzo initially filed a complaint with federal workplace safety regulators in January before bringing his case to federal court. The lawsuit requests reinstatement, back pay and damages for emotional distress and reputational harm.

NYCB completed its acquisition of Flagstar in December 2022, forming a combined institution with nearly 400 branches and a broadened national footprint.

Just three months later, Flagstar — now operating under NYCB — acquired $38 billion in assets and $34 billion in deposits from failed Signature Bank after regulators seized it during a historic bank run.

Signature’s collapse stemmed from poor governance and overexposure to uninsured crypto-related deposits, with nearly 90% of customer funds unprotected.

The rapid expansion strained Flagstar’s balance sheet and led to financial instability by early 2024, forcing the company to rebrand as Flagstar Financial.

Today, the institution remains one of the 25 largest banks in the US but continues to navigate the risks tied to its aggressive growth strategy.