There is more litigation involving Coast lawyer and businessman Stephen Colson. I previously wrote about the financial scandal involving Colson. On Friday there was a federal court removal of an interpleader action involving Colson that was originally filed in Harrison County Circuit Court. The interpleader Complaint alleges that in February, Wachovia Bank froze over fifty bank accounts belonging to Colson or related entities and deposited the funds–over $1.5 million–into the Court.

The Defendants in the case include Colson, Colson’s businesses, Fidelity National Financial, Fidelity National Title Group, Lawyers Title Insurance Corporation and John Does 1-50. The Doe Defendants will allow Wachovia to add other parties who claim an interest in the funds. It would not be surprising to see parties with claims against Colson or his businesses intervene into the lawsuit.

The interpleader Complaint identifies all the bank accounts and their balances. The action states that in late 2008, many of the accounts were suffering overdrafts that Colson promised to rectify, but didn’t. The Complaint states that Wachovia investigated and discovered “unusual” transfers between the accounts in order to cover overdrafts. An interpleader action requires Colson and others with a claim to the funds to fight over the money in Court. The case has been assigned to federal district court judge Sul Ozerden.

The interpleader action is an ominous development for Colson. First, his companies’ bank accounts were emptied and frozen, presumably shutting down operations. Second, Wachovia is required by law to report certain suspicious activities to the government. There is background information on suspicious activity reports (SAR) here, here, and here. Banks get in big trouble for not reporting suspicious activities. There is little doubt that Wachovia alerted the government about this unusual activity and that an investigation is underway. The investigation could lead to criminal charges against Colson. Finally, getting out of line with a client’s money is a cardinal sin for lawyers. If Colson was improperly moving client funds from trust accounts to personal or business accounts, then the Mississippi Bar will impose severe penalties even if Colson escapes criminal prosecution.