Imagine a bank CEO, during a critical legal Zoom call, with a junior employee on his lap—while discussing sensitive matters. This is just one shocking allegation in a federal whistleblower lawsuit against Alessandro DiNello, former CEO of Flagstar Bank, filed by Ross Marrazzo, the bank’s ex-chief compliance officer. The suit paints a disturbing picture of misconduct and financial impropriety at one of America’s largest banks.
According to the New York Post, the lawsuit, filed in the US District Court of the Eastern District of New York, accuses DiNello of inappropriate behavior, interference in money laundering probes, and potential insider trading, while claiming Marrazzo was fired for exposing these issues.
Flagstar Bank merged with New York Community Bancorp in December 2022, later rebranding as Flagstar Financial. Shortly after, between late 2022 and early 2023, the bank acquired $38 billion in assets and $34 billion in deposits from the failed Signature Bank, which collapsed due to poor governance and risky crypto exposure. This rapid expansion strained Flagstar’s balance sheet, setting the stage for internal turmoil.
Marrazzo, with over 40 years in regulatory compliance, joined Flagstar in 2022 and initially earned praise for tackling compliance challenges. By early 2023, as the bank absorbed Signature’s troubled assets, concerns about governance grew. DiNello, who became CEO post-merger, stepped down in April 2023 after a brief tenure. But during his time, allegations of misconduct surfaced. A particularly bizarre incident occurred in early 2024 during a Zoom call with Skadden Arps lawyers.
In this call, a junior NYCB employee was allegedly sitting on DiNello’s lap, rubbing his head, while sensitive legal topics were discussed. Another executive reported this to Marrazzo, providing screenshots as evidence. It’s a scene that raises serious questions about professionalism at the top.
Marrazzo reported the incident to the bank’s audit committee chair, prompting an investigation by Cravath Swaine & Moore. Shockingly, no disciplinary action was taken against DiNello—board members dismissed it as a minor issue. Outside lawyers even noted that no company policy banned such behavior.
Management also warned Marrazzo that firing DiNello could lead to a messy lawsuit against the bank. This apparent protection of leadership over accountability is a red flag for investors who value strong governance.
More troubling, the lawsuit claims DiNello interfered with money laundering investigations. He allegedly pressured Marrazzo to keep open an account flagged for suspicious transactions tied to illegal deposit structuring and even suggested tipping off the client. This potential violation of federal “tipping” rules is no small matter.
DiNello is accused of directly speaking to the client under investigation, risking serious legal breaches. Marrazzo faced threats from DiNello, who reportedly said, “I would fire you,” if he closed the account. Marrazzo stood firm, later stating, “I would do it again.”
Separately, Marrazzo investigated suspicious transfers in DiNello’s accounts, including a $5 million payment to an “old friend” with no documentation, followed by a $1.7 million return from a different account. These transactions—between a limited liability company and a personal account—raised concerns about money laundering or insider trading.
Before completing this probe or notifying authorities, Marrazzo was fired in September 2023. The timing reeks of retaliation, especially given his role as interim chief risk officer by early 2024 and prior positive reviews.
The lawsuit seeks damages under the Sarbanes-Oxley Act for whistleblower retaliation, alongside breach of contract claims for $333,333 in unpaid severance. Marrazzo also requests reinstatement, back pay, and compensation for emotional distress. His attorney, Michael J. Willemin, stated, “Financial institutions may not be permitted to operate above the law.”
For investors, Flagstar Financial’s story is a cautionary tale of aggressive growth and weak oversight. The bank, among the top 25 in the US, faces risks from its strained balance sheet and rapid acquisitions like Signature Bank’s toxic assets. Consider scrutinizing governance before investing in such institutions.
Due diligence is key—monitor Flagstar’s regulatory updates and leadership changes. If governance failures persist, safer bets might lie in banks with proven compliance records. Wealth-building demands vigilance, not blind trust in big names.