A Maryland community bank and an Alabama company accused of running a pyramid scam have filed dueling lawsuits in a tangled Web tussle.

The battle revolves around the allegedly unauthorized transfer of $6.7 million - now frozen - into the bank by Powercard International Inc., a multilevel marketing company, and alleged falsehoods about where the money came from.

Powercard, of Daphne, Ala., sells so-called Internet shopping malls for about $400 each. The buyers are encouraged to direct friends and family to buy products from the malls - which feature links to prominent retailers, such as OfficeMax, CVS, and Golf Warehouse.

The bank - $717 million-asset Columbia Bank in Columbia, Md., - fired the first shot in the legal skirmish. It sued Powercard and a McLean, Va., electronics funds transfer firm for transferring some $6.7 million into the bank without permission.

The bank froze the funds, prompting Powercard to countersue, saying the move had pushed it to the brink of failure. Powercard filed suit May 5 in U.S. District Court in Baltimore seeking access to the funds and other unspecified damages.

"You can imagine what the loss of $6 million has done to Powercard's viability," said Powercard attorney H. Kenneth Kudon, who is based in Potomac, Md.

Though Powercard is still in business, Mr. Kudon said the company would like to have money available to refund to customers - but that this is impossible if the funds are frozen.

Columbia said Powercard made unauthorized withdrawals from customers' accounts and then lied to bank officials when they asked about the money's origins. In a quarterly report filed May 15 with the Securities and Exchange Commission, the bank called Powercard's suit "meritless."

Michigan Attorney General Jennifer M. Granholm is weighing legal action against Powercard, asserting that its business plan amounts to an illegal pyramid scheme.

She said customers of Powercard, which does business as KM.net, earn income "primarily from recruitment, and not through the sale of products." Michigan law requires participants in multilevel marketing programs to make money from product sales as well as from recruitment.

Ms. Granholm is negotiating a settlement with Powercard, a spokesman said.

In an April 10 filing in U.S. District Court, attorney Dennis P. McGlone, who is representing Columbia Bank, said the bank was told that the money had come from Powercard's business dealings with Fannie Mae, Freddie Mac, and Sallie Mae.

In actuality, he argued, Powercard had withdrawn $399.95 each from the bank accounts of about 17,000 customers without obtaining proper authorization from the Automated Clearing House - an electronic payments network. According to court documents, Columbia froze the money because it "was in doubt as to the proper owner of the funds."

An official close to the bank added that Columbia has used its own funds to return more than $100,000 to Powercard customers who asked for their money back. Columbia has filed a claim seeking to recoup all of its expenses from the frozen funds. Mr. McGlone would not comment.

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