5 Aug No Comments MikeT Expert Matters, Theft of Checks Payable

Facts: The plaintiff owned and operated a large environmental services company in Delaware. Unknown to the plaintiff, the plaintiff’s accountant opened an account in the company’s name in a bank in New Jersey. The bank in New Jersey was supplied with appropriate account opening documents and other evidence of the accountant to act. The accountant then misappropriated a series of checks payable to the Plaintiff and deposited these checks into the fraudulent account at the New Jersey bank. He then transferred the funds to his personal account at another bank in Pennsylvania. Many months later, the United States Attorney’s Office in New Jersey became aware of the ongoing misappropriation of the funds and convened a grand jury to investigate the accountant’s activities. A grand jury subpoena was served on the bank and the bank was provided with additional information by the FBI that identified the checks being deposited by the accountant as the target of the grand jury’s investigation. The bank took no action against the accountant nor did it attempt to stop the deposit of the misappropriated checks. After the Plaintiff became aware of the misappropriation, it filed suit against the bank claiming that the bank should have prevented the deposit of the stolen checks after it was notified of the ongoing theft of the checks.

Client: The Plaintiff company

Subject of Expert Report: Whether the defendant bank negligently (1) failed to perform a the proper investigation of the accountant’s activity when it did not investigate the checks being deposited; (2) failed to make an inquiry to the FBI to attempt to ascertain the specific nature of the wrongdoing; (3) failed to provide a copy of the federal grand jury subpoena or otherwise inform the accountant of the grand jury investigation; and (4) failed to “freeze” the account of the accountant or otherwise block or prevent the deposit of the checks payable to the order of the plaintiff into the account of the accountant following the service on it of the grand jury subpoena.

Outcome: The case settled shortly before trial.