6 Jul No Comments MikeT Theft of Checks Payable

Facts: The plaintiff corporation operated a medical care facility. It retained the services of a medical billing corporation to process and send invoices to insurance carriers and to receive and process checks remitted by the insurance carriers to pay for the services. The sole shareholder of the medical billing corporation initiated a scheme to misappropriate checks payable to the plaintiff received from the insurance carriers, falsify the accounting records of the plaintiff corporation and to deposit the checks over forged endorsements of the plaintiff corporation into an account of the medical billing corporation at the defendant bank.

Client: The plaintiff corporation.

Subject of Expert Report: Whether or not the defendant bank failed to act with ordinary care and in accordance with the reasonable commercial standards of the banking business by accepting a series of some 90 “double-endorsed” checks payable to the plaintiff corporation for deposit into an account of the medical billing corporation. In addition, assuming that the defendant bank was negligent for so doing, whether or not the defendant bank breached its duty of “good faith” by accepting the checks for deposit with ““good faith” being defined as “honesty in fact and the observance of reasonable commercial standards of fair dealing.”

Outcome: The case settled before trial.