3 Nov No Comments MikeT Expert Matters, Theft of Checks Payable

Facts: The plaintiff was a country club engaged in the selling of new country club memberships and resort homes. The manager of the country club entered into an agreement with a local real estate agent to misappropriate funds resulting from the sale of new memberships.  The real estate agent opened a “doing business as” account a local bank in a name substantially similar to that of the country club.  The manager of the country club then diverted checks payable to the country club to the real estate agent who deposited the checks into his “doing business as” account at the bank.  Over a several year period, some $700,000 in checks were diverted and deposited at the bank over forged endorsements of the payee.

Client: The bank.

Subject of Expert Report: Whether or not the bank acted with ordinary care and in accordance with the reasonable commercial standards of the banking business in (1) opening the checking account for the real estate agent in the “doing business as” name, and (2) accepting for deposit into the account checks payable to the order of the country club.

Outcome: The case settled a few days prior to trial.