Obtained A Full Recovery Of $750,000 From A Major California Bank For Negligent Payment
Fraudulent Checks Drafted On A Client’s Business Account
This firm obtained, through settlement, a full recovery of $750,000 from a major California Bank for negligent payment of fraudulent checks, wrongfully drafted on the business account of our client. Our client employed a bookkeeper who over the course of many years routinely drafted fraudulent checks to herself and third parties. Her purpose in doing so was to embezzle company funds by converting these checks to cash and/or deposits to her personal account.
The Bank failed to recognize and respond to classic fraud indicators inherent in these embezzlement transactions. The Bank tenaciously defended every aspect of the case, arguing that it bore no duty of care to our client and that it would prevail on summary judgment. The Bank insisted that California Law so plainly favored its case, that little to no risk existed in the matter actually proceeding to trial.
In California, a complex statutory scheme exists to guide the rights and obligations of both Banks and their account holders. California Bank statutes are not, however, dispositive of all potential embezzlement liability. To the contrary, Bank conduct and the nature of embezzlement activity must be carefully analyzed to determine whether actual Bank liability exists. In the referenced case, Bank operating procedures, training and management practices were identified and evidence concerning the insufficiency of such procedures and practices was submitted to the Court in opposition to the Bank’s summary judgment motion. Based on the evidence submitted, the Court found issues of Bank liability for negligent payment of the fraudulent checks.
The Bank failed to obtain its summary judgment and was instead ordered to trial. The Bank then dramatically altered its settlement position, raising its offer from a low five figure sum to a high six figure sum, resolving the legal action. The Bank’s payment comprised the approximate amount of all embezzled funds. A judgment was also obtained by this firm against the employee embezzler for other damages caused to our client, in an amount of $499,000.