From State Bar of Wisconsin, “An employee embezzled about $34 million from her employer through banking transactions. The employer sued the bank, asserting a violation of the Wisconsin Uniform Fiduciaries Act, but a state appeals court recently upheld dismissal of the case.
Koss Corp. sued Park Bank after learning that one of its employees, Sujata Sachdeva, used the bank to siphon millions of dollars over 12 years. Sachdeva was ultimately convicted on multiple criminal charges, but Koss sued the bank to recover losses.
Koss maintained numerous accounts at Park Bank. Sachdeva, who worked in Koss’s accounting department, drew funds on those accounts with cashier’s checks she was authorized to request. A signature was not required to obtain the checks, and the bank allowed Sachdeva’s assistant to request them on Sachdeva’s behalf.
Sachdeva used the cashier’s checks to pay personal creditors, including high-end retailers. During a five-year period, she requested 359 cashier’s checks.
She also wrote 43 checks drawn on accounts payable to Koss’s “petty cash” box and requested numerous wire transfers despite the absence of a wire transfer agreement with the bank, which had policies against wire transfers absent an agreement. The bank wired more than $16 million to pay Sachdeva’s personal credit card bills.
In 2009, an American Express employee called Koss’s CEO to report that funds had been wired from Koss’s account to pay Sachdeva’s credit card bill, which uncovered the scheme. She pled guilty to federal wire fraud and received 11 years in prison. The court ordered $34 million in restitution but, of course, Sachdeva did not have that money.
Koss filed a lawsuit against Park Bank, arguing the bank violated Wisconsin’s Uniform Fiduciaries Act (UFA) by ignoring “red flags” and violating its own policies. To prove a UFA violation, there must be evidence that a party acted in bad faith.”