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Customers Sue Bank to Get Back CD Money Stolen by the Bank's Employee


As reported by the CU Times, "Nearly 50 credit unions, municipalities and pension funds have filed suit against Iowa-based MetaBank to recover $4 million in allegedly stolen certificate of deposit funds." A former MetaBank employee pleaded guilty to the theft. Employee theft at a bank is troubling, but what is much more troubling is that the bank's customers are having to sue to get back their deposits and interest. Here's an excerpt from The Des Moines Register:
MetaBank said "it does not appear at this time that she stole any bank money as part of this fraud," but the bank says there are still "unresolved questions as whether, under what theory and to what degree the bank might be liable for the former employee's actions."

Another thing that makes this case troubling is that the customers victimized were financial institutions. One would think they had professionals making and verifying the deposits at MetaBank.

I find it hard to believe that MetaBank didn't quickly pay the affected customers of all of their deposits and interest. With this publicity, who would trust MetaBank with their money? I'm also surprised that MetaBank's regulators didn't require them to immediately make their depositors whole. An attorney for one of the affected credit union's made a good point in The Des Moines Register article:
"Frankly, it would undermine the entire banking system if a bank is allowed to refuse to pay back deposits on the basis that someone thereafter stole them, especially when the thief was one of their own branch supervisors,"

You might think that the FDIC would protect depositors in his case, but FDIC insurance does not cover losses due to theft or fraud. One important thing you can do to protect yourself is to check your balances online and check your statements monthly. As described by the OCC's website:
Your deposit account agreement states that it's your responsibility to review your periodic statement and advise the bank of any errors. Generally, you have 30 days from the statement date to find the error and notify the bank.

This might not help if the criminal employee is able to falsify the statements and the online balances. Another thing that may help is avoid dependence on any one bank representative. Dealing with multiple employees can make it harder for one rogue employee to get away with fraud. Please leave a comment if you have any other advice on how to prevent being a victim of this type of fraud?

Update 7/15/09: 2008 press release in which MetaBank described the theft.

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  |     |   Comment #1
A couple of very rare typos from BG:

effected -> affected (twice)

rouge -> rogue
Banking Guy
  |     |   Comment #2
Thanks! They're fixed now.
  |     |   Comment #3
I used to laugh when I heard about the "old days", when people put their money in a mattress because they did not trust banks. The more I read, the less I laugh.
Data Is Gold
  |     |   Comment #4
Mike then this story should put a smile/frown on your face.

  |     |   Comment #5
The mattress story is a self-fulfilling prophecy. I've seen similar stories before, and have little sympathy for the people who befall such a fate. People who are SO obsessed with losing their money that their radical, paranoid actions result in exactly that happening. Too bad, but you brought it upon yourself.
  |     |   Comment #6
It is quite interesting to also read the comments from the IA newspaper articled linked above.

We are sadly, familiar with this case. You have an interesting quote that Metabank said "no bank money was stolen". Metabank never cared about the 50 or so client's that expected them to hire trustworthy employees. The 50 clients who purchased the CDs were Metabank's customers as well. Does Metabank care about any of their clients? Further more, according to the FDIC, when you make a deposit at a bank, you are immediately covered and protected... Unless your money is stolen.

We had actually contacted the FDIC multiple times. After all, they released a Bill of Rights this year that basically said your deposit is safe and insured as long as it is under the FDIC insurance limits. Banking Guy points out, the FDIC does not cover loss due to fraud or theft (I've also heard a rumor that they don't cover deposits if the building is destroyed by fire). The fact is the FDIC only covers deposits if the bank fails. The FDIC basically always said, it wasn't their problem.

More amazing about this case, is monthly checks were sent out to each depositor, each month. The checks always cleared. The clients received safekeeping receipts and many rolled over their CD, year-after-year. There was never any reason to believe fraud was going on. It is so hard to believe that this went on so long, undetected.

The newspaper article also has an interesting quote from Metabank about justice being served now that she has pleaded guility. Justice has not been served.. There are still about 42 clients that have not had their $99,000 returned.

You do make a great point about the dangers of only working with one bank employee. Far too often, you think you have a good contact at a bank so you always call them about issues. Occasionally, calling someone else would be a good idea. However, once the funds have been stolen, it is too late.

I do wonder if other banks would have behaved any differently. After all, if the FDIC isn't going to pressure them, who will.

Hopefully, now that the case is getting press, Metabank will do the right thing and return the funds (and of course cover the attorney fees that clients have had to incur up until this point). I would also hope that some serious changes can be made so that cases like this are not allowed to drag on for so long.
Mike Morse
  |     |   Comment #7
I would like to nominate Chris CD to be the head of the Consumer Watchdog post that the Obama Administration ought to create. He could be the Big Dog watching out for all us little guys (if you consider $40 million credit unions "little guys"). Well written comments!
  |     |   Comment #8
This article should really make us all stop and consider its implications. FDIC does not cover employee theft. Any suggestions, other than generic check your account, which is an after the fact discovery? Do we now need to ask a bank if we are covered, as customers, by their “blanket bond?” Could a CSR even answer that question? Does this issue mean we might have to return to distinguishing national banks for state banks? Is the issue different for credit unions? Any insight into this issue is appreciated
  |     |   Comment #9

I won't be much help here. First, I don't believe an employee would know the answer. And even though, banks and credit unions carry a bond on their employees and insurance policies against losses such as fire, that doesn't mean the policies will pay. In this case, the claim was made, but the bonding company refused. Personally, I don't really blame the bonding company, after all for about 18-months, no charges were even filed. Were they supposed to take the bank's word for it?

Secondly, I believe the NCUA operates the same way as the FDIC. They are only insuring your funds against closure of the institution.

Finally, I don't think it would matter whether it was state chartered or nationally chartered.

To be honest, in all of my years in this business, I had never run up against a situation like this. But, that doesn't help the 42 customers who are now affected.

The only insight would be a letter writing campaign to the FDIC and your elected officials. The FDIC should have gotten involved. The depositor shouldn't be put on hold until the case is solved. The depositors were able to prove in a matter of days that they had all wired in funds and had safekeeping documents. They are the innocent victims. Some sort of law should be added that funds have to be returned within a reasonable time frame, like 90-days.

The fact is that controls that are in place at banks should be sufficient. Most banks have a two or three-tiered system for handling wires and changes to accounts. I really don't believe most people need to worry about their deposits. But some changes to the law could secure and protect them more.
  |     |   Comment #10
Everyone who has an account with this bank should close their accounts as soon as possible and tell customer service it's because of how they did not make restitution to the accounts that had monies stolen, this will send a clear message to the bank to do the right thing or they will be forced out of business.
  |     |   Comment #11

Hmm looks like plenty of comments about "FDIC should", "Bank should" compensate the innocent victims.

Well ... Why should FDIC? Why should the bank?

Imagine a scenario where you are in a bank a few thieves hold-up the bank, and while at it steal money in your pocket. Should the bank/FDIC pay for this?

Imagine a scenario where you are virtually in a bank a few bank employees turn thieves and do a virtual hold-up at bank, and while at it they steal money from your account. Should the bank/FDIC pay for this?

An employee turned thief is no different than a thug turned thief. The thug may use a gun and am employee-thief may use a pen (or a phone) to carry out the task.

In any case theft is a separate matter than error in bank's own processing/handling of transactions or the collapse of the bank.

Oh yes ... and if the Bank were to really compensate these 42 customers, then it is not as if there are no victims. The victims then are the innocent shareholders of this bank's stock.

Oh yes ... and if the FDIC were to really compensate these 42 customers, then also it is not as if there are no victim. The victims are millions of innocent banking customers who pay into the pool of funds makes the FDIC fund.

So ... What do you think ?

Steven William Leak
  |     |   Comment #35
FDIC isn't responsible for the personal theft from their pockets,billfoads and such however they are responsible for a crooked bank manager who defrauds elderly customers  since the bank has their money in trust,and the bank is liable for the personal theft or any physical harm to anyone within their bank. If FDIC is not responsible their really isnt much good in worrying about doing business with a FDIC bank since FDIC usually will only insure banks if they fold.
  |     |   Comment #12
Snippy back!
  |     |   Comment #13
I think so. If not, it may be his twin.
  |     |   Comment #14
@ 5:42 -- A more appropriate example would be a customer depositing cash through a teller, then the teller taking the cash. Any distinction between "the bank's money" and "the customer's money" is irrelevant after the duly authorized agent of the bank (the teller) accepted the deposit. Metabank seems to be getting terrible legal advice, probably from a law firm with a vested interest in protracted litigation.
  |     |   Comment #15
@ 5:42 PM:

Agreed. If I'm a shareholder of this bank then I don't want to pay for this theft.

I think your example is correct. As a shareholder I buy insurance for theft. My insurance does not exclude employee-thief, anymore than it excludes a street-criminal or internet-hacker.
  |     |   Comment #16
@5:42, in the case of a robbery, the bank does have insurance that will pay the bank. Given, the nature of a direct robbery, I'm guessing the claim-to-payment time frame is somewhat quick. Also, in the case of a robbery, no one in particular had their money stolen, but it was the bank as a whole. What I mean, is the cash is not marked to belong to this depositor vs. that depositor.

In the case of theft, companies are liable for their employees. If an appliance repairman steals from me while he is fixing my appliance, then the company is liable. If the employee damages something, the company is liable.

In the banks case, the employees are bonded, and the bond company should have paid out. However, as no charges were filed for about 18-months, what exactly was the bond company supposed to pay-out on. The bank's word?!?

The 42-customers wired money into the bank. That should be treated the same as if they walked-in and handed the cashier a check. Either way, the funds could still be stolen. Having to wait 18-months to have your money returned is ridiculous. Having to sue is even more ridiculous. If a bank is robbed, you don't have to wait to make a withdrawal, or write a check, etc. This should be no different.

I'm not saying the FDIC should pay, I'm saying they should have intervened or legislation should be in place that allows them to intervene.

I am saying, the bank is responsible for the actions of their employees. They hired them. Their controls or lack there of allowed the theft to occur and carry on for a number of years. And although, they carry insurance and bonds to cover such, when that process has broken down, they should step-up to the plate. If I were a stockholder, I would seriously question the quality of the people representing my investment. One bad apple can certainly hurt the investment. As a stockholder, I would be seriously concerned about why controls weren't in place or how they broke down if they were. I would rather my bank step-up and gain in reputation, vs. hide behind procedures and law suits.

I would say there is a big difference between a Thug and an employee turned Thief. The bank didn't (I hope) hire the Thug. The bank did hire the employee and the bank's controls and processes failed.
  |     |   Comment #17

1) As an employer I conduct background check before employing people.

2) I also make employees sign various agreements on their first day one of which is that you will not engage in criminal activity.

3) I have internal/external auditors perform their audits.

4) I pay for insurance to cover various types of thefts.


Despite all this ... you expect me to pay? ... Well I disagree.

And when I disagree, I don't go to any Tom, Dick or ChrisCD to settle thru a blog-site. Instead I allow a judge to decide in the court of law!

  |     |   Comment #18
What is scary is that a bad employee can transfer almost all of the money out of the bank and nobody will be responsible for it.
Fraud, theft, embezzlement and number of other creative mischiefs can render the bank insolvent and FDIC will just wipe their hands off of it.
Nice banking system we have!!!!!!!
  |     |   Comment #19
Hey ChrisCD,

If your housekeeper gets his hands on your mail/documents, and steals your identity and runs up charges in your name, then just because he has done it in your name would you "step-up" to the plate and "do-the-right-thing" and pay-off the bills that are in your name?

Or would you tell the supposed creditors of your, that there is a crime here, that your are not responsible, that they should go after your housekeeper.

If the creditors still insist that it is your fault that you employed this housekeeper-thief, so you got to be responsible and pay-up. Then what?

Would you pay-up or would you tell them to sue?

Well ????

  |     |   Comment #20
If the bank goes bankrupt becaue of crime (internal or external), does FDIC then step in and make it all good? (i'm scared of whole system now). Did someone say that there is other insurance that takes care of this crime type of loss? thanks.
  |     |   Comment #21
Banking Guy how can your readers be sure this is not happening to us? Is it good enough if our on-line balances are correct? Do we need to have paper statements? Can both of those look OK and correct, but the bank or CU still comes back and tells us our money is not really there?

This is scary stuff. There is a lot about it I don't yet understand.

Guessing: Did the perp steal only from NON-individuals because such entities as CUs, pension funds, and municipalities were/are less likely to check their accounts and statements? less likely to call in and speak with a person other than the perp him/herself? And what if they had??
  |     |   Comment #22
"Nobody ever lost a dime at an FDIC-insured institution" . . . . until now. Boy, what consummate horsesh**. This is amazing. If you want to telephone the FDIC and tell them what you think of the value of their so-called "insurance", here is the number:


I just called them and was politely received.

If we deposit CD money legitimately and cannot recover it at time of maturity, the reason why does not make a lot of difference. If the FDIC does not provide coverage in certain circumstances, then there **** well should be a disclaimer to that effect in large letters next to each and every FDIC symbol. This situation borders on absurdity. The FDIC: WABOA!
  |     |   Comment #23
@10:34 -- So you won't stand behind your company, unless forced? And for the record, the clients have not gone to any old Tom, Dick, Harry, or ChrisCD. They are going through a judge and hoping for their day in court. But, 18-mos is a little excessive.

@10:56 -- As I hit submit the last time, I had to ask myself, what would I do. And it might take me the rest of my life, but I wouldn't hang others out-to-dry. Of course, I would pursue what the law affords me, too. But, as most of us that use credit cards do, I have placed a certain amount of faith in their fraud loss dept and insurace, but when all was said and done, I would make sure things were whole.

We all place a lot of trust and faith in our banks. My profession and livelihood depend on banks being trustworthy and honest. But if the banks and companies of the world are going to take the route of pointing the finger elsewhere until we all turn to dust, it is just a little scary.

For the record, I have deposits at multiple banks and I'm not going to panic and rush out and withdraw all of my money. I just believe some changes can be made to make us feel better about our bank deposits.
  |     |   Comment #24
My Dear ChrisCD,

>> But, 18-mos is a little excessive.

Are you a citizen of US? Don't like the delay in our justice system? ... Well ... get off your butt & do something about it. ****ing about it on the blog ain't going to buy you nothing.

  |     |   Comment #25


>> Of course, I would pursue what
>> the law affords me, too.

Hmm ... so is the bank!


  |     |   Comment #26

>> We all place a lot of trust
>> and faith in our banks.

Speak for yourself. Don't speak for others.

I place my faith in my God & my trust in the US Constitution.

Banks? Trust & Faith? A lot of it? ... Are you dreaming?
  |     |   Comment #27
Chris CD,

>> My profession and livelihood
>> depend on banks being trustworthy
>> and honest.

We certainly don't envy your profession! Perhaps we pity it and you because you have it.

>> We all place a lot of trust and
>> faith in our banks.

Yeah ... right!

Have they started giving out money with "In Banks We Trust" printed on yet?

  |     |   Comment #28
This was a interesting discusion, several good points being made. Why has it stoped? Mr. Onions has stolen our blog!! Wa Wa Wa Steve CD..... T-R-U-S-T
  |     |   Comment #29
My understanding is that an 'agent' relationship, which is a strictly-legally-defined term, is a relationship wherein the agent can enter into contracts on behalf of the principal, and that these contracts are as valid as if entered into by the principal directly. Analogies to a thug or bank-robber are not correct in that a bank-robber is not an authorized agent of the bank he is robbing. As the thefts occurred by a duly authorized agent of the bank the bank is clearly liable in this case. The FDIC has nothing to do with this, since the bank has not failed. The bank is clearly liable for the actions of its agent, and it seems that they were insured against criminal actions by that agent, so in court this should be a slam-dunk. If justice is to be completely served then plaintiffs should also be awarded restitution for all legal costs, and if the court awarded punitive damages along the way I certainly wouldn't object. The bank owes its customers the money, and the bonding company owes the bank the money. Unless the bank fails the FDIC has nothing to do here. Legally, it's a no-brainer, but morally, for those trying to sleaze their way out of their legal responsibilities, it's pathetic.
  |     |   Comment #30
What will stop the CEO or the president to transfer all of the customers money out of the country in a secret bank accounts and close the doors.
They disappear and enjoy the stolen money. FDIC shrugs off the shoulders and says: tough luck, it is not our responsibility.
End of the story......
  |     |   Comment #33
Yes I am having a hell of a time getting anyones attention to the fact that a bank manager (primer client manager) shuffled our money from one account to another without permission she closed cd accounts early causing loss of interest and fees she opened new cds and would purposely put the money into an account out side of our trust the cds would no longer reflect on our babk statments and the other employees had a hard time finding the $100,000.00 missing I can tell for sure in one instance were she does a lot of shuffling she withdraws 100,000.00 cd and only deposits $60,000.00 in our checking account Without my permission and 40,000.00 is missing and there is more she has done.
  |     |   Comment #34
And, the FDIC said what?
  |     |   Comment #36
For 50 years, I banked in Los Angeles, CA buying mostly Certificates of Deposit from various banks.  I know how to compute CDs and cannot remember one time when the LA banks secretly removed money from my CD accounts.  That is not true in Kalamazoo, Michigan where every LAND bank takes a certain amount every (or every other) month.  When I complain, some of the Michigan banks stop their thievery for a month or two--and then carry on as before! 
  |     |   Comment #37
What do the banks call it?  Clearly it is being disclosed.  Why are you still banking there?

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