Bank of America sued for aiding and abetting

Two local companies, one shuttered, claim bank allowed misappropriation of vendor funds

Call it an egregious case of the left hand not knowing what the right hand is doing.

Two local construction firms have sued Bank of America in Davidson County Chancery Court, claiming the bank aided, abetted and conspiratorially assisted a former — and now fired — bookkeeper steal more than $200,000 slated for company vendors.

A brief summary of this case follows including cursory details of an elaborate but surprisingly simple embezzlement scheme that might still be working if not for a clerical error made by the alleged perpetrator.

On Jan. 1, 2010, Mark IV Enterprises, a locally based contractor, succumbed to the well-documented economic collapse of 2008-2009 and closed its doors. The fallout was particularly hard on the nation’s real estate and construction industries and Middle Tennessee couldn't escape the deleterious economic backlash.

Mark IV had employed a bookkeeper, Susan Bennett, whose responsibility was to track and receive payments for services performed and to pay bills for expenses incurred. The 47-year-old was also responsible for preparing deposits and writing checks for payments made on behalf of Mark IV and after its demise, Legacy Project Resources.

The same principal, Tonya Jones, owned both Mark IV and Legacy.

Bennett was laid off in 2009, along with all other Mark IV employees. Jones hired Bennett back under the Legacy moniker to perform similar bookkeeping work, but this time on a temporary basis. No problems existed until early 2011, when Jones received a complaint from a Mark IV vendor. An invoice had not been paid.

Jones reviewed Mark IV records and determined that the vendor was mistaken, had been paid and that the check to the vendor had cleared the company’s Bank of America account. Jones contacted BofA to get a check copy. She then discovered that the vendor’s check had indeed been deposited into a Bank of America account, as she’d been told, but that it had not been endorsed.

After further looks, Jones discovered the vendor’s check had been deposited to Bennett’s personal account. Appropriately alarmed, Jones investigated some more and discovered that Bennett had created dummy invoices for services and was paying vendors for actual services performed before then depositing the check for the fake invoice from the same vendor into her personal account.

Genius – until one is caught, of course. Bennett’s tomfoolery came to a screeching halt at the moment she made a small clerical error. She forgot to pay a vendor.

The vendor called to complain. Game over.

Bennett had allegedly carried out the same scheme with both Mark IV and Legacy Resources, applying the same methods of deception to each enterprise. Legacy’s losses totaled nearly $7,500. Mark IV’s losses exceeded $200,000, obviously contributing to its demise.

According to the Nov. 15 complaint — which is available here — Bank of America deposited all checks to third party vendors into Bennett’s account. This deception occurred for an estimated three years and under the oversight of three separate employers, the complaint states.

Bennett was arrested in June 2011. A review of the inmates held in Davidson County jail Friday confirmed that Bennett is confined in the minimum-security area and awaiting trial.

Mark IV and Legacy are being represented by Nashville lawyer Jean Dyer Harrison of the Harrison Law Group. Harrison could not be reached by midday Friday.

Mark Miller, shareholder in the Nashville office of Baker Donelson Bearman Caldwell & Berkowitz PC, does not represent the parties in this case but is a banking law expert.

Miller said fraud cases typically involve rogue employees who divert company dollars by depositing account receivable dollars into their personal accounts, a seemingly much easier deception than rerouting dollars earmarked for vendors. This is why Bennett had to pay the invoices twice but still doesn’t address how the bank let this deception go on for a three-year period.

Local attorney Andrea Taylor McKellar of the McKellar Hyde PLC represents Bank of America in this matter but would not comment on the case, citing client confidentiality.

McKellar’s most recent legal response to date has been a change of venue request approved by the courts to move the case from Chancery Court to District Court, a filing Miller said was typical in cases of this type.

“Large banks often have venue selection clauses in their account agreements,” Miller said.

Mark IV and Legacy allege that the checks Bennett deposited into her personal account were — with few exceptions — not endorsed. Regarding the exceptions, Bennett wrote her personal account number on the back of each but did not sign.

The plaintiffs allege the bank knew of Bennett’s deception because it accepted the deposits made payable to corporate entities without endorsement from those entities. They are seeking damages of $500,000 as well as 10 percent pre-judgment interest applied to awarded amounts and  attorney fees and court costs.

Bank of America has not responded to the complaint, which was first filed in mid-November. The venue change notice was filed Jan. 3.