Check Kiting Costs Banks Millions

Recently, a large bank located in the southeastern part of the United States agreed to pay out $9 million in claims settlements. They settled the allegations that they knowingly knew of cash kiting schemes and pushed themselves in front of other victims to recover their losses first.

Synovus Bank, based in Columbus Georgia, settled with plaintiffs without admitting they acted maliciously or had any involvement in the wrongdoing. They settlement which was agreed upon and included South Florida-based attorneys who represented Frank Mongelluzzi and his wife Anne who owned a Clearwater based staffing firm, Able Body’s, who allegedly committed the kiting.

The plaintiff’s attorneys alleged Mongelluzzi with regularity overdrew some of the over 300 accounts he and his businesses had at close to 40 different banks, including almost 80 accounts at Synovus. The defendant appeared to be using the “float period” before a check was cleared to move funds and loan payments.

In the complaint described in court, Synovus had emails back in 2010 that showed the bank’s executives had concerns about Mongelluzzi’s overdrafts and notified them that their actions were illegal.

Synovus then came alongside and helped the Mongelluzzis sell Able Body, alleges the 2014 complaint filed in U.S. Bankruptcy Court for the Middle District of Florida.

Synovus was owed about $60 million at the time the scheme was at its peak, said the lead attorney for the trustee. However, by the time Frank Mongelluzzi filed for bankruptcy in 2011, Synovus only recovered $3.5 million of his debt.

The South Florida forensic accounting firm did a “superb job” with the insurmountable task of tracking transfers among the hundreds of accounts.

All in all, it appears that the hard work of the attorneys involved paid off. They were able to fit all the pieces together and figure out the truth of what happened.

The settlement was scheduled for a preliminary approval hearing Sept. 7.

Case: Angela Welch v. Synovus Bank

Case no.: 8:11-bk-01927-CED

Description: Fraud

Filing date: Jan. 27, 2014

Settlement date: July 25, 2016

Judge: U.S. Bankruptcy Judge Caryl Delano

Plaintiff’s attorneys: Genovese Joblove & Battista attorneys Robert Elgidely, Benjamin Bean and Mark Feluren in Fort Lauderdale and John Genovese and Michael Friedman in Miami

Defense attorneys: Charles Ketchey, Alicia Koepke and Lara Fernandez, Trenam, Tampa

Settlement amount: $9 million