The bank denies responsibility for fraud – Los Angeles Business Journal

If a bank employee allows fraudulent withdrawals from a customer, who is responsible – the bank or the employee?
This is the question asked by Cyrus Heckmat, a Los Angeles entrepreneur who claims that a business development officer at the Los Angeles-based 1st Century Bank, a division of MidFirst Bank, helped and helped raise more than $ 1.8 million. from him.

So far, the answer to Heckmat’s question has been that the bank is not responsible. At least the court of first instance ruled that MidFirst Bank could not be held liable for the employee’s alleged misconduct, and this decision was upheld by an appellate court. Hekmat hopes to get the California Supreme Court to settle his dispute.

This is an important case because it can set a precedent in the state of California for allowing banks to say “we are not responsible by answering a superior”, which means “we are not responsible by our employment relationships with our employees. any bad deeds or negligence they do, ”Hekmat said. “And that’s just shocking.”

MidFirst Bank’s lawyers did not respond to requests for comment, but in court documents they said that according to the law, the employer cannot be held liable for malicious behavior of an employee “if the employee significantly deviates from his work duties for personal purposes.”

Lost money

Heckmatt, founder and CEO of the Los Angeles-based learning program ExamPerformance.com, an online learning program that prepares and trains students to take tests, said the saga began in 2016 when he agreed to gave his first cousin a loan of approximately $ 1.86 million. The cousin had to repay the loan because he had to receive a $ 5 million fee.

The then cousin’s girlfriend, whom he later married, worked at 1st Century Bank as a business development officer, and she opened an account for Heckmatt, according to court documents. She transferred $ 1.86 million from Heckmat’s account to her then-boyfriend’s account. Separately, she dealt with Heckmatt’s application for a $ 2 to $ 4 million credit line.

The loan was never repaid, and Hekmat later learned that his cousin should not be paid a search fee, according to court documents. Moreover, his loan application was never properly processed or submitted to the bank.

Heckmatt, who has experience as a real estate attorney at law firm Paul Hastings and investment firm Indivest Inc. in Los Angeles, also claims damages for a real estate deal he was making at the time.

“In addition to Hekmat’s $ 1,862,388.89, which was transferred to (cousin), Hekmat lost $ 400,000 in deposits he had made in support of his land acquisition transaction because he was unable to execute the land acquisition transaction due to incapacity. to finance the necessary deposits ”, according to court documents.

Hekmat claims that the woman – a bank employee – helped to commit fraud by opening Hekmat’s account and then transferring money from her to her future husband’s account, knowing that the money was unlikely to be returned. He also claims that she handled his credit line application incorrectly. According to one of his documents: “These actions of (the woman)… are normal activities of bankers and are an integral part of the banking business.”
As a result, the bank is responsible, or at least in part, Heckmatt said.

whose job

However, the bank has won in court, at least so far.
The main point of contention is the doctrine of response of the superior, which states that the employer is responsible for the wrongful acts of an employee, but only insofar as such actions are performed within the work. If the actions are outside this scope, the employer may not be liable.

MidFirst argues that because the impetus behind the woman’s alleged misconduct is for personal gain and is clearly outside the scope of the work, MidFirst cannot be held accountable.
MidFirst also added, using a separate precedent, that it had no obligation to “process, review and respond carefully and fully” to Hekmat’s credit line application.

One of MidFirst’s legal reports states that “the law is clear that the employer is not strictly responsible for all actions of its employees during working hours” and that the courts have ruled that the employer will not be held directly responsible for malicious or delinquent behavior if the employee significantly deviates from his work duties for personal purposes. “

It further cites a decision which states that “if an employee’s tort is personal in nature, the mere presence at work and the presence of professional duties before or after the breach will not give rise to a lawsuit against the employer according to the doctrine for respondeat superior. ”

Heckmat cites a number of cases in his defense which find that for a court to impose liability against an employer in accordance with the respondeat superior doctrine does not require the employee’s act to be in favor of the employer.
Both sides have been handed over to the state Supreme Court.

“There is no hearing date or approximate date on when this issue will end,” a Hekmat lawyer wrote in an email to the Business Journal. “The time when the Supreme Court must decide to allow or deny a review is currently set for July 5. He may decide until then or extend the date again. “

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