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Tuesday, 29 September 2015 17:04

Federal judge rules against Huntington Bank in CyberNET fraud case

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A federal judge yesterday ruled against Huntington National Bank regarding its financial relationship with Cyberco Holdings Inc. and Teleservices Group Inc.  

Both entities were created by Grand Rapids businessman Barton Watson, who committed suicide in 2004 after federal agents began investigating his companies for fraud.

According to an opinion authored by Judge Paul Maloney with the U.S. District Court for the Western District of Michigan – Southern Division, Huntington Bank is liable for $71,833,628.81 plus interest for victims of Cyberco’s financial crimes. All told, it is expected that Huntington will pay in excess of $80 million.

Marcia Meoli served as trustee of Teleservices and pursued relief on behalf of the victims of the financial crimes. Meoli was represented by John Anding, a partner at Grand Rapids-based law firm Drew Cooper & Anding P.C., and Douglas Donnell, a partner with Grand Rapids firm Mika Meyers Beckett & Jones PLC.

“This verdict confirms that Huntington was blinded by greed,” Anding said in a statement. “The bank put profits before duty. It took millions from suspicious and unknown sources to repay itself. Had it said no, the Ponzi scheme would have collapsed and the victims would have been spared. Justice has been done.”

In his opinion, Maloney wrote that “Barton Watson ran a Ponzi scheme of sorts.” Cyberco, which did business as CyberNET Engineering, secured loans from a number of financial institutions — including Huntington Bank, where it also maintained its bank account — to purchase computer equipment from Teleservices. However, the company never actually purchased the equipment. Instead, it used the loans to make payments on other loans, as well as to pay for salaries.

“Huntington disagrees with this ruling and will move forward to appeal. We continue to maintain that this opinion exceeds legal precedent,” Huntington spokesperson Brent Wilder said in a statement to MiBiz.

Huntington first offered Cyberco banking and lending services in 2002. Huntington began to suspect the company of fraudulent activities in January 2004 and told Cyberco it needed to find a new bank. The company began repaying its multi-million dollar loan to Huntington with direct and indirect payments from Teleservice Group’s account with a California bank, Silicon Valley Bank.

Later that year, the FBI raided Cyberco and Teleservices’ office in downtown Grand Rapids, permanently closing the companies. Both companies went on to file bankruptcy, leading to nearly a decade of litigation.

Read 2919 times Last modified on Monday, 12 October 2015 12:43

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