Fraud Involving Corporate Employee

Question:

A former employee with access to corporate establishment documents uses them to open a corporate account with him/herself as an authorized signer. The true corporate officer discovers the account has been opened after checks made payable to the company are missing. The bank performed as much due diligence as possible in verifying the legitimacy of the corporation and obtained the ID of the authorized signer. Can the "true" corporate officer collect lost money from the bank or must they pursue legal action against the former employee?

Answer:

The problem here is not the existence of the corporation or the identity of the signatory. The issue is: Did the signatory have authority to act for the corporation; i.e. what did your bank require in the way of a verified corporate resolution authorizing this individual to sign? If your bank obtained a resolution which was attested by the appropriate corporate officer as being legitimate, it should be very difficult to show that any negligence on your part contributed to the forgery.

First published on BankersOnline.com 01/19/04