Construction company, bank, settle dispute over $345,000 cyber heist
Both had sought to hold the other responsible for theft
Computerworld - A Maine construction company that sued its bank after losing $345,000 in an online banking heist has settled its dispute after a protracted legal battle that raised questions about the bank's responsibility in protecting customer accounts against cyber fraud.
The settlement between Patco Construction and People's United Bank (formerly Ocean Bank) comes about four months after the U.S. Court of Appeals for the First Circuit faulted the bank's security measures at the time of the theft and advised the two sides to work out a compromise.
Bankinfosecurity.com, which was the first to report the settlement, quoted Patco's co-owner Mark Patterson as saying that the bank has agreed to reimburse the company's losses from the theft. No other details of the settlement were released.
Court records show that the two sides agreed to dismiss the case on Nov. 19. Neither Patterson nor People's United responded to requests for comment on the settlement.
Patco, a family-owned construction company in Sanford, Maine, sued Ocean Bank in 2009 after online crooks believed to be operating in Europe siphoned close to $590,000 in a series of unauthorized Automated Clearing House (ACH) transfers.
About $243,000 was later recovered after the fraud was detected. Patco sued Ocean Bank for the remaining money claiming that the theft was the result of the bank's failure to implement reasonable security measures as defined under the Uniform Commercial Code (UCC).
The lawsuit charged Ocean Bank with negligence and breach of contract for failing to detect and stop the unauthorized ACH transfers even though they were clearly fraudulent. Patco claimed in its lawsuit that the bank should have noticed that the fraudulent transfers were for much higher amounts than the company's usual transactions and were being sent to an unfamiliar overseas bank account.
Patco also faulted Ocean Bank for not implementing stronger authentication mechanisms, such as token-based authentication and out-of-band verification, which many banks were using at the time.
Ocean Bank, for its part, blamed Patco for the loss. The bank said the thieves were able to steal the money only because Patco had allowed them to gain access to the username and password the company used to log in to its commercial banking account.
Ocean Bank insisted that it had processed the ACH requests in good faith after it had verified that the proper IDs, passwords and answers to challenge response questions were being used to conduct the transactions.
In a ruling in May 2011, a Maine Magistrate sided with Ocean Bank and recommended that the U.S. District Court in Maine grant the bank's motions for a summary dismissal of Patco's complaints.
- IT Certification Study Tips
- Register for this Computerworld Insider Study Tip guide and gain access to hundreds of premium content articles, cheat sheets, product reviews and more.
- Jyske Bank extends brand message to more than one million visitors a month
- IBM WebSphere Portal software helps bank offer a clearly differentiated digital experience
- The Big Data Opportunity for HR and Finance
- If CEOs, CFOs, CIOs, and CHROs want to drive their businesses forward, they will need to quickly recognize the enormous value of big...
- Onboarding New Employees
- Read this paper to understand the difference between training and socialization in employee onboarding.
- Clearing the Network Hurdle to Cloud Deployment
- Although enthusiasm is high among IT pros for cloud services, an IDG Research Quick Poll survey found that, in fact, the cloud is...
- 2014 Gartner Magic Quadrant Report
- For the 7th year in a row, Riverbed is in the "Leaders" Quadrant of the 2014 Magic Quadrant for WAN Optimization Controllers. In... All Financial IT White Papers
- NSS Labs & Cisco Present: Evaluating Leading Breach Detection Systems Today's constantly evolving advanced malware and APTs can evade point-in-time defenses to penetrate networks. Security professionals must evolve their strategy in lockstep to...
- Will the Real Endpoint Threat Detection and Response Please Stand Up? This webinar explores new technologies & process for protecting endpoints from advanced attackers as well as the innovations that are pushing the envelope...
- What should I look for in a Next Generation Firewall? SANS Provides Guidance With so many vendors claiming to have a Next Generation Firewall (NGFW), it can be difficult to tell what makes each one different....
- Why Are Customers Really Deploying an NGFW? It seems every IT Security expert is talking about the NGFW, but what are people really doing? This webcast covers 5 real-world customer...
- Charting Your Analytical Future - "Making predictive analytics part of your business processes" Webinar This session will show how predictive analytics can be used throughout the organization by anyone looking for answers and how organizations can make...
- All Financial IT Webcasts