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.
Flashback to the late 1960s, when this pilot fish has just gotten a job in a bank's data processing department -- and one day his new boss tells him to grab a disk pack and run for a cab.
- 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.
- 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...
- The Business Value of Continuous Delivery
- Download this whitepaper to learn more about the business value of Continuous Delivery and see why it could be a game changer for...
- Ten Factors Shaping the Future of Application Delivery
- Download this research report conducted by Enterprise Management Associates (EMA) to learn how those that are seeking to accelerate application delivery are leveraging...
- Software Asset Management: Ensuring Today's Assets
- Today's trends like BYOD and SaaS are new and exciting in terms of how they will help make our jobs more productive but...
- Trends Shaping Software Management: 2014
- Most IT executives recognize the relationship between mobile computing and worker productivity, and have long issued notebook computers and other mobile devices to... All Financial IT White Papers
- On-demand webinar - 7 Keys to Service Catalog Implementation Success Watch this webinar to learn 7 crucial keys to make your service catalog a success!
- Transform Your IT Service Management Watch this webinar, to learn how EasyVista can increase IT productivity & efficiency and deliver streamlined & integrated IT Service & Asset Mgmt.
- IBM FlashSystem V840: Leveraging Software-Defined Flash to Drive Your Business With end-to-end, tightly integrated functionality and super-fast flash technology, products like IBM FlashSystem V840 Enterprise Performance Solution empower businesses to leverage the efficiency...
- Leveraging Flash Storage to Accelerate Oracle Real Application Clusters Join this webinar to understand the latest solid-state storage trends, the specific applications driving solid-state storage deployments and the benefits of deploying the...
- Top 4 Digital Signage Fails Join RMG Networks for a look at four of the most common reasons digital signage fails in corporate businesses. Learn about strategies to...
- All Financial IT Webcasts