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.
- 15 Non-Certified IT Skills Growing in Demand
- How 19 Tech Titans Target Healthcare
- Twitter Suffering From Growing Pains (and Facebook Comparisons)
- Agile Comes to Data Integration
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
- The 12 PCI DSS 3.0 requirements addressed by Peer 1 Hosting This handy quick reference outlines the 12 PCI DSS 3.0 requirements, who needs to be compliant and how Alert Logic solutions address the...
- Defense Throughout the Vulnerability Life Cycle This whitepaper provides insight into how to leverage threat and log management technologies to protect your IT assets throughout their vulnerability life cycle.
- Mobile Policy Checklist Here's what to consider when putting together a mobile policy designed to support a highly productive workforce.
- Securing BYOD Mobile computing is becoming so ubiquitous that people no longer bat an eye seeing someone working two devices simultaneously. Individuals and organizations are...
- Live Webcast On-demand webinar: "Mobility Mayhem: Balancing BYOD with Enterprise Security" Check out this on-demand webinar to hear Sophos senior security expert John Shier deep dive into how BYOD impacts your enterprise security strategy...
- Live Webcast Endpoint Backup & Restore: Protect Everyone, Everywhere Arek Sokol from the bleeding-edge IT team at Genentech/Roche explains how he leverages cross-platform enterprise endpoint backup in the public cloud as part...
- Streamline Software Asset Management, Compose a software Management Symphony Keeping track of your organization's software is easy with effective software management solutions from CDW. View the videos in our software solutions channel
- Druva inSync: Endpoint Data Protection & Governance CLICK HERE to watch this video about protecting corporate data on laptops and mobile devices, sponsored by Druva. All Security White Papers | Webcasts