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Defendant Fifth Third wants out of lawsuit

Bank protected by state statute, can't be held liable for city's own negligence, it says

Published: Friday, May 3, 2013 1:15 a.m. CDT • Updated: Friday, May 3, 2013 2:16 p.m. CDT

DIXON – Fifth Third Bank has filed a motion seeking to be removed as a defendant in the lawsuit the city filed seeking $53 million in damages in the wake of the Crundwell embezzlement.

The bank was not named in the original suit, but had itself added in February to allow it access to evidence in anticipation of being added.

In March, the city amended its suit to say Fifth Third Bank, along with the city's auditors, was to blame for former Dixon comptroller Rita Crundwell stealing nearly $54 million from city funds, which she funneled through a secret account at the bank.

Document: Click here to read the motion

The bank's attorney says, however, that all of the claims the city has made against it are barred by the Illinois Fiduciary Obligations Act, which protects banks from liability for its dealings with an account holder's dishonest finances.

A hearing is scheduled at 11 a.m. Thursday.

The city's suit claims, among other things, that the bank was negligent and in breach of contract, and demands it return "money had and received."

According to the suit:

– Fifth Third knew of Crundwell's account, which she used to transfer city funds for her personal use by creating fake invoices from the Illinois Department of Transportation, but did not disclose it when auditors asked for a list of all of the city's accounts.

– A resolution approved by the Dixon City Council was required to open an account dealing with the transfer of city funds, which did not happen with the secret account, nor does the bank have any valid documents from council members approving the account.

– Of the checks used to transfer city funds, 179 were made out to "treasurer," but at no time did the state treasurer endorse those checks, nor did they have an authorized signature.

– The bank's fraud detection procedures failed to detect the theft.

For its part, Fifth Third Bank:

– Says the city itself was negligent in detecting the theft, and so Fifth Third is not liable for the results of that negligence.

– Does not owe the city any money, because the bank no longer has any of the city's funds that "in equity and good conscience should be returned."

– Says the city can't claim a breach of contract, because no contract has been provided in court documents, and because the secret account was not listed as a city account.

– Denies violating the Illinois Uniform Commercial Code.

The city's lawsuit also names its former auditors – CliftonLarsonAllen, LLP, Clifton Gunderson, LLP, Janis Card Co., LLC, Samuel S. Card, CPA, P.C., Samuel S. Card, Todd Etheridge and Ron Blaine – saying they should have detected the 20-year theft.

 

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