Dinn, Hochman & Potter, LLC

Bank suing ATM company for losses

Ohio-based Diebold, Inc. is the subject of a lawsuit recently filed by Webster Bank in which the ATM manufacturer is accused of failing to protect more than $11 million in cash. The Connecticut-based lending institution with an estimated $20 billion in assets filed a 19-page complaint in the contract dispute. Both parties reportedly agreed that services involving the movement of money from the machines could be subcontracted. However, the agreement stipulated that any subcontractors be properly insured.

Webster alleges that Diebold failed to adhere to that agreement and acted negligently when it turned over millions of dollars in cash to another company in New York for transportation. Instead, the second company did not complete the deposit of the monies they collected in a timely manner. The bank further alleged that upper management in the company 'floated" the cash, took millions of dollars from the bank and customers and illegally used the money to run their own business.

The financial institution discovered the plot in January 2010 and found that millions of dollars were missing. At the same time, the bank found that the subcontractor was not properly insured. Two of the subcontractor's executives reportedly confessed to mishandling the money, and criminal charges were subsequently filed with both being convicted of fraud. Diebold refused to pay for the bank's loss and said it was not at fault. Webster wants the court to hold Diebold accountable for the losses.

It is unclear whether Webster had liability insurance to protect it from this type of loss. The lawsuit, filed in federal court, is asking for damages in excess of $11 million.

Source: Hartford Business.com, "Webster suing for $11M lost in 'float' scheme", Gregory Seay, February 06, 2014

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