A local law firm has won an $83-million judgment against a bank with a large presence in the region.
The judgment, including interest, against Huntington National Bank by U.S. District Judge Paul Maloney yesterday is a result of legal action dating back to the November 2004 raid on the now-defunct Cyberco Holdings, dba CyberNET, at its downtown Grand Rapids offices.
The judgment will be shared by victims of a $100-million Ponzi scheme perpetrated by Cyberco and its affiliate, Teleservices, both entities operated by Barton Watson.
The scheme involved phony sales of non-existent computer equipment from Teleservices to Cyberco.
Marcia Meoli, bankruptcy trustee of Teleservices, who pursued relief on behalf of the victims against Huntington National Bank, was represented by a team of litigators from Mika Meyers, including the lead attorney representing the trustee, Douglas Donnell, and John Anding, of Drew, Cooper & Anding, as special trial counsel.
Mika Meyers said today that its litigators successfully argued the case on behalf of the Teleservices bankruptcy trustee against Huntington National Bank, and the firm detailed the case.
Cyberco maintained a comprehensive banking relationship with Huntington National Bank starting in 2002.
Court records have documented Huntington “had reason to know” that funds from Teleservices sent to the bank were fraudulent, according to Mika Meyers.
“This has been a lengthy process, but we have felt all along that the defrauded creditors were owed a dedicated effort by our firm to recover what was rightfully theirs," Donnell said.
“We are very pleased with Judge Maloney’s judgment and feel that the companies defrauded are receiving everything due to them.”
Anding, of Drew, Cooper & Anding, said the judgment "affirms the trial verdict entered by the bankruptcy court and adopts its findings that Huntington turned a blind eye to the six- and seven-figure large round dollar transfers into Cyberco’s depository accounts from Teleservices, which Huntington admitted came from an unknown and suspicious source."
Brent Wilder, a VP and associate director of public relations at Huntington, said the company will appeal the ruling.
“Huntington disagrees with this ruling and will move forward to appeal,” Wilder said. “We continue to maintain that this opinion exceeds legal precedent.”
History of the case
Mika Meyers said that in 2006 and 2007, its attorneys representing the Cyberco and Teleservices bankruptcy victims, through a designated trustee, filed lawsuits against Huntington, alleging that Huntington received fraudulent transfers from Teleservices and Cyberco “with knowledge that the money received was obtained by fraud.”
In 2009, following months of pre-trial discovery, a 12-day trial was conducted in the U.S. Bankruptcy Court for the Western District of Michigan with Judge Jeffrey Hughes presiding.
At the trial, Mika Meyers said most of the witnesses called by both sides were current or former Huntington employees.
Former Cyberco President James Horton, former CEO Barton Watson’s second in command, testified how the fraud was committed using both Cyberco and Teleservices and how Huntington failed to stop to it, “despite multiple illogical explanations” from Watson and Horton to Huntington while the fraud was proceeding.
In early 2011, Judge Hughes issued a 127-page opinion finding that Huntington acted in “bad faith” and identifying $72 million in transfers, with some possible minor adjustments, that Huntington would be required to pay to the Teleservices bankruptcy trustee.
Starting in March 2012 and lasting through July 2012, Judge Hughes made several more rulings resolving the remaining issues in the case and awarding the Teleservices bankruptcy trustee $72 million, plus interest, which, at that time, brought the total amount owed to about $80 million.
Since the U.S. Bankruptcy Court was not constitutionally permitted to issue a final judgment, the court packaged all of its decisions in the form of a report and recommendation, which was submitted to the U.S. District Court for the Western District of Michigan, according to Mika Meyers.
In September 2012, Huntington National Bank objected to many of the findings by Judge Hughes, and Huntington and the trustee submitted lengthy briefs regarding Huntington’s objections.
That led to the September 2014 hearing when U.S. District Judge Paul Maloney heard oral arguments on Huntington’s objections.