Nevada state law recommends that bank account owners check their monthly statements regularly for unauthorized or suspicious transactions and promptly report any findings. The statute of repose protects the bank from liability for unauthorized transactions that are not reported by the customer within one year.
The statute of repose places a portion of the responsibility for reviewing the account and detecting fraud on the customer. As months pass, paper trails fade and discovering a forged check or illegal transaction becomes more difficult. Banks can’t expect to help a customer pinpoint the details of a transaction that happened 5 years ago.
Our story begins in 2006, when a long-time employee of a Nevada commercial transactions and business lawyer started embezzling funds from one of his business accounts. The employee, Mary Williams, began the embezzlement the year her employer, Nicholas Pereos, closed her account.
Pereos, instead of actually closing the account, kept it active to wait for possible outstanding checks to clear, and Williams saw her opportunity. From 2006 to 2010, she used the “closed” account to deposit checks of clients and then later went back and withdrew the cash.
When Pereos learned of the thievery in 2010, he decided to sue Bank of America. But, the bank’s defense claimed Pereos was responsible for examining his monthly statements and reporting the unauthorized transactions – preferably within 30 days and at least within a year. The judge sided with Bank of America and Pereos’ case was dismissed.
However, just last week, the decision was reversed by the Nevada Supreme Court and Pereos’ case against the bank was reinstated. The reasoning behind the court’s reinstatement is twofold.
First is Pereos’ argument that he was not receiving proper monthly statements. The Supreme Court ruled that this fact must be further examined. For Bank of America’s initial argument to apply, Pereos must have received complete monthly statements. Unfortunately, since Pereos claimed he had assumed the account was dormant since 2006, notice of any activity at all should have raised a red flag.
Second, the court stated that the statute of repose is reset for each illegal transaction, so Bank of America may still be held liable for any checks written within 12 months of discovering the embezzlement.
It can be difficult to pursue a lender liability suit against a powerful entity like Bank of America, but as this case illustrates, it’s entirely possible to take legal action against a big bank.
We can’t argue with the fact that it’s a good idea to watch your monthly statements, but financial institutions have a duty to inform consumers regularly and accurately of their account activity by providing complete statements. Banks are also required to follow an account owner’s instructions and cancel or remove users as requested.
If a bank has not fulfilled its obligations, it may be possible for a consumer who has suffered losses to collect damages.
If your bank has breached its duty to act appropriately regarding your account and you have experienced losses equaling over $500,000, give us a call. There are few lawyers willing to sue banks, especially big banks. But just as the underdog David triumphed over the giant Goliath in the Biblical battle of David and Goliath, banks are not invincible. We know these cases can succeed.
For more information on lender liability or claims involving fraud loss, contact attorney Brian Mahany at [hidden email] or through his direct line at (414) 704-6731. All inquiries kept strictly confidential.