Litigators from the law firm Mika Meyers have successfully argued a case representing a bankruptcy trustee (Teleservices) against Huntington National Bank arising out of a massive fraud orchestrated over a decade ago by the now-defunct Cyberco Holdings, d/b/a CyberNET. (Covered in-depth in the August 8, 2012 Grand Rapids Legal News.)
On Sept. 28, U.S. District Judge Paul Maloney issued a 23-page Opinion and a Judgment totaling $83 million with interest against Huntington National Bank and in favor of the Teleservices Trustee. Judge Maloney heard oral arguments on Huntington’s objections in Sept, 2014.
This matter is a result of legal action dating back to the Nov. 2004 raid on Cyberco’s Grand Rapids offices. Cyberco maintained a comprehensive banking relationship with Huntington National Bank starting in 2002. As court records documented, Huntington had reason to know that funds from a Cyberco-related entity called Teleservices sent to the bank were fraudulent.
“We are very pleased with Judge Maloney’s judgment and feel that the companies defrauded are receiving everything due them,” said lead attorney Douglas Donnell.
In 2006 and 2007, Mika Meyers 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 was obtained by fraud.
In 2009, a 12-day trial was conducted in the U.S. Bankruptcy Court for the Western District of Michigan, Judge Jeffrey Hughes presiding. At the trial, almost all the witnesses called by both sides were current or former Huntington employees. Former Cyberco President, James Horton, Barton Watson’s second-in-command, testified how the fraud was committed using both Cyberco and Teleservices, and the bank’s failure to put a stop to it despite multiple illogical explanations from Watson and Horton.
In early 2011, Judge Hughes found that Huntington acted in bad faith and identified $72 million in transfers that Huntington would be required to pay to the Teleservices bankruptcy Trustee.
Judge Hughes made several more rulings in March-July 2012 resolving the remaining issues in the case, and awarding the Trustee $72 million plus interest
which, at that time, brought the total amount to about $80 million.
Since the Bankruptcy Court was not constitutionally permitted to issue a final judgment, the Court submitted a Report and Recommendation to the U.S. District
Court for the Western District of Michigan.
“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. The Mika Meyers team did a tremendous job proving our case” Donnell added.
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