$3,500,000 Settlement For Embezzled Investment Funds
For over twenty-five years, Linda Watson relied and depended on American Management Company (“AMC”) to oversee her personal finances, as well as those of Trusts established for herself and her parents. AMC’s officers told Watson (as did AMC’s contract with Watson) the firm would maintain strict internal controls over the authorization and approval of disbursements from Watson’s accounts, and would review all checks prior to signing them. In reality, AMC and its officers were asleep at the wheel. For nearly ten years, AMC bookkeeper Thomas Hauk embezzled millions from Watson’s accounts. Hauk’s scheme succeeded only because AMC allowed Hauk unfettered access to blank check stock for Watson’s accounts and stamps bearing the signatures of two of AMC’s officers with signature power over those accounts. Hauk used the check stock and the signature stamps to “sign” over one hundred unauthorized checks drawn on Watson’s and the Trust’s accounts and deposited them into accounts of business entities that he controlled. Hauk’s embezzlement was made possible only because of AMC and its officers’ extreme carelessness in failing to secure the signature stamps and check stock. But their negligence does not end there. AMC maintained no written policies or procedures for the business’ most important functions, including their accounting system, client payables and disbursements, and the safeguarding of check stock and signature stamps. AMC and its officers also ignored numerous warning signs that Hauk should not have been trusted, including tardiness, absenteeism, and failure to perform his job duties. These concerns were raised with AMC’s officers on several occasions, but they did not discipline or terminate Hauk, and the embezzlement continued unabated. After Hauk’s embezzlement was discovered, Watson learned AMC carried no insurance coverage that would cover her losses. Edgar Law Firm filed a lawsuit on behalf of Watson against AMC (and various related entities and individuals) for negligence, negligent supervision, breach of fiduciary duty, and breach of contract. One the eve of trial, the defendants relented and settled the case for $3.5 million, which represented almost 100% of Watson’s damages.