Security First Network Bank v. C.A.P.S., Inc

Facts

Joseph V. Sykes (Sykes), using the name “Marvin Goldman” opened an account with Security First Network Bank. Sykes then fraudulently initiated a debit entry to transfer funds from Saks, Incorporated’s account with LaSalle Bank National Association. Sykes initiated two debit transfers in the amount of $450,000 each from Saks Inc.’s account to his account with Security First Network Bank as Marvin Goldman. The debit transfers were originated through Security First Network Bank using Saks, Inc.’s account number but wrongfully naming the account holder as “Marvin Goldman.” Sykes also fraudulently initiated a debit entry to transfer funds from Consolidated Artist’s Payroll Service, Inc.’s account with The Northern Trust Company to Syke’s account with Security First Network Bank as Marvin Goldman. Sykes originated three debit transfers in the amount of $175,000 each in the same manner as above. Neither Consolidated Artist’s Payroll Service, Inc. nor Saks, Inc. authorized the debit transfers. They assert that when Security First Network Bank discovered Sykes’ fraudulent scheme it failed to timely notify LaSalle Bank National Association and The Northern Trust Company. Security First Network Bank refused the banks’ demands it return the money. Saks brought suit against Security First Network Bank alleging negligence and breach of warranties under the 2000 NACHA Operating Rules and the U.C.C. Consolidated Artist’s Payroll Service, Inc. brought suit for breach of Security First Network Bank’s duty to exercise ordinary care under the U.C.C., breach of warranties under the U.C.C. and for violation of the Illinois Consumer Fraud and Deceptive Practices Act.