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CONFIDENTIAL

Sep. 9, 1995

Breach of Fiduciary Duty
Embezzlement
Respondeat Superior

Confidential

Settlement –  $1,232,500

Judge

Stephen M. Lachs

Court

L.A. Superior Central


Attorneys

Plaintiff

Eric Lagin

Natasha Roit


Defendant

Len R. Comden

Stephen M. Lans

Randall H. Kennon


Facts

From 1985 through 1991, Plaintiff textile converter company became a victim of an embezzlement scheme perpetrated by its Defendant bookkeeper (now deceased) and its Defendant former employee. Over a 5-year period, the perpetrators embezzled close to $4,000,000 from Plaintiff's company. This scheme -- which consisted of forgery of hundreds of checks, the manipulation of both the internal records and the outside auditors' review, and the creation and presentation for payment of numerous fake invoices and vendor statements -- remained undetected despite the numerous financial reviews by Plaintiff's accountants, also Defendants. When the scheme was finally discovered, Defendant bookkeeper committed suicide and Defendant former employee fled after filing bankruptcy (she had since been convicted and is serving time in jail), and the stolen money was not recovered. During the period of the embezzlement, Plaintiff banked with Defendant (also sued under its former bank names); the perpetrators had processed the forged checks through the other Defendant bank. Plaintiff sued the Defendant banks, their accountants, and brought claims against the Defendant bookkeeper's estate and also won a judgment in bankruptcy court against the accomplice. The only money actually recovered from the incarcerated embezzler was $21,500 remaining in one of her accounts in Defendant bank.

Settlement Discussions

Offers and/or demands, exchanged prior to this result, were not disclosed.

Damages

$4,000,000.

Other Information

The Court ruled that the Defendant banks' liability was limited to one year preceding the filing of the complaint. A confidential settlement was reached with the Defendant accountants (contracted by Plaintiff).


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