Confidential
Settlement – $114,000Facts
In or about October 1996, the plaintiff, a clothing manufacturer hired defendant No. 1 (the former employee), a
trusted financial assistant. Prior to hiring defendant No. 1, the plaintiff had also engaged the services of
defendant No. 2, a company specializing in conducting criminal background checks of potential employees.
The plaintiff hired defendant No. 2 for the express purposes of conducting a criminal background check of
defendant No. 1.
The plaintiff was provided by defendant No. 2 with a report on the former employee in which it stated, among
other things, that the former employee had no criminal history. In reliance on the background report, the
plaintiff hired the employee as a trusted financial assistant, a position in which he worked until March 2000, at
which time he resigned. After his resignation, the plaintiff discovered that the former employee had embezzled
approximately $230,000, representing approximately one to two percent of the plaintiffÆs gross receipts.
After the former employee had quit, and the theft was discovered, the plaintiff conducted an additional criminal
background check through a different company and this revealed that the former employee had two felony
convictions, the first being for forgery of a document involving $483,000 and the second, in 1993, for theft by
embezzlement of personal property exceeding $25,000.
The plaintiff brought this lawsuit against the former employee and also against the
defendant investigation firm for failing to discover the prior felony convictions and that their
services fell below industry standards in failing to discover the two felony convictions.
Settlement Discussions
The plaintiff submitted a demand of $150,000. No offer was tendered.
Damages
The plaintiff suffered a loss of $228,000 as a result of the theft of the former employee, who was not located.
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