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Home / News / Local / Court finds for defendant in fraudulent wire transfer case

Court finds for defendant in fraudulent wire transfer case

Case involved sending money to Republic of Cyprus

The federal court in Springfield has returned a $440,000 defense verdict in a bank case involving a fraudulent wire transfer to the Republic of Cyprus.

The story begins in April 2009, when Choice Escrow and Land Title of Springfield established a trust escrow account with BancorpSouth Bank, also in Springfield. When the title company opened the account, it opted to use the bank’s online services and, shortly thereafter, also opted to use the bank’s wire transfer services.

BancorpSouth normally requires customers using its online platform to use its “Dual Control” protocol for wire transfers, a system set up to allow for such transactions using two individuals with separate user IDs and passwords — one to enter and approve the wire transfer request and one to log in to release the funds.

Choice, citing convenience concerns, declined the use of Dual Control and signed a document saying so, including that it understood the risks of not using the security protocol.

“Essentially, they said they didn’t want to use it because they were concerned that one of the designated authorized users might be out of the office when they needed to do a wire and thus would hold up their ability to complete a transaction,” said Rod H. Nichols, of Carnahan, Evans, Cantwell & Brown in Springfield, who represented BancorpSouth.

Plaintiff’s attorney Bruce McCurry, of Chaney & McCurry in Springfield, said the  case is on appeal. “We believe public comment prior to the final decision is premature,” he said.

In November 2009, Jim Payne, one of the principals of Choice Escrow, received an email bulletin from one of its underwriters warning of a scam whereby a fraudster would embed a “Trojan horse” onto a victim’s computer, collect the victim’s password and other information and then wire funds from the victim’s account to a foreign one.

Payne then forwarded the bulletin to a BancorpSouth employee, asking if it was possible to block transfers to foreign banks, to which BancorpSouth said it wasn’t and again suggested Choice Escrow sign up for Dual Control.

Payne then asked for an explanation of how Dual Control works, and, again, Choice declined its use.

On March 17, 2010, BancorpSouth received a wire transfer request of $440,000 from Choice’s account. The request was made under the user ID and password assigned to a Choice employee and initiated from the IP address registered to Choice. Further confirmation came from detecting a secure-device identification token the bank downloaded onto the computer in question.

BancorpSouth honored the request and transferred the funds. Immediately after the wire was released, BancorpSouth sent a fax confirmation to Choice.

The next morning, a Choice employee reviewed the fax and determined the $440,000 wire was not authorized and contacted the bank. BancorpSouth then tried to recover the funds with the assistance of the FBI, the U.S. State Department and the U.S. Embassy in Cyprus but was unsuccessful.

Choice then sued BancorpSouth, claiming the bank was liable for the loss under Article 4A of the Uniform Commercial Code and contending its security measures for online banking were not commercially reasonable.

The case was set for a jury trial on April 15, with both sides filing motions for summary judgment. The court granted BancorpSouth’s motion, finding that Choice was offered but refused a commercially reasonable security procedure.

The court also noted that expert witnesses for both parties acknowledged that Dual Control is widely recognized in the banking industry as a commercially reasonable security procedure and that Choice’s own expert admitted it’s likely that Dual Control would have prevented the $440,000 transfer from taking place, had it been used.

Defense verdict


Venue: U.S. District Court for the Western District of Missouri

Case Number/Date: 6:10-cv-03531/March 18, 2013

Judge: John T. Maughmer

Plaintiff’s Expert: Bradley N. Maryman, Simi, Calif. (computer security and forensic consulting)

Defendant’s Expert: Peter A. Makohon, Charlotte, N.C. (bank information and security technologies)

Last Pretrial Demand: $340,000

Caption: Choice Escrow and Land Title LLV v. BancorpSouth Bank

Plaintiff’s Attorneys: Bruce McCurry and Jeff McCurry, Chaney & McCurry, Springfield

Defendant’s Attorneys: Rod H. Nichols and John E. Price, Carnahan, Evans, Cantwell & Brown, Springfield