PHH says worker took $500,000, blames 2 banks

December 24, 1991|By Peter H. Frank

PHH Corp. has filed suit against two of the state's largest banks, saying they allowed a PHH employee to embezzle more than $500,000 from the company over the past three years.

The large business services company in Hunt Valley charged Maryland National Bank and Signet Bank/Maryland with breach of contract and negligence for cashing or transferring 40 checks written on PHH accounts on behalf of the employee, according to the suit.

The suit, filed Friday in Baltimore County Circuit Court, is seeking restitution of $538,228.37 that, PHH claims, was taken from the company in transactions from Jan. 14, 1988, to Aug. 14, 1991.

The action, the suit said, "arises from the defendant banks' wrongful acceptance, negotiation and payment of altered checks bearingunauthorized endorsements, all drawn on PHH's checking account."

A spokesman for PHH, Peter Brinch, declined to comment on the suit. Maryland National and Signet Bank/Maryland also declined to comment.

The complaint stems from allegations that PHH makes in the suit regarding the director of the company's corporate tax department, Marion Holmes.

Mr. Holmes, who was not named as a defendant in the lawsuit, was employed by the company from 1986 until 1991 to make tax payments to the Internal Revenue Service using Signet bank, the suit said.

Mr. Holmes could not be reached for comment yesterday.

The lawsuit alleged that several times Mr. Holmes directed a subordinate at PHH to prepare checks for tax payments when no payments were necessary. The checks, drawn on the company's corporate account at Maryland National, were payable to Signet Bank as agent of the IRS.

Mr. Holmes would add his account number to the back of the checks and deposit them into his and his wife's joint account at Signet, the suit said.

"Signet accepted the checks from Holmes without hesitation," the suit alleged, "even though Holmes' alterations were obvious to any responsible bank employee."

Maryland National then breached its contract with PHH by paying the bad checks, the suit said.

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