Articles Posted in Billing Fraud

As Chicago business, shareholder rights and commercial law litigators, we frequently handle cases involving allegations of business fraud or financial mismanagement, often as part of complex business dispute, that require significant expertise in financial issues. When handling a divorce involving a family business or other closely held company, we also sometimes find we need an expert’s help properly valuing the business, so we can help our clients get the most equitable possible distribution of marital property.

Our Chicago, Oak Brook, Wheaton and Naperville business trial attorneys have handled many complex business and commecial law litigation matters which have involved presenting or cross-examining accounting witnesses.

While we’re confident in our legal skills, these situations call for specialized financial skills. To give our clients the best possible representation in business, shareholder and other commercial disputes, we sometimes retain a forensic accountant or fraud examiner. Both of these jobs are twofold: They help attorneys and their clients understand the complex financial aspects of their cases, and they may also be called to testify as expert witnesses. A forensic accountant’s job is to examine a person or corporation’s accounts “cold,” from the outside; the subject isn’t generally expected to cooperate. Similarly, a fraud examiner delves deep into a company’s finances, looking for the source of anything that seems inconsistent or suspicious. Both can serve as expert witnesses who help establish the value of a business or testify to the existence of fraud.

Are you a consumer with questions or concerns related to potential fraud and do not know what government agency to contact? The Chicago Federal Reserve Bank provides a web page that allows you to link to government agencies that may help you. The web page has links to federal and state banking agencies, federal and state securities agencies, and state insurance agencies located in Illinois, Indiana, Iowa, Michigan, and Wisconsin. You can also link to various useful financial , insurance, and banking tools, and to lists of financial services regulators, and consumer complaint filing information. Click here to link to the Chicago Federal Reserve Fraud web page.

If you need legal assistance in pursuing a civil lawsuit because government regulators cannot help you in recovering money lost due to fraud, our private sector lawyers can assist you by clicking here to contact us.

In a business fraud lawsuit pitting a bank against its security vendor, the Illinois Appellate Court for the 1st District ruled May 1 that an attachment order must be voided under the Illinois Attachment Act if plaintiffs fail to file an attachment bond beforehand. In ABN Amro Services Company, Inc. v. Navarrete Industries, Inc., No. 1-07-0089 (Ill. App. 2008), the appeals court voided such an order and remanded it to the trial court.

The case arose from alleged fraud by INS, which provided security for multiple Chicago-area La Salle Bank branches. A fraud investigator discovered that Armando Navarrete of INS was fraudulently overbilling the banks by an alleged $15.9 million, then paying kickbacks to the banks’ vice president for security, George Konjuch. The bank filed a lawsuit in September of 2006 against INS, Konjuch, Navarrete and another INS employee, alleging fraud, civil conspiracy and constructive trust, plus breach of fiduciary duty against Konjuch. (Konjuch and Navarrete have since been indicted by a federal grand jury for the scheme.)

At the same time, plaintiffs asked for a temporary restraining order, a preliminary injunction and an order of statutory prejudgment attachment, all of which were attempts to keep the alleged conspirators from absconding with the money. Upon receiving notice of these filings, defendants immediately filed motions to void the restraining order and the prejudgment attachment. After hearings, the trial court dissolved the restraining order and denied the preliminary injunction, but declined to vacate the attachment order. Both sides appealed.

Our firm obtained a favorable verdict in a consumer fraud case with Terrill v. Oakbrook Hilton Suites & Garden Inn 788 NE2d 789 (2nd Dist 2003). In that case, our client, Cathy Terrill, was overcharged for a hotel room; her bill contained a charge for “taxes” that included an undisclosed non-tax charge for security services. This case was part of a set of class actions in Du Page County from 2000 to 2007 (Oakbrook Terrance Hotel Overcharge Class Actions), all of which alleged that hotels misled and overcharged their customers by including non-tax charges as “taxes” on their bills.

In Terrill, the Oakbrook Terrace Hilton moved for summary judgment at the trial court, claiming the Hotel Operators Occupation Tax Act (35 ILCS 145/3(f)) and Illinois Supreme Court precedent barred Terrill’s suit. The trial judge denied that motion and the hotel appealed. It claimed that because the security fees paid for extra security from Oakbrook Terrace law enforcement — a local government entity with the power to collect taxes — it had already paid the extra money to the state Department of Revenue and could not be sued.

The Illinois Second District Court of Appeal rejected that argument, calling it “untenable at best”:

Since the Fair and Accurate Credit Transactions Act took full effect in 2006, businesses have seen a rapid growth in class-action lawsuits over credit card numbers printed on receipts. FACTA, which was intended to help prevent identity theft, requires businesses that accept credit cards to hide all but the last five digits of the card number on receipts, and not to print the expiration date at all.

Businesses that failed to meet those requirements in time were hit with hundreds of class actions within the first year of the law’s effective date in December of 2006. Restaurants, at which consumers regularly and normally leave credit card receipts, have been an especially frequent defendant. The actions allege that businesses in violation of FACTA are willfully disregarding the law because they had several years to comply, and ask for up to $1,000 for each violation. Federal appeals courts split on the matter of whether a business’s unintentional failure to comply with FACTA was “willful,” but the U.S. Supreme Court decided in 2007’s Geico v. Edo, 551 U.S. __ (2007), an appeal from the Ninth U.S. Circuit Court of Appeals, that a willful violation may be “reckless disregard” for the law as well as a knowing or intentional violation.

Senator Charles Schumer of New York introduced legislation on May 6, 2008 that would end liability for businesses that print expiration dates but comply with the requirement to shorten credit card numbers. The proposed Credit and Debit Card Receipt Clarification Act of 2008 would declare any business that printed the expiration date but not the entire number to be “not in willful noncompliance” with FACTA. It would apply to any unresolved lawsuit, regardless of when that lawsuit was filed.

As billing fraud class action attorneys, we were pleased to see that a Pennsylvania federal district court recently certified a class in a lawsuit alleging three health clubs in Pennsylvania charged excessive startup fees. In Allen v. Holiday Universal, the court certified a class of all plaintiffs who joined a Bally Total Fitness in Pennsylvania (which includes Holiday Universal, Inc. and Scandinavian Health Spa gyms) on or after December 7, 1998 and paid more than $100 in startup costs.

In a 63-page Memorandum of Order, U.S. District Judge Gene Pratter of the Eastern District of Pennsylvania rejected several arguments raised by the defense that the class should not be certified. Among those arguments were:

* Club members with different contracts were too different to form a class.

Illegal debt collection practices exposed:

The Federal Trade Commission’s (“FTC”) website summarizes illegal debt collection practices. Below is the summary from the site:

Fair Debt Collection

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