MetaBank Lawsuit and allegedly "fraudulent" COD's

Meta Bank of Iowa is being sued by 8 groups who bought fraudulent COD’s after former employee Charlene Marie Pickhinke of Sac City plead guilty to stealing $4.2 million from the bank. In her guilty plea Pickhinke admitted to selling COD’s to as many as 50 banks and credit unions across the country.

While Meta Financial Group Inc. disclosed the fraud to the SEC as early as May 2008, a lawyer for Guardian Angel Credit Union Chris Meier says, “Regardless of whether one of MetaBank’s employees thereafter stole the deposits, MetaBank is liable to its depositors.” The Guardian Angel Credit Union deposited $99,000 with MetaBank and in its lawsuit is asking for the case to be handled with class action status since there are at least 50 more financial institutions involved with the fraud. While MetaBank says, “It does not appear at this time that she stole any bank money as part of the fraud”, and that there is still, “unresolved questions as whether under what theory and to what degree the bank might be liable for the former employee’s actions.” you have to wonder, if the bank isn’t responsible for its employees and branch managers, who is? Further the fraud happened between 1995 and 2008, that’s a span of about 13 years, how was this allowed to continue on for so long?

It would appear that at the very least there is the legal question of whether MetaBank was negligent in their oversight of its employees; making them 100% liable for the fraud that either their business model, or lack of oversight allowed to happen in the time spanning from 1995 to 2008. Further if she didn’t steal any bank money as part of the fraud these banks do in fact have COD’s with MetaBank why wouldn’t they be forced to honor them?