An eastern Pennsylvania bank charges that a customer and six corporations he controls wrote a whopping $1.7 million in check overdrafts this year.
In court papers filed earlier this month, Nazareth (Pa.) National Bank and Trust Co., a subsidiary of First Colonial Group Inc., is accusing Thomas Neely of Pocono Pines, Pa., and the corporations of fraud, conspiracy, and "wrongfully and tortuously" converting bank funds for their own personal use, possibly in foreign transactions.
The suit, filed in the Court of Common Pleas of Northampton County, claims that the defendants defrauded the bank by depositing overdrawn checks into six corporate bank accounts and then wiring money they didn't have to other trust accounts at the European American Bank and Bank of New York.
The $290 million-asset Nazareth National Bank is seeking full compensation, plus interest from March 31, and punitive damages of at least $50,000. The lawsuit also demands an injunction to prevent further fund transfers out of any of the defendants' accounts so the money will not leave the court's jurisdiction.
The six corporations are New Concepts Development Inc. of Mountainhome, Pa., and Shire Holding Corp., Toneli Associates Inc., Cordex Development Corp., Hopeful Properties Inc., and Cantico International Ltd. - all of which share the same post office box in Pocono Pines.
Mr. Neely could not be reached for comment.
According to the documents, in February and March Mr. Neely deposited 16 checks worth $1.8 million into the companies' accounts at Nazareth. The checks were drawn from Cordex's account at the Bank of Montreal.
But, the lawsuit charges, Mr. Neely knew the Montreal account didn't have enough money to cover the checks, which were later returned by the Bank of Montreal for insufficient funds.
To make the Nazareth accounts appear as though they had enough money to cover withdrawals, the suit says, Mr. Neely and the corporations moved funds among the accounts almost daily, ignoring "all corporate formalities and . . . (treating) the corporate defendants as a single enterprise for his own individual purposes and benefit."
Simultaneously, the suit alleges, Mr. Neely and the corporations were already transferring money they didn't have from the Nazareth accounts to a trust account at the Bank of New York in the name of Mr. Neely's attorneys, Rick Steiner Rubin & Tannenbaum. At least $400,000 was also sent to a Cordex account at European American Bank, the suit charges.
In addition, Mr. Neely and various family members allegedly withdrew $300,000 to $400,000 in numerous cash transactions of just under $10,000 each, leaving the bank accounts overdrawn by the end of March.
Nazareth officials discovered the problem after several checks drawn on the Bank of Montreal bounced, but the defendants had already transferred money to the two New York banks, according to Nazareth's attorney, Frederick D. Lipman.