Defamation claim raised in suit over fraud loss

Mid Penn Bank is firing back at claims it did not adequately protect a nonprofit from fraud.

  • In a legal filing this month, the Harrisburg-based bank alleges that the Center for Independent Living of Central Pennsylvania harmed the bank’s reputation in a press release issued in February announcing a lawsuit against the bank.
  • In the press release, the center claimed that Mid Penn did not try to help after the nonprofit fell victim to a fraud that cost it nearly $250,000.
  • The press release also alleged that the bank’s security procedures “failed to protect” the nonprofit.
  • In its defense, Mid Penn noted that it helped the center recover nearly $45,000 and that the bank worked to recover more.
  • In addition, the bank says it repeatedly offered the nonprofit anti-fraud tools but that the nonprofit “refused” the offers.
  • Thus, claims that Mid Penn did not help “are objectively untrue and were made to deter others from associating or doing business with Mid Penn,” the bank wrote in its counterclaim.
  • A bank spokesperson declined to comment.
  • “We are reviewing their counterclaim but we think that it’s legally defective in a number of ways,” said Shohin Vance, an attorney for the center.

How did this start: The center, which provides services to people with disabilities, sued Mid Penn in February in Dauphin County court, seeking to hold the bank responsible for its loss.

  • The fraud involved a secret email folder created by hackers to divert emails sent from Mid Penn to the nonprofit’s CFO.
  • The diversion allowed hackers to initiate unauthorized ACH transactions for nearly $250,000, according to court filings. 
  • The money ended up in accounts at Citibank.
  • Mid Penn said it froze the center’s accounts upon learning of the unauthorized transactions but claims that more than a month elapsed before the bank was alerted.
  • “Had [the center] monitored its accounts on any sort of regular basis, it likely would not have taken over a month to become aware of and notify Mid Penn of these missing funds, which prevented any possibility of reversing the transactions or returning the funds at issue,” the bank wrote in its counterclaim.
  • The bank claims the fraud-prevention tools it offered the center could have prevented the loss.
  • “I am not aware of these offers being made and we look forward to obtaining and reviewing these alleged offers,” said Vance, an attorney at Philadelphia-based law firm Kleinbard.

What’s next: The bank is seeking damages of at least $50,000 over the nonprofit’s allegedly defamatory statements.

  • The bank also is asking the court to dismiss the nonprofit’s lawsuit.


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