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Pioneer Bank Sues For Lost $34 Million In ValueWise Scandal

Pioneer Bank has joined the number of firms filing lawsuits over the continuing and complex MyPayrollHR/ValueWise scandal, which a report from the Daily Gazette calls one of the largest in Capital Region history.

The scandal caused over $100 million in losses to hundreds of businesses and individuals upon its collapse in August of last year, the report says, when their paychecks didn’t go through after CEO Michael Mann, or someone else near the top of the company, moved workers’ money into a private account used for embezzlement.

Michael Mann, the CEO of MyPayrollHR, pled guilty in September to charges, including co-mingling of funds, outright fraud and money transfers called kiting. The actions had gone unnoticed for years.

The efforts to recover the stolen money might be tough, as Mann lacks the funds to make anywhere close to a full reimbursement — a lot of the stolen money had gone into his now-defunct businesses, the report says.

Pioneer was previously sued by Berkshire Bank and Chemung Canal Trust Company, which each bought a line of credit near the scandal’s beginning, claiming they’d lost $19 million. Pioneer’s response was that it came down to error on its CPA’s part.

Pioneer has sued Teal, Becker & Chiaramonte CPAs (TBC) demanding $34,099,589 plus interest, which the report says is equivalent to the amount of money Pioneer lost in the scheme. This is emblematic of how much of the recent lawsuits have gone, leveled at the legitimate companies that had become entwined in the scheme.

According to Pioneer, it suffered a “massive loss” because of the accountants’ malpractice when they audited ValueWise Corporation.

Among the allegations in Pioneer’s lawsuit are that TBC issued unqualified statements that later proved to be false and had multiple misstatements because of Mann’s widespread fraud that TBC hadn’t caught for a decade. And when Mann’s schemes collapsed, the ValueWise entities defaulted on lines of credit and caused Pioneer to lose money.

The MyPayrollHR scandal, PYMNTS writes from a conversation with DailyPay CEO Jason Lee, highlights the failure of the old ways of biweekly paychecks. Lee told Karen Webster last year that the old system was simply too slow, often taking several days to go through and making people wait for money they lost out of no control of their own.

In Lee’s opinion, the ideal system would be to pay workers for their work as soon as said work is completed, rather than making them wait for bigger lump sums.

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