Newtown Savings Bank fraudulently wired $67,000, state judge finds

NEWTOWN — A state judge has ruled against Newtown Savings Bank in a lawsuit accusing the bank of allowing more than $67,000 to be fraudulently wired.

Shelton-based Precision Computer Services alleged in a complaint filed in 2018 that the bank refused to reimburse the company for the lost funds.

In a judgment filed in Milford Judicial District Court, Judge W. Glen Pierson wrote that the bank “failed to accept and execute the payment order in a way that comported with the plaintiff's reasonable expectations, as established by reasonable commercial standards of fair dealing.”

Newtown Savings Bank declined to comment on the judgment.

“For nearly five years, Newtown Savings Bank's leadership did not reimburse our company for the fraudulent wire transfer that it failed to authenticate,” Michael FitzSimons, who owns PCS with his wife, said in a statement Tuesday. “I'm deeply saddened that I put my trust in the leadership of my hometown bank that, in the end, failed to protect one of its longtime customers.”

The issue stemmed from a scam that changed one letter in FitzSimons' email address, according to the judgment. The bank thought it received authorization for the wire transfer from FitzSimons, but did not properly authenticate that he sent the email, the judgment stated.

However, the judgment states a person who is an employee at PCS did confirm the wire transfer.

On June 14, 2017, officials at the bank received an email that appeared to be from FitzSimons, according to court filings. The email asked the bank to process a wire transfer for $67,560 to an entity in Hungary for “legal services, assistance and strategic advice,” the filings state.

The bank officials replied saying they would need authorization from the person emailing purporting to be FitzSimons, who wrote in another email, “Please process the attached wire transfer,” the judgment states.

However, the emails purporting to be from FitzSimons had been sent from an address that swapped the letter “g” for a “q,” according to the judgment. The letters “resemble closely one another in the typeface used for the email communication,” the court filing states.

In a response to the complaint, the bank's attorney argued the payment order was authorized because it was received “from a party, who was authorized by the plaintiff and was, therefore, an authorized transfer” pursuant to state law.

But Pierson ruled that even though an “authorized individual” at PCS had confirmed the wire transfer, it violated the security procedure agreed to by the two parties because it “originated by an imposter purporting to be Michael FitzSimons.”

“This violates the plain terms of the security procedure established by the agreement and is not an ‘authorized order'... of a person identified as the sender, because Michael FitzSimons did not authorize the order,” Pierson wrote.

An expert witness for the company wrote in an affidavit that the imposter “employed a character substitution fraud to ‘spoof ' the email address of Michael FitzSimons, leading to a transfer of the plaintiff's funds to Hungary,” the judgment states.

“By June of 2017, the existence of this type of fraud was well known in the banking industry,” the judgment stated.

The expert also noted that such schemes are one of the “easiest types of fraud for a person to spot with minimal training,” because they only require the recipient to read the email address from the sender. The bank should have been even more careful, the judgment notes, citing the expert witness, because Hungary “is a known destination of fraudulent transfers.”