We’re the ‘only victim,’ says financial firm

A West Coast financial services company that pulled back money from thousands of employees’ bank accounts nationwide described itself Tuesday as “the biggest victim, and really the only victim” of last week’s apparent collapse of Clifton Park-based Mypayrollhr.

While an attorney for the parent company of Pasadena, Californiabased Cachet Financial Services suggested employers would get their payroll funds back, workers this week are still struggling with negative bank accounts and loss of income needed to pay for necessities like groceries and rent.

Wendy Slavkin, general counsel for Cachet’s California-based parent company FBG Holdings, placed the blame for the reversals and deductions squarely on Mypayrollhr owner Michael Mann.

In an interview Tuesday with the Times Union, Slavkin said that “as it stands today ... the biggest victim, and really the only victim and victims, is Cachet” and another financial services company that contracted with Mypayrollhr.

Slavkin estimated that Cachet could face losses of as much as $26 million.

“The employers are getting back their money,” she said. “We are not.”

Cachet first entered into an agreement with what became Mypayrollhr about 12 years ago, Slavkin said. Cachet is the company that distributes the payroll to individual workers whose employers had contracted with Mypayrollhr.

The process usually runs smoothly: Since transfers are largely done via direct deposit, specialized permits and licenses are needed to move money from a payroll processor’s account to an employee’s. Because many payroll companies lack those permits, they will partner with a bank or, in Mypayrollhr’s case, with a firm like Cachet.

The money is supposed to be moved out of an employer’s account and into a holding account controlled by Cachet. Cachet then takes the money out of that account and distributes it to employees.

But in the days prior to Mypayrollhr’s shutdown, something went wrong at “virtually lightning speed” during that first step, Slavkin said. The system was tampered with electronically by an unknown party, she claimed, and the funds were never transferred into Cachet’s holding account.

“They manipulated the account, so that instead of the money going from the employer to our Cachet settlement account, it went into a different account that was controlled by Mypayrollhr — or Michael Mann, I assume, who is the principal,” Slavkin said.

Efforts by the Times

Union to reach Mann since Mypayrollhr shut down have been unsuccessful.

Slavkin said she doesn’t know how the transfer was manipulated, only that it was done “by somebody who is very, very, very smart.”

The computer program tried to complete the second part of the process — when money is transferred from Cachet’s account into the employees’— but since the money never went into the Cachet account, what Slavkin termed a “deficiency” was created.

Cachet then attempted to claw back its funds, Slavkin said, but made an error in its coding. Because of that error, Cachet “assumed” the receiving banks would reject the transaction, she said.

But that didn’t happen, so Cachet attempted a second reversal to get its money back. That’s why many employees are reporting their bank accounts having been hit twice, she said.

“We’ve had cyberhacking, outside hacking, (but) never experienced anything like this,” she said. “So what are we doing today? We’re trying to create some sort of protocol in our system that alarms us or (notifies) us when a payroll company tries to change the banking code.”

She said Cachet doesn’t

know whether the missing money is in Mypayrollhr’s account at Pioneer Bank, which hasn’t communicated with Cachet.

Based in the Capital Region, Pioneer Bank has remained silent since news of the payroll company’s closure first hit last week. The Times Union first reached out to Pioneer on Friday, but didn’t receive a response until Monday — when a spokesman said a statement would be released later in the week.

Pioneer Bank’s silence leaves several unanswered questions — including whether there are still funds in Mypayrollhr’s account that can be recouped by those who have been left without a paycheck.

Slavkin said she’s reached out to the U.S. attorney for the Northern District of New York, along with FBI offices in Albany, Boston, Los Angeles and Pennsylvania. She said federal authorities are investigating Mypayrollhr.

The U.S. attorney’s office has declined to comment, as has state Attorney General Letitia James. A spokesperson for the IRS said federal law prohibits the agency from commenting on organizations.

Slavkin said she sympathizes with the employees who had their accounts deducted, but stressed the money belonged to Cachet.

“To make sure that there’s no problem, what (Cachet) ... has, I think, quite generously done is called its bank and instructed its bank to call the hundred or so receiving banks ... and advise them and instruct them to reject those reversal files, so that no money at all comes out of those employee accounts,” she said.

Slavkin claimed most of the employees are getting their money back. “If they haven’t, they will,” she said. “It’s a matter of yesterday, today, tomorrow.”

But it’s not a matter of yesterday, today or tomorrow for North Carolina resident Addam Terwilliger, a single father of an infant and a nonverbal autistic 13-year-old. Terwilliger said his bank account is nearly $500 in the red because of Mypayrollhr.

Terwilliger, who worked as a tractor-trailer attendant in North Carolina

until last week, first noticed a deduction in his account Thursday. He woke up to another on Friday and is terrified that his account might get hit again this week.

It’s a nightmare scenario for anyone who lives paycheck to paycheck and needs to buy diapers, baby wipes and teething medicine for his child. He’s already had to go to a food bank to provide for his family, he said. He said he doesn’t know how he’ll be able to afford medicine if one of his children gets sick.

“I’m really not in a situation to where I can alleviate the backdraft of this,” Terwilliger said. “... I have nothing left to fall back on.”

Terwilliger said his manager told him to find another job because he doesn’t know when the situation will be fixed. So he’s now a server at his local Denny’s — a job that came with a large pay cut.

If given the chance to speak to the person responsible, Terwilliger said, he’d tell them: “This is really messed up.”

“It’s hurtful,” he said. “It’s not even about me at this point — it’s about my children.”