De­posit re­ver­sals strand hun­dreds

Pay­roll pro­cess­ing firm shut down un­ex­pect­edly

Sun Sentinel Broward Edition - - Front Page - By Ron Hurt­ibise

Hun­dreds of South Florida em­ploy­ees — along with work­ers across the United States — faced the hor­ri­ble dis­cov­ery last week that their elec­tron­i­cally de­posited pay­checks had been elec­tron­i­cally re­moved from their bank ac­counts.

The work­ers were left fi­nan­cially stranded af­ter a third-party pay­roll pro­cess­ing com­pany con­tracted by their em­ploy­ers — Clifton Park, N.Y.-based My­Pay­rollHR — shut down un­ex­pect­edly be­fore trans­fer­ring funds from their em­ploy­ers into an ac­count con­trolled by another ven­dor re­spon­si­ble for dis­burs­ing the pay.

That ven­dor, Ca­chet Fi­nan­cial Ser­vices, a pri­vately held com­pany based in Santa Ana, Calif., said it ini­ti­ated the di­rect de­posit re­ver­sals to re­coup $26

mil­lion its sys­tems au­to­mat­i­cally sent to thou­sands of em­ploy­ees de­spite never re­ceiv­ing it from My­Pay­rollHR.

On Tues­day, an at­tor­ney for the ven­dor said it would ask all of the em­ploy­ees’ banks to re­turn all pay that was with­drawn.

In a short news re­lease last week, New York Gov. An­drew Cuomo called for his state’s Depart­ment of Fi­nan­cial Ser­vices to in­ves­ti­gate My­Pay­rollHR’s “ir­re­spon­si­ble” ac­tions.

“The sud­den and un­ex­plained shut­down of My­Pay­rollHR in Clifton Park is dis­turb­ing and com­pletely un­ac­cept­able,” Cuomo’s state­ment said. "Its reck­less ac­tions have left em­ploy­ees across the state and the nation with neg­a­tive bank ac­counts and forced busi­nesses who de­pend on its pay­roll ser­vices to scram­ble to find ways to com­pen­sate their em­ploy­ees.

The Al­bany (N.Y.) Times Union, which cov­ers the re­gion that in­cludes Clifton Park, re­ported over the week­end that em­ploy­ees of My­Pay­rollHR were among those whose ac­counts were deb­ited. The web­site quoted the su­per­in­ten­dent of the state’s Depart­ment of Fi­nan­cial Ser­vice as con­firm­ing that an in­ves­ti­ga­tion into the com­pany was un­der­way.

My­Pay­rollHR had 4,000 busi­ness clients, the Times Union re­ported.

The owner of one of those busi­nesses, Mi­ami Lakes-based staffing com­pany Affin­ity Em­ploy­ment, said up to 300 of his South Florida work­ers re­ported los­ing at least a week’s worth of pay to the re­v­erse de­posit.

Brad Mete, Affin­ity’s pres­i­dent and co-founder, said his com­pany de­cided to re­im­burse the em­ploy­ees for a week of the lost pay to en­sure they could keep their heads above wa­ter.

Mete said he be­came aware of the prob­lem Thurs­day, when em­ploy­ees over­seen by the staffing com­pany be­gan re­port­ing with­drawals of their Aug. 30 pay from their check­ing ac­counts. Affin­ity of­fi­cials tried call­ing My­Pay­rollHR, but that com­pany was un­re­spon­sive, Mete said.

On Fri­day, Affin­ity’s em­ploy­ees started re­port­ing that a sec­ond week’s worth of pay had been with­drawn from their ac­counts, Mete said.

Em­ploy­ees as­signed to about 70 South Florida com­pa­nies were af­fected, he said. They range from as­sem­bly work­ers mak­ing $9 an hour in man­u­fac­tur­ing plants, to $10-an-hour janitors, to ware­house work­ers mak­ing $15, as well as in­for­ma­tion tech­nol­ogy and health care work­ers earn­ing higher wages, he said,

“Th­ese are peo­ple liv­ing pay­check to pay­check, whose rents were due Sept. 1,” he said. “This is a hor­ror story.”

Mete is ad­vis­ing the em­ploy­ees to ask their banks to re­v­erse the with­drawals, and some have, he said.

Ca­chet Fi­nan­cial Ser­vices, the com­pany that ini­ti­ated the with­drawals, on Mon­day said it only wants banks to re­v­erse one of the with­drawals and only for em­ploy­ees who lost money twice.

In an in­ter­view on Mon­day, Ca­chet’s at­tor­ney Wendy Slavkin said the com­pany feels bad about the em­ploy­ees’ predica­ments, but that Ca­chet shouldn’t be held re­spon­si­ble for pay­ing them. “That money never be­longed to those em­ploy­ees,” she said. But on Tues­day, Slavkin said Ca­chet had de­cided to ask all banks to en­sure all af­fected em­ploy­ees would get their money back. “Ei­ther they’ve re­ceived it or will re­ceive it," she said.

Ca­chet will pur­sue the money from My­Pay­rollHR af­ter it asks in­ves­ti­ga­tors and the court to help fig­ure out where it went, she said.

Nor­mally, My­Pay­rollHR would be re­spon­si­ble for col­lect­ing money from the em­ploy­ers and de­posit­ing that money into a hold­ing ac­count over­seen by Ca­chet, Slavkin said.

Ca­chet, be­cause it is au­tho­rized to con­duct bankto-bank trans­ac­tions un­der fed­eral rules, would then move the money from the hold­ing ac­count into each em­ploy­ees’ check­ing ac­counts.

“All of this is done by com­puter,” Slavkin said.

But in this case, Ca­chet dis­trib­uted the pay­checks af­ter some­one ap­par­ently ma­nip­u­lated the com­puter pro­gram to di­vert it away from the hold­ing ac­count con­trolled by Ca­chet and into a mys­tery ac­count, Slavkin said.

When Ca­chet dis­cov­ered its ac­count had been deb­ited $26 mil­lion and there was no de­posit from My­Pay­rollHR, it tried to take back the $26 mil­lion by send­ing a spe­cific re­ver­sal code to all of the em­ploy­ees’ banks, she said.

But some­one wrote the re­ver­sal code in­cor­rectly, Slavkin said, prompt­ing Ca­chet to re­send the re­ver­sal or­der us­ing the cor­rect code. “The banks should have re­jected the [first] in­cor­rect re­ver­sal code,” she said, but some didn’t and al­lowed both the first and sec­ond re­ver­sal or­ders to with­draw money from the em­ploy­ees’ ac­counts, re­sult­ing in deb­its of two weeks of pay.

Many em­ploy­ees who go to their banks to dis­pute the with­drawals are suc­ceed­ing in get­ting the de­posit re­ver­sals re­versed, Slavkin said.

Oth­ers, ac­cord­ing to Mete, are run­ning into re­sis­tance. Some banks are re­vers­ing one but not both of the with­drawals, he added.

As of Tues­day night, 1,953 peo­ple joined a Face­book group, Vic­tims of My­Pay­rollHR and Ca­chetFS, to share sup­port and tips on how to dis­pute the re­ver­sals at their banks.

Slavkin said Ca­chet has in­sur­ance but not enough to cover a $26 mil­lion loss. Ca­chet of­fi­cials have asked My­Pay­rollHR’s bank to freeze its ac­counts but that hasn’t hap­pened yet.

My­Pay­rollHR’s CEO, Michael Mann, is no longer re­turn­ing phone calls from Ca­chet, de­spite 12 years of do­ing busi­ness to­gether.

The voice­mail sys­tem at My­Pay­rollHR on Tues­day said no one was avail­able to take calls and to try back later.

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