Bank sues Florida man in check-kiting scheme

By Pankaj Ladhar of Manos • Alwine P.L.

Sarasota police and the United States Secret Service are investigating an alleged kiting scheme involving a Florida businessman, who is now involved in a lawsuit. The man was working with an advertising company in a different state. The advertising company received and repaid short-term loans from the Florida businessman.

In a check-kiting scheme, more than one bank account is used to move money, then withdraw the money. For example, a check-kiter might write a check for $10,000 on an account with only $1,000 in it. The check-kiter withdraws another large amount from the second bank to get cash before the first check bounces.

The advertising company became associated with the lawsuit, which was filed by the bank, but is not named as a defendant. The detective working the case stated that the advertising company is not a suspect in the case. The out-of-state advertising agency has offices in Sarasota. The check-kiting scheme cost the bank about $9.8 million.

The Florida business man used an account at the bank in the name of one of his other companies in the alleged check-kiting scheme. That company is in the same building as the advertising company’s Florida offices, as is the bank involved in the check-kiting scheme.

The businessman deposited 260 checks from the advertising company into a bank account that totaled millions of dollars. In the end of January, another bank refused to honor some of the checks – about $14.8 million worth. The advertising company had enough in its bank account to cover the checks, but the businessman instructed him to cancel 33 checks, thus causing the bank to refuse to honor them. During this transaction, the businessman was still withdrawing money from the bank that is suing him. He sent millions (not specified) back to the advertising company before the plaintiff bank learned that the other bank was not going to honor the checks.

Source: Fayo Observer, “Lender to Smith Advertising & Associates facing lawsuit in Florida,” Paul Woolverton, Feb. 23, 2012