Reference no: EM13329647
In February 2008, Steve Szabo, a Venezualan resident, maintained a checking account with Bank of America in Palm Beach Gardens, Florida. An unknown person with an internet address in Nigeria hacked into Szabo's accounts on-line and, by placing a telephone call to customer service on February 11, 2011, transferred funds totaling $ 133,701.24 from certificates of deposit owned by Szabo into Szabo's checking account.
On or about February 20, 2011, at America’s branch in Osburn, Idaho, Quimby presented a check purporting to be check number 392 drawn on Szabo's checking account with Bank of America, payable to Quimby in the sum of $ 120,000.00. Quimby received this check from a potential investor in gold mining property owned by Quimby. Because of the size of the check and the concerns expressed by Quimby, the branch manager verified through Bank of America's records that Szabo's account had sufficient funds to cover the amount of the check. The branch manager also called the telephone number in Szabo's account records and spoke to a person who purported to be Szabo and confirmed that the check was valid and intended to be payable to Quimby (the hacker had changed the telephone number on Szabo’s account to his own number).
Quimby then endorsed the Szabo check. Bank of America the check and issued Quimby a cashier's check in the sum of $ 120,000.00 which Quimby deposited on February 20, 2011, to his account at Bank of America's Baker City, Oregon branch. Bank of America deposited the Szabo check to its general ledger account, which is maintained for Bank of America's own funds.
Shortly thereafter, the originator of the check contacted Quimby, stating that he decided not to invest in Quimby's gold mining business and instructed Quimby to return the funds to a designated account. On February 22, 2011, Quimby sent $ 111,000.00 by wire transfer from his account with Bank of America to an account at Wing Hang Bank Ltd. for the benefit of Run Yue International Trading Company located in Hong Kong, China. The recipient is unknown to Bank of America, and the funds are unaccounted for. All attempts by Bank of America to recover the funds wire transferred by Quimby have been unsuccessful.
On March 3, 2011, Szabo filed an affidavit with Bank of America regarding the fraudulent activity in his account which affirmed that he had not been involved in the fraudulent issuance of check number 392 and had not benefitted from the stolen funds. Bank of America's investigation confirmed that Szabo had not issued or authorized issuance of check number 392 to Quimby, that blank checks had been obtained by persons unknown without Szabo's consent or knowledge, and that Szabo's signature on check number 392 was a forgery. Because check number 392 on Szabo's account was not properly payable to Quimby, Bank of America repaid Szabo the sums which had been fraudulently taken from his account.
Pursuant to its account agreement with Quimby, Bank of America recovered a portion of its loss on the transaction from Quimby's business account with Bank of America. However, after such partial recovery, Bank of America has sustained a loss of $ 117,542.11, together with interest thereon at the legal rate from April 21, 2011.
Assume that Bank of America can find Quimby and files a lawsuit against him. Who will win and why? You must use IRAC and do a complete analysis.