The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas has been accused of negligence in facilitating the unauthorised transfer of $154,000 from an account belonging to a commercial client.

The BISX-listed institution has been named as a defendant, and is being sued, in the Maryland federal courts by Donald Callender, proprietor of a financial consulting business with a Nassau-based affiliate.

Bank of the Bahamas, according to the lawsuit obtained by Tribune Business, appears to have become embroiled in a nasty family dispute between Mr Callender and his former daughter-in-law, who he is accusing of taking money from his business without permission.

Erica Callender, who was office manager for her father-in-law’s Convergence Management Associates (CMA) business, allegedly instructed Bank of the Bahamas to make two wire transfers from its Bahamian account to her personal banking facilities in the US.

The largest transfer, allegedly involving $125,000, occurred when Mr Callender was hospitalised and being treated for congenitive heart failure,

He claims that Bank of the Bahamas undertook none of the due diligence necessary to determine that the transaction request was authentic before transferring the monies to Erica Callender’s account.

The lawsuit is another unwanted headache for Bank of the Bahamas, which is struggling to return to a sustainable financial footing after losing nearly $100 million over its past two financial years.

But there is no suggestion that the Callenders involved in the lawsuit are related to the late Colin Callender, his family or the Callenders & Co law firm.

The address given for CMA’s Nassau affiliate, Convergex Caribbean Ltd, matches that for the Alexiou, Knowles & Company law firm, research by Tribune Business has established.

Donald Callender’s complaint, filed on New Year’s Eve, alleges that his daughter-in-law instructed Bank of the Bahamas on May 27, 2010, to wire transfer funds to an account with National Bank of Florida.

The funds involved came from Convergex Caribbean Ltd, which had maintained corporate bank accounts with Bank of the Bahamas for “many years”.

Erica Callender, who was responsible for CMA’s bookkeeping, allegedly instructed Laurie Major, a Bank of the Bahamas employee, to send $29,000 to the Florida bank account.

“The account at the National Bank of Florida was in the name of the company Island Hotel Company Ltd USA, and was the beneficiary of the requested transfer. At the time of the transfer, Ms Callender was in debt to the Island Hotel Company,” the lawsuit alleged.

It claimed that the $29,000 transfer cleared Erica Callender’s debts with the Island Hotel Company, which is thought to be one of the subsidiary companies at Paradise Island’s Atlantis resort.

There is nothing to suggest that the Island Hotel Company has done anything wrong in relation to the ‘Callender affair’, but the lawsuit claims that Erica Callender - who did not have signatory authority over the Convergex Caribbean account - effected the wire transfer without her father-in-law’s knowledge.

Donald Callender alleged that the same scenario was repeated two years’ later, when his daughter-in-law again instructed Ms Major to wire transfer $125,000 from Convergex Caribbean’s accounts with Bank of the Bahamas.

The funds were allegedly transferred Erica Callender’s Bank of America account in Maryland at a time when her father-in-law was hospitalised.

“Before effectuating the transfer, Ms Major of the Bank of the Bahamas inquired as to whether the requested transfer was authorised by plaintiff Donald Callender, the owner of the account,” the lawsuit alleges.

“In response, Ms Callender informed Ms Major that Mr Callender was ill, and that he would not be able to provide or give consent to the requested transfer. In fact, at the time of the request, plaintiff Callender had just been admitted to a hospital and was being treated for congestive heart failure.”

Erica Callender allegedly misrepresented to Bank of the Bahamas that she had the authority to execute the wire transfer, with the bank again accused of failing to verify whether this was accurate.

“In total, defendant fraudulently transferred $154,000 from an account owned by the plaintiff and maintained by the defendant, Bank of the Bahamas, into either an account owned by her or into an account of an entity to whom she was indebted,” the lawsuit alleged.

Accusing Bank of the Bahamas of negligence, the lawsuit claims that it “breached its duty” to Donald Callender by failing to implement, or follow, security procedures that would have prevented the unauthorised transfer of funds.

“It was the obligation of the defendant, Bank of the Bahamas, to have sufficient security procedures in place that were a commercially reasonable method of providing security against unauthorised entries or transfers from accounts held by the bank,” the lawsuit alleged.

“Bank of the Bahamas had a duty to the plaintiff and others to verify the authenticity of any instructions concerning the transfer of funds from its accounts. The bank further had a duty to act in good faith, and in compliance with the necessary security procedures, and adhere to the observance of reasonable commercial standards of fair dealing to ensure that all requests for transfers of funds are legitimate.

“In short, the Bank of the Bahamas has an obligation to determine if payment or requested transfer from a customer account is authorised.”

The lawsuit alleged that Donald Callender only discovered the transactions, and missing funds, when external experts scrutinised his company’s books in early 2015. It claims that none of the money has been repaid by his former daughter-in-law.