Business account, single-member LLC. Owner has reported upwards of $17,000 in ATM and check fraud perpetrated by his employee/live-in girlfriend. He has filed an affidavit of forgery on the checks, and did file a police report, however he told them he didn't want to pursue her criminally, he "just needed the case number to get his money back". They subsequently closed the case with no investigation. The report shows that he was aware she was doing this over a period of years, but now he's "out of money" so it's an issue.

I'd like to take the stance that ordinary care was tossed out the window long ago and he doesn't get to decide now after allowing it for so long that he's not okay with it. If he wants any refunds he better have insurance for his business and plan to fire/prosecute her. Thoughts on if we can wipe our hands of it?

seems like this is your out...so you do your investigation, referring to this as well, even ask him if that is factually accurate, and then it seems you will be able to deny. what does your deposit agreement state about time frame for notifying the bank when the customer detects an error or fraudulent activity?

30 days from the statement the charge first occurred on, since it's a business account. UCC would give him more time, but I don't think even that allow him to intentionally neglect protecting his account for that long of a time frame. Even being kind to him, most of what he reported is well beyond that. A bit under half of it is ATM withdrawals and those are just getting flat out denied but the terms are a lot more clear on that for business accounts than check issues.

For check issues, there is the legal concept called "ratification." He let it go on for so long that the bank is entitled to rely on his inaction in paying the checks.

There is also the UCC 4-406 limitation on liability when unauthorized items involve the "same offender."

Thanks John, very happy to have some details to reference!