WHOOPS!

“To err is human, to forgive is divine.” – Alexander Pope.

Let us consider the first part of Pope’s phrase. We all make mistakes; some bigger than others. Does a day pass when we make a mistake, error, boo boo, screw up or faux pas? Ok, you understand. For me, my first goof up of the day is often before I finish my morning coffee.

But we can all take solace from this monumental error. Citibank erroneously wired $500 million, by accident. And cannot recover it. Yes, that’s right. Half a billion dollars!

Citibank personnel accidentally wired almost $500 million to lenders of cosmetic maker Revlon. Citibank was Revlon’s loan agent. The actual error was around $900 million, but some firms returned the erroneous deposits. As to the $500 million payment, it was to be “only” an $8 million interest payment. Instead, the huge improper overpayment was applied to Revlon’s loans, being treated as a monstrous pre-payment. This, despite a “six eyes” security safeguard, where three people were required to review and approve the wire transfer. Despite the security measures, a contractor checked the wrong box on a digital payment form. Whoops!

Citibank sued in Federal Court in New York and lost, based on a New York rule of law known as the “discharge for value defense”. As the money was due the lenders, the mistaken overpayment did not have to be returned but was applied to the underlying debt. The Court’s ruling is on appeal and the money is frozen, but nonetheless, likely some Citibank folks are looking for employment elsewhere.

I can’t speak for you, but the fact that I didn’t shovel some snow from the walk is not such a big thing, is it?

  • Allan Opsitnick

Author: opsitnickslaw

Allan J. Opsitnick J.D. and B.A. Degrees, University of Pittsburgh

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