Judge Rules Trial May Proceed Against Key Bank by 33 Businesses Cheated in Mainely Payroll Scam

(PORTLAND, Maine) - Thirty-three small businesses that lost millions of dollars in dealing with a corrupt Augusta payroll company this week cleared a major legal hurdle and won the opportunity to proceed to trial against Key Bank. Their lawsuit alleges that bank officials "aided and abetted" a highly publicized payroll tax scam.

Cumberland County Superior Court Justice Thomas D. Warren denied Key Bank's motion for summary judgment. The judge ordered the case can go to trial before a jury to determine whether Key Bank assisted or encouraged the misdeeds of Clifford Levesque, the owner of the former Mainely Payroll (MPI).

Also, the judge ruled that punitive damages remain a possibility if the jury finds against Key Bank - a significant and potentially costly ruling for a nationwide bank, said lawyers for the businesses, Terrence D. Garmey of Smith Elliott Smith & Garmey and Jeffrey A. Thaler of Bernstein, Shur, Sawyer & Nelson.

"Our clients are Maine business women and men who have waited for years to have their day in court," said Thaler, a Portland attorney. "They are heartened that the judge has agreed they may now proceed and let a jury of Maine citizens decide this case."

Mainely Payroll processed paychecks for many Maine businesses. According to undisputed evidence summarized in Justice Warren's opinion, Levesque, a former Key Bank employee, experienced cash flow problems in 1995. He began to arrange for clients' money in the MPI account to be transferred, with Key Bank's knowledge, to other Key Bank accounts - of Levesque and his son Michael - to cover the Levesques' growing indebtedness to Key. He also shorted clients' quarterly tax payments, keeping the difference for his and his son's needs.

Levesque's scheme unraveled in 1996. Both he and his son Michael later pleaded guilty to federal criminal charges, and are serving federal prison sentences. The 33 plaintiffs have claimed they suffered losses exceeding $2.5 million, Garmey said.

The judge, in his March 5 ruling, said genuine issues of fact need to be determined by a jury that "include, but are not limited to, whether Key Bank gave substantial assistance to Levesque by knowingly providing him with special overdraft privileges that facilitated his misappropriation and whether Key gave substantial encouragement to Levesque's wrongdoing by arranging for and even requiring that Lube Plus (his son's business) overdrafts be covered from the MPI payroll account." The judge also set for trial the issue of whether Key Bank permitted and encouraged Levesque to cover overdrafts in his son's business account at Key with payroll funds.

Trial is anticipated later this year.

The 33 businesses in the lawsuit are located throughout Maine and include Augusta Fuel Co. (based in Augusta), Maine Eye Care Associates (Waterville), Pepino's Mexican Restaurant (Brewer), New England Whitewater Center (Millinocket), Apgar Imaging Systems (Augusta), Jenkins, Inc. (Readfield), Cushnoc Bank and Trust, Anesthesia & Respiratory Care Associates, Capital Ambulance Service (Bangor), Fore River Management Company (Portland) and Groundalf, Inc. (Augusta).

Thaler, a resident of Yarmouth is a well-known trial attorney and shareholder at the statewide firm of Bernstein, Shur, Sawyer & Nelson. He has been listed in every edition of "Best Lawyers in America" since 1988.

Garmey, a Cape Elizabeth resident, is a partner in the Portland office of the Saco-based firm of Smith Elliott Smith & Garmey. He is also considered one of the state's top trial lawyers and likewise has been listed in "Best Lawyers in America" for several years.

Also, several of the mid-coast businesses will be represented at trial by Philip Mancini of Portland.
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Please note: For a copy of Justice Warren's 16-page
decision, please call Wolfe PR at 775-5115. Docket
numbers CV-99-101 & CV-99-102 are on file at
Cumberland County Superior Court. Thank you!