fraud unfortunately for my clients the southern california counseling center they were among his victims and were thereby victimized by his fraud mistress karen's incarcerated he has a restitution order be nice if that were filled but we're not finished so seeking other avenues we entered the claim to our insurance carrier the great american insurance company seeking coverage under the computer fraud insurance sections  salient facts in our view come in large measure both from our proof of loss completed by my clients with their initial attorneys from the law clerk firm but also out of the carians a guilty plea to which he admitted number facts including specifically then franklin payroll services initial taking of funds for payroll was the the mr zakaria and thereafter diverted them and that only at that point in time once the farms were already out of my client's position did kind of computer fraud that the policy excluded from coverage for computer fraud acts by authorised representatives and it found that zakarian and benefit ben franklin payroll services conduct was within that exception and we have a couple problems with that first off and foremost ben franklin ben franklin payroll services doesn't exist there's certainly lots of paperwork using that name mr zakarian was a clever fraudster and to say hey i'm just a person who's going to co mingle your funds would not be a terribly successful so successful fraud to give a premature of legitimacy to the fraud he invented also a trade name ben franklin ben franklin peril services he had a credit or clever marketing scheme but the similar authorized representative exclusion but factually this case could not be further could not be more different from stanford what happened in stanford was a payroll company that was the jetta met that did exist took funds and there was companies controller but the payroll company took the funds they weren't authorized representative of illegitimate company were d b a hypothetically if it were an actual entity yes but there is no such authorization there's authorization if you look at kind of what while on the level for about six months i forget the exact time somebody was doing this on behalf of your client so they were authorized i mean i don't i don't quite understand this because they were unincorporated months tax payments were never made from day one not a single dollar was transmitted to the property tax authority so that component was not transmitted to your honor's point though that someone was processing the payroll that's true using the  theory the theory is that is a couple but at bottom it's that there is no b f p s the f p s is a name it's a fiction it's part of a fraud and it's necessarily so because again if mr zakaria and whatever pushed my client and said hey i have no company no incorporation no register tradename no register d b a none of the appropriate legal formalities to have a company or even a sole proprietorship for that matter the thing doesn't launch so he created a fiction the name authorized to pay the employees salary and to transmit taxes to the government call it what you will and that and to the person pay the employees but d for example move away from this case for a second just to understand a fishing scheme very common electronic computer fraud scheme initiated by an e mail an e mail either contacts a person or a server and creates the faint impression that they're someone who should have access to the systems there's going to be a grant of authority intrinsics somewhere in fact in almost every fraud case computer or otherwise there's going to be some grant of authority the issue that we're trying to drill down in p s i'm a sole proprietorship or b f p s nk and i like to do business under ben franklin because i just do you have an entity and then you have a trade name and you have a link up here all that was presented on the case because or all that means is that they can sue or be sued i guess well let us know what you can sue on the contract that they make if they don't register but i don't know doesn't really have to really have any consequence but i would submit it doesn't an organization only exist by grants of a loss of for example and individual different you know and individuals this naturally corporation exists because state law creates us already to cre corporation but if there is no creative corporation well but i stayed so that i want to have a corporation doesn't make one one of the reason and one about an unincorporated association what about a union which is generally an unincorporated association what about a partnership in the caption so like the prior form your honor i can't speak to that my answer at present would be is that is that it's a limited liability partnership that creates because that's the legal entity and there you know in stark the definition of computer fraud is because the access to your friends the computer is at the computer and without authorization that was never an authorization for the specific direction of funds and access was this was not a withdrawal seems like most anything these days would be computer fraud i think it would be broader these days that then and days past but check fraud would certainly not be computer fraud these days although i  save notice these days if you write a check and it shows up on your bank account as a c h transaction but but but in contrast to and i think your honour's correct in contrast to  that type of transaction where there's a physical writing of a check the fraudsters act there would be a physical taking of a check i e nine computer activity of course it has an electronic manifest as your honor correctly stated just about everything does today here's  call them the counseling center executed a pool whole portfolio of documents constituting zakariya and ben franklin as their agent for purposes of payroll processing including among others and a c h authorization form specifically giving them the authority to make debits from the counseling centers bank account and  make transfers from that on top of that every payroll period one of the counseling centers employees would log onto the ben franklin website and specifically tell them we want you to take quoting here the policy underlying the exclusion clause is most readily understood as an effort to place on the insured the risk of a faithless agent and then in stanford the  court stated that the exclusion was intended to embrace all statuses that are authorized and thus are the insurance of policyholders responsibility to supervise so the the courts have recognized both this court and the first circuit as well as lower courts elsewhere that i consider that that that that you take a look at what this third below the district judge looked at it and said well what we have here is the counseling center was aware that it was executing on a c h transfer authorization it was aware that it was executing  power of attorney form it was aware of what all these documents were and and what their purpose was it may have been lied to about what you know she really didn't reach that that is shoot but it said that here because the fraud was in the inducement that renders those documents as between the policyholder and the negotiations that go into the the transaction through the district court actually address the argument that was made by council just now which argument are your friend here  the crime paula c is not tailored to provide indemnity to the the insured for all types of third party fraud  i have never seen a clause that would provide insurance for all types of third party transactional fraud you're on or and so i don't know how one would that is something that could could fall within the coverage and you know depending on the specific facts and circumstances whether those are two examples your honor but that's not what we have here what we have here is a situation reinforcing that every two weeks by telling them how much they want to take it out for each employee and that simply is not the the kind of peril that case out of the out of the district in louisiana there was a bernie madoff case and in that situation the coverage was identical to what we have here and the district court in that case held that gone and the fact that those were generated by and printed by a computer and sent by a computer that did not mean that the loss was covered by the computer fraud coverage because of the initial transfers out from the hospital were in like to address that response questions by judge ward last how the exclusion should have been drafted to cover this it could have said again we have here just undefined terms authorized representative it could have been written to say whether the product of ostensible authority whether void pursuant to void authority or avoidable already and i think that would have addressed clearly the issue because it was drafted that way in this context it's a big us and we said it should be construed against the insured favor of my client as to the contention that hacking this computer fraud hacking isn't right at all it's terrible conduct and it's that it's that it's a tort it's a content assault and inside the terms but i don't see it as fraud and this is called computer fraud not computer toward a computer misconduct as far as the contention well the district court just applied stanford the district court cited specifically in this is it you are eight and this is putting stanford one seventy four thirty twenty five is that authorized representative prove asian excludes coverage from his approach or misappropriation of funds by those individuals or entities authorized and i think to get back would not be a dead horse there is no authorized  agency what we heard in response is well no there was a payroll tax agreement that authorized if you look at that agreement it's at your three twenty five three twenty six first of all it's unsigned but i think to take another crack at your honour's earlier questions because i understand the route to the heart of the matter if you look at the signature line on your three twenty six it says ben print ben franklin payroll service signature of authorized officer putting aside that it's not s i think that itself underscores the whole issue of that i was saying about the entity it purports to reflect the place for signature of an authorized officer officers entities again those are all creatures of state laws that they're  want to do business under this name does not create an officer status and doesn't create an entity to even have an officer so again apologize for belaboring it but i think that speaks to the nonexistence finally as to the fraud an execution question your honor i don't believe district court made a finding of fraud in the execution we submit the not existence resolves issue in our favor in any event but i don't see how given that counseling center is ostensible belief