Court Opinion

ID: 2965122
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:35:43.357127+00
Date Added: 2024-06-11T13:12:32.474808
License: Public Domain

USCA1 Opinion

	

                            United States Court of Appeals
                                For the First Circuit

                            _____________________________

          No.  97-1678

                           THE STOP & SHOP COMPANIES, INC.,

                                 Plaintiff, Appellee,

                                          v.

                             FEDERAL INSURANCE COMPANY, 

                                Defendant, Appellant.

                                 ____________________

          No.  97-1784

                           THE STOP & SHOP COMPANIES, INC.,

                                Plaintiff, Appellant,

                                          v.

                             FEDERAL INSURANCE COMPANY, 

                                 Defendant, Appellee.

                                 ____________________

                    APPEALS FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                      [Hon. Patti B. Saris, U.S. District Judge]
                                            ___________________

                                 ____________________

                                        Before

                                Selya, Circuit Judge,
                                       _____________
                            Coffin, Senior Circuit Judge,
                                    ____________________
                              and Stahl, Circuit Judge.
                                         _____________

                                 ____________________

               Leonard F. Clarkin with whom Harry C. Beach was on brief for
               __________________           ______________
          Federal Insurance Company.
               Joseph L. Kociubes with whom Victor H. Polk, Jr., and Denise
               __________________           ___________________      ______
          Jefferson Casper were on brief for The Stop & Shop Companies,
          ________________
          Inc.
               Michael Roster, Michael H. Hudnall, Robert A. Lewis, and
               ______________  __________________  _______________
          William Carpenter on brief for Stanford University Hospital,
          _________________
          amicus curiae.
                                 ____________________

                                  February 12, 1998
                                 ____________________

                                         -2-

               COFFIN, Senior Circuit Judge.  This is an insurance coverage
                       ____________________

          dispute  involving a  crime insurance  policy  issued by  Federal

          Insurance  Company ("Federal")  to Stop  &  Shop Companies,  Inc.

          ("Stop  & Shop").   Federal appeals the  district court's finding

          that it must  indemnify Stop & Shop for loss arising out of theft

          by  officers  of Hamilton  Taft  & Company  ("Hamilton  Taft"), a

          company  employed  by Stop  &  Shop  to  process and  pay  taxes.

          Federal  also challenges  the  district  court's  calculation  of

          damages, and  Stop & Shop cross-appeals denial  of its attorney's

          fees.  We  conclude that the authorized  representative exclusion

          in the crime insurance policy bars  recovery by Stop & Shop.   We

          therefore  reverse the district court's holding that Federal must

          indemnify  Stop & Shop,  and leave  the attorney's  fees decision

          intact.

                          FACTUAL AND PROCEDURAL BACKGROUND

               The  material facts are essentially undisputed.  In February

          1990, Stop & Shop purchased a crime insurance policy from Federal

          which  provided coverage for  "direct losses caused by  the . . .

          disappearance, wrongful  abstraction or Computer  Theft of  Money

          and Securities . .  . ."1  The policy excluded  coverage for loss

          due  to  the  "[t]heft  or  any  other fraudulent,  dishonest  or

          criminal  act .  .  .  by any  [e]mployee,  director, trustee  or
                              
          ____________________

               1Insuring Clause 2 provides coverage for such loss within or
          from the premises or banking premises; insuring clause 3 provides
          for coverage from  such loss "outside  the premises, while  being
          conveyed  by  the Insured,  .  .  .  or  any  other  person  duly
          authorized by the Insured to have custody thereof. . . ." 

                                         -3-

          authorized  representative of the Insured whether acting alone or

          in collusion  with others."   Because we  find that the  issue in

          this case turns  on the exclusion clause, we  detail only briefly

          the  somewhat   unusual  circumstances  surrounding   the  losses

          suffered by Stop & Shop.  

               Stop &  Shop entered  into a tax  service agreement  in 1987

          with Hamilton Taft, by which Stop & Shop would deposit funds with

          Hamilton Taft  and Hamilton  Taft would then  use these  funds to

          remit timely payments  to taxing authorities on behalf  of Stop &

          Shop.   The agreement allowed  Hamilton Taft to commingle  Stop &

          Shop  funds with  deposits from  other customers  and to  use the

          money  for  its own  investments  and  expenses  so long  as  tax

          payments owed by Stop & Shop were made when due.  In 1989, Connie

          Armstrong assumed  control  of  the  company,  becoming  Hamilton

          Taft's sole shareholder, director and chief executive officer.  

               In  1990, Stop  & Shop  renewed  its contract  with Hamilton

          Taft,  after making certain  revisions.  These  included changing

          the language, "This agreement may  not be assigned to persons who

          are not employees of Hamilton Taft" to "This agreement may not be

          assigned by Hamilton Taft."  

               In the  relevant period for this  case, Stop & Shop  had tax

          payments due on  October 18, 1990, October 25,  1990, January 17,

          1991, and January 24, 1991, totalling $5,257,474 for October, and

          $7,632,269 for January.  On these  dates, Hamilton Taft employees

          prepared the checks  and recorded them as payments  made in their

          accounting logs.  As was standard practice with amounts in excess

                                         -4-

          of $100,000, the checks were then sent to the front office for an

          officer's  counter-signature.    The checks  were  not,  however,

          mailed in the required period of time.  

               Upon discovering that  its October and January  tax payments

          had not  been made,  Stop & Shop  contacted Hamilton  Taft, which

          ultimately responded by  paying the October liability  on January

          31, 1991, and the January liability on March 8, 1991.  Around the

          same time, a  former Hamilton Taft comptroller  reported to about

          thirty  Hamilton Taft clients that the company's executives, most

          notably Armstrong, were  diverting client funds intended  for tax

          payments  and using  these funds  for their  personal use  or for

          investment  in other Armstrong-owned  companies.  In  late March,

          three  Hamilton   Taft  clients  petitioned   the  company   into

          involuntary bankruptcy, and a Trustee was appointed.  The Trustee

          calculated the loss  from improper diversion  of client funds  at

          over $55  million.   In January 1992,  the Trustee  demanded that

          Stop & Shop  repay the bankrupt estate for  the January and March

          1991  tax  payments made  by  Hamilton Taft,  arguing  that these

          payments were voidable preferences.2 

                              
          ____________________

               2The Bankruptcy Code allows a bankruptcy trustee to:
               .  . . avoid any transfer  of an interest of the debtor
               in property --
               (1) to or for the benefit of a creditor;
               (2) for or on account of an antecedent debt owed by the
               debtor before such transfer was made;
               (3) made while the debtor was insolvent;
               (4) made --
                    (A) on  or within 90  days before the date  of the
                    filing of the petition . . .
          11 U.S.C.   547(b).

                                         -5-

               Litigation proceeded in federal  court in California,  where

          the Ninth  Circuit ultimately agreed  that the January  and March

          payments were voidable preferences subject to repayment.  Shortly

          thereafter, Stop & Shop settled with the Trustee for a portion of

          its tax liability.  It then  filed a claim in district court  for

          indemnification by Federal for its remaining loss; upon Federal's

          motion  for  a   transfer  of  venue,  the  case   was  moved  to

          Massachusetts.   Federal  argued  that it  had  no obligation  to

          indemnify  because Stop  & Shop's  loss  was not  direct and  the

          policy's authorized representative  exclusion barred recovery for

          theft  perpetrated by  Hamilton Taft  executives.   The  district

          court   found direct  loss and  held the exclusion  inapplicable.

          The court  then awarded  damages to  Stop &  Shop but  denied its

          request for attorney's fees.  Each side appeals.  

                                      DISCUSSION

               Although  the parties raise  multiple issues on  appeal, our

          conclusion on the exclusion clause issue makes it unnecessary  to

          discuss the  remaining ones.   We therefore begin  with Federal's

          claim that the  clause bars coverage, and Stop  & Stop's response

          that  the clause is inapplicable because the responsible Hamilton

          Taft  executives diverted funds  for their personal  gain and not

          for the benefit of the company.

               Construction of insurance contracts and application of their

          terms to  facts are  matters  of law,  which we  review de  novo.
                                                                  __  ____

          Preferred Mut. Ins.  Co. v. Travelers Co., 127 F.3d 136, 137 (1st
          ________________________    _____________

                                         -6-

          Cir. 1997).  Exclusionary clauses  must "state clearly what items

          are  to  be excluded  and  any  ambiguity  is to  be  interpreted

          strictly in  the insured's favor."   American Home Assur.  Co. v.
                                               _________________________

          Libbey-Owens-Ford Co., 786 F.2d 22, 28 (1st Cir. 1986) (applying,
          _____________________

          as we  do here, Massachusetts  law).  Ambiguity exists  where the

          language is susceptible to more than one rational interpretation.

          Mt. Airy Ins. Co. v. Greenbaum, 127 F.3d 15, 19 (1st. Cir. 1997).
          _________________    _________

          But  where  the policy's  language  is  plain, we  interpret  and

          enforce  it  according  to  the  ordinary  meaning  of  the words

          contained in  the policy's provisions.   Bird v.  Centennial Ins.
                                                   ____     _______________

          Co.,  11 F.3d  228,  232  (1st Cir.  1993);  Cody v.  Connecticut
          ___                                          ____     ___________

          General Life  Ins. Co., 387 Mass.  142, 146, 439  N.E.2d 234, 237
          ______________________

          (1982).   "[L]ack  of  ambiguity  is a  relative  status, not  an

          absolute one.  . . . [I]t is  sufficient if the language employed

          is such that a reasonable person, reading the document as a whole

          and in  a  realistic context,  clearly  points toward  a  readily

          ascertainable meaning."  Fashion House, Inc. v. K Mart Corp., 892
                                   ___________________    ____________

          F.2d 1076, 1085 (1st Cir. 1989).

               The question for us is  whether the actions of Hamilton Taft

          executives  in diverting  funds  for their  own  gain fall  under

          Federal's  authorized  representative  exclusion.   The  district

          court  found   that  the  term  "authorized  representative"  was

          ambiguous based on several factors:  it was not defined in either

          the policy or case law, other  crime insurance contracts included

          express  terms excluding coverage, the parties' course of conduct

          in amending the Agreement suggested their specific intention that

                                         -7-

          Hamilton  Taft and  not  Armstrong be  Stop  & Shop's  authorized

          representative, and no public  policy reasons precluded coverage.

          Resolving the  ambiguity  in  favor of  the  insured,  the  court

          therefore determined  that  Stop &  Shop  was covered  under  the

          policy for the losses sustained. 

               We find each of these  reasons lacking in force and conclude

          that   the  language  in  context  is  susceptible  to  only  one

          definition, exclusion of coverage.  In the absence of a statutory

          definition, or  any relevant state law construction  of the term,

          we  begin by  turning to  the lexical  meaning, as  Massachusetts

          courts frequently do,  see, e.g., Gordon v. Safety  Ins. Co., 417
                                 _________  ______    ________________

          Mass. 687, 690, 632 N.E.2d 1187, 1189 (1994), and to a thoughtful

          federal case, Colson Services Corp. v. Ins. Co. of North America,
                        _____________________    _________________________

          874 F. Supp.  65 (S.D.N.Y. 1994), which provide  us with thorough

          and specific explanations  of the term.   Black's Law  Dictionary
                                                    _______________________

          133-34  (6th ed.  1990)  defines  "authorized"  as  possessed  of

          control  or power  delegated by  a  principal to  his agent,  and

          "representative" as "a  person or thing  that . .  . in some  way

          corresponds  to, stands  for,  replaces,  or  is  equivalent  to,

          another person or thing.  . . . includ[ing] an  agent, an officer

          of  a corporation  or  association  . .  .  or  any other  person

          empowered to act for another," id. at 1302.   Webster's Third New
                                         ___            ___________________

          International   Dictionary   (Unabridged)  146   (1966)   defines
          __________________________

          "authorized,"  inter  alia,  as  "endorse[d],  empower[ed],"  and
                         _____  ____

          "representative" as  "standing for  or in the  place of  another:

          action for another or others:  constituting the agent for another

                                         -8-

          especially through  delegated authority,"  id. at  1926-27.   The
                                                     ___

          court in Colson relied on the Webster's meaning,  concluding that
                   ______               _______

          a company given authority by another company to act as  its agent

          in choosing investments was an  "authorized representative" under

          the relevant crime insurance policy.  874 F. Supp. at 68.

               These   definitions   persuade   us   that  an   "authorized

          representative"  can be either  a person or  company empowered to

          act on an entity's behalf.  Stop &  Shop accepts this definition,

          but  insists  that  in  this  case only  Hamilton  Taft  was  its

          authorized  representative   and  that  individuals   who  behave

          inconsistently  with the interests of Hamilton  Taft, such as the

          executives who committed  the theft here,  cannot fall under  the

          exclusion.  

               We repeat  at the  threshold the  fundamental premise  that,

          while  a corporation  does have  a  noncorporeal and  independent

          existence, it can  conduct its affairs only through  its officers

          and  employees.  See  Holmes v. Bateson,  583 F.2d 542,  560 (1st
                           ___  ______    _______

          Cir. 1978).  Thus,  where Hamilton Taft is conceded to  be Stop &

          Shop's authorized representative,  it must also be  conceded that

          Hamilton Taft may carry  out its obligations to Stop  & Shop only

          through the acts  of its officers and employees.   Given this, we

          must consider whether the term  omits acts by individuals  acting

          for their own benefit.

               Stop  &  Shop  argues  that  the  authorized  representative

          exclusion is  at  minimum ambiguous  on  this point  because  the

          policy does not delineate its  scope, as other policies have done

                                         -9-

          in the context of employee  exclusion clauses.  Before addressing

          the specifics  of this argument,  we emphasize that  it stretches

          the notion of  ambiguity to conclude  that language is  ambiguous

          because of something that is  not said.  Definitions of ambiguity

          require  examination of the language employed, see, e.g., Fashion
                                               ________  _________  _______

          House,  892 F.2d at  1085, not the  language omitted.   With some
          _____

          hesitancy  therefore we  address  Stop  &  Shop's  argument  that

          ambiguity   exists  because   the  exclusion   does   not,  after

          "authorized representative," contain the language, "while working

          or otherwise."  

               A careful  review of the  cases cited  for this  proposition

          reveals their constant thrust, and the inappropriateness of their

          use in  the instant  case.   For they  all actually  turn on  the

          temporal scope of the  action -- specifically, whether the  theft
          ________

          was committed outside of working  hours -- rather than the nature

          of authority given or the type of  behavior involved.  See, e.g.,
                                                                 _________

          Citizens  Ins.  Co.  of  New Jersey  v.  Kansas  City  Commercial
          ___________________________________      ________________________

          Cartage, Inc.,  611 S.W.2d 302,  309-11 (Mo. Ct. App.  1980); Del
          _____________                                                 ___

          Vecchio v. Old Reliable Fire  Ins. Co., 132 N.J. Super 589,  594-
          _______    ___________________________

          96,  334 A.2d  394,  397-98  (1975); Sehon,  Stevenson  & Co.  v.
                                               ________________________

          Buckeye Union  Ins. Co., 298  F. Supp. 1168, 1169-70  (S.D.W. Va.
          _______________________

          1969); Century Indem.  Co. v. Schmick, 351 Mich.  622, 627-28, 88
                 ___________________    _______

          N.W.2d 622, 624-25 (1958).3  These cases have found that theft by
                              
          ____________________

               3In Colson, 874 F. Supp.  65 (S.D.N.Y. 1994), also cited for
                   ______
          this  proposition,  the  applicable policy  excluded  acts  by an
          authorized representative "while working  or otherwise," but  the
          case never discussed  and in no way turned on the meaning of this
          clause.  Rather, the Colson court explored only the definition of
                               ______

                                         -10-

          employees after  their shift is over -- in other words, after the

          period of time  during which they are actively  working for their

          employer -- falls  under an employee  theft exclusion only  where

          the "while  working  or otherwise"  language is  included in  the

          policy. Other cases  have taken the contrary position,  but we do

          not  discuss  them,  as  we   find  this  entire  line  of  cases

          inapposite.  We are  not involved here with when the diversion of
                                                      ____

          funds  occurred; certainly  no argument  has been  made that  the

          fraud  was  perpetrated at  any  time other  than  during working

          hours.    Nor  would  it  make sense  to  think  of  a  corporate

          authorized representative as having working hours.

               Indeed,  to the  extent  they  are  relevant,  the  employee

          exclusion  cases  support  Federal's  contention  that,  for  the

          purposes  of determining coverage,  it is irrelevant  whether the

          wrong  is perpetrated  for the  benefit of  Hamilton Taft  or the

          individual.4   Even  the cases  applying  a temporal  restriction

          assume that if the temporal scope is satisfied, all inappropriate
                                                          ___

          use of funds is included under the exclusion, irrespective of who
                              
          ____________________

          the  term "authorized representative"  in an effort  to determine
          whether  an investment company that made  bad investments for the
          insured  fell  under  the  applicable  crime  insurance  policy's
          authorized representative  exclusion.   Id. at 67.   As  the case
                                                  ___
          neither relied on  the "while working or  otherwise" language nor
          concerned acts by individuals, it  does not support Stop & Shop's
          arguments.

               4While   Federal  and   Stop   &  Shop's   dispute  concerns
          application of  the term "authorized representative"  rather than
          "employee," we  agree with  Stop & Shop  that the  way "employee"
          exclusions  have been interpreted  is instructive as  we consider
          how  to construe  the  scope  of  the  authorized  representative
          exclusion.

                                         -11-

          benefits from  the improper use.  None of  these cases so much as

          queries  whether an employee who steals  for himself, rather than

          to add  to the company's  coffers, does not therefore  fall under

          the exclusion. 

               As evidence  in support  of its  construction,  Stop &  Shop

          makes much of its 1990 modification to the Tax Service Agreement.

          Instead of adopting the standard language of Hamilton Taft's pre-

          printed form, stating that the  agreement "may not be assigned to

          persons  who are  not employees  of Hamilton  Taft," Stop  & Shop

          revised  the clause  to provide  that the  agreement "may  not be

          assigned by Hamilton Taft."   The district court agreed that this

          change indicated that  Stop & Shop intended that  no entity other

          than Hamilton Taft could be the authorized  representative.  This

          conclusion requires  reading too  much between  the  lines.   The

          record contains no evidence of  the context in which the contract

          revision  was  made,  nor  gives  any  clue  as  to  why  it  was

          implemented.  We see no  relationship between the revision and an

          understanding of the term "authorized representative."  

               Hamilton   Taft  can  act  only  through  its  officers  and

          employees,  and the reality is that the grant of authority to the

          executives of  Hamilton Taft  enabled their  diversion of  funds.

          When we consider, too, that employee exclusion  clauses have been

          construed to encompass theft  for personal benefit, and that  the

          policy  excludes   illegal  acts   by  employees,   directors  or

          authorized representatives  without distinguishing  between these

          groups, the intent of the exclusion is most readily understood as

                                         -12-

          an effort  to bar coverage of wrong committed by persons who have

          been granted access to the corporate funds.

               Nor do  public policy  concerns play  an obvious role  here.

          The district court, while conceding that the dispute in this case

          turns wholly on an interpretation of a contract clause and not on

          an equitable allocation  of risk between innocent  parties,5 felt

          vicarious  liability-agency law  provided useful guidance.   Some

          Massachusetts cases have  found companies liable for  the illegal

          actions of their  employees only where the employees  act for the

          companies'  benefit rather  than for  their own.   See  Kansallis
                                                             ___  _________

          Finance Ltd. v. Fern, 421 Mass. 659, 665-69, 659 N.E.2d 731, 734-
          ____________    ____

          37 (1996) (reviewing existing case  law).  We do not  pursue here

          the conflict  in the case law on this  issue, as we disagree with

          the district court's assessment that these cases provide a useful

          context for  understanding the  present situation.   These  cases

          turn  on equitable allocation  of the financial  burden resulting
                              
          ____________________

               5Federal   seeks  to  apply   the  alter  ego   doctrine  in
          furtherance  of  its argument;  agreeing  with Stop  &  Shop, the
          district court found the doctrine  inapplicable to this case.  We
          see  no  need to  ground  refusal  of  coverage in  this  complex
          doctrine,  which  is   based  on  the  equitable   allocation  of
          liability.   Indeed, to apply it  would turn equitable allocation
          on its head, for it was Stop & Shop, not Federal, whose choice of
          Hamilton Taft gave Armstrong access to the diverted funds.  
               We are not faced here with equitable, public policy concerns
          about placing  responsibility on  the guilty,  or more  culpable,
          party, nor are we presented with a need to find an  extraordinary
          way to  impose liability  on a generally  untouched party.   This
          case does  not involve a  creditor seeking to hold  an individual
          liable  for  misuse or  theft  of  funds,  nor  does it  seek  to
          guarantee  that a  wrongdoer  company does  not recover  under an
          insurance  policy for  abuse  perpetrated  by  its  own  officer,
          director  or shareholder.  Hamilton  Taft is not  a party to this
          action, and  its liability for  the misappropriation of  funds is
          not at issue here.  

                                         -13-

          from bad  acts by  officers or  employees.  Where  a creditor  or

          third  party suffers  at  the hands  of such  a  person, and  the

          company somehow  ratified the  improper act  or gave its  express

          authority to perpetrate fraud, it  makes equitable sense for  the

          company to pay.  It is equally true that where a maverick officer

          or  employee perpetrates fraud against the company's interest and

          without the  company's express  or implied knowledge,  it may  be

          unfair  to hold the  company liable.   We are  not concerned here

          with a  determination of  whether the  corporation Hamilton  Taft

          should  be liable  to a  creditor for  the wrongful  acts of  its

          employees.   It may be  that Stop &  Shop suffered a  loss at the

          hands   of  Hamilton  Taft   employees  for  which   it  deserves

          compensation.   But Stop &  Shop's insurer, Federal, who  was not

          party to the fraud, has no responsibility to reimburse for losses

          suffered unless those losses are contractually covered.  

               If we were to hold, as Stop & Shop's argument would  have us

          do, that an insurance  company must bear  the full cost of  theft

          only  when it  was committed  by  an individual  working for  the

          insured company's  authorized representative but  acting contrary

          to  the  representative's  interest,  the  exclusionary   clause,

          insofar  as it deals with the authorized representative, wouldn't

          accomplish much.   The  policy underlying  the exclusion  clause,

          which  includes,   without  distinction,   employees,  directors,

          trustees  and   authorized  representatives,   is  most   readily

          understood as  an effort  to  place on  the insured  the risk  of

          picking  a  faithless agent.    It  makes  little sense  for  the

                                         -14-

          exclusion clause to encompass self-interested acts on the part of

          employees,  but  not  on  the  part  of  those  working  for  the

          authorized representative.6 

               We come full  circle, then, to the contract.   The exclusion

          clause specifically states  that the crime insurance  policy does

          not cover theft by an authorized representative.  The policy does

          not restrict  the scope  of "authorized  representative" to  acts

          benefitting Hamilton Taft,  the record contains no  evidence that

          such a restriction was contemplated, and no case law applies such

          a  restriction.   In sum,  although exclusion  clauses are  to be

          narrowly construed,  we find no  basis for imposing  the proposed

          limit.   In  the  absence of  legally  cognizable  ambiguity,  we

          enforce the ordinary meaning of the words.  Bird, 11 F.3d at 232.
                                                      ____

          It  is most sensible  to consider "authorized  representative" as

          one of a  series of capacities in which an individual who commits

          theft may have been given access to funds by the insured.  We see

          use  of the  term  as  a straightforward  effort  to embrace  all

          statuses  that are  "authorized,"  and  thus  are  the  insured's

          responsibility to supervise.  Because  Hamilton Taft can act only

          through   its  officers,  we  must  construe  this  exclusion  to

          encompass generally  acts by the  officers of Hamilton Taft.   As

                              
          ____________________

               6Theft  and misappropriation  of funds  --  acts covered  by
          crime insurance policies -- are  by their very nature most likely
          to be  committed for  individual rather  than corporate  benefit.
          Certainly,  an authorized representative company may, for its own
          benefit, steal  an insured company's  funds, but we think  by far
          the  more likely scenario is  that a person  with access to funds
          through  their employment position  will risk illegally acquiring
          these funds for personal profit.

                                         -15-

          officers of  the corporate  representative, Armstrong and  others

          were given access and power to divert funds.7

               Finding that the  diversion of funds by officers of Hamilton

          Taft  falls under  Federal's authorized  representative exclusion

          policy, we  reverse the  district court  decision,  and need  not
                      _______

          reach the direct loss and damages questions raised on appeal.  As

          we find Stop  & Shop  is not covered  under Federal's policy,  we

          deny its cross-appeal for attorney's fees.
          ____

               It is so ordered.
               ________________

                              
          ____________________

               7This is particularly true where, as here, the officers were
          the only persons  who could have  perpetrated the fraud,  because
          they alone were endowed with the authority to co-sign checks over
          $100,000.

                                         -16-