The FBI and the New York State Department of Labor are investigating allegations that a payroll company brought millions of dollars in payroll to employees to their own bank account, officials said Thursday.
An FBI spokesman confirmed the investigation into the agency's Albany, New York, office tweeted that it "sought information from business owners who may have suffered financial loss due to the alleged activity of MyPayrollHR and its affiliates. "
A spokesman for the US Department of Labor said New York authorities, including investigations.
MyPayrollHR, based in Clifton Park, New York, apparently ceased operations last week after direct company Cachet Financial Services claimed it diverted as much as $ 26 million in payroll checks for small businesses. to one of your bank accounts. Cachet handles direct deposit transactions for many payroll companies.
Last week, MyPayrollHR said in a message to customers posted by the KrebsonSecurity website that "we are no longer able to process additional payroll transactions."
In some cases, small business employees did not receive the regular paychecks by direct deposit at the end of August, and their normal salaries were withdrawn from their accounts twice. The second withdrawal was the result of a technical error that has since been fixed, said Cachet's General Manager Wendy Slavkin.
But MyPayrollHR still did not make the original payments, she said, and the company notified the FBI.
MyPayrollHR did not respond to a request for comment.
Olivia Braund, who works with marketing for the Shafran Realty Group in Carlsbad, California, said she received a text from Chase Bank after payday notifying that her account was lost for the exact amount of her regular check.
Her boss, Alan Shafran, was kind enough to cover the amount, she said, adding that she soon realized the entire office had had the same experience.
Chase reversed the charges, Braund said, and she repaid her boss, but she ended up opening a new account to make sure it didn't happen again.
"It was one of those things where everyone was strolling for answers," she said. "We have a new payroll company now."
Around 4,000 businesses using MyPayrollHR were affected by the situation, Slavkin said.
The incident happened just before Labor Day weekend when MyPayrollHR, who has been working with Cachet for about 12 years, sent the usual data files for the last pay period for employees, she said.
The files would normally place employer funds in a Cachet holding account for payout to workers, but codes were changed that redirected funds to an account with Pioneer Bank controlled by MyPayrollHR, Slavkin said.
Before the diversion was captured, Cachet had initiated direct deposits into workers employed by companies using MyPayrollHR, she said. But the money wasn't there.
Cachet did not understand exactly what the problem was and moved to reverse the Pioneer deposit, but found on September 4 that the account was frozen, Slavkin said.
Cachet also sent reverse direct deposit requests to employees, but after realizing the first request contained the wrong code, the company placed another request, Slavkin said.
Both requests were accepted, which led some workers to find that not only were they not paid, but twice their normal wages had been removed from their accounts, she said.
Cachet has been working with the employee banks to correct the chargeback and will cover the paychecks until they can recover money from Pioneer Bank or MyPayrollHR, she said.
"It's basically Cachet's money used to pay thousands of employees across the country," Slavkin said.
The company is also rolling out new protocols that will prevent outside parties from diverting funds.
It is not clear what will make me of funds deposited with Pioneer Bank. A spokeswoman for the institution referred NBC News to a US Securities and Exchange Commission filing dated Wednesday regarding "$ 19 million in deposit activity" that may constitute "potentially fraudulent business."
"The company is working with the relevant law enforcement agencies in connection with this case," the SEC said in the report.
The FBI has already heard from potential victims across the nation, an agent said. The US Department of Labor is monitoring the investigation and is prepared to help, a spokeswoman said.
Michael Kosnar and Jay Varela contributed.