City to Recoup $1M in Ameripay Losses

The City of Summit got some good news Tuesday night.

Finance Chairman Rich Madden informed council that the city would be recouping $1 million in monies lost in the Ameripay payroll fraud from last summer thanks to an insurance payment from the Municipal Excess Liability Joint Insurance Fund.

"We will be continuing ongoing litigation for the balance of our loss," he said.

The acceptance of the insurance payout was approved 6-0. Councilwoman Ellen Dickson was absent to participate in the Union County Freeholders debate.

Madden said the city should receive payment within 30 days.

"Good work," said Council President Dave Bomgaars. "Good news."

The total loss the city endured when Ameripay filed for bankrupty was $1.358 million. This $1 million payment covers just more than 72 percent of the city's loss. However, Bomgaars added the city has also spent roughly $69,000 in legal fees regarding Ameripay and has incurred additional expenses related to interest fees and bonding fees.

As of June 30, 2009 Ameripay ceased operations and a Chapter #7 bankruptcy petition was filed following action taken by the Securities and Exchange Commission. The SEC filed a complaint in US District Court alleging that Ameripay failed to make certain required withholding tax payments for some of their clients.

As its payroll processing company, Ameripay was responsible for paying all state and federal withholding taxes on behalf of the City. Summit officials have received confirmation from the IRS that Ameripay failed to remit a total of $1,359,935 on behalf of the City.