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"Just from a customer-service perspective, I would recommend that the bank take a different approach," Herd says. "You really need to get your own bank to fight on your behalf. From what you're telling me...I think it's reasonable to assume that the reversal of direct deposit is not permissible and the bank should work with the customer on recovering the funds and maybe even provisionally credit that customer with what their normal direct deposit would have been while it collects the funds."
Miller says he has about 30 payroll checks on his desk that Commercial Bank didn't honor, but some employees who immediately cashed paper checks got their money. "If they did it quickly, they apparently were able to get them cashed, even at Commercial Bank itself," Miller says. A few days before direct deposits were reversed, Paychex told Gateway that it was taking the money back. Miller says a Gateway official called a division of state government and was told that the direct-deposit reversals were legal, but he could recall neither the official's name nor the arm of the state that provided the advice. After hearing from Paychex, Miller says Gateway officials warned some employees that their money might be at risk, but it was difficult to notify everyone because the blood bank had closed. "Several of the employees took their money and then closed their account to prevent the possibility of a reversal," he says.
In an August 14 letter to employees, Miller suggested filing small-claims court claims against Gateway for the amount they are owed in wages, expenses and vacation time. "This may give you standing over our creditors in the event that, after paying the bank notes, money is left," Miller writes. But the prospects look bleak.
The non-profit blood bank owes about $1.5 million, Miller estimates, and if there is any money left after paying creditors and Commercial Bank, it would be "a fairly small amount." Gateway had about 50 employees, and Miller says he doesn't know how many haven't been paid.
Miller became Gateway CEO less than a month before the blood bank closed, and he says debt was about twice what he'd been told when he took the job. "Based on what I was hearing from the creditors I knew about, it looked as though a turnaround was possible if we could straighten out some of the inefficient business practices and some of the other things that were there," he says.
The end came when Gateway's supplier refused to provide blood-collection bags unless it was paid in advance and the company that tested blood for infectious diseases would no longer accept business from Gateway because it was owed $240,000. "You can't run a blood bank if you can't collect blood," Miller says. "Had I been aware of the full scope of the debt that Gateway had and the nature of the debt, the liens against the organization and specifically the breadth of those liens, I think I would have sought a more orderly effort to either sell the assets to another blood bank or shut down in a more orderly way."
If Gateway was based elsewhere, employees who didn't get paid could turn to the state instead of fighting alone in court. But Missouri is one of nine states without a wage-collection law allowing the government to take action.
"There are no statutes that give us enforcement to get money back for employees," says Tammy Cavender, spokeswoman for the Missouri Department of Labor and Industrial Relations. "Every day, we field calls about people that didn't get money they feel was owed to them. Employees really don't have any recourse in getting money unless they take them to court."
It's a different situation in Illinois, where the state last year collected $10 million on behalf of 8,000 employees who complained about not getting paid.
Miller says he hasn't been paid himself.
"My pledge to the employees is, until they are paid what's due them, I won't take a nickel," he says.
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