Since the collapse of Monterey-based Pinnacle Workforce Solutions, a payroll processing company, in October 2016, dozens of local businesses and churches – hundreds nationally – are still trying to figure out how millions of their dollars went missing.
“The mystery is there wasn’t a single person who could explain how the money could disappear,” says Claudia Ward, senior warden for All Saints’ Episcopal Church in Carmel, which used Pinnacle’s services for payroll. “It appears to be fraud.”
The case is currently being investigated by Special Agent Roahn Wynar in the FBI’s San Francisco office. Wynar has not responded to repeated requests for comment.
It has been difficult for the victims and the public to understand exactly what took place and how a quarter-century-old business could come crashing down in less than a week. But now, a case in U.S. District Court in San Jose is shedding light onto the exent of the damage and just how Pinnacle lost other people’s money.
Cachet Financial Services, a Pasadena-based company that provided automated clearing house (ACH) services to Pinnacle, filed suit on Nov. 29. The company claims to have more than $1 million sitting in Pinnacle’s now-closed account and wants to distribute the funds to nonprofits and businesses who were the intended recipients.
“The purpose of our lawsuit is to deposit a little over $1 million held by Cachet Financial into the federal court for the ultimate distribution to the 80 or so churches and small businesses in the Monterey area which lost money as a result of their unfortunate relationship with Pinnacle,” Tom McCurnin, a banking lawyer for Cachet, writes by email.
In the complaint, Cachet lists 81 former Pinnacle clients from not just Monterey County, but also Louisiana, New York and Pennsylvania, owed more than $2 million. In addition to All Saints’, three other Monterey County churches lost money to Pinnacle and are named in the suit. Other local businesses include Britannia Arms in Monterey, Casa Sorrento in Salinas and the luxury clothing brand Robert Talbott.
Cachet’s lawyers also outline possible nefarious action by Pinnacle. ACH companies act as middlemen for processing payroll and other large transactions. Every pay period, Pinnacle would send Cachet a coded file to tell the ACH how to distribute funds. But, on Sept. 21, Pinnacle had manipulated the code sent to Cachet so the money collected from its clients went directly to Pinnacle instead of being held in the ACH account before being distributed to its clients’ employees, the suit alleges.
When Cachet went to distribute the money, there was a shortfall of $1.3 million. Cachet went ahead and processed the transaction. But on Sept. 27, when Pinnacle submitted another likely manipulated file, funds were still insufficient so Cachet refused to release money, leading to bounced payroll checks across the country.
The ending balance in Pinnacle’s account with Cachet was $1.05 million – less than half of what was needed to process the payroll claims. Now Cachet is petitioning the court to create a special master, a court-appointed overseer, to distribute those funds to victims, even if they won’t collect all they’re owed.