The City of Surrey has launched a major legal battle against two of Canada's prominent financial institutions, seeking to recover more than $2.5 million it claims was lost through a sophisticated, years-long fraud allegedly perpetrated by a former city employee.
Financial Institutions Named in New Lawsuit
In a lawsuit filed on December 23 in the B.C. Supreme Court, the municipality alleges that CIBC's Simplii Financial division and Coast Capital Savings Federal Credit Union are responsible for the entire multimillion-dollar loss. The city contends the banks allowed the "conversion" of cheques that were fraudulently altered by the ex-employee.
This new legal action comes months after Surrey initiated a separate lawsuit against the former employee herself, Sunny Mercedes Catlin. The RCMP also charged Catlin in November with fraud, theft, and forgery in relation to the case.
Details of the Alleged Seven-Year Scheme
The city's claims outline a complex fraud that allegedly spanned seven years, from 2017 to 2024. According to court documents, the former employee—a long-time clerk in Surrey's finance department—is accused of issuing 183 fake cheques with a total value exceeding $2.5 million.
The funds were allegedly directed to three recipients:
- The employee herself
- Her mother
- Her part-time cake-decorating business
The lawsuit states that the city's economic crime unit, after a two-year investigation, concluded the employee manipulated security deposit transactions through a "complicated multi-step process." The city emphatically denies any involvement or prior knowledge, stating, "The city was not aware of and did not participate in the fraud."
Legal Proceedings and Unproven Allegations
It is crucial to note that the allegations contained within the lawsuit have not been tested or proven in court. Catlin has denied the accusations against her. Similarly, CIBC and Coast Capital Savings have not yet filed statements of defence in response to the city's latest claims, and the allegations against the financial institutions remain unproven.
The core of the city's argument against the banks appears to rest on their duty of care. Surrey's position suggests that the financial institutions should have detected and prevented the fraudulent activity, given its scale and duration, through standard verification and monitoring protocols.
This case highlights the significant financial vulnerabilities that public institutions can face from internal threats and raises questions about the responsibilities of banking partners in preventing such losses. The outcome could set a notable precedent for municipal liability and banking oversight in Canada.
