What the Recent MyPayrollHR Scandal Means For You

What the Recent MyPayrollHR Scandal Means For You

You may have heard the recent news about a payroll processing company that absconded with millions of dollars of their clients’ payroll and tax deposits, leaving their clients’ employees without paychecks and, in some cases, with their paychecks being debited from their accounts twice.

It’s a story fraught with fraud and missteps, and it’s leaving many employers questioning whether their payroll is secure.

If you’re a TRICOM payroll processing client, the short answer is YES.

News broke in early September that a New York payroll company, MyPayrollHR, absconded with nearly $35 million in payroll and tax payments, leaving approximately 250,000 of their clients’ employees without paychecks.

What Happened

MyPayrollHR was a payroll processing firm located in Clifton Park, NY, and was a subsidiary of ValueWise Corp. MyPayrollHR had approximately 4,000 clients across the United States, from whom it would collect their payroll and tax payments. It would then deposit those funds into a holding account owned by Cachet Financial Services, who would then deposit the funds into client’s employees’ financial institutions via direct deposit.

For the deposit meant to happen the first week of September, instead of having the funds deposited from MyPayrollHR to the Cachet Financial Services holding account, the file to the bank directed the funds to be deposited into a different account under the ownership of MyPayrollHR and its CEO, Michael Mann.

Cachet Financial Services proceeded to make the direct deposits into employees’ accounts; however, the funds were not in the holding account to pull from. Cachet then proceeded to reverse the deposits to over 250,000 employees. They believed they made an error in the coding of their first attempt at reversing the deposits, so they corrected the error and tried to reverse the deposit once again.

The result was that in some instances, BOTH reversals went through, meaning that some employees had the amount of their paychecks removed from their accounts twice, resulting in an untold number of overdrafts and fees.

In addition to this, NatPay Corporation was responsible for making the tax payments for these MyPayrollHR clients from the money that MyPayrollHR was supposed to have deposited. These clients not only did not have their payroll go through, they are now also liable for any unpaid payroll taxes that MyPayrollHR was holding for them.

Shortly after this incident, MyPayrollHR sent a short message to all its clients saying it was no longer in business, and that they should find another payroll processing provider. The whereabouts of the Michael Mann, MyPayrollHR CEO is currently unknown, and the FBI is investigating.

Why You’re Safe with TRICOM
Thankfully, if you have your payroll processed with TRICOM, you can rest assured that this type of scenario cannot happen to you. There are several reasons for this:

  1. We process everything in-house. Many MyPayrollHR clients did not realize that they processed their payroll because other payroll processing companies presented that solution as their own without indicating that they outsource that work to a third party. TRICOM does all our payroll processing in-house, with no third party vendors. Everything is done in our offices, under our watchful eyes. We also take care of tax payments, and let you know when, how much, and from which account from which your taxes are paid.
  2. As part of a publically held company, we have strict regulations as to how account changes can be made and who is authorized to make them. Only select individuals are able to make changes to deposit accounts, and those changes are then approved by someone else within the organization.
  3. All changes to payroll files have to be approved before being made. We’ve had incidents in the past where we’ve received an email asking to change the bank deposit account for one week. We always independently verify any changes of this nature with the client. In some cases, it’s led us to discover that their email account had been hacked and we were able to avert possible fraud and theft.  
  4. We have external, independent auditors who confirm that we are following all regulations and procedures. This ensures that your data and money are safe.

We sincerely hope that everyone impacted by this fraud will have the opportunity to recover their funds. However, it’s the loss of trust that’s harder to overcome. Every time something like this happens in the industry, it gives us the opportunity to reassure our clients that the security of your business data and funds comes first.