PHILADELPHIA – A federal judge has approved a default judgment in excess of $300,000 in favor of a nonprofit alternative transportation company working toward tube travel, who attempted to recover monies it said that its former treasurer embezzled from it.
Tube Transport for America, Inc. of Washington, D.C., first filed suit in the U.S. District Court for the Eastern District of Pennsylvania on May 20, 2020 versus Chad Wilkinson of West Chester.
“Plaintiff’s charitable purpose is to promote economic prosperity and social welfare by supporting alternative modes of transportation such as the hyperloop system, a sealed system of tubes through which a pod may travel free of air resistance or friction conveying passengers or objects at ultra-high speed while being very efficient and thereby drastically reducing travel times,” the suit said.
The plaintiff would “lobby and raise funds in the D.C. area to advocate for hyperloop technology research, development, and implementation nationwide.”
Wilkinson was appointed director and Treasurer of Tube on Feb. 28, 2019, serving in that role until his resignation 11 months later, on Jan. 27. As a director, Wilkinson was responsible for “upholding his fiduciary duties and acting in the best interest of Tube to ensure adequate management of the corporation’s affairs.”
“As Treasurer, Wilkinson was responsible for and in custody of all Tube’s funds and was to perform all duties incident to the office. Defendant was to ensure that an accounting system was in place and maintained in order to provide true and accurate accountings of the corporation’s financial transactions during periodical reporting to the board of directors,” the suit said.
Wilkinson was the sole custodian of Tube’s checkbook and debit card, the suit said.
Among other transgressions, Wilkinson was alleged to have redirected the address for the company’s bank statements to his own personal address in West Chester. On Jan. 27, Wilkinson was forced to resign as Tube’s Treasurer and Andrew Handel was immediately appointed to fill the vacancy.
In February 2020, Handel, acting as Tube’s new Treasurer, gained access to Tube’s bank statements covering the period of July 1, 2019 through Feb. 28. Upon review of the statements, Handel discovered that Wilkinson had misappropriated over $300,000 of Tube’s funds for his own personal benefit, the suit said.
Between July 1, 2019 and Jan. 27, the suit stated Wilkinson conducted an excessive number of expenditures and withdrawals, only two of which were approved by Tube’s board of directors pursuant to its by-laws and none of the others had any substantiation or expense reports.
“No Tube representative has seen or spoken to Wilkinson since Feb. 28, when Handel texted Wilkinson regarding a $250,000 check made out to Tube that Wilkinson had in his possession. After careful review, Tube has determined that, since June 2019, Wilkinson stole in excess of $310,000 through the scheme described above,” the suit stated.
The plaintiff filed to secure a default judgment on Aug. 25, 2020, pursuant to Rule 12 of the Federal Rules of Civil Procedure. Per this rule, Wilkinson was required to file his answer or other responsive pleading within 20 days of being served with the complaint (on Aug. 24 of last year) and failed to do so.
The default judgment was entered the next day, Aug. 26.
UPDATE
According to U.S. District Court for the Eastern District of Pennsylvania Judge Karen S. Marston, the plaintiffs attempted to serve proper notice of the judgment through personal mail, email and certified service, but Wilkinson was not able to be located, and his landlord informed them this past June that Wilkinson had abandoned his apartment.
In examining the claims against Wilkinson, these being breach of fiduciary duty, conversion, fraud and embezzlement, Marston examined each in turn.
“Tube Transport has submitted its articles of incorporation, which make clear that the company is a non-profit, and that its directors and officers are not entitled to substantial personal benefit beyond a reasonable salary by virtue of their position. Nonetheless, Wilkinson, who as a Tube Transport director and officer owed the company a fiduciary duty, misappropriated $307,063.25 of Tube Transport’s funds, solely for his own personal benefit. There can be no question that Tube Transport was harmed by this financial loss. Therefore, Tube Transport has stated a legitimate cause of action against Wilkinson for breach of fiduciary duty,” Marston said.
“Tube Transport has established that Wilkinson deprived them of their money, without their consent and without permission or other justification. Therefore, Tube Transport has stated a legitimate cause of action against Wilkinson for conversion.”
Marston likewise found that the fraud charge passed muster as well.
“Tube Transport has established that, as its treasurer, Wilkinson was responsible for providing accurate reports of the company’s financial situation to the Board of Directors. Instead, he intentionally provided false information, which did not accurately reflect Tube Transport’s finances,” Marston stated.
“Wilkinson intended that Tube Transport would rely on his misrepresentations so that his theft would go unnoticed, and, because he had sole control of the company’s bank account and bank statements and because the company had no reason to disbelieve him, it did rely on his inaccurate information when making budgeting and spending decisions. Tube Transport suffered damages as a result of its reliance on Wilkinson’s misrepresentations. Therefore, Tube Transport has stated a legitimate cause of action against Wilkinson for fraud.”
However, since embezzlement is not recognized as a tort in Pennsylvania, Marston dismissed that claim and approved the default judgment, finding that since Wilkinson has not provided a defense or answered the complaint, that he was culpable by his own conduct.
The plaintiff was represented by Michael J. Engle of Armstrong Teasdale in Philadelphia and Brian E. McGovern of McCarthy Leonard & Kaemmerer, in Town & Country, Mo.
The defendant did not secure legal counsel.
U.S. District Court for the Eastern District of Pennsylvania case 2:20-cv-02379
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com