Angry andoverdrawn employees who had been receiving direct deposits. as wellas their employers, were left in the lurch after apparentmalfeasance by the payroll company's CEO.

Cloud-based payroll company MyPayrollHR,based in upstate New York, has vanished with nearly $35 million inpayroll funds from its customer firms, leaving thousands ofemployees not only stiffed for their pay but also for additionalfunds that also disappeared from their accounts—including moneythat wasn't even in their accounts in the first place.

Angry and overdrawn employees who had been receiving directdeposits from the firm, a subsidiary of ValueWise Corp. as well astheir employers, were left in the lurch after apparent malfeasanceby the payroll company's CEO Michael T. Mann. KrebsOnSecurityreports that not only did payroll fundsdisappear, but also money that belonged to some of the employeesaffected.

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CBS News reports that one employee at an animal shelterrescue—which had to shut down until the money is recovered—actuallylost way more than she had. According to Tanya Willis, who runs theshelter, one employee's account—which had less than $1,000 init—was overdrawn to the tune of nearly a million dollars. She toldCBS, "She had less than a thousand dollars in that account so wewant to know how is that even possible?"

Cachet Financial Services handled the process for MyPayrollHR,and KrebsOnSecurity says that for more than 12 years the latterwould submit a file to the former to tell it "which employeeaccounts at which banks should be credited and by how much."

But the instructions file on September 4 was different, andinstructed Cachet to send all clients' payroll funds instead to anaccount at Pioneer Savings Bank that was operated and controlled byMyPayrollHR. That amounted to approximately $26 million, but itdidn't end there. Even though MyPayrollHR's account wassubsequently frozen, the payroll file instructed clients' financialinstitutions to go ahead and withdraw the money from Cachet'sholding account, despite the fact that there had been nodeposit.

And finally, an incorrectly formatted reversal request fromCachet, followed by a corrected one, resulted in a number offinancial institutions processing both reversal requests.

Mann has not returned phone calls from customers seekingredress, and MyPayrollHR has notified customers that it was goingout of business and they needed to find other means of payrolldistribution. Both the FBI and federal prosecutors in New York areinvestigating, and the report adds that Cachet isn't the onlycompany left holding the bag for the initial $26 milliondeposit.

National Payment Corporation (NatPay), a Florida-based firm thathandles tax withholdings for MyPayrollHR clients, is also on thehook for more than $9 million after payment files were processeddespite the bank accounts of MyPayrollHR and an affiliated companybeing frozen. MyPayrollHR's website is now offline and Mann hasstill not been heard from.

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