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CyberNET creditors eye Huntington Bank for answers mlive.com By Ed White The Grand Rapids Press GRAND RAPIDS -- Huntington Bank seemed proud to count CyberNET Group as a customer. The proof was framed on a wall at the high-tech company. "We want clients who share our values," said John Irwin, a Huntington senior vice president, promoting CyberNET in the bank's 2002 annual report. CyberNET's jilted creditors want to know more about that relationship. Since the November collapse of CyberNET, and its parent Cyberco Holdings, much attention has been placed on the $1 million auction of what remained at headquarters: computers, wine, luxury cars, fine furniture. Now the emphasis is turning to more significant nitty-gritty: the flow of millions of dollars in the months before fraud was discovered. No one is accusing Huntington of wrongdoing, but creditors and the bankruptcy trustee want answers from Cyberco's lead bank. The bank is a "critical witness. ... All roads seemed to lead to or from Huntington," Hal Nelson of the trustee's legal team said at a recent court hearing. "We have an interest in determining what money came in to (Cyberco), where it came from and, of course, what money went out," Nelson told a judge. Cyberco's own records can't be trusted or have been seized by the FBI. Huntington is a key source because it is required to keep reams of data, due to federal banking rules. The bank already has turned over 12,000 documents to the trustee, with more to come. There is another important reason to put a spotlight on Huntington. Nelson said Cyberco apparently paid off $15 million in bank debt within months of its demise. At the same time, the company was gathering millions in new loans from financiers across the country, insisting the cash would go for computer servers. In truth, there was no new equipment, just hollow black boxes with blinking lights. "Whether or not (the payments) are suspicious is not the most important fact. The fact is Huntington got them," said Steve Rayman, the trustee's co-counsel. Trustee has questions The trustee's job is to hunt for assets that can be distributed to Cyberco's creditors. In some circumstances, the trustee can try to recover money spent in the weeks before the bankruptcy. Huntington officials will face questions by the trustee's legal team, perhaps later this summer after all documents are reviewed. "I want to stress this: We don't know if we have causes of action against Huntington or any lender," Nelson said. "We believe we will at the end of the day, but we don't know which lender or how much. ... This investigation is going to take a long time." A Huntington spokesman said the bank's West Michigan president, James Dunlap, was unavailable Friday and would not comment on a pending legal case. The bank issued a statement saying loans were repaid "in the normal course of business." Cyberco's payments "should not be misinterpreted by ... other creditors seeking to recoup losses," the bank said. Creditor wants answers Some of the sharpest criticism is coming from El Camino Resources, a California leasing company that lost $11.8 million with Cyberco and wants a "full, unfettered examination" of Huntington. El Camino especially wants to know what alarms, if any, went off at Huntington when Cyberco was paring its debt with checks written from Teleservices Group, a phony equipment vendor created by company executives. Did Huntington recognize that Teleservices checks were signed by the same Cyberco executives who regularly dealt with the bank? "There was no logical business reason why a supplier to Cyberco should be paying millions of dollars to Huntington," El Camino attorney John Graham said. Claims in the bankruptcy case are just under $100 million. Nelson said it's too early to know how much money will be available to creditors, but they should not expect to be made whole. "This is not going to be a case where someone gets 60, 70, 80 cents on a dollar," he said.
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