2017-30085 Resolution RESOLUTION NO. 2017-30085
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA, APPROVING AND AUTHORIZING THE MAYOR
AND CITY CLERK TO EXECUTE A SETTLEMENT AGREEMENT BETWEEN THE
CITY OF MIAMI
BEACH, FLORIDA AND SUNTRUST BANK, WITH RESPECT TO
THE 2016 THEFT OF FUNDS THAT OCCURRED FROM ONE OF THE CITY'S
SUNTRUST
ACCOUNTS, INCLUDING, AMONG OTHER TERMS, A PAYMENT BY
SUNTRUST
BANK TO THE CITY IN THE AMOUNT OF $536,258.00; (2)
APPROVING AND AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE
AMENDMENT NO. 1 TO THE TREASURY MANAGEMENT MASTER
AGREEMENT
BETWEEN THE CITY AND SUNTRUST BANK, DATED FEBRUARY
1, 2013, FOR THE PROVISION OF VARIOUS BANKING SERVICES,
INCORPORATING THE TERMS OF THE SETTLEMENT AGREEMENT; (3)
APPROVING
A TERM SHEET FOR A GLOBAL SETTLEMENT AGREEMENT
,
CITY SUNTRUST BANK, STR MARKETPLACE, LLC., AND BANK
AMONG THE
CA WITH RESPECT TO THE 2016 THEFT OF FUNDS,
OF AMERI N.A.,
INCLUDING,
AMONG OTHER TERMS, A PAYMENT BY STR MARKETPLACE,
LLC TO THE CITY IN THE AMOUNT OF $900,000.00; (4) AUTHORIZING THE
MAYOR AND
CITY CLERK TO EXECUTE THE GLOBAL SETTLEMENT
AGREEMENT (CONSISTENT WITH THE TERM SHEET APPROVED HEREIN), IN
A FORM ACCEPTABLE TO THE CITY ATTORNEY; AND (5) RATIFYING ALL
ACTIONS UNDERTAKEN BY THE CITY MANAGER WITH RESPECT TO THE
RECOVERY
OF THE CITY'S FUNDS STOLEN FROM THE CITY'S SUNTRUST
ACCOUNT.
WHEREAS, the City has been a customer of SunTrust Bank ("SunTrust") for over two
decades; and
WHEREAS, on November 14, 2012, the Mayor and City Commission adopted
Resolution tion No. 2012-28055, approving an agreement between the City of Miami Beach, Florida
and SunTrust, pursuant to RFP No. 53-11/12, for the provision of various banking
("City")
(5)services for five a year term, with five (5) additional one (1) year renewal options, at the
City's option; and
WHEREAS, pursuant ursuant to City Commission Resolution No. 2012-28055, the City and
Suntrust executed a Treasury Management Master Agreement, with the initial term
commencing on
January1, 2013, and expiring on December 31, 2017 (the "Agreement"); and
WHEREAS, pursuant to the Agreement, the City currently has over 27 bank accounts
with SunTrust and maintains an average daily balance with SunTrust ranging from $92 million to
$170 million; and
1
WHEREAS between July 29, 2016 and October 27, 2016, the City was a victim of a
theft
of a total of $3,686,712 stolen from the City's General Depository Account (-6568)
maintained
bySunTrust (the "Account"), which funds were stolen through the use of fraudulent
and unauthorized Automated Clearing House (ACH) debits from the Account; and
WHEREAS, a majorityof the debits were to a Bank of America account held by a Texas
firm, ST Marketplace,R Market lace LLC, that runs an online marketplace for "personal seat licenses" for
seats at professional sporting events; and
WHEREAS, on or about May 31, 2017, an individual in New York was criminally charged
with
committingthe offenses of bank fraud and aggregated identity theft, in violation of federal
based on the individual's fraudulent use of the City's funds from the Account to purchase
law,
personal seat licenses and re-sell individual seat tickets through online services such as
Craigslist and StubHub; and
WHEREAS, the City has worked diligently to mitigate its damages from the theft and
has recovered $2,063,086 to date; and
WHEREAS, in connection with a pending forfeiture proceeding related to the criminal
prosecution referenced above, the United States Department of Justice has seized two bank
accounts
with a total of $112,510, and the City has filed a petition for remission of property in
connection therewith; and
WHEREAS, despite the City's best efforts, it has to date been unable to recover
$1,623,626 that was stolen from the Account; and
WHEREAS, on July 10, 2017, the City notified SunTrust of potential claims due to the
foregoing bank fraud; and
WHEREAS, although SunTrust has denied any liability to the City relating to the bank
fraud matter, in recognition of SunTrust's community presence in the City of Miami Beach, and
its longstanding Ion standin relationship with the City, both SunTrust and the City desire to facilitate a
commercial resolution of the foregoing issues; and
WHEREAS, without anyadmission of liability whatsoever and with a reservation of all
terms of which are memorialized in
SunTrust has submitted a proposal to the City, the
rights, g
the
Settlement Agreement, attached as Exhibit "A" to the Commission Memorandum
accompanying this Resolution; and
WHEREAS, thero osed Settlement Agreement (and Amendment No. 1 to the Master
p p
Treasury Agreement,reement, attached as Exhibit "B" to the Commission Memorandum accompanying
this Resolution) provides for the following:
• an extension of the term of the Agreement for banking services for a period of
two (2) years, pursuant to the City's renewal option as provided in RFP No. 53-11/12 and City
Commission Resolution No. 2012-28055; and
2
• an adjustment of the City's Earning Credit Rate (ECR), which serves as a
monthly against a ainst bank fees the City is otherwise obligated to pay; and
• a n increase of forty-five (45) basis points with respect to the interest rate the City
Y
earns on the excess balance on various accounts maintained at SunTrust; and
• the retroactive application of the increased interest rate to specified accounts,
effective as of January 1, 2017; and
• a mutual release of claims relating to the foregoing bank fraud matter; and
WHEREAS,
the proposed Settlement Agreement would result in the City recovering the
amount of $53 ,
6 258.00 and establishes the framework for the City to recover additional
amounts each
month duringthe renewal term, with the monthly earnings depending on the
volume of transactions and the average monthly balance in the accounts; and
WHEREAS, the Administration has benchmarked the SunTrust proposal, and
recommends the approval of the Settlement Agreement and Amendment No. 1
Administration
as being in the City's best interest, particularly in view of the competitive terms and retroactive
nature of the proposal to Jan. 1, 2017; and
WHEREAS, the Administration has also negotiated a proposed settlement with STR
Marketplace, whereby
LLC, STR Marketplace, LLC agrees to make a lump sum payment to the
City in the amount of $900,000 to settle all claims among the parties with respect to the 2016
theft of funds; and
WHEREAS,
the proposed Term Sheet for a Global Settlement Agreement among the
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City,
STR Marketplace, LLC., Bank of America and SunTrust, is attached as Exhibit "C" to the
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Commission
Memorandum accompanying this Resolution, and provides for the $900,000
City,payment to
the and a mutual release of all claims among the parties relating to the 57
ACH transactions at issue; and
Ys proposed WHEREAS, the Cit ' settlement with STR Marketplace, LLC depends in part
on SunTrust's agreement to release any claims SunTrust may have against STR Marketplace
and Bank of America, N.A.; and
WHEREAS, in further support of the City's Settlement Agreement with SunTrust, and
continued
relationshipwith SunTrust Bank, SunTrust has agreed to provide the mutual releases
requested bySTR Marketplace and Bank of America, in an effort to facilitate the City's recovery
to all
of $900,000 from STR Marketplace and bring closure parties with respect to the 2016 theft
of funds;
WHEREAS,
of the total $3,686,712 stolen from the City's account, the Administration
recommends thatMayor
the and CityCommission approve the foregoing settlements, as these
settlements will having
result in the Cityrecovered the total amount of $3,499,344, not including
City pursue amounts the
intends to in the pending criminal forfeiture proceeding (with a
maximum potential
recoveryof $112,510), and also not including any additional monthly
earnings accruingCity
to the as a result of the adjusted ECR and interest rate that will be
3
applied to the City's accounts through the Settlement Agreement with SunTrust.
pp Y
NOW,
THEREFORE, BE IT DULY RESOLVED BY THE CITY COMMISSION OF THE
CITY
OF MIAMI BEACH, FLORIDA that the Mayor and City Commission hereby (1) approve
and authorize theMayorCity
and Clerk to execute a Settlement Agreement between the City of
Miami Beach,
Florida and SunTrust Bank, with respect to the 2016 theft of funds that occurred
from one oy
f the City's SunTrust accounts, including, among other terms, a payment by
SunTrust Bank
to the Cityin the amount of $536,258.00; (2) approve and authorize the Mayor
and City Clerk to execute Amendment No. 1 to the Treasury Management Master Agreement
City Between the
and SunTrust Bank, dated February 1, 2013, for the provision of various
Banking Services, incorporating incor oratin the terms of the Settlement Agreement; (3) approving a Term
Sheet for a Global Settlement Agreement among the City, SunTrust Bank, STR Marketplace,
LLC, and Bank
of America, N.A., with respect to the 2016 theft of funds, including, among other
Marketplace,a payment
bySTR Market lace, LLC to the City in the amount of $900,000.00; (4)
authorizing theMayor
and CityClerk to execute the Global Settlement Agreement (consistent
sheet approved herein) in a form acceptable to the City Attorney; and (5) ratifying
with the term pp
all actions undertakenCity
bythe Manager with respect to the recovery of the City's funds
stolen from the City's SunTrust account.
3/ of OC*4.6,/ , ?W. ,PASSED AND ADOPTED thisday ,
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SETTLEMENT
AGREEMENT
THIS SETTLEMENT AGREEMENT AND RELEASE (the "Settlement Agreement") is
made and entered into this 31st day of October, 2017 (the "Effective Date"), by and between the
City of Miami Beach (the "City") on the one hand, and SunTrust Bank("SunTrust") on the other
hand (collectively the "Parties" and each a"Party").
RECITALS
WHEREAS, the City maintains a number of deposit banking accounts at SunTrust and a
list of such accounts is attached hereto as Exhibit A (the accounts listed on Exhibit A are hereby,
the "Accounts");
WHEREAS,the Accounts were opened and are governed by, among other agreements, the
Request for Proposal, RFP NO. 53-11/12, For the Provision of Various Banking Services to the
City of Miami Beach,for a Five-Year Period with Five One-Year Renewal Options, sought by the
City and responded to by SunTrust(the "Contract");
WHEREAS, the original term of the Contract was from January 1, 2013 to December 31,
2017 but has five (5) one-year renewal option periods that may be exercised by the City (each an
"Option Period");
WHEREAS, the City alleges it suffered a loss related to or arising out of Automated
ClearingHouse ("ACH") debits that occurred in the Accounts between July 29, 2016 and
October 27, 2016 (the"Transactions");
WHEREAS, the City believes it has or may have claims, causes of action, counterclaims
or defenses which could be brought or asserted by the City against SunTrust related to or arising
out of alleged fraudulent or unauthorized ACH debits that occurred in the Accounts between July 29, 2016 and October 27, 2016 (the "Claims");
WHEREAS, a dispute has arisen between the Parties as to which Party is responsible for
the Transactions (the "Dispute");
WHEREAS,to avoid the further expenditure of time, effort and money, and without
determiningthe validity or invalidity of the position of each of the Parties with respect to the
� compromise,each of the Parties desires fully and finally to comprom se, settle and resolve all claims
and causes of action between them as set forth herein; and
WHEREAS, SunTrust acknowledges that the City is entering into this Settlement
Agreement, in reliance upon SunTrust's agreement to release STR Marketplace, LLC and Bank
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of America,N.A. with respect to the Transactions, as outlined in the Non-Binding Term Sheet
for a Proposed Global Settlement among STR Marketplace, LLC,the City, SunTrust, and Bank
of America,N.A. presented to the City Commission at its October 31, 2017 meeting.
Page 1 of 5
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of these premises and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,the Parties,
intending to be legally bound hereby, covenant and agree as follows:
1. Election of Option Period and Modification of the Contract.
1.1. The City agrees to exercise two (2) one-year Option Periods of the Contract
which will renew the Contract for two (2)years until December 31, 2019 (the "Exercised Option
Periods"). The extension of the Contract under the Exercised Option Periods will continue to be
governed bythe same terms as the original period of the Contract except for the changes listed in
section 1.2 below.
1.2. The Parties agree that the Contract will be modified for the period of November 1,
2017 until the end of the Exercised Option Periods as follows:
1.2.1. SunTrust will agree to convert all the Accounts to hybrid accounts in
which the balances of the Accounts are subject to being analyzed to potentially cover the fees
and expenses incurred for the Accounts (known as earnings credit analysis) and if such balances
are in excess of that needed to cover the fees and expenses for the Accounts,to earn interest on
the Accounts for the balances exceeding the balances needed to cover the fees and expenses for
the Accounts;
1.2.2. SunTrust will apply a 60 basis points earnings credit to the Accounts for
any balances used to cover the fees and expenses incurred for the Accounts; and
1.2.3. SunTrust will offer 50 basis points interest on any balances in the
Accounts that exceed the balances needed to cover the fees and expenses for the Accounts as
described in section 1.2.2. above.
1.2.4. The rate for the earnings credit and interest stated in sections 1.2.2 and
1.2.3 are in lieu of, and not in addition to, any other rate of earnings credit or interest called for in
the Contract.
2. Payment of Additional Interest.
Within sixty (60) days of the Effective Date, SunTrust will deposit a total of Five
Hundred Thirty-Six Thousand Two Hundred Fifty-Eight Dollars and Zero Cents ($536,258.00)
� ' i
into one of the Accounts which amount is an approximation of the total amount of additional
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interest for thep eriod of January 1, 2017 through October 31, 2017 that would have been paid
had the balances entitled to interest in the Accounts been paid interest at 50 basis points minus
the amount of interest actually paid in the Accounts during the period. The City agrees and
affirms that other than thispaY ment and any interest paid prior to the Effective Date,the City is
not entitled to any additional interest on the Accounts for any period prior to November 1, 2017.
Page 2 of 5
3. Releases.
3.1. In consideration of the agreements by SunTrust as outlined in sections 1 and 2
above and for other good and valid consideration,the receipt and sufficiency of which is hereby
acknowledged,the City, for itself, its officers, managers, employees, attorneys, agents,
representatives, successors, assigns and any other legal representatives, does hereby release,
acquit and forever discharge SunTrust, and its current and former predecessors, successors,
acquiring entities, acquired entities, assigns, parents, affiliates and subsidiaries and each of its
current and former directors, officers, employees, attorneys, agents, and any other legal
representatives, of and from any and all actions, causes of action, claims, rights, suits,
proceedings, demands, relief, liabilities, controversies, damages, losses and expenses (including
attorney's fees), whatsoever, in law or equity, which the City, either now has, had, or may
hereafter claim to have against those persons or entities by reason of any matter, act, omission,
cause or event that has occurred prior to the Effective Date and that relate to or arise out of the
Transactions,the Claims, or the Dispute. This release does not apply, however,to any claims
that the City may have under or arising out of the Settlement Agreement.
3.2. In consideration of the agreements by the City as outlined in section 1 above and
for other good and valid consideration, the receipt and sufficiency of which is hereby
acknowledged, SunTrust, for itself, its officers, employees, attorneys, agents, representatives,
successors, assigns and any other legal representatives, does hereby release, acquit and forever
discharge the City, and its officers, managers, employees, attorneys, agents, representatives,
successors, assigns and any other legal representatives, of and from any and all actions, causes of
action, claims,rights, suits, proceedings, demands, relief, liabilities, controversies, damages,
losses and expenses (including attorney's fees),whatsoever, in law or equity, which SunTrust,
either now has, had, or may hereafter claim to have against those persons or entities by reason of
any matter, act, omission, cause or event that has occurred prior to the Effective Date and that
relate to or arise out of the Transactions, the Claims, or the Dispute. This release does not apply,
however, to any claims that SunTrust may have under or arising out of the Settlement
Agreement.
4. Additional Terms.
4.1. The Settlement Agreement was negotiated between the Parties at arm's length.
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Each Party had ample opportunity to consult with independent legal counsel. No Party will be
entitled to have any language contained in the Settlement Agreement construed against any other
Party based upon the identity of the drafter.
4.2. The Settlement Agreement sets forth the entire agreement between the Parties
regarding the subject matter hereof and supersedes any and all prior agreements, negotiations and
g g J
understandings regarding such subject matter except as herein specifically set forth in this
settlement. The Settlement Agreement shall not be altered or modified except by written consent
of the Party or Parties against whom enforcement of the alteration or modification is sought.
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Page 3 of 5
4.3. The Parties agree that the Settlement Agreement represents a compromise
settlement of disputed claims and that nothing in the Settlement Agreement is intended to be, nor
shall it be construed as, an admission of wrongdoing by any Party.
4.4. Each Party to the Settlement Agreement herein represents and warrants that: (a)
thep erson executing the Settlement Agreement on its behalf is duly authorized to bind the Party
purporting to be bound thereby; (b) all formalities and approvals required to authorize the entry
into and performance of the Settlement Agreement have been undertaken; and (c)the entry into
andp erformance of the Settlement Agreement is not barred, prohibited or impaired by any law,
rule, regulation, contract,judgment, order, or decree by which that Party is bound.
4.4. The Settlement Agreement shall be governed by and construed in accordance with
the laws of the State of Florida without giving effect to its conflict of laws rules.
4.5. The Settlement Agreement may be executed in two or more counterparts, each of
which will be deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the Parties have caused this instrument to be executed on and
as of the day and year written bel. ,.
CITY OF MIAMI t .,A i
By:
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Page 4 of 5
SUNTRUST BANK
By:
Print: Je r P ' bio w k-
Title: 6-ral.f/� v, Cc! (1,5filen
Sworn to and subscribed before me
this 3t day of 6eteber, 2017.
Uv�Vv�.YJ�Y'
c,)3sf,
UVN-C),
Notary Public
My Commission expires:
4 DENA C CAMPBELL
� Notary Public
Henry County
State of Georgia
� My Commission Expires Aug 21.2018
Page 5 of 5
Exhibit A
LIST OF ALL ACCOUNT NUMBERS
List of bank accounts on file with City's Finance Department; City's bank account
information is confidential and exempt from public records disclosure pursuant to Section
119.071(5) of the Florida Statutes.
AMENDMENT NO. 1 TO THE
TREASURY MANAGEMENT MASTER AGREEMENT
BETWEEN THE CITY OF MIAMI BEACH, FLORIDA
AND
SUNTRUST BANK
This Amendment No. 1 (Amendment) to the Treasury Management Master Agreement,
dated February1, 2013, byand between the City of Miami Beach, Florida ("City"), and
SunTrust Bank, ("SunTrust"), is entered into this 31st day of October, 2017 (Effective
Date):
RECITALS
WHEREAS, on November 14, 2012, the Mayor and City Commission adopted
Resolution No. 2012-28055, approving an agreement between the City and SunTrust,
pursuant to
RFP No. 53-11/12, for the provision of various banking services for a five (5)
(5)year term, withfiveadditional one (1) year renewal options, at the City's option; and
WHEREAS, City
pursuant to Commission Resolution No. 2012-28055, the City
and SunTrust executed a Treasury Management Master Agreement, with the initial term
commencing
on January1, 2013, and expiring on December 31, 2017 (the
"Agreement"); and
WHEREAS, o October 31, 2017, the Mayor and City Commission adopted
� .�--
Resolution
No. 2017-OCAS , approving the Settlement Agreement between the
SunTrust, a copyof which is attached hereto as Exhibit "A," with respect to
City and
certain alleged fraudulent or unauthorized ACH debits that occurred in the City's General
Depository Account (-6568) between July 29, 2016 and October 27, 2016; and
WHEREAS, this Amendment No. 1 incorporates certain of the terms of the
Settlement Agreement, as set forth herein.
NOW THEREFORE, in consideration of the mutual promises and conditions
good herein,
and other and valuable consideration, the sufficiency of which is
hereby acknowledged,ed, the City and SunTrust hereby agree to amend the Agreement as
follows:
1. ABOVE RECITALS.
The above
recitals are true and correct and are incorporated as part of this
Amendment No. 1.
2. MODIFICATIONS.
Agreement is herebyamended (deleted items and inserted
The
items underlined) as follows:
17 to the TreasuryManagement Terms and Conditions, entitled
(a) Section
"Term and Termination," is hereby amended by adding a newsentence
at the end of Section 17, as follows:
At the conclusion of the initial term, this agreement shall be renewed for
an additional term commencin• on Janua 1 2018 and ex•irin• on
December 31, 2019.
,
(b) Section 2 of the Agreement,reement entitled Organization of Agreement, is
hereby amended by adding a new Section 2(j) as follows:
The terms and conditions set forth in the Settlement Agreement attached as
Exhibit "A" hereto, including Section 1 (and subsections) and Section 2
thereof, are hereby incorporated by reference.
3. RATIFICATION.
Except
as amended herein, all other terms and conditions of the Agreement shall
remain unchanged and in full force and effect. In the event there is a conflict
g
between theprovisions rovisions of this Amendment and the Agreement, the provisions of
this Amendment shall govern.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their appropriate officials, as of the date first entered above.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
CITY OF MI =� -t .:+;'FLORIDA
FOR CITY. F.:
ATTEST:
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By. 1r ' ' ii.
Rafael . Granado, Cu y * er HIi• , Mayor
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City Attorney pApf Date
NON-BINDING TERM SHEET FOR PROPOSED GLOBAL SETTLEMENT
AMONG
STR MARKETPLACE, LLC,CITY OF MIAMI BEACH,SUNTRUST BANK, BANK OF AMERICA,N.A.
proposal Only:
This Non-Binding Term Sheet states only a proposal for consideration by the City of
Miami Beach City Commission. The Term Sheet is subject to and withoutwaiver of all rights of
STR Marketplace, LLC, City of Miami Beach, SunTrust Bank, and Bank of America, N.A. No party
is bound until a definitive, final settlement agreement and release is signed by all parties, and
neither this Term Sheet nor any of its terms shall be used in any way to prove an admission of
any wrongdoing or any liability on the part of any of the parties.
Proposed General Terms:
1. Parties:
a. City of Miami Beach ("CMB").
b. STR Marketplace, LLC("STR")
c. SunTrust Bank("SunTrust")
d. Bank of America, N.A. ("BANA")
2. Subject Matter:
The proposed global settlement agreement concerns the Automated Clearing House
("ACH") debit transaction instructions initiated by an impostor using the identity of "Robert
Walsh, Jr." and conducted during the period July 28, 2016 through on or about October 26,
2016, for purchase of personal seat licenses through STR's Internet seat license marketplaces,
resulting in 57 ACH debit entries totaling $3,555,395.66, originated by STR as Originator and
BANA as Originating Depository Financial Institution, and charged against CMB's general
depository account(the "CMB Account") at SunTrust(collectively,the"ACH Transactions").
1 Settlement Amount:
STR will pay CMB the settlement amount of Nine Hundred Thousand and 00/100 U.S.
Dollars ($900,000.00) in a one-time lump sum payment, by cashier's check or wire transfer,
within five (5) business days of all parties' execution of a global settlement and release
document.
Page 344 of 426
4. Mutual Releases:
CMB, SunTrust, BANA, and STR shall release and forever discharge each other from any
and all claims, demands, causes of action, suits, and charges or grievances of any kind or
character, known or unknown, fixed or contingent, liquidated or unliquidated, which were or
could have been asserted by any of the parties against any of the parties, in any way arising
from or relating to any of the ACH Transactions, including without limitation any attorney's fees
or costs.
5. Indemnity Against Insurance Claim.
CMB anticipates that, upon execution of the global settlement agreement contemplated
herein, CMB will withdraw any insurance claim it has submitted with respect to the ACH
Transactions. CMB shall indemnify STR and BANA from and against any claim, demand, cause of
action, or suit by any insurer in any way arising from any insurance claim by CMB concerning
any of the ACH Transactions.
6. No Representation as to Tax Consequences.
The parties shall not make any representations or warranties to each other concerning
tax treatment of the settlement amount or global settlement agreement by the United States
Internal Revenue Service or any State or local taxing authority.
2
Page 345 of 426
Resolutions - R7 H
MIAMI BEACH
COMMISSION MEMORANDUM
TO: Honorable Mayor and Members of the City Commission
FROM: Jimmy L. Morales, City Manager
DATE: October 31, 2017
SUBJECT: A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA, (1)APPROVING AND AUTHORIZING THE MAYOR AND
CITY CLERK TO EXECUTE A SETTLEMENT AGREEMENT BETWEEN THE CITY
OF MIAMI BEACH, FLORIDA AND SUNTRUST BANK, WITH RESPECT TO THE
2016 THEFT OF FUNDS THAT OCCURRED FROM ONE OF THE CITY'S
SUNTRUST ACCOUNTS, INCLUDING, AMONG OTHER TERMS, A PAYMENT BY
SUNTRUST BANK TO THE CITY IN THE AMOUNT OF $536,258.00; (2)
APPROVING AND AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE
AMENDMENT NO. 1 TO THE TREASURY MANAGEMENT MASTER
AGREEMENT BETWEEN THE CITY AND SUNTRUST BANK, DATED FEBRUARY
1, 2013, FOR THE PROVISION OF VARIOUS BANKING SERVICES,
INCORPORATING THE TERMS OF THE SETTLEMENT AGREEMENT; (3)
APPROVING A TERM SHEET FOR A GLOBAL SETTLEMENT AGREEMENT
AMONG THE CITY, SUNTRUST BANK, STR MARKETPLACE, LLC., AND BANK
OF AMERICA, N.A., WITH RESPECT TO THE 2016 THEFT OF FUNDS,
INCLUDING, AMONG OTHER TERMS, A PAYMENT BY STR MARKETPLACE,
LLC TO THE CITY IN THE AMOUNT OF $900,000.00; (4) AUTHORIZING THE
MAYOR AND CITY CLERK TO EXECUTE THE GLOBAL SETTLEMENT
AGREEMENT (CONSISTENT WITH THE TERM SHEET APPROVED HEREIN),
IN A FORM ACCEPTABLE TO THE CITY ATTORNEY; AND (5) RATIFYING ALL
ACTIONS UNDERTAKEN BY THE CITY MANAGER WITH RESPECT TO THE
RECOVERY OF THE CITY'S FUNDS STOLEN FROM THE CITY'S SUNTRUST
ACCOUNT.
RECOMMENDATION
The Administration recommends that the Mayor and City Commission approve the foregoing
settlements, as these settlements will result in the City having recovered the total amount of
$3,499,344. important 344. It is im ortant to note that this recovery has been achieved without protracted and
expensive litigation, and will likely result in full recovery of the remaining outstanding amounts by the
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end of the first quarter of 2018, if not sooner.
ANALYSIS
BACKGROUND
The City of Miami Beach has been a customer with SunTrust for over 20 years. On November 14,
2012, the Mayor and City Commission adopted Resolution No. 2012-28055, approving an agreement
between the City of Miami Beach, Florida "City" and SunTrust, pursuant to RFP No. 53-11/12, for
theP rovision of various banking services for a five (5) year term, with five (5) additional one (1) year
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renewal options, at the City's option. Pursuant to City Commission Resolution No. 2012-28055, the
City and SunTrust executed a Treasury Management Master Agreement, with the initial term
commencing on January 1, 2013, and expiring on December 31, 2017 (the"Agreement").
The City currently has over 27 bank accounts with SunTrust and maintains an average daily
balances ranging from $92 to $170 million. Between July 29, 2016 and October 27, 2016, the City
was a victim of theft with a total of $3,686,712 stolen from the City's General Depository Account
(#6568) maintained by SunTrust (the "Account"), which funds were stolen through the use of
fraudulent and unauthorized Automated Clearing House (ACH)debits from the Account. A majority of
the debits were to a Bank of America account held by STR Marketplace, LLC, a Texas firm that runs
an online marketplace for"personal seat licenses" for seats at professional sporting events.
On or about May 31, 2017, an individual in New York was criminally charged with committing the
offenses of bank fraud and aggregated identity theft. The individual was in violation of federal law,
based on the individual's fraudulent use of the City's funds from the Account to purchase personal
seat licenses and re-sell individual seat tickets through online services such as Craigslist and
StubHub.
The City has worked diligently to mitigate its damages from the theft and has recovered $2,063,086
to date. Despite the City's best efforts, it has been unable to recover the remaining $1,623,626 that
was stolen from the Account.
PROPOSED SETTLEMENT AGREEMENT WITH SUNTRUST BANK, N.A.
On July 10, 2017, the City notified SunTrust of potential claims due to the foregoing bank fraud.
Although SunTrust has denied any liability to the City relating to the bank fraud matter it has
cooperated with and assisted the City subsequent to the fraud in recovering funds and improving
internal controls.As such, in recognition of those efforts and the bank's longstanding relationship with
the City, both SunTrust and the City desire to facilitate a commercial resolution of the foregoing
issues.
Accordingly, without any admission of liability whatsoever and with a reservation of all rights,
SunTrust has submitted a proposal to the City, the terms of which are memorialized in the Settlement
Agreement attached as Exhibit"A". The proposed Settlement Agreement provides for the following:
1. An extension of the term of the Agreement for banking services for a period of two (2) years,
pursuant to the City's renewal option as provided in RFP No. 53-11/12 and City Commission
Resolution No. 2012-28055;
2. An increase of forty five (45) basis points (for a total of 50 basis points) with respect to the
interest rate the City earns on the excess balance on various accounts maintained at SunTrust;
3. The retroactive application of the increased interest rate, effective as of January 1, 2017;
4. An adjustment of the City's Earning Credit Rate (ECR), which serves as a monthly credit
against bank fees the City is otherwise obligated to pay; and
5. A mutual release of claims relating to the foregoing bank fraud matter.
The proposed Settlement Agreement (and Amendment No. 1 to the Treasury Management
Agreement, attached as Exhibit "B" hereto, incorporating the terms of the Settlement Agreement),
would result in the City, within sixty days after the execution of the Agreement, recovering a minimum
amount of $536,258 plus interest earned from November 1 through December 31, 2017. The
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Agreement also establishes the framework for the City to recover additional earnings each month
during the renewal term, with the monthly earnings depending on the volume of transactions and the
average monthly balance in the accounts.
The Administration has benchmarked the SunTrust proposal, and Administration recommends the
approval of Amendment No. 1 as being in the City's best interest, particularly in view of the highly
competitive terms and retroactive nature of the proposal to Jan. 1, 2017.
TERM SHEET FOR GLOBAL SETTLEMENT WITH STR MARKETPLACE, LLC
The Administration has also negotiated a proposed settlement with STR Marketplace, LLC,
whereby STR Marketplace, LLC agrees to make a lump sum payment to the City in the amount of
$900,000 to settle all claims among the parties with respect to the 2016 theft of funds.
The proposed Term Sheet for a Global Settlement Agreement among the City, STR Marketplace,
LLC., Bank of America and SunTrust, is attached as Exhibit "C" hereto, and provides for the
$900,000 payment to the City within five business days of the executed Agreement and a mutual
release of all claims among the parties relating to the 57 ACH transactions at issue.
As STR Marketplace has proposed a global settlement among the parties, the City's proposed
settlement with STR Marketplace, LLC depends in part on SunTrust's agreement to release any
claims SunTrust may have against STR Marketplace and Bank of America, N.A.
In further support of the City's Settlement Agreement with SunTrust, and continued relationship
with SunTrust Bank, SunTrust has agreed to provide the mutual releases requested by STR
Marketplace and Bank of America, in an effort to facilitate the City's recovery of $900,000 from
STR Marketplace and bring closure to all parties with respect to the 2016 theft of funds.
Accordingly, of the total $3,686,712 stolen from the City's account, the Administration recommends
that the Mayor and City Commission approve the foregoing settlements, as these settlements will
result in the City having recovered the total amount of $3,499,344, not including any amounts the
City intends to pursue in the pending criminal forfeiture proceeding, and not including any additional
monthly earnings accruing to the City as a result of the adjusted ECR and interest rate as part of the
Agreement with SunTrust. It is important to note that this recovery has been achieved without
protracted and expensive litigation, and will likely result in full recovery of the remaining outstanding
amounts by the end of the first quarter of 2018, if not sooner. Finally, it is also important to highlight
that to date, there has been no evidence that any City employee was in any way involved with the
fraud and theft.
Legislative Tracking
Finance
ATTACHMENTS:
Description
a Resolution
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