Updates Regarding Frozen Bank Accounts

We will use this web page to ensure you have the most up-to-date information about the frozen bank accounts related to the alleged banking fraud impacting several payroll companies in the United States, including us.

The first thing we want you to know is that your ongoing payroll will not be impacted. Payroll processing has continued and will continue. We have separated and secured all funds moving forward.

This page will be updated as changes occur and will include contact information and links to additional information. This is the fastest way to ensure our customers have the right information in the fastest timeframe. Click here to jump to the most recent update or read Important Information below.

Updates

8/22/22 at 4:00pm

  • This is a quick update on our lawsuit against Pioneer Bank in New York.
  • Even though it has been quite some time since we provided an update, work in the lawsuit continues on a daily and weekly basis. On August 16, 2022, we had another conference call with the New York Department of Financial Services, which regulates banks in New York State. They continue to take an interest in resolving this matter and are asking frequent questions. The information we provided them at our last meeting in Manhattan is very complex for anyone not well versed in our industry and there has been a significant amount of time spent helping them to understand the information we provided and to feel confident that we have given them accurate information.
  • We continue to make appropriate filings in our lawsuit and are hopeful the court will finally be able to get things moving on that front.

4/15/22 at 5:00pm

  • We are sorry it has been some time since we have sent out an update around the frozen funds situation. We want to assure you that we are still working diligently to get the tax funds released as quickly as possible. We are in the discovery phase and working with our attorneys and their team weekly, daily, and sometimes hourly, to ensure they have the information they need.
  • We are hopeful that the New York Department of Financial Services will intervene and require Pioneer Bank to return the funds. Whether the Department of Financial Services intervenes or we continue to move forward in the courts, we have not given up our fight to resolve this situation. If anything, we are more determined than ever.
  • Thank you for the grace you have shown us while we wage this court battle. The entire Southwestern Payroll team is incredibly grateful for all of you and your patience and support. We are determined to see this through and to see your tax funds returned to you.

11/12/21 at 5:00pm

  • Our lawsuit against Pioneer Bank is still moving forward. We are scheduled for another round of depositions the second and third weeks of December. We are hopeful that we will finish the discovery phase of the litigation and motion practice in the first quarter of 2022. We are still fighting hard, and we believe we are absolutely on the right side of the law.
  • As always, if you want more details please call us at 918-587-3321 and we can put you in contact with our attorneys.

7/22/21 at 6:00pm

  • I wanted to give you an update on our case against Pioneer Bank and our mission to recover your tax funds. We took eight depositions of Pioneer Bank personnel over the last two weeks, and we anticipate deposing five to ten more Pioneer Bank employees and executives in August and September. The first round of depositions went well.
  • We will also be disclosing our expert reports to the courts and opposing counsel in the next week or so, and Pioneer Bank will disclose their expert reports about a month later. Our discovery cut-off is in early October. After the discovery cut-off, the parties will file motions, and we will ask the court to set us for trial.
  • We are pushing ahead, and we are dedicated to fighting to get your tax funds back regardless of the time and expense associated with the lawsuit. If anyone wants more details, please contact me, and I will put you in touch with one of our lawyers.

4/15/21 at 12:00pm

  • It has been quite a while since our last update, and many of you have inquired about our progress in getting your tax funds released. We are in a phase of the lawsuit that is full of work and very time consuming, but does not produce a lot of “news”.
  • However, I wanted to at least provide some update on our progress. Currently, our attorneys are reviewing the more than 250,000 pages of documents that Pioneer Bank has produced. We are also in the process of scheduling depositions with relevant witnesses.
  • Please know that we are committed to pushing this process as much as we can and our attorneys are doing their absolute best to get a positive result as soon as possible. Nothing is more urgent to our team and to me personally.

2/4/21 at 12:00pm

  • We are still progressing in our suit against Pioneer Bank. We have obtained documents establishing that in spite of what Pioneer Bank claims, it knew it was housing our clients’ tax funds when it decided to take them to satisfy Michael Mann’s loans. We are continuing to press on with the litigation, and we continue to be encouraged that we will ultimately prevail.

11/30/20 at 3:00pm

  • On Monday November 23rd, we received the long awaited discovery document request from Pioneer Bank and they received ours. This starts the clock ticking on the deadlines to produce requested documents.  We have 45 days to produce the information requested.
  • This marks an important milestone in our court case and will be the first chance we will have to demand documents from the bank that will support our claims against them on behalf of our clients.
  • This process will place great demands on our team to comply in a timely manner and we will be focusing on that. At the same time, we must prepare for and complete the demanding process of extra payrolls, year-end filings, W-2s, etc.
  • We will do our best to respond to all your questions as fast as possible, but I must ask for your continued patience while we work through the steps necessary to fulfill all our responsibilities.
  • I expect to have another update next week after discussions with the IRS later this week. We have been sending Levy notices to our contact so that the action could be stopped. The IRS representative wishes to discuss the plan moving forward.
  • May you all prosper and stay safe during this holiday season.

10/13/20 at 5:30pm

  • We apologize that it has been about 12 weeks since our last update. This time has been filled with legal wrangling but few significant developments. COVID-19 caused a slow down in New York courts which created a huge back log.
  • But, we are happy to report that we have successfully overcome all Pioneer Bank’s motions and attempts to stall the case.
  • Fortunately, we are now entering the discovery phase of the lawsuit and we should begin to receive the information we need from the bank to support our claims. We have continued to gather evidence that demonstrates the bank knew that these were client tax trust funds are not subject to seizure to offset their losses due to their poor decision making.
  • We are hopeful that the discovery process will make it clear to Pioneer Bank that they will not prevail and need to settle this with us sooner rather than later.
  • We will send out more regular updates moving forward.

7/8/20 at 2:00pm

  • Yesterday, July 7th, we learned that the courts have made an important interim ruling and will allow the fraud charge we levied against Pioneer Bank to stand. The judge ruled that there is sufficient evidence of potential fraud on the part of the bank to warrant the charge. This means that we can start the discovery process and make demands for information from the bank to support our claims.
  • Coupled with the decision of the IRS to sue Pioneer Bank as well, we are hopeful this will lead to some positive action by Pioneer Bank and cause them to come to the table.
  • We appreciate our clients sticking with us as we work to end this case in our favor and get all of our clients’ funds back. We will continue to update you as developments warrant.

5/7/20 at 5:00pm

  • Last week the federal government filed a lawsuit against Pioneer Bank for wrongfully seizing millions of dollars in tax funds – including the frozen tax funds paid by Southwestern Payroll on behalf of our clients.
  • This IRS filing is great news. Although we still don’t have a timing for the resolution, we do believe this will expedite the resolution in our favor.
  • Unfortunately, until then we must continue to navigate each client’s situation related to their frozen funds individually. As always, contact us via Tax@swpay.com and copy your primary contact with any questions or updates about your account.
  • We are continuing to fight to get these funds released and returned to you or deposited on your behalf and are grateful for the IRS taking this step. We will reconnect as soon as we have updates on the lawsuit, on the funds or both.

3/24/20 at 5:00pm

  • We continue to await decisions on several fronts regarding the frozen funds at Pioneer Bank. We have not posted in some time because we were waiting on something concrete to report. Unfortunately, the COVID-19 situation has only served to slow down any progress that might otherwise have been made to advance our cause.
  • We are still waiting on the judge to rule on whether the fraud charge included among the other charges in our lawsuit will be allowed to stand. As we mentioned previously, Pioneer Bank wants this dismissed because it would have negative consequences for them just to have it stand. We hope the judge will rule in our favor and believe it would help our overall cause.
  • The New York Department of Financial Services continues to review our claims and we still hope that they will join the fight on our side. Obviously, New York has been dramatically affected, especially Manhattan, where their office is located, so we do not expect much progress in the next few weeks or months from them.
  • The Department of Justice has requested permission to intervene on behalf of the IRS and we are awaiting that authorization. The impact of COVID-19 on that process is unknown to us, but certainly will not be beneficial to the timeline.
  • Please know that we are working diligently on the situation in every way that we can. There is nothing more important to us than our clients and their businesses. We greatly appreciate you and your patience with us as we continue to work through the communication for all clients.

1/30/20 at 3:30pm

  • We are pleased to share an update on the penalty abatements related to the frozen funds that have not been deposited with the IRS. We received a short written statement from the IRS confirming that they are in the process of abating the penalties that resulted from our inability to deposit some federal taxes.  Click here to view a copy.
  • Additionally, I was informed this morning that almost half of our affected clients have already had their penalty abated in the last two weeks. Notices are staged and sent automatically and may still have been sent prior to the abatement posting.
  • We continue to apply pressure at every point we can to cause the bank to release the funds. We will send further updates when we have news.

1/10/20 at 12:30pm

  • We are pleased to announce that the Internal Revenue Service collection agent assigned to the frozen funds situation informed us this morning, January 10th, 2020, that the IRS will be conducting a mass abatement of the penalties with regard to the frozen funds issue affecting our clients. Today we are providing additional information requested by the IRS that is necessary for the abatement to occur. We do not yet know the timeline exactly as this is an evolving situation, but we will offer updates as we receive them.
  • We are very pleased by this encouraging development and look forward to more good news as we move through this process. Thank you for your patience and understanding.

12/16/19 at 3:00pm

  • On December 16th we had our first pre-trial conference in our case against Pioneer Bank and Michael Mann and related entities.  Our goal was to have the Judge in the Northern District of New York accept our claims and allow the discovery phase to begin.  Discovery is the process where the parties exchange information that is relevant to the case such as internal email communications, accounting records, etc.  These items are necessary to properly substantiate our claims.
  • The most powerful charge we have levied is that the bank committed fraud against us by continuing to accept deposits into the tax account while knowing that they were not going to allow those funds to be paid out and failing to notify us.  We truly believe that we have a very strong legal basis for our fraud claim because Pioneer Bank induced us to continue depositing our client tax trust funds when they knew that had no intention of allowing these funds to be deposited with the appropriate taxing authorities.
  • Pioneer Bank is attempting to get the fraud charge dismissed.  We have responded with additional details and facts that we learned of since the original complaint and the judge decided to give the bank an extension to file a second motion to dismiss before ruling.  They have until January 10th to do that. He also decided to delay discovery until he has had a chance to rule on that motion and we know that all charges will be covered during the discovery process.
  • This does not mean we are resting on the matter.  We continue to prepare for the next phase.  We also believe we will receive some information in a related case that will benefit us during the interim period and allow us to continue our documentation work.  We will post updates as soon as we have new information to share.

12/11/19 at 2:30pm

  • Our legal team continues to pursue our lawsuit against Pioneer Bank and Michael Mann’s entities. Our first hearing, originally scheduled for Friday, December 13th, was rescheduled by the courts for Monday, December 16th. NatPay, an industry leader in ACH processing that was also impacted by Pioneer Bank and Michael Mann’s actions, will be joining our lawsuit. This is a positive development as we can share information and resources. NatPay has uncovered important and helpful information that benefits our case. At this time we are beginning to receive many notices from various authorities. We are responding to each one as quickly as possible. If you receive any notice from any tax authorities, please email it to tax@swpay.com.

11/14/19 at 2:00pm

  • Yesterday we filed a request for an expedited initial conference in our suit against Pioneer Bank and Michael Mann regarding the frozen tax funds.  Originally the court had set this for February 3, 2020.  Given the urgency of the matter, we petitioned our assigned Magistrate Judge in the Northern District of New York to move the conference to December 13, 2019 and our request was immediately granted by the Judge. This is a significant positive step and we look forward to taking the next steps in this process.

11/1/19 at 12:00pm

  • Today Southwestern Payroll filed a lawsuit against Pioneer Bank in Albany, New York. We sent an update email to all clients, which you can view online here. We continue to work on behalf of our clients with all the relevant tax agencies to deal with notices, abate penalties and take whatever actions that we can as they become necessary. We also continue to provide email updates to clients as developments occur.

10/16/19 at 5:00pm

  • Today we sent a recap file to the Oklahoma Employment Security Commission with a list of all clients that are affected by having some of their third quarter Oklahoma Unemployment taxes frozen at Pioneer Bank.  After speaking with our local representative, we are hopeful they will be able to offer some support or relief from notices and penalties.  We will update further as we learn more.

10/15/19 at 6:00 p.m.

  • On October 14, Southwestern Payroll sent data requested by the IRS Collections Office about which clients have been affected with regard to federal tax deposits, both those related to 941 deposits (Social Security, Medicare and Federal Income Tax Withholdings) and also Federal Unemployment. We provided a list of clients with funds that are under the control of Pioneer Bank. We are hopeful this will help the IRS minimize the impact of these events on our clients with respect to notices and penalties.
  • We will update you further as developments warrant.

10/11/19 at 3:30 p.m.

  • On October 10th, Southwestern Payroll made a formal demand to Pioneer Bank to release the majority of the Southwestern Payroll’s client’s tax trust funds that are frozen at Pioneer Bank. This demand was based on research conducted over the last several weeks and documentation of specific client funds and amounts that the bank allowed to be deposited into the bank after the bank had frozen all outbound transactions.
  • We have stated a very clear an undeniable case for the return of these funds. However, at this stage, we cannot force Pioneer Bank to comply. This may take regulatory or civil action against the bank in a New York court. Therefore, we have no updates on the timeline for the return of these funds.
  • As we continue our audits and produce documentation, we will be making additional demands for the remaining client tax trust funds in their possession.
  • We will update you with any further developments as we continue to fight for our clients and work through the process to correct this unfortunate event.
  • We thank you for your understanding, patience and support that so many have expressed to us.

10/2/19 at 3:00 p.m.

  • Last week the FBI released its criminal complaint against Michael Mann. In the complaint, the FBI asserts that there is a basis for a finding of probable cause that Michael Mann committed bank fraud. The affidavit states “In sum and substance, Mann stated that he wished to accept responsibility for his conduct and confess to a fraudulent scheme that he had been running for years.”
  • As a reminder, nobody working at Southwestern Payroll or any of the affected payroll companies committed any crime. We are victims of this scheme. We continue to seek resolution of this matter and work to regain access to the client funds that are frozen.

9/24/19 at 4:00 p.m.

  • We are providing personal details to our affected customers; we have connected with many who were impacted and continue this communication as fast as possible. Thank you for your understanding as we work through this.

9/23/19 at 5:00 p.m.

  • Michael Mann has been arrested and charged with bank fraud (as reported by various news and media outlets).

9/20/19 at 3:00 p.m.

  • All customers notified of the alleged fraud via email from Darin Alred
  • Accounting continues to be processed and our team continues to call all customers.
  • Web page developed to ensure accurate information
  • Southwestern Payroll employees calling all customers.
    • Our employees are committed to reaching all of our customers quickly about this situation.

9/20/19 at 5:30 p.m.

  • Some Southwestern Payroll clients have received emails stating that someone is accessing their state withholding or unemployment accounts online. This is a normal part of regaining independent access to our clients tax accounts with the states. Susan Wall is the name you will generally see associated with this process, but there may be others. Please do not be alarmed, but always call us any time you are unsure. We are happy to clarify as needed and confirm that all is well with your online accounts.

Contact Information

Customers:

  • Your representative is rapidly calling and emailing every one of his/her clients. If possible, please use this page for data updates.
  • If you need to contact us about a specific need, call or email your personal representative.
  • All others call the main line to be transferred or leave a message for a callback: 918.587.3321

Media:

  • Call/text Hannah Jackson at (918) 606-8721 or email hannah@schnake.com.

Other:

  • If you’re neither a member of the media or a customer and you aren’t sure who to contact, please email tax@swpay.com and provide your name, phone number and question and we’ll assist.

Important Information

On September 4, 2019, an allegation against our parent company Cloud Payroll regarding fund misappropriation came to our attention. A formal investigation has begun, and will be ongoing for quite some time.

Southwestern Payroll has severed all ties with Cloud Payroll, and we are once again operating independently as Southwestern Payroll.

  • Most importantly: your payroll has continued and will continue to be processed without interruption.
    • The only impact on Southwestern Payroll Service, Inc. customers is that some tax funds are not available for deposit because they are frozen by Pioneer Bank.
  • Who is impacted?
    • Customers with payrolls dated August 28, 2019, through Sept. 3, 2019, are impacted the most. Almost all deposits resulting from those payrolls are frozen.
    • Unemployment taxes which are deposited at the end of October will be impacted because some of those funds are among the deposits frozen. We will deposit the funds that remain in our custody as the states permit.
    • Some tax codes with monthly deposit frequencies for August payroll are affected because those funds were in the Pioneer account awaiting deposit in September.
  • What happened?
    • We are a victim of alleged financial fraud perpetrated by Michael Mann (as reported by various news and media outlets). Michael Mann owned interest in several payroll companies across the U.S., including Southwestern Payroll Service, and allegedly committed millions of dollars in fraud of various forms in an ongoing scheme whose boundaries and nature we do not yet know (as reported by various news and media outlets).
    • The FBI recently raided Michael Mann’s home.
    • His bank, Pioneer Bank in Albany, NY froze all of his and his company’s bank accounts.
    • For Southwestern Payroll specifically, his actions caused the inability to access the various funds which we had stored in a Pioneer bank account for the payroll dates listed above among other taxes. As a subsidiary of Mann’s company, our client tax funds were deposited in this account as an interim step to being paid in to tax authorities when due by a centralized corporate tax team.
  • At our request, a Tulsa County Judge has appointed a Receiver.
    • David Rhoades is a Certified Turnaround Professional, a Certified Fraud Examiner, and a Certified Forensic Consultant. State and Federal courts recognize him as an expert in the operation and viability of companies, in the area of corporate governance, alter ego and corporate veil issues, and in the viability of bankruptcy and business plans. Rhoades has served the Courts as trustee, examiner, special master, special administrator and receiver.
  • When do you expect to get the money back? What will happen if you don’t get the money back?
    • At this time, we do not have enough information and we do not want to speculate. As soon as we have the available information regarding this matter, we will provide an update.
  • What are we doing?
    • We’re continuing to make sure your payroll is processed on time and correctly and that all future funds are handled securely under our control. All employee payments will be made as directed.
    • We will be working hand-in-hand with authorities to do all we can to get this money unfrozen and released to the taxing authorities.
    • We are calling and emailing all of our customers to make sure they know what is going on and how they are impacted specifically.
    • We will be updating this page regularly with updates.