Lawyer for accused PNC Bank swindler says client has started to repay $27M

A New York tech company founder who PNC claims defrauded it of over $27 million has started to chip away at his balance, but the bank has doubts a full payoff is possible without court intervention.

“We still don’t have a very clear picture of whether this is a truly viable business where we should engage in negotiations for it to continue operating,” Eric Olshan, an attorney representing PNC, said Monday at a virtual hearing in federal court in Pittsburgh.

The bank Thursday sued Dan Herbatschek and affiliated companies. This includes Ramsey Theory Capital, a New York-based firm he started in 2017 that deals with software design, artificial intelligence and related fields.

According to the lawsuit, three bounced checks totaling $2.9 million led the bank to uncover that “Herbatschek was executing a large-scale fraudulent check-kiting scheme.”

Check-kiting is when fraudsters deposit checks between multiple bank accounts and take advantage of the window before a check clears to withdraw funds they don’t have.

The PNC accounts carried a negative balance of more than $27.3 million as of Aug. 11, according to the bank.

Olshan said Herbatschek has paid off about $500,000 of his debt since, and may have millions of dollars more available through selling off his real estate and art collection.

A Wall Street Journal article this year about the ultra-wealthy buying luxury real estate noted Herbatschek paid more than $12 million in May to buy a five-bedroom condominium on Manhattan’s Upper East Side. The article also said he was buying three additional multimillion-dollar properties.

Even so, “we’re not seeing anything that suggests there’s $26 million around that can be paid to PNC to make it whole,” Olshan said.

Herbatschek’s attorney, David Berardinelli, pushed back on the idea his client couldn’t pay off his debt.

“We’ve already begun the process of doing that and are hoping to work out with them a path to get that dollar amount whittled down to where it’s ultimately zero,” Berardinelli said.

He also noted Ramsey Theory and the other companies were generating “real and substantial income,” including some over the past few days.

PNC has already received some financial information, and is seeking more, said Olshan, a former U.S. attorney for the Western District of Pennsylvania. The bank also wants to work out an agreement where Herbatschek is barred from spending money other than what’s necessary to keep his businesses afloat.

For now, Chief U.S. District Judge Mark Hornak is choosing not to act, instead allowing the two sides to work out an agreement with initial steps toward Herbatschek eliminating his balance. That pact would then be shared with the court.