The New York Supreme Court, Appellate Division, held that the fraudulent payment of money could be recovered from the employer, and not the person who fraudulently induced the payment directly. The salesman operated a pyramid scheme without the knowledge of the employer and used the deposits of customers to fund the scheme. The Court held that even though the salesman had defrauded both the plaintiffs and the employer, the party that allowed the perpetration of the fraud should bear the loss. Thus, the employer was liable for the customer's loss.
Full case and case summary also available online at: http://www.mlmlegal.com/legal-cases/RocksandJeans_v_LakeviewAutoSales.php
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