A-13216, A-59110, OCTOBER 28, 1938, 18 COMP. GEN. 386

A-13216, A-59110, OCTOBER 28, 1938, 18 COMP. GEN. 386

CHECKS - ALLEGED FORGERIES - INVESTIGATION, NOTICE, AND RECLAMATION PROCEDURE HEREAFTER IN ALL CHECK CASES IN WHICH FORGERY IS ALLEGED, REPORTS OF SECRET SERVICE INVESTIGATIONS WILL BE REQUESTED AND PROMPT NOTICE WILL BE GIVEN INTERESTED INDORSERS, WITHOUT DEMANDING REMITTANCE, THE TREASURER OF THE UNITED STATES ALSO TO BE ADVISED, AND THE MATTER REFERRED TO HIM FOR RECOVERY OF THE AMOUNTS INVOLVED THROUGH THE USUAL RECLAMATION PROCEEDINGS INSTITUTED IN FORGERY CASES, IF, UPON INVESTIGATION, IT IS FOUND THAT REIMBURSEMENT SHOULD BE OBTAINED FROM THE INDORSERS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, OCTOBER 28, 1938:

A LETTER TO THIS OFFICE DATED AUGUST 17, 1938, OF YOUR ADMINISTRATIVE ASSISTANT IS AS FOLLOWS:

REFERENCE IS MADE TO YOUR LETTER DATED MAY 10, 1938 (A-13216, A 59110), AND TO PRIOR CORRESPONDENCE FROM THE TREASURY REQUESTING YOUR COOPERATION IN HANDLING RECLAMATION MATTERS THROUGH THE TREASURER OF THE UNITED STATES ON WHOM THESE CHECKS ARE DRAWN.

IT APPEARS THAT YOU HAVE SEPARATED CHECK CLAIMS FILED IN YOUR OFFICE IN TWO DISTINCT GROUPS, SUBSTANTIALLY AS FOLLOWS:

1. WHERE THE PAYEE'S ENDORSEMENT HAS BEEN FORGED.

2. WHERE THE NAME ENDORSED ON THE CHECK IS NOT THE PAYEE'S NAME SHOWN ON THE FACE OF THE CHECK--- AS DISTINGUISHED FROM CASES INVOLVING A FORGED PAYEE'S SIGNATURE.

YOU STATED IN YOUR LETTER DATED DECEMBER 3, 1937, THAT IT HAD BEEN YOUR PRACTICE TO REFER CHECKS FALLING WITHIN THE FIRST CLASSIFICATION TO THE SECRET SERVICE DIVISION FOR INVESTIGATION AND THAT IF IT WAS SUBSEQUENTLY ASCERTAINED THAT THE PAYEE'S ENDORSEMENT HAD BEEN FORGED, THE CASE WAS FORWARDED TO THE TREASURER FOR RECLAMATION PROCEEDINGS. YOU FURTHER STATED:

"WITH RESPECT TO GROUP 2, HOWEVER, WHERE IT CLEARLY APPEARS THE INDORSEMENT OF THE PAYEE'S NAME DIFFERS FROM THE NAME OF THE PAYEE AS IT APPEARS ON THE FACE OF THE CHECK, SHOWING RATHER CONCLUSIVELY THAT THE CHECK WAS NOT INDORSED AS DRAWN, THUS DISPENSING WITH THE USUAL SECRET SERVICE INVESTIGATION REQUIRED IN FORGERY CASES SUCH AS THOSE INCLUDED UNDER GROUP 1, THE LONG STANDING PRACTICE OF THIS OFFICE IN SUCH CASES HAS BEEN TO MAKE DEMAND DIRECTLY UPON THE CASHING BANK. THE RESULT IN THESE CASES HAS BEEN MOST SATISFACTORY FROM THE STANDPOINT OF EXPEDITION, ECONOMY, AND OF ADEQUATE PROTECTION OF THE INTERESTS OF ALL PARTIES CONCERNED. * * *"

IN TREASURY LETTER DATED APRIL 2, 1938, TRANSMITTING COPIES OF YOUR LETTERS IN FIVE DIFFERENT CASES TO THE ENDORSING BANKS INVOLVED, REQUESTING THAT DIRECT REFUND BE MADE TO YOU, IT WAS OBSERVED THAT YOU HAD REQUESTED REFUND DIRECT FROM THE ENDORSING BANKS INSTEAD OF THROUGH THE TREASURER OF THE UNITED STATES AS DRAWEE, WITH THE APPARENT INTENTION OF SETTLING WITH THE PAYEE WITHOUT THE USUAL INVESTIGATION BY THE SECRET SERVICE DIVISION TO SUBSTANTIATE THE PAYEE'S CLAIM OF NONRECEIPT. IT WAS FURTHER POINTED OUT:

"THE TREASURY FEELS THAT ALL CASES IN WHICH FORGERY OF ENDORSEMENT IS ALLEGED SHOULD BE INVESTIGATED TO THE END THAT THE APPREHENSION AND CONVICTION OF FORGERS WILL ACT AS A DETERRENT, TO ESTABLISH SO FAR AS POSSIBLE THE GOOD FAITH OF THE CLAIMS MADE BY THE PAYEES AND TO PROTECT WITHIN REASON THE ENDORSERS HANDLING GOVERNMENT CHECKS.'

THE FOLLOWING IS QUOTED FROM YOUR REPLY DATED MAY 10:

"WITH RESPECT TO THE FIVE CASES CITED IN YOUR LETTER THE RECORDS OF THIS OFFICE SHOW (1) THAT IN EACH CLAIM THE PAYEE WAS FURNISHED A PHOTOSTATIC COPY OF THE INVOLVED CHECK, TOGETHER WITH FORM OF AFFIDAVIT FOR EXECUTING IN THE EVENT THAT NONRECEIPT OF THE ORIGINAL CHECK WAS ASSERTED; (2) THAT SINCE IT CLEARLY APPEARED AFTER EXAMINATION OF THE EXECUTED AFFIDAVIT, OTHER FACTS OF RECORD, AND COMPARISON OF THE SIGNATURES, THAT THE PAYEE HAD NOT RECEIVED THE ORIGINAL CHECK AND AS THE CHECK WAS NOT INDORSED AS DRAWN--- AS DISTINGUISHED FROM A FORGED INDORSEMENT--- DEMAND WAS MADE UPON THE CASHING BANK IN ACCORDANCE WITH EXISTING PROCEDURE IN SUCH CASES; (3) THAT THE CASHING BANK IN EACH CLAIM HAS PROMPTLY REMITTED THE AMOUNT REQUESTED, WITHOUT PROTEST; AND (4) THAT SETTLEMENT HAS BEEN MADE WITH THE PAYEES. THE RESULT IN THESE CASES WAS, AS STATED IN MY LETTER OF DECEMBER 3, 1937, WITH RESPECT TO THE PROCEDURE AS TO CASES UNDER GROUP 2,"MOST SATISFACTORY FROM THE STANDPOINT OF EXPEDITION, ECONOMY, AND OF ADEQUATE PROTECTION OF THE INTEREST OF ALL PARTIES CONCERNED.'"

IN THIS CONNECTION, YOUR ATTENTION IS INVITED TO THE FOLLOWING CASES WHICH HAVE COME TO THE ATTENTION OF THE TREASURY, IN WHICH THE ENDORSEMENT ON THE CHECK VARIES IN SOME DEGREE FROM THE NAME OF THE PAYEE ON THE FACE OF THE CHECK, THE SUBSEQUENT INVESTIGATION OF SUCH CASES SHOWING FACTS MATERIALLY AFFECTING THE INTERESTS OF BOTH THE GOVERNMENT AND THE ENDORSERS, WHICH FACTS WOULD NOT HAVE BEEN DISCLOSED HAD NOT AN INVESTIGATION BEEN CONDUCTED:

1. THE CASE OF HENRY BARTON INVOLVES CHECK NO. 1486477, DATED JUNE 16, 1936, FOR $1.19 DRAWN ON THE TREASURER OF THE UNITED STATES THROUGH THE FEDERAL RESERVE BANK OF ATLANTA BY J. F. CANNON, SYMBOL 41-01-52, THE FIRST ENDORSEMENT OF WHICH APPEARS TO BE "HENNRY BARTOM.' UPON SUBMISSION OF A STATEMENT FROM THE PAYEE ADVISING THAT HE HAD NOT RECEIVED THE CHECK, THE CASE WAS REFERRED TO THE SECRET SERVICE DIVISION FOR INVESTIGATION ON AUGUST 19, 1936, AND RECLAMATION OF THE AMOUNT OF THE CHECK WAS REQUESTED FROM THE FEDERAL RESERVE BANK OF ATLANTA ON AUGUST 26, 1936. THE TREASURER'S ACCOUNT WAS CREDITED WITH THE AMOUNT OF THE CHECK ON SEPTEMBER 3, 1936. THE INVESTIGATION SHOWED THAT THE CHECK WAS STOLEN, FORGED, AND NEGOTIATED BY ONE DEWEY YOUNG, AGE 12, WHO WAS HELD FOR THE UNITED STATES GRAND JURY ON CHARGE OF VIOLATION OF SECTION 73, CHAPTER 4, TITLE 18, U.S.C. THE DEFENDANT, HOWEVER, SUBSEQUENTLY BEING RELEASED BECAUSE OF THE FACT THAT HE WAS UNDER FOURTEEN YEARS OF AGE. WITH A FINAL REPORT OF THE INVESTIGATION THERE WAS TRANSMITTED A RELEASE EXECUTED BY THE PAYEE ACKNOWLEDGING RECEIPT OF THE AMOUNT OF THE CHECK IN FULL. ACCORDINGLY, TREASURER'S CHECK IN THE AMOUNT OF $1.19 WAS TRANSMITTED TO THE FEDERAL RESERVE BANK FOR ADJUSTMENT WITH THE ENDORSERS, THE ORIGINAL CHECK BEING FORWARDED TO YOUR OFFICE ON MARCH 31, 1938. IT IS PERTINENT TO NOTE THAT WHEREAS THIS CASE APPEARS TO BE ONE WHICH WOULD FALL WITHIN YOUR GROUP 2, IT CLEARLY INVOLVED A FORGED ENDORSEMENT OF THE PAYEE'S NAME, IN VIEW OF WHICH IT DOES NOT APPEAR THAT THE NECESSITY OF AN INVESTIGATION BY THE SECRET SERVICE DIVISION COULD BE DISPENSED WITH.

2. THE CASE OF ERNEST W. VALENTINE INVOLVES CHECK NO. 1191761, DATED MARCH 11, 1938, FOR $22.00, DRAWN ON THE TREASURER OF THE UNITED STATES THROUGH THE FEDERAL RESERVE BANK OF RICHMOND BY S. S. MACKS, SYMBOL 51-02- 30, BEARING THE ENDORSEMENT "EARNEST W. VALENTINE," A PHOTOSTATIC COPY OF WHICH WAS TRANSMITTED TO THE SECRET SERVICE DIVISION BY THE FEDERAL RESERVE BANK OF RICHMOND UPON RECEIPT OF A REQUEST FOR STOPPAGE MADE BY THE DISBURSING CLERK PURSUANT TO ADVICE OF NONRECEIPT FROM THE PAYEE. REPORT OF THE INVESTIGATION REVEALED THAT JOSEPH MARTIN BREIGHNER, BROTHER -IN-LAW OF THE PAYEE, FORGED AND UTTERED THE CHECK. THE PAYEE WAS ALLOWED TO SIGN A WITHDRAWAL OF CLAIM INASMUCH AS MR. BREIGHNER HAD REFUNDED THE AMOUNT OF THE CHECK TO HIM.

3. THE CASE OF LEWIS SAULESBURY RELATES TO CHECK NO. 7612691, DATED SEPTEMBER 17, 1936, FOR $30.25, DRAWN ON THE TREASURER OF THE UNITED STATES THROUGH THE FEDERAL RESERVE BANK OF PHILADELPHIA BY L. V. WITCOMBE, SYMBOL 70-01-30, WHICH WAS NEGOTIATED UPON THE ENDORSEMENT "LEWES SULBOBWRY.' IT APPEARS THAT, IN ACCORDANCE WITH YOUR PROCEDURE IN HANDLING GROUP 2 CASES, YOU ADDRESSED A LETTER DATED MARCH 3, 1937, TO THE NATIONAL BANK OF COATESVILLE, COATESVILLE, PENNSYLVANIA, REQUESTING THAT THE AMOUNT OF THE CHECK BE FORWARDED TO YOUR OFFICE BY CHECK, DRAFT, OR MONEY ORDER, MADE PAYABLE TO "THE UNITED STATES," IN ORDER THAT PROPER SETTLEMENT MIGHT BE MADE WITH THE PAYEE. ON DECEMBER 1, 1937, YOU CHARGED THE AMOUNT OF THE CHECK TO THE TREASURER'S ACCOUNT, APPARENTLY FOR THE REASON THAT THE BANK HAD MADE NO RESPONSE TO YOUR REQUEST. THE TREASURER REQUESTED REFUND THROUGHT THE FEDERAL RESERVE BANK OF PHILADELPHIA ON DECEMBER 9, 1937, AND ON DECEMBER 15, 1937, REFERRED THE CASE TO THE SECRET SERVICE DIVISION FOR INVESTIGATION. THE TREASURER'S ACCOUNT WAS CREDITED ON DECEMBER 14, 1937. ON APRIL 4, 1938, SECRET SERVICE AGENT BLASS REPORTED THAT IT HAD BEEN ESTABLISHED THAT "* * * SUBJECT CHECK WAS RECEIVED AND NEGOTIATED BY PAYEE'S SON, OLIVER SAULESBURY, AND THAT HIS CLAIM WAS NOT MADE WITH INTENT TO DEFRAUD. A WAIVER OF CLAIM PROPERLY EXECUTED IN DUPLICATE BY THE PAYEE IS ATTACHED.' THE CHECK AND FILE WERE THEREFORE RETURNED TO YOU WITH THE REQUEST FOR ADVICE AS TO THE DISPOSITION OF THE AMOUNT RECOVERED. YOUR LETTER DATED MAY 24, 1938 (MISC -F 0622428-MEW), STATED THAT SUCH AMOUNT SHOULD BE RETURNED TO THE ENDORSERS FROM WHOM RECOVERY WAS MADE.

4. THE CASE OF BASIL BARKOWSKY INVOLVES CHECK NO. 13605357, DATED AUGUST 27, 1937, FOR $30.25, DRAWN ON THE TREASURER OF THE UNITED STATES THROUGH THE FEDERAL RESERVE BANK OF PHILADELPHIA BY L. V. WITCOMBE,SYMBOL 70-01- 30, WHICH WAS CASHED ON THE ENDORSEMENT OF "BASIL BARKUSK.' ON SEPTEMBER 24, 1937, THE FEDERAL RESERVE BANK OF PHILADELPHIA TRANSMITTED THE CHECK WITH ADVICE THAT PAYMENT HAD BEEN DECLINED, UPON ADVICE FROM THE DRAWER THAT NONRECEIPT HAS BEEN REPORTED. THE MATTER WAS REFERRED TO THE SECRET SERVICE DIVISION ON OCTOBER 14, 1937, A REPORT OF WHICH WAS SUBMITTED ON DECEMBER 9, 1937, STATING THAT THE PAYEE HAD BEEN FOUND GUILTY OF MAKING A FALSE CLAIM FOR A DUPLICATE CHECK AND HAD BEEN SENTENCED TO ONE YEAR SUSPENDED, AND ONE YEAR PROBATION, AND ORDERED TO WITHDRAW HIS CLAIM FOR A DUPLICATE CHECK.

IT IS SUBMITTED THAT A PROCEDURE WHICH PERMITS THE GOVERNMENT TO REQUEST REFUND DIRECTLY FROM THE BANKS UPON THE PAYEE'S CLAIM OF NONRECEIPT AND TO MAKE SETTLEMENT WITH THE PAYEE WHEN RECOVERY IS EFFECTED WITHOUT AN INVESTIGATION OF THE MERITS OF THE PAYEE'S CLAIM, DOES NOT ADEQUATELY PROTECT THE INTERESTS OF ALL PARTIES CONCERNED.

IT WILL BE NOTED THAT WHILE ALL OF THE FOREGOING CASES INVOLVE CHECKS "WHERE THE NAME ENDORSED ON THE CHECK IS NOT THE PAYEE'S NAME SHOWN ON THE FACE OF THE CHECK," THE INVESTIGATION OF THE FIRST TWO CASES CITED SHOWED THAT THE CHECKS BORE FORGED ENDORSEMENTS; THE INVESTIGATION OF THE PAYEE'S FAMILY, A CIRCUMSTANCE WHICH WOULD HAVE RESULTED IN A DUPLICATE PAYMENT TO THE PAYEE OR TO HIS FAMILY IF YOUR PROCEDURE IN HANDLING GROUP 2 CASES HAD BEEN FOLLOWED; AND THE INVESTIGATION OF THE FOURTH CASE REVEALED THAT A FALSE CLAIM HAD BEEN MADE. WITHOUT THE INVESTIGATION, THE RESULT WOULD HAVE BEEN FAILURE TO PUNISH THE CRIMINAL AS WELL AS A DOUBLE PAYMENT TO HIM. IT IS FELT THAT THESE CASES ARE TYPICAL GROUP 2 CASES AND THEY HAVE BEEN BROUGHT TO YOUR ATTENTION WITH THE HOPE THAT YOU WILL FIND IT DESIRABLE TO GIVE FURTHER CONSIDERATION TO THE MATTER OF AMENDING YOUR PROCEDURE WITH REGARD TO CHECKS FALLING WITHIN THIS CLASS AND, AS WAS STATED IN TREASURY LETTER OF APRIL 2,

"* * * WILL ADOPT FOR ALL SUCH CLAIMS OF PAYEES THE UNIFORM PROCEDURE OF OBTAINING REPORTS OF INVESTIGATION OF ANY ALLEGED FORGERY; ALSO, THAT YOU WILL GIVE PROMPT NOTICE TO THE INTERESTED ENDORSERS; AND, WHEN IT IS FOUND APPROPRIATE TO REQUEST REIMBURSEMENT FROM THE ENDORSERS, WILL SEND YOUR FINDINGS DIRECT TO THE TREASURER OF THE UNITED STATES FOR RECOVERY * * *"

WHILE THE PRACTICE OF RECOVERING THE AMOUNT FROM THE ENDORSERS AND MAKING SETTLEMENT WITH THE PAYEE ON THE BASIS OF HIS AFFIDAVIT MAY APPEAR ECONOMICAL, IT PROVIDES NO PROTECTION FROM THE FREE NEGOTIABILITY OF THE GOVERNMENT CHECK OR FOR THE PUNISHMENT OF THE FORGER AND IT IS NOT IN THE INTEREST OF ALL PARTIES CONCERNED.

THERE ARE HEREWITH ENCLOSED COPIES OF RELEVENT PAPERS.

THIS OFFICE HAS NO RECORD OF THE VALENTINE AND BARKOWSKY CASES. APPARENTLY THE CLAIMS IN SAID CASES ORIGINATED IN THE TREASURY DEPARTMENT. AS TO THE BARTON CASE, THERE IS NO RECORD OF ANY CLAIM HAVING BEEN FILED IN THIS OFFICE--- THE ONLY PAPER ON FILE IN THIS CASE BEING A REPORT DATED MARCH 31, 1938, FROM THE TREASURER OF THE UNITED STATES, ADVISING THIS OFFICE THAT HE HAD REVERSED RECLAMATION PROCEEDINGS, THUS INDICATING THAT THE MATTER IN THIS CASE LIKEWISE ORIGINATED IN THE TREASURY DEPARTMENT. FROM THE DESCRIPTION OF THESE CASES, GIVEN IN THE CITED LETTER, THE SAID CASES WOULD NOT HAVE BEEN PROPERLY FOR CONSIDERING AS GROUP 2 CASES. GROUP 2 CASES CONTEMPLATE THOSE CHECKS WHICH ARE INDORSED AND DEPOSITED IN THE NAME OF A PERSON ENTIRELY DIFFERENT FROM THAT SHOWN ON THE FACE OF THE CHECK, AND DO NOT CONTEMPLATE THOSE INVOLVING MINOR DISCREPANCIES IN THE SPELLING OF THE INDORSED PAYEE'S NAME, FOR IN SUCH CASES THERE MAY BE SAID TO APPEAR AN ATTEMPT TO WRITE THE PAYEE'S NAME AND, AS SUCH, PROPERLY FOR TREATING AS A GROUP 1 CASE. GENERALLY GROUP 2 CASES RESULT FROM AN ERRONEOUS DELIVERY AND INADVERTENT ACCEPTANCE BY THE DEPOSITOR WITH NO INTENTION MANIFESTED OF FORGING THE NAME OF THE PAYEE. AS TO SUCH CASES IT IS NOT UNDERSTOOD HOW A SECRET SERVICE INVESTIGATION WOULD SERVE ANY USEFUL PURPOSE, AND IT IS WITH RESPECT TO SUCH CASES THAT EXPERIENCE HAS SHOWN RECOVERY AS PROMPT AND EFFICIENT ALMOST WITHOUT EXCEPTION, BY MEANS OF A SINGLE DEMAND LETTER UPON THE INVOLVED BANK.

THE SAULESBURY CASE INVOLVED A SLIGHT DIFFERENCE IN THE SPELLING CONTEMPLATED TO BE COVERED UNDER GROUP 2 AS ABOVE DESCRIBED THE CASE WAS NOT ONE PROPERLY FOR HANDLING AS A GROUP 2 CASE. THIS OFFICE REGRETS THE IMPROPER TREATING OF THAT CASE AS A GROUP 2 CASE RATHER THAN AS A GROUP 1 CASE. NOTWITHSTANDING THE PROCEDURE HERETOFORE PURSUED IN SO-CALLED "GROUP 2" CASES--- WHICH PROCEDURE HAS NOT, TO MY KNOWLEDGE, RESULTED IN ANY LOSS TO THE GOVERNMENT THROUGH PAYMENT OF THE RECOVERED MONEYS TO PERSONS NOT ENTITLED--- I HAVE GIVEN MUCH CONSIDERATION TO THE POINTS STRESSED IN YOUR LETTER THAT THE INTERESTS OF ALL PARTIES CONCERNED SHOULD BE PROTECTED TO THE MAXIMUM DEGREE POSSIBLE. THE MATTER OF THE LEGAL SUFFICIENCY OF AN INDORSEMENT ON A GOVERNMENT CHECK IS, OF COURSE, PRIMARILY FOR THE CONSIDERATION OF THE TREASURER OF THE UNITED STATES IN VIEW OF WHICH IT APPEARS PROPER TO REFER TO THE TREASURER FOR COLLECTION ALL CASES IN WHICH IT IS FOUND UPON INVESTIGATION THAT REIMBURSEMENT FROM THE INDORSERS SHOULD BE HAD BECAUSE OF IRREGULARITIES IN THE NEGOTIATION OF PARTICULAR CHECKS.

YOU ARE ADVISED, THEREFORE, THAT THE PROCEDURE HERETOFORE FOLLOWED IN CASES FORMERLY CLASSED AS GROUP 2 CASES WILL NO LONGER BE FOLLOWED, AND THAT HEREAFTER IN ALL CHECK CASES IN WHICH FORGERY IS ALLEGED THE PROCEDURE WILL BE AS FOLLOWS:

(1)REPORTS OF INVESTIGATIONS WILL BE REQUESTED.

(2) PROMPT NOTICE WILL BE GIVEN THE INTERESTED INDORSERS, WITHOUT DEMANDING REMITTANCE, AND THE TREASURER OF THE UNITED STATES WILL ALSO BE ADVISED.

(3) IF, UPON INVESTIGATION, IT IS FOUND THAT REIMBURSEMENT SHOULD BE OBTAINED FROM THE INDORSERS, THE MATTER WILL BE REFERRED TO THE TREASURER OF THE UNITED STATES FOR RECOVERY OF THE AMOUNTS INVOLVED THROUGH THE USUAL RECLAMATION PROCEEDINGS INSTITUTED IN FORGERY CASES.