A-78849, MAY 11, 1937, 16 COMP. GEN. 996

A-78849: May 11, 1937

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UPON LEAVING A HOTEL AT WHICH HE WAS STAYING WHILE WORKING IN THE VICINITY. A LOAN WAS OBTAINED ON THE SECURITY OF THE CERTIFICATE BY AN UNIDENTIFIED IMPOSTOR. IS AS FOLLOWS: REFERENCE IS MADE TO THE FOLLOWING DESCRIBED LOANS OBTAINED BY AN UNIDENTIFIED IMPOSTOR ON THE SECURITY OF ADJUSTED SERVICE CERTIFICATE NO. 2699783. THE SECRET SERVICE DIVISION OF THE UNITED STATES TREASURY WAS REQUESTED. SINCE THE INVESTIGATION DEVELOPED THE FACT THAT THE VETERAN WAS APPARENTLY NOT IMPLICATED IN THE ILLEGAL HYPOTHECATION OF THE ADJUSTED SERVICE SERVICE CERTIFICATE NO. 2699783. A 50 PERCENT LOAN OF $540.00 WAS GRANTED HIM BY THE REGIONAL OFFICE OF THIS ADMINISTRATION. WAS PAID BY CHECK NO. 1071048.

A-78849, MAY 11, 1937, 16 COMP. GEN. 996

VETERANS' ADMINISTRATION - ADJUSTED COMPENSATION - ERRONEOUS PAYMENTS - GOVERNMENT LIABILITY WHERE VETERAN CONTRIBUTIVELY NEGLIGENT WHERE A VETERAN, UPON LEAVING A HOTEL AT WHICH HE WAS STAYING WHILE WORKING IN THE VICINITY, LEFT HIS ADJUSTED SERVICE CERTIFICATE WITH THE PROPRIETOR FOR DEPOSITING IN THE SAFE AND FAILED TO RETURN THEREFOR, OR MAKE INQUIRY THERE ABOUT, UNTIL SEVERAL YEARS AFTER THE PROPRIETOR HAD SOLD THE HOTEL AND SAFE TO ANOTHER, AND A LOAN WAS OBTAINED ON THE SECURITY OF THE CERTIFICATE BY AN UNIDENTIFIED IMPOSTOR, THE AMOUNT OF SAID LOAN AS REDUCED BY GOVERNMENT ACCEPTANCE OF A COMPROMISE OFFER OF THE CASHING ENDORSER'S LIABILITY MUST REMAIN AS A CHARGE AGAINST THE CERTIFICATE, THE VETERAN'S FAILURE TO EXERCISE THE PROPER DEGREE OF CARE HAVING CONTRIBUTED TO THE FRAUDULENT LOAN.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, MAY 11, 1937:

YOUR LETTER OF MARCH 5, 1937, IS AS FOLLOWS:

REFERENCE IS MADE TO THE FOLLOWING DESCRIBED LOANS OBTAINED BY AN UNIDENTIFIED IMPOSTOR ON THE SECURITY OF ADJUSTED SERVICE CERTIFICATE NO. 2699783, ISSUED IN FAVOR OF WALTER F. BACKHAUS, A-3640505.

TABLE

CHECK NO.

DATE (VOUCHER NO.) AMOUNT DISBURSING OFFICER SYMBOL 6-26-29 --- 18810

$100.00 RICHARD H. ZOHM ------- 99216 3-23-31 --- 56513 434.00 RICHARD H. ZOHM ------- 99216

ON SEPTEMBER 18, 1931, THE VETERAN SUBMITTED AN AFFIDAVIT IN WHICH HE DECLARED THAT HE HAD NOT SIGNED THE NOTES (FORM 1185) COVERING THESE LOANS, AND HAD NOT RECEIVED OR NEGOTIATED THE CHECKS ISSUED IN PAYMENT THEREOF. THE SECRET SERVICE DIVISION OF THE UNITED STATES TREASURY WAS REQUESTED, UNDER DATE OF OCTOBER 13, 1931, TO DETERMINE THE IDENTITY OF THE FORGER AND TO REPORT THE RESULTS OF ITS INVESTIGATION. SINCE THE INVESTIGATION DEVELOPED THE FACT THAT THE VETERAN WAS APPARENTLY NOT IMPLICATED IN THE ILLEGAL HYPOTHECATION OF THE ADJUSTED SERVICE SERVICE CERTIFICATE NO. 2699783, A 50 PERCENT LOAN OF $540.00 WAS GRANTED HIM BY THE REGIONAL OFFICE OF THIS ADMINISTRATION, WASHINGTON, D.C., UNDER DATE OF DECEMBER 17, 1932, AND WAS PAID BY CHECK NO. 1071048, DRAWN BY J. B. SCHOMMER, SYMBOL NO. 89826.

RECORDS SHOW THAT THE AMOUNT OF THE LOAN OF $100.00, PAID BY CHECK NO. 18810, WAS RECOVERED FROM THE ENDORSERS OF THE CHECK AND WAS DEPOSITED TO THE UNITED STATES GOVERNMENT LIFE INSURANCE FUND, UNDER DATE OF JUNE 14, 1933, UNDER CERTIFICATE OF DEPOSIT NO. 450. THIS LOAN WAS ACCORDINGLY REMOVED AS A CHARGE AGAINST THE VETERAN'S CERTIFICATE. IN A LETTER OF JUNE 24, 1933, THE ASSISTANT TREASURER OF THE UNITED STATES ADVISED THAT THE ENDORSERS OF CHECK NO. 56513 HAD REFUSED TO REFUND THE AMOUNT OF THE LOSS SUSTAINED BY THE UNITED STATES, AND THAT THIS PHASE OF THE MATTER HAD BEEN SUBMITTED TO THE SOLICITOR, TREASURY DEPARTMENT, WASHINGTON, D.C. THE VETERANS' ADMINISTRATION WAS FURTHER ADVISED, UNDER DATE OF JANUARY 9, 1937, THAT THE ATTORNEY GENERAL HAD ACCEPTED AN OFFER OF $234.98 IN COMPROMISE OF THE LOSS SUSTAINED AS A RESULT OF THE FRAUDULENT NEGOTIATION OF CHECK NO. 56513. THE AMOUNT RECOVERED WAS DEPOSITED TO THE APPROPRIATION (0T873) ADJUSTED SERVICE CERTIFICATE FUND, VETERANS' ADMINISTRATION, BY CERTIFICATE OF DEPOSIT NO. 1983, DATED OCTOBER 15, 1936.

THE VETERAN HAS SUBMITTED AN APPLICATION (FORM 1701) FOR SETTLEMENT OF HIS ADJUSTED-SERVICE CERTIFICATE UNDER THE PROVISIONS OF THE ADJUSTED COMPENSATION PAYMENT ACT, 1936. IT IS, THEREFORE, REQUESTED THAT THE VETERANS ADMINISTRATION BE ADVISED WHETHER THE FULL AMOUNT OF $434.00 MAY BE REMOVED AS A CHARGE AGAINST ADJUSTED SERVICE CERTIFICATE NO. 2699783, PRIOR TO MAKING FINAL SETTLEMENT WITH THE VETERAN.

THE CIRCUMSTANCES SURROUNDING THE LOSS OF THE VETERANS' ADJUSTED SERVICE CERTIFICATE, RESULTING IN ITS ILLEGAL HYPOTHECATION BY AN IMPOSTOR WHOSE IDENTITY REMAINS UNKNOWN, ARE GIVEN IN THE FOLLOWING EXCERPTS TAKEN FROM THE REPORT DATED JUNE 11, 1932, OF AN INVESTIGATION MADE BY THE DIVISION OF SECRET SERVICE, TREASURY DEPARTMENT:

* * * MR. BACKHAUS STATED THAT, WHEN HE RECEIVED HIS ADJUSTED SERVICE CERTIFICATE AT KEWASKUM, HE WENT SHORTLY THEREAFTER, TO RANDOM LAKE, WIS., WHERE HE STAYED AT THE GLOBE HOTEL, THEN BEING CONDUCTED BY ONE JACOB GERHARDT. HE SAID HE WORKED AROUND THIS PART OF THE COUNTRY AS A WELL DRILLER, AND THAT, WHEN LEAVING GERHARDT'S PLACE, THE LATTER SAID HE COULD LEAVE HIS CERTIFICATE OF DISCHARGE AND ADJUSTED SERVICE CERTIFICATE AT HIS PLACE IN HIS SAFE, WHICH HE DID. HE SAID THAT ABOUT FOUR YEARS AGO GERHARDT MOVED TO PLYMOUTH, LATER TO ST. CLOUD, WIS., LATER GOING TO ELKHART LAKE, WHERE HE IS AT PRESENT ENGAGED IN THE BUTCHER BUSINESS.

IN JULY 1931, BACKHAUS STATED HE PROCEEDED TO ELKHART LAKE, AND ASKED JAKE GERHARDT FOR HIS CERTIFICATE AND DISCHARGE PAPERS AND THAT GERHARDT LOOKED FOR THEM, BUT HE WAS UNABLE TO FIND SAME, AND STATED THEY MUST HAVE BEEN BURNED UP WITH OTHER PAPERS WHICH HE HAD DESTROYED A FEW MONTHS PREVIOUS. ABOUT THREE WEEKS LATER, HE SAID HE CALLED AGAIN ON GERHARDT, BUT HE STATED AGAIN THAT HE HAD BEEN UNABLE TO FIND THESE PAPERS ON MAKING A FURTHER SEARCH, AND THAT THEY MUST HAVE BEEN DESTROYED BY FIRE.

* * * I PROCEEDED TO ELKHART LAKE AND INTERVIEWED THIS MAN (MR. GERHARDT) AND HE STATED THAT, WHEN LIVING IN RANDOM LAKE, WIS., WHERE HE ALSO CONDUCTED A SMALL HOTEL, WALTER F. BACKHAUS LEFT HIS ADJUSTED SERVICE CERTIFICATE AND DISCHARGE PAPERS IN A SAFE AT HIS PLACE, AND THAT HE, GERHARDT, LATER SOLD HIS HOTEL, TOGETHER WITH THE SAFE WHICH CONTAINED THE BACKHAUS PAPERS, TO ONE OSCAR LOEBLE, WHO NO LONGER LIVES AT RANDOM LAKE,

MR. GERHARDT SAID THE LAST TIME HE SAW THE PAPERS BELONGING TO BACKHAUS WAS ABOUT THE MIDDLE OF MAY 1931, IN ELKHART LAKE, WHEN HE GOT OUT THE ENVELOPE CONTAINING SAME, TOGETHER WITH OTHER PAPERS, SOME OF WHICH PAPERS HE DESTROYED, AND HE SAID HE WAS OF THE OPINION THAT THE BACKHAUS PAPERS WERE AMONG THOSE DESTROYED, AS HE HAD BEEN UNABLE TO FIND THEM. HE SAID HE PUT THE PAPERS WHICH HE WANTED TO DESTROY, IN A WASTE BASKET, AND SAME WERE LATER TAKEN TO THE STOVE AND BURNED UP. HE SAID THAT MR. BACKHAUS CAME TO HIM AT ELKHART LAKE AND MADE A REQUEST FOR HIS PAPERS, AND, WHEN HE STARTED TO LOOK FOR SAME, HE WAS UNABLE TO FIND THEM, AND NATURALLY FIGURES THAT THEY HAD BEEN DESTROYED BY MISTAKE WHEN HE BURNED THE OTHER PAPERS MENTIONED ABOVE. * * *

IN A SUBSEQUENT REPORT MADE BY THE OPERATIVE UNDER DATE OF JULY 7, 1932, IT IS DISCLOSED THAT OSCAR LOEBLE TOOK OVER THE GLOBE HOTEL AT RANDOM LAKE FROM JACOB GERHARDT IN JULY 1927.

IT THUS APPEARS THAT, UPON LEAVING THE GLOBE HOTEL TO TAKE UP HIS WORK AS A WELL DRILLER IN ANOTHER COMMUNITY, THE VETERAN LEFT HIS ADJUSTED SERVICE CERTIFICATE AND DISCHARGE PAPERS IN THE POSSESSION OF GERHARDT AND MADE NO FURTHER INQUIRY AS TO THEIR SAFETY UNTIL SEVERAL YEARS AFTER GERHARDT HAD CEASED TO BE PROPRIETOR OF THE HOTEL AND HAD BEEN MOVING FROM PLACE TO PLACE ABOUT THE COUNTRY.

IT CANNOT BE SAID THAT, UNDER SUCH CONDITIONS, THE LEAVING BY THE VETERAN OF HIS ADJUSTED-SERVICE CERTIFICATE AND CERTIFICATE OF DISCHARGE IN ANOTHER PERSON'S POSSESSION CONSTITUTED A PROPER DEGREE OF CARE ON THE PART OF THE VETERAN IN THE SAFEGUARDING OF SUCH VALUABLE PAPERS. SINCE THE LACK OF PROPER CARE IN THE SAFEGUARDING OF SUCH PAPERS CONTRIBUTED TO THE FRAUDULENT HYPOTHECATION OF HIS ADJUSTED SERVICE CERTIFICATE FOR THE LOAN OF $434, MADE ON MARCH 23, 1931, THE FULL AMOUNT OF THE LOAN MAY NOT, ON THE BASIS OF THE PRESENT RECORD, BE REMOVED AS A CHARGE AGAINST HIS CERTIFICATE--- IT BEING A WELL ESTABLISHED PRINCIPLE THAT, AS BETWEEN TWO INNOCENT PERSONS WHERE A LOSS MUST FALL, IT WILL FALL UPON THE ONE WHO MADE THE LOSS POSSIBLE. SEE 15 COMP. GEN. 692.

ACCORDINGLY, YOU ARE ADVISED THAT, IN THE SETTLEMENT OF THE VETERAN'S ADJUSTED SERVICE CERTIFICATE UNDER THE PROVISIONS OF THE ADJUSTED COMPENSATION PAYMENT ACT, 1936, THERE SHOULD BE WITHHELD AN AMOUNT SUFFICIENT TO COVER THAT PORTION OF THE GOVERNMENT'S LOSS, RESULTING FROM THE FRAUDULENT NEGOTIATION OF CHECK NO. 56513, DRAWN MARCH 23, 1931, THAT HAS NOT BEEN RECOVERED FROM THE INDORSING BANK--- SUCH AMOUNT BEING FOR CONSIDERATION AS A LIEN AGAINST THE ADJUSTED SERVICE CERTIFICATE WITHIN THE MEANING OF SECTION 7 OF THE ADJUSTED COMPENSATION PAYMENT ACT, 1936.