A-80621, OCTOBER 5, 1936, 16 COMP. GEN. 334

A-80621: Oct 5, 1936

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THE ADMINISTRATIVE PRACTICE THEN IN FORCE IN SUCH CASES OF RETURNING THE BOND OF INDEMNITY TO THE VETERAN WITH REQUEST THAT HE INFORM THE BONDING COMPANY THAT THERE WAS NO FURTHER LIABILITY THEREUNDER DID NOT EXTINGUISH SUCH LIABILITY IN THE PRESENT CASE WHERE BOTH THE VETERAN AND THE BONDING COMPANY DISCLAIM RECEIPT OF THE BOND PURPORTED TO HAVE BEEN RETURNED. IS LIABLE TO THE UNITED STATES FOR THE LOSS SUSTAINED BY IT ON ACCOUNT OF THE ISSUANCE OF THE ORIGINAL ADJUSTED SERVICE CERTIFICATE. AS FOLLOWS: REFERENCE IS MADE TO THE ORIGINAL AND DUPLICATE ADJUSTED SERVICE CERTIFICATES ISSUED TO THE ABOVE NAMED VETERAN. WAS ISSUED AND FORWARDED TO THE ABOVE NAMED VETERAN. UPON SUBMISSION OF A BOND OF INDEMNITY UPON WHICH THE VETERAN WAS NAMED AS PRINCIPAL AND THE MASSACHUSETTS BONDING AND INSURANCE COMPANY AS SURETY.

A-80621, OCTOBER 5, 1936, 16 COMP. GEN. 334

BONDS OF INDEMNITY - LIABILITY OF BONDING COMPANY WHERE A VETERAN EXECUTED A BOND OF INDEMNITY TO SECURE THE ISSUANCE OF A DUPLICATE OF HIS ADJUSTED SERVICE CERTIFICATE, THE ORIGINAL OF WHICH APPARENTLY HAD BEEN STOLEN, AND IT LATER DEVELOPED THAT THE ORIGINAL CERTIFICATE HAD BEEN HYPOTHECATED BY AN IMPOSTOR FOR A LOAN, THE ADMINISTRATIVE PRACTICE THEN IN FORCE IN SUCH CASES OF RETURNING THE BOND OF INDEMNITY TO THE VETERAN WITH REQUEST THAT HE INFORM THE BONDING COMPANY THAT THERE WAS NO FURTHER LIABILITY THEREUNDER DID NOT EXTINGUISH SUCH LIABILITY IN THE PRESENT CASE WHERE BOTH THE VETERAN AND THE BONDING COMPANY DISCLAIM RECEIPT OF THE BOND PURPORTED TO HAVE BEEN RETURNED; AND THE BONDING COMPANY, HAVING RETAINED THE PREMIUM PAID FOR THE ISSUANCE OF THE BOND, IS LIABLE TO THE UNITED STATES FOR THE LOSS SUSTAINED BY IT ON ACCOUNT OF THE ISSUANCE OF THE ORIGINAL ADJUSTED SERVICE CERTIFICATE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, OCTOBER 5, 1936:

CONSIDERATION HAS BEEN GIVEN THE MATTER PRESENTED BY YOUR LETTER OF SEPTEMBER 15, 1936 (DBC-H) RELATIVE TO THE WORLD WAR ADJUSTED COMPENSATION CASE OF THOMAS B. MAW, A-3975208, AS FOLLOWS:

REFERENCE IS MADE TO THE ORIGINAL AND DUPLICATE ADJUSTED SERVICE CERTIFICATES ISSUED TO THE ABOVE NAMED VETERAN.

ORIGINAL ADJUSTED SERVICE CERTIFICATE NO. 3171888 IN THE AMOUNT OF $1,557.00, DATED FEBRUARY 1, 1927, WAS ISSUED AND FORWARDED TO THE ABOVE NAMED VETERAN. ON DECEMBER 14, 1931, THE VETERAN SUBMITTED AN AFFIDAVIT REPORTING THE LOSS OF HIS ADJUSTED SERVICE CERTIFICATE, STATING THAT THE BUILDING IN WHICH THE CERTIFICATE HAD BEEN KEPT HAD BEEN BURGLARIZED UPON THREE DIFFERENT OCCASIONS. UPON SUBMISSION OF A BOND OF INDEMNITY UPON WHICH THE VETERAN WAS NAMED AS PRINCIPAL AND THE MASSACHUSETTS BONDING AND INSURANCE COMPANY AS SURETY, A DUPLICATE CERTIFICATE NO. 3826913 WAS ISSUED. BOTH THE ORIGINAL AND DUPLICATE CERTIFICATES WERE DEPOSITED WITH THE BOSTON, MASSACHUSETTS, REGIONAL OFFICE OF THIS ADMINISTRATION AS SECURITY FOR 50 PERCENT LOANS OF $778.50 EACH.

AN INVESTIGATION BY THE SECRET SERVICE DIVISION, TREASURY DEPARTMENT, REVEALS THAT THE VETERAN HAD NEVER SEEN THE ORIGINAL ADJUSTED SERVICE CERTIFICATE, AS IT HAD BEEN RECEIVED BY HIS WIFE, WHO PUT IT AWAY WITH OTHER IMPORTANT PAPERS. MRS. MAW AT A LATER DATE DEPOSITED SOME PAPERS IN A STRONG BOX AT THE HOME OF HER MOTHER AND SHE EXPRESSED THE BELIEF THAT THE ADJUSTED SERVICE CERTIFICATE WAS AMONG THEM. THESE PAPERS PROVED TO BE MISSING, AND AT THE TIME THE LOSS WAS DISCOVERED THE JANITOR OF THE APARTMENT BUILDING, WHO WAS BELIEVED TO HAVE POSSIBLY BEEN CONCERNED IN A NUMBER OF ROBBERIES IN THE BUILDING, WAS DISMISSED. THE NAME OF THE JANITOR WAS GIVEN AS THOMAS HIBBARD.

SUBSEQUENT INVESTIGATION REVEALED THAT THE LOAN OF $778.50 GRANTED ON THE VETERAN'S CERTIFICATE ON JUNE 8, 1931, AND PAID BY CHECK NO. 141373, DISBURSING OFFICER H. H. BARRACLOUGH, SYMBOL NO. 99106, WAS NEGOTIATED BY ANOTHER VETERAN, FREEMAN F. HIBBARD, A-3048670, WHO HAD ALSO HYPOTHECATED THE ADJUSTED SERVICE CERTIFICATE OF DAVID CEDAR, A 4122444. MR. CEDAR HAD ALSO BEEN A RESIDENT IN AN APARTMENT BUILDING FOR WHICH THE ALLEGED THOMAS HIBBARD HAD ACTED AS JANITOR.

IN ACCORDANCE WITH THE PROCEDURE BEING FOLLOWED AT THAT TIME, THE DUPLICATE CERTIFICATE WAS FORWARDED TO THE ACTUARIAL AND INSURANCE POLICY DIVISION OF THIS ADMINISTRATION ON JULY 6, 1932, FOR CANCELLATION, AND THE INDEMNITY BOND WAS RETURNED TO MR. MAW WITH A REQUEST THAT THE VETERAN INFORM THE BONDING COMPANY THAT THERE WAS NO FURTHER LIABILITY THEREUNDER.

ON APRIL 22, 1935, THE COMPTROLLER GENERAL OF THE UNITED STATES ISSUED A DECISION A-57361 IN THE CASE OF THOMAS E. MATHEWS, A-4052947 IN WHICH HE HELD, IN PART, THAT THE CONDITION OF THE FORM OF BOND OF INDEMNITY REQUIRED BY THIS ADMINISTRATION IS SUCH AS TO INDEMNIFY THE UNITED STATES GOVERNMENT AGAINST ANY LOSS ARISING OUT OF THE ISSUANCE OF THE ORIGINAL CERTIFICATE.

PRIOR TO THE RECEIPT OF THIS DECISION, IT HAD BEEN THE PRACTICE TO MAKE DEMAND ON THE BONDING COMPANY ONLY WHERE IT DEVELOPED THAT THE ORIGINAL AND DUPLICATE CERTIFICATES HAD BEEN HYPOTHECATED BY THE VETERAN AS LOAN COLLATERAL, IT HAVING BEEN HELD THAT WHERE THE ORIGINAL CERTIFICATE HAD BEEN HYPOTHECATED FOR LOANS BY AN IMPOSTOR, IT WOULD NOT CONSTITUTE A VALID, ADVERSE CLAIM FOR WHICH THE BONDING COMPANY COULD BE HELD LIABLE.

HOWEVER, EFFORTS TO RECOVER THE BOND OF INDEMNITY FROM THE BONDING COMPANY AND MR. MAW HAVE BEEN FUTILE, THE BONDING COMPANY STATING THAT IT HAD NO FURTHER KNOWLEDGE OF THE BOND AFTER IT WAS ISSUED AND FORWARDED TO WASHINGTON, AND MR. MAW SUBMITTING AN AFFIDAVIT DATED AUGUST 17, 1936, TO THE EFFECT THAT HE NEVER RECEIVED THE BOND SUPPOSEDLY RETURNED TO HIM.

RECOVERY FROM THE ENDORSERS OF THE CHECK ISSUED IN PAYMENT OF THE FRAUDULENT LOAN IS PENDING; HOWEVER, THREE DIVIDENDS OF $77.85 EACH HAVE BEEN RECEIVED FROM THE FEDERAL NATIONAL BANK, BOSTON, MASSACHUSETTS, THE CASHING BANK, WHICH FAILED EITHER PRIOR OR SUBSEQUENT TO THE INITIATION OF RECLAMATION PROCEEDINGS. THE REMAINING AMOUNT OF THE FRAUDULENT LOAN MAY NOT BE RECOVERED FROM THE IMPOSTOR, FREEMAN F. HIBBARD, AT THIS TIME, INASMUCH AS HE OBTAINED A 50 PERCENT, LOAN OF $399.50 ON MARCH 20, 1931, ON THE SECURITY OF HIS OWN CERTIFICATE, WHICH IS ONLY IN THE AMOUNT OF $799.00, AND HAS NOT SUBMITTED AN APPLICATION FOR SETTLEMENT THEREOF.

CONGRESSMAN JOHN W. MCCORMACK HAS EXPRESSED INTEREST IN THE CASE ON BEHALF OF THE VETERAN WHO HAS SUBMITTED AN APPLICATION FOR SETTLEMENT OF HIS ADJUSTED SERVICE CERTIFICATE UNDER THE PROVISIONS OF THE ADJUSTED COMPENSATION PAYMENT ACT, 1936. IT IS REQUESTED THAT SPECIAL CONSIDERATION BE GIVEN THIS CASE AND THAT THIS ADMINISTRATION BE AUTHORIZED TO MAKE FINAL SETTLEMENT WITH MR. MAW, WHO IS STATED TO BE IN SUCH GREAT NEED AS WOULD APPEAR TO WARRANT EXPEDITED ACTION.

WHILE IT HAS BEEN STATED THAT PRIOR TO RECEIPT OF DECISION A-57361, DATED APRIL 22, 1935, REPORTED IN 14 COMP. GEN. 770, THE ADMINISTRATIVE PRACTICE IN THIS CLASS OF CASES WAS TO RETURN THE INDEMNITY BOND TO THE VETERAN WHO FURNISHED IT TO SECURE THE ISSUANCE OF THE DUPLICATE ADJUSTED SERVICE CERTIFICATE WITH THE REQUEST THAT THE VETERAN INFORM THE BONDING COMPANY THAT THERE WAS NO FURTHER LIABILITY THEREUNDER, AS IS REPORTED TO HAVE BEEN DONE HERE, THE FACT REMAINS THAT BOTH THE VETERAN AND THE BONDING COMPANY IN THE INSTANT CASE HAVE DISCLAIMED THE RECEIPT OF THE BOND PURPORTED TO HAVE BEEN RETURNED. THUS, THE CONTEMPLATED ACTION IN RESPECT OF THE BOND HERE WAS NOT FULLY AND COMPLETELY CONSUMMATED, AND THE LIABILITY UNDER THE BOND WAS NOT EXTINGUISHED BY SUCH ACTION. THEREFORE, THE BONDING COMPANY HAVING RETAINED THE PREMIUM PAID FOR THE ISSUANCE OF THE BOND, AND THE GOVERNMENT HAVING SUSTAINED A LOSS ON ACCOUNT OF THE ISSUANCE OF THE ORIGINAL CERTIFICATE, THERE WOULD APPEAR A LIABILITY ON THE PART OF THE BONDING COMPANY UNDER THE BOND TO INDEMNIFY THE GOVERNMENT'S LOSS, AND ACTION SHOULD BE TAKEN THEREUNDER TO ENFORCE SUCH LIABILITY--- THE PROCEEDING TO BE AS IN THE CASE OF A LOST OR DESTROYED CONTRACT. THIS OFFICE SHOULD BE ADVISED PROMPTLY WHEN THE GOVERNMENT'S LOSS SHALL HAVE BEEN RECOVERED UNDER THE TERMS OF THE BOND.

IT APPEARING FROM THE FACTS STATED IN THE LETTER, SUPRA, AND, ALSO, FROM AN EXAMINATION OF THE CHECK RECLAMATION FILE THAT VETERAN MAW WAS IN NOWISE AT FAULT IN THE MATTER OF THE FRAUDULENT HYPOTHECATION OF HIS ORIGINAL ADJUSTED SERVICE CERTIFICATE BY AN IMPOSTOR FOR THE LOAN IN QUESTION HERE, YOU ARE AUTHORIZED TO REMOVE THE CHARGE MADE AGAINST HIS ADJUSTED-SERVICE CERTIFICATE ON ACCOUNT OF SAID FRAUDULENT LOAN AND TO MAKE FINAL SETTLEMENT OF HIS ADJUSTED-SERVICE CERTIFICATE ACCOUNT SUBJECT, OF COURSE, TO ALL VALID OUTSTANDING LIENS AGAINST SAID ACCOUNT.