A-92350, APRIL 6, 1938, 17 COMP. GEN. 820

A-92350: Apr 6, 1938

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ANOTHER STATUTE OF THE STATE PROVIDING THAT NO RIGHT TO ENFORCE PAYMENT AGAINST ANY PARTY TO AN INSTRUMENT IS ACQUIRED THROUGH OR UNDER A FORGED SIGNATURE. IS AS FOLLOWS: REFERENCE IS MADE TO THE FOLLOWING CHECKS DRAWN BY A. ARE RETURNED HEREWITH. ATTENTION IS INVITED TO LETTERS DATED DECEMBER 24 FROM THE FEDERAL RESERVE BANK OF MINNEAPOLIS AND THE ENCLOSURE DATED DECEMBER 22 FROM THE ATTORNEY FOR THE FIRST NATIONAL BANK AND TRUST COMPANY. IT IS REQUESTED THAT THIS OFFICE BE ADVISED WHETHER RECLAMATION PROCEEDINGS MAY BE ABANDONED. THERE IS ALSO TRANSMITTED CHECK NO. 19. WHICH CHECK WAS NEGOTIATED UNDER SIMILAR CIRCUMSTANCES AS THE ABOVE ITEMS. THE AMOUNT OF WHICH WAS OBTAINED FROM THE ENDORSERS THROUGH THE FEDERAL RESERVE BANK OF MINNEAPOLIS BY MEANS OF RECLAMATION PROCEEDINGS.

A-92350, APRIL 6, 1938, 17 COMP. GEN. 820

CHECKS - FORGERIES - RECLAMATION - EFFECT OF STATE STATUTES AND COLLECTION PROCEDURE RECLAMATION PROCEEDINGS ON GOVERNMENT CHECKS, ISSUED ON "PADDED" PAY ROLLS, TO PAYEES WHO HAD PERFORMED NO SERVICE, AND CASHED ON FORGED ENDORSEMENTS, MAY NOT BE ABANDONED BECAUSE OF CASHING BANK'S CLAIM THAT THE STATE STATUTE MADE THE CHECKS PAYABLE TO BEARER IN SUCH CIRCUMSTANCES, ANOTHER STATUTE OF THE STATE PROVIDING THAT NO RIGHT TO ENFORCE PAYMENT AGAINST ANY PARTY TO AN INSTRUMENT IS ACQUIRED THROUGH OR UNDER A FORGED SIGNATURE, AND THE CHECK HAVING BEEN PRESENTED BY THE BANK TO A FEDERAL RESERVE BANK FOR COLLECTION UNDER A COLLECTION CIRCULAR WHICH SPECIFICALLY RESERVED THE RIGHT OF THE FEDERAL RESERVE BANK TO CHARGE BACK TO ITS MEMBER BANKS THE AMOUNTS OF FORGED CHECKS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE TREASURER OF THE UNITED STATES, APRIL 5, 1938:

YOUR LETTER OF JANUARY 6, 1938, AWS-C, IS AS FOLLOWS:

REFERENCE IS MADE TO THE FOLLOWING CHECKS DRAWN BY A. A. COWLING:

TABLE

NUMBER DATE AMOUNT PAYEE SYMBOL DATE PAID 13113----- 7-21-36 $40.00 ROBERT GILLESPIE----- 57-04-30 7 30-36 11603----- 7- 7-36 40.00 EMIL HAYFIELD-------- 57-04-30 7-16-36 13115----- 7-21-36 40.00 WM. KERR------- ------ 57-04-30 7-30-36 16868----- 8-19-36 32.00 WILLIAM KERR--------- 57- 04-30 8-24-36 10783----- 6-26-36 32.00HOWARD KRUSE--------- 57-04-30 7- 1- 36 16869----- 8-19-36 40.00 HOWARD KRUSE--------- 57-04-30 8-24 36 13110-- ---7-21-36 55.00 HOWARD H. KRUSE------ 57-04-30 7-30 36 19575----- 9- 3-36 40.00 WALLACE RICHTMYER---- 57-04-30 9 10-36 19570----- 9- 3-36 44.00 ROBERT KINNEY-------- 57-04-30 9-10-36

THE FIRST EIGHT CHECKS AND FILES PERTAINING THERETO, RECEIVED WITH YOUR LETTERS OF DECEMBER 2, 1937, ARE RETURNED HEREWITH. ATTENTION IS INVITED TO LETTERS DATED DECEMBER 24 FROM THE FEDERAL RESERVE BANK OF MINNEAPOLIS AND THE ENCLOSURE DATED DECEMBER 22 FROM THE ATTORNEY FOR THE FIRST NATIONAL BANK AND TRUST COMPANY, HELENA, MONTANA, DENYING LIABILITY BECAUSE OF SECTION 8416 OF THE REVISED CODE OF MONTANA OF 1935.

IN VIEW OF THE ABOVE, AND OF THE CIRCUMSTANCES IN THE CASE, IT IS REQUESTED THAT THIS OFFICE BE ADVISED WHETHER RECLAMATION PROCEEDINGS MAY BE ABANDONED.

THERE IS ALSO TRANSMITTED CHECK NO. 19,570 AND FILE, WHICH CHECK WAS NEGOTIATED UNDER SIMILAR CIRCUMSTANCES AS THE ABOVE ITEMS, AND THE AMOUNT OF WHICH WAS OBTAINED FROM THE ENDORSERS THROUGH THE FEDERAL RESERVE BANK OF MINNEAPOLIS BY MEANS OF RECLAMATION PROCEEDINGS. IT IS REQUESTED THAT THIS OFFICE ALSO BE ADVISED WHETHER THE AMOUNT OF THIS CHECK MAY BE RETURNED TO THE ENDORSERS OR WHETHER IT SHOULD BE DEPOSITED TO THE APPROPRIATION INVOLVED.

KINDLY RETURN THE FILES WITH YOUR REPLY.

THE INVESTIGATION CONDUCTED BY THE DIVISION OF SECRET SERVICE, TREASURY DEPARTMENT, SHOWS THAT THE CHECKS WERE NEGOTIATED BY ARTHUR G. POUNSFORD, FORMER TIMEKEEPER FOR THE WORKS PROGRESS ADMINISTRATION AT TOWNSEND, MONT., WHO HAS BEEN CONVICTED OF ENDORSING AND CASHING THE TWO CHECKS DRAWN TO THE ORDER OF EMIL HAYFIELD AND ROBERT KINNEY. THE WORKS PROGRESS ADMINISTRATION HAS REPORTED THAT THE CHECKS ARE NOT DUE THE PAYEES INDICATED FOR THE REASON NO SERVICES WERE RENDERED AND THE CHECKS WERE DRAWN ON PADDED PAY ROLLS.

THE FILES RELATING TO THE FIRST EIGHT CHECKS LISTED WERE TRANSMITTED TO YOU ON DECEMBER 2, 1937, FOR THE PURPOSE OF INSTITUTING RECLAMATION PROCEEDINGS AGAINST THE ENDORSERS INASMUCH AS UNDER PARAGRAPH 34 (2) OF TREASURY CIRCULAR NO. 176, THE TREASURY RESERVED THE RIGHT TO CHARGE ANY PAID CHECK BACK TO THE REMITTING BANK UPON SUBSEQUENT DISCOVERY OF A FORGED INDORSEMENT AND FOR THE FURTHER REASON THAT THE ENDORSING BANKS' WARRANTIES AS TO THE GENUINENESS OF THE PAYEES' NAMES AS ENDORSED ON THE CHECKS HAVE FAILED.

ONE OF THE CASHING BANKS, THE FIRST NATIONAL BANK AND TRUST CO., HELENA, MONT., IS RESISTING THE RECLAMATION PROCEEDINGS, BASING ITS ACTION UPON THE PROVISIONS OF SUBSECTION 3 OF SECTION 8416, REVISED CODES OF MONTANA, 1935, WHICH PROVIDE:

8416. WHEN PAYABLE TO BEARER.--- THE INSTRUMENT IS PAYABLE TO BEARER:

3. WHEN IT IS PAYABLE TO THE ORDER OF A FICTITIOUS OR NONEXISTING OR LIVING PERSON NOT INTENDED TO HAVE ANY INTEREST IN IT, AND SUCH FACT WAS KNOWN TO THE PERSON MAKING IT SO PAYABLE, OR KNOWN TO HIS EMPLOYER OR OTHER AGENT WHO SUPPLIES THE NAME OF SUCH PAYEE.

IN THIS CONNECTION ATTENTION MAY BE INVITED TO SECTION 8430, REVISED CODES OF MONTANA, 1935, WHICH PROVIDES:

8430. FORGED SIGNATURE, EFFECT OF.--- WHEN A SIGNATURE IS FORGED OR MADE WITHOUT THE AUTHORITY OF THE PERSON WHOSE SIGNATURE IT PURPORTS TO BE, IT IS WHOLLY INOPERATIVE, AND NO RIGHT TO RETAIN THE INSTRUMENT, OR TO GIVE A DISCHARGE THEREFOR, OR TO ENFORCE PAYMENT THEREOF AGAINST ANY PARTY THERETO, CAN BE ACQUIRED THROUGH OR UNDER SUCH SIGNATURE, UNLESS THE PARTY AGAINST WHOM IT IS SOUGHT TO ENFORCE SUCH RIGHT IS PRECLUDED FROM SETTING UP THE FORGERY OR WANT OF AUTHORITY.

IN ANY EVENT IT HAS BEEN HELD THAT WHERE A CHECK DRAWN ON THE TREASURER OF THE UNITED STATES WAS PRESENTED BY A MEMBER BANK TO A FEDERAL RESERVE BANK FOR COLLECTION AND A YEAR LATER THE CHECK WAS RETURNED UNPAID BY THE TREASURER OF THE UNITED STATES BECAUSE OF FORGERY, THE FEDERAL RESERVE BANK MIGHT PROPERLY CHARGE BACK TO THE MEMBER BANK THE AMOUNT OF SUCH CHECK, PARTICULARLY IN VIEW OF THE FACT THAT THIS RIGHT WAS SPECIFICALLY RESERVED TO THE FEDERAL RESERVE BANK BY THE FEDERAL RESERVE BANK'S COLLECTION CIRCULAR ACCORDING TO THE TERMS OF WHICH COLLECTIONS WERE MADE. SEE CLOSTER NATIONAL BANK V. FEDERAL RESERVE BANK OF NEW YORK, 285 FED. 138, CERTIORARI DENIED, 261 U.S. 613.

THE FEDERAL RESERVE BANK OF MINNEAPOLIS APPEARS TO HAVE HANDLED THESE CHECKS UNDER ITS COLLECTION CIRCULAR NO. 382, PARAGRAPHS 3 AND 5, WHICH LIKEWISE SPECIFICALLY RESERVE THE RIGHT TO CHARGE BACK TO ITS MEMBER BANKS THE AMOUNT OF FORGED CHECKS.

IN SUCH CIRCUMSTANCES THE ENTIRE FILE IS HEREWITH RETURNED, AS REQUESTED, FOR COMPLETION OF THE RECLAMATION PROCEEDINGS AND THE TAKING OF SUCH OTHER ACTION AS MAY BE NECESSARY TO PROTECT THE INTERESTS OF THE UNITED STATES.

THE AMOUNT RECOVERED ON CHECK NO. 19,570, DRAWN TO THE ORDER OF ROBERT KINNEY AND HELD IN YOUR RECLAMATION SUSPENSE ACCOUNT SHOULD BE DEPOSITED TO THE CREDIT OF THE APPROPRIATION COUNT,"365027--- EMERGENCY RELIEF, WORKS PROGRESS ADMINISTRATION, NON-FEDERAL PROJECTS APPROVED PRIOR TO JUNE 22, 1936, 1936-37" OFFICIAL PROJECT NO. 65-91 697.