B-122552, FEB 7, 1955

B-122552, FEB 7, 1955

PRECIS-UNAVAILABLE

SECRETARY OF THE TREASURY:

REFERENCE IS MADE TO LETTER DATED JANUARY 11, 1955, AND ENCLOSURE, FROM THE FISCAL ASSISTANT SECRETARY, REQUESTING THAT THE SUSPENSION IN THE ACCOUNTS OF THE TREASURER OF THE UNITED STATES IN THE AMOUNT OF $10,000 BE REMOVED. THIS AMOUNT REPRESENTS THE VALUE OF TREASURY CHECK NO. 24,555,750 DATED MAY 11, 1954, DRAWN TO THE ORDER OF GEORGE E. SCOTT, WHICH WAS CASHED ON MAY 19, 1954, OVER THE COUNTER AT THE TREASURER'S CASH ROOM, UPON A FORGED ENDORSEMENT. THE CHECK REPRESENTS AN AWARD MADE BY THE VETERANS ADMINISTRATION.

IT IS STATED THAT ORDINARILY THE TREASURER WOULD NOT OBJECT TO THE SUSPENSION, AND IN THE EVENT THE ERRONEOUS PAYMENT PROVED UNCOLLECTIBLE, REQUEST WOULD BE MADE FOR RELIEF UNDER THE PROVISIONS OF THE ACT OF AUGUST 4, 1947, 31 U.S.C. 156. IT IS REPORTED, HOWEVER, THAT THERE ARE CIRCUMSTANCES IN THIS CASE WHICH RAISE A QUESTION AS TO WHETHER THE TREASURER'S ACCOUNT SHOULD BE SUSPENDED IN THE FIRST INSTANCE.

THE LETTER STATES THAT THE SCOTT VOUCHER, UPON WHICH THE AWARD WAS MADE, AND APPARENTLY OTHER PAPERS ASSOCIATED WITH THE TRANSACTION WERE FORGED BY OR AT THE DIRECTION OF A FORMER EMPLOYEE OF THE VETERANS ADMINISTRATION WHO GAINED ACCESS TO ITS FILES AFTER WORKING HOURS. THE GENUINE VOUCHER SHOWING THE APPROVAL OF THE AWARD TO SCOTT WAS ABSTRACTED FROM THE FILES AND A FRAUDULENT VOUCHER SUBSTITUTED THEREFOR. THE VOUCHER SHOWING THE AWARD TO SCOTT, ALONG WITH MANY OTHERS, WAS SCHEDULED ON A PRESCRIBED FORM AND FORWARDED TO THE CHIEF DISBURSING OFFICER WITH THE SCHEDULE WHICH WAS CERTIFIED BY A DULY AUTHORIZED CERTIFYING OFFICER OF THE VETERANS ADMINISTRATION. FROM THIS SCHEDULE THE CHECK IN QUESTION WAS PREPARED, ADDRESSED AND DELIVERED TO THE FORGER.

IT IS REPORTED THAT THE FORGER OF THE CHECK PRESENTED AT THE TREASURER'S CASH ROOM A VETERANS ADMINISTRATION EMPLOYEE PASS AND A NUMBER OF LETTERS ON VETERANS ADMINISTRATION LETTERHEAD ADDRESSED TO SCOTT AT THE SAME ADDRESS APPEARING ON THE CHECK. THE PRESENTER WAS REQUESTED TO EXPLAIN THE PURPOSE FOR WHICH A CHECK OF THIS AMOUNT WAS ISSUED TO HIM, WHICH WAS SATISFACTORILY DONE. HE ALSO WAS ASKED TO PLACE HIS THUMBPRINT ON THE CHECK, WHICH HE DID WITHOUT QUESTION.

THE FISCAL ASSISTANT SECRETARY STATES THAT IT IS THE BELIEF OF YOUR DEPARTMENT THAT THE PROXIMATE CAUSE OF THE LOSS RESTS WITH THE VETERANS ADMINISTRATION. FURTHER, HE CONTENDS THAT THE BURDEN OF OBTAINING RELIEF UNDER APPLICABLE LAWS SHOULD BE ASSUMED BY OFFICIALS OF THAT ADMINISTRATION, AND THAT THE SUSPENSION IN THE TREASURER'S ACCOUNT SHOULD BE REMOVED. ENCLOSED WITH THE LETTER FROM THE FISCAL ASSISTANT SECRETARY WAS A COPY OF LETTER FROM YOUR DEPARTMENT ADVISING THE VETERANS ADMINISTRATION OF YOUR REFUSAL TO REIMBURSE THE NATIONAL SERVICE LIFE INSURANCE FUND WITH THE AMOUNT OF THE CHECK.

IT HAS BEEN INFORMALLY ASCERTAINED THAT THE PERSON INVOLVED IN THE ENCASHMENT OF THE INSTANT CHECK SIMILARLY PROCURED THE ISSUANCE OF, AND FRAUDULENTLY NEGOTIATED, ANOTHER CHECK IN THE SAME MANNER AS DESCRIBED ABOVE. THIS CHECK WAS NEGOTIATED THROUGH THE RIGGS NATIONAL BANK, WHERE THE FORGER OPENED AN ACCOUNT IN THE AMOUNT OF THE CHECK AND LATER WITHDREW THE SUM. UPON DISCOVERY OF THE FACT OF THE FRAUDULENT NEGOTIATION OF THIS CHECK, DEMAND WAS MADE UPON THE RIGGS NATIONAL BANK, WHICH, APPARENTLY RECOGNIZING ITS LIABILITY IN THE MATTER, REFUNDED THE AMOUNT OF THE CHECK. IN THIS CONNECTION, SEE NATIONAL METROPOLITAN BANK V. UNITED STATES, 323 U.S. 454. THAT CASE INVOLVED THE PROCUREMENT AND ISSUANCE OF 144 GOVERNMENT CHECKS BY THE PREPARATION OF FICTITIOUS VOUCHERS, AND THE COURT, WHILE RECOGNIZING THE NEGLIGENCE ON THE PART OF THE GOVERNMENT IN PERMITTING THE PREPARATION OF SUCH VOUCHERS, APPLIED THE PRINCIPLE THAT THE BANK WAS LIABLE ON THE BASIS OF ITS GUARANTEE OF PRIOR ENDORSEMENTS.

THE CHECK IN THE INSTANT CASE WAS CASHED BY THE DRAWEE (TREASURER OF THE UNITED STATES), AND CONSEQUENTLY, THERE WAS NO INTERVENING GUARANTEE OF PRIOR ENDORSEMENTS BY A CASHING BANK. IN THIS TYPE OF CASE, THE COURTS HAVE BEEN INFLUENCED BY THE CONTRACT RELATIONSHIP EXISTING BETWEEN BANKS AND THEIR DEPOSITORS. SEE 9 C.J.S., BANKS AND BANKING, SECTION 356C(1). IN MIDLAND SAVINGS AND LOAN COMPANY V. TRADESMEN'S NATIONAL BANK OF OKLAHOMA CITY, 57 F. 2D 686, THE COURT HELD THAT, WHERE A BANK ACTUALLY PAYS A CHECK BEARING A FORGED ENDORSEMENT, SUCH PAYMENT DOES NOT DISCHARGE THE BANK'S OBLIGATION TO THE DRAWER. SEE, ALSO, NATIONAL METROPOLITAN BANK V. REALTY APPRAISAL AND TITLE COMPANY, 47 F. 2D 982. SIMILARLY, IT WOULD APPEAR THAT THE TREASURER OF THE UNITED STATES, AS THE DRAWEE OF GOVERNMENT CHECKS, MUST ASSUME THE SAME OBLIGATION WHEN CASHING A CHECK UPON A FORGED ENDORSEMENT, AND THIS WOULD BE SO UNLESS THE PAYMENT THEREOF COULD BE JUSTIFIED UPON THE BASIS OF AN ESTOPPEL.

WHILE NO REPORT OF THE CIRCUMSTANCES WHICH PERMITTED THE FORGER TO PROCURE THE ISSUANCE AND DELIVERY OF THE CHECK TO HIM HAS BEEN OBTAINED FROM THE VETERANS ADMINISTRATION, IT MAY BE THAT AGENCY WAS NOT ENTIRELY FREE FROM FAULT IN THE MATTER. HOWEVER, IT DOES NOT APPEAR THAT THE FAILURE OF THE VETERANS ADMINISTRATION TO DISCOVER THE FORGED VOUCHER WAS THE PROXIMATE CAUSE OF THE LOSS INVOLVED. IT IS INDICATED THAT THE FORGER WAS ABLE TO IDENTIFY HIMSELF AS THE PAYEE OF THE CHECK BY AN EMPLOYEE PASS, AMONG OTHER THINGS. HOWEVER, THE RECORD DOES NOT SHOW THAT ANY CHECK WAS MADE WITH THE VETERANS ADMINISTRATION CONCERNING THE EMPLOYMENT OR PAST EMPLOYMENT OF THE PRESENTER BY THAT AGENCY, WHICH PRECAUTION WOULD NOT SEEM UNREASONABLE IN VIEW OF THE AMOUNT OF THE CHECK. A VERIFICATION OF THIS FACT SHOULD HAVE REVEALED CIRCUMSTANCES WHICH WOULD HAVE PUT THE TREASURER'S OFFICE ON NOTICE OF A POSSIBLE DEFECT IN THE PRESENTER'S ENTITLEMENT TO THE CHECK.

IN VIEW OF THE ABOVE, AND OF THE OBLIGATION UNDER THE LAW ATTENDANT UPON THE PAYMENT BY A DRAWEE OF A CHECK BEARING A FORGED ENDORSEMENT, IT WOULD APPEAR THAT THE PROXIMATE CAUSE OF THE LOSS MUST BE ATTRIBUTED TO THE TREASURER OF THE UNITED STATES. HOWEVER, THE CIRCUMSTANCES RELATED WOULD CONSTITUTE PROPER GROUNDS FOR CONSIDERATION OF RELIEF OF THE TREASURER UNDER THE PROVISIONS OF THE ACT OF AUGUST 4, 1947, 31 U.S.C. 156. AS SOON AS THE UNCOLLECTIBLE AMOUNT OF THE ERRONEOUS PAYMENT CAN BE ASCERTAINED, THIS OFFICE WILL GIVE PROPER CONSIDERATION TO A REQUEST FOR RELIEF OF THE TREASURER OF THE AMOUNT INVOLVED UNDER THE PROVISIONS OF THE AFOREMENTIONED ACT.