B-233804, April 6, 1989, 68 Comp.Gen. 371

B-233804, April 6, 1989, 68 Comp.Gen. 371

Appropriations/Financial Management - Accountable Officers - Cashiers Relief - Illegal/improper payments - Fraud Under the provisions of 31 U.S.C. Sec. 3527(c), we deny relief to a Veteran Administration cashier who accepted for deposit a fraudulently negotiated draft and who later permitted withdrawal from a patron's account amounts credited for these deposits. The cashier negligently failed to follow printed instructions to call the bank for an authorization number before cashing. Had the cashier followed the instructions, clearly printed on the draft, the cashier would not have accepted the drafts for deposit and permitted subsequent withdrawals of the supposed deposits.

Mr. Hoffman:

This responds to your request of November 28, 1988, that we relieve Keith Campbell, an agent cashier working for the Veterans Administration (VA), from liability under 31 U.S.C. Sec. 3527 (1982), for a loss of $3,950. For the reasons discussed below, we deny the requested relief.

On July 25, 1988, Robert C. Lamb, an inpatient at the Center, presented two "Greenback Money Drafts" for deposit into the Personal Funds of Patients account at the VA Medical Center (Center) in Louisville, Kentucky. The drafts were for $1,500 and $700. Mr. Campbell, the agent cashier for the account, has stated that he had seen these drafts before, and that he was aware of what they were. Because Mr. Campbell believed the drafts to be cashier's checks or money orders, he did not apply a 10 day credit deferral to the drafts. Instead, he immediately credited Mr. Lamb with $2,200 after Mr. Lamb endorsed the drafts and showed his driver's license to Mr. Campbell.

After depositing these drafts, Mr. Lamb proceeded over the next two days to withdraw from the account a total of $3,950. On July 25, he withdrew $100; on July 26, he withdrew $600. On July 27, Mr. Lamb presented for deposit another Greenback Money Draft for $1,800. Mr. Campbell treated this draft in the same fashion as the prior two drafts and credited Mr. Lamb's account with the draft amount. Later that day, Mr. Lamb requested withdrawal of $2,200 from the account. At first Mr. Campbell questioned Mr. Lamb about the withdrawal, but he gave Mr. Lamb the requested sum in twenty dollar bills. Still later the same day, Mr. Lamb withdrew an additional $1,050 in the same manner. Thus, as of July 27, Mr. Lamb had apparently deposited $4,000 into the account and had withdrawn $3,950.

The Center eventually discovered that Mr. Lamb had fraudulently negotiated the drafts he had submitted to Mr. Campbell. On August 15, 1988, the payee bank, NTS, returned the first of the three drafts. Someone at the Center called NTS and discovered that the draft had contained a false money transfer code and authorization number. On August 16, 1988, NTS informed the Center that all three of the drafts which Mr. Campbell deposited were invalid.

The Greenback Money Draft which Mr. Lamb negotiated is not a check at all. Instead, it is a type of bank draft used by NTS, Inc., as part of its specialized money transfer system. NTS provides blank drafts in public places throughout the United States. On the front of these drafts is printed the following: "Do not cash before calling. To obtain an Authorization Number, Call Toll Free: (the provided number)." Further, on the back of these drafts, where the payee's signature is required, is printed the following:

"IMPORTANT:

This check will not be honored without:

1. Valid Driver's License Information

2. Payee's Signature

3. NTS Authorization Number - You must call NTS before cashing." NTS includes the quoted language on their drafts because it requires approval of a draft by its authorization center, which determines whether the payor has sufficient funds in an NTS account, before NTS will honor the draft. Thus, while the NTS draft may appear to be similar to ordinary checks in some respects, its limited negotiability is denoted on the front and back.

Discussion

Under the facts presented, Mr. Campbell is an accountable officer, even though the trust account consists of VA patients' deposits rather than federal dollars. See B-125477, November 5, 1984. Therefore, Mr. Campbell is personally liable for any losses to the trust account resulting from erroneous payments unless relieved of liability under 31 U.S.C. Sec. 3527(c). This provision allows us to grant relief to accountable officers for deficiencies arising from illegal, improper, or erroneous payments, when we determine that the payment was not the result of bad faith or lack of reasonable care by the officer.

The facts as presented to us indicate that Mr. Campbell failed to use reasonable care in accepting the Greenback Money Drafts for deposit, and that this failure caused the loss to the trust account. Mr. Campbell failed to follow the instructions, printed on the draft's front as well as back, which directed Mr. Campbell to call for an authorization number and which warned that the draft was invalid without authorization. Having examined a copy of the draft, we conclude that a reasonable person in Mr. Campbell's position would have seen and heeded the clear language on the draft's face and back, and attempted to obtain or confirm authorization from NTS before crediting Mr. Lamb's account. Had Mr. Campbell done so, he would have immediately discovered Mr. Lamb's attempted fraud, and this would have prevented the subsequent erroneous payment of funds from the account to Mr. Lamb.

Thus Mr. Campbell's negligent acceptance of drafts for deposit and subsequent payments based on the resulting fictitious fund balances made the later payment an improper one. See, e.g., B-226911, October 19, 1987. /1/

/1/ We note your conclusion that Mr. Campbell's negligent failure to defer credit for the required 10-day waiting period was not the cause of the trust account's loss in this case. As your letter states, the VA was not able to discover that Mr. Lamb's drafts were invalid within this 10- day period. Given our conclusion, we did not address this issue.