B-242444, Jul 8, 1991, Office of General Counsel

B-242444: Jul 8, 1991

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Army finance officer and his cashier are relieved of liability under 31 U.S.C. Which were followed by the cashier. Were adequate. The loss was the result of criminal activity beyond the control of either the officer or cashier. If other cashiers were involved then relief should also be requested for them for the amounts they cashed. The checks were cashed by a service member purporting to be Private Denny W. Choate and were later returned to the finance office by the bank because of insufficient funds. It was discovered that the checks had been fraudulently negotiated by Private Tyler A. Private Kosmoski was tried and convicted by General Court Martial for the fraud. Major Walker was the disbursing officer officially responsible for the account.

B-242444, Jul 8, 1991, Office of General Counsel

APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Cashiers - Relief - Illegal/improper payments - Fraud APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Disbursing officers - Relief - Illegal/improper payments - Fraud DIGEST: U.S. Army finance officer and his cashier are relieved of liability under 31 U.S.C. Sec. 3527(c) for improper payments made when cashing fraudulently endorsed personal checks for a service member. The officer's standard operating procedures for cashing personal checks, which were followed by the cashier, were adequate, although improvements could be made. The loss was the result of criminal activity beyond the control of either the officer or cashier. If other cashiers were involved then relief should also be requested for them for the amounts they cashed.

Colonel Garry D. Foster

Finance Corps Chief of Staff

U.S. Army Finance and Accounting Center

Attn: General Law Division

Re: Major C. R. Walker (DSSN 6369):

This letter responds to your request that we relieve Major C.R. Walker, Finance Officer, Disbursing Station Symbol Number (DSSN) 6369, 7th Finance Group, 3rd Finance Support Unit, APO New York, and his cashier, Gabriel Alfaro, under 31 U.S.C. Sec. 3527(c) (1988) from liability for improper payments totaling $5,080.00. For the reasons stated below, we grant relief to Major Walker for the full amount and to Cashier Alfaro for the checks he actually cashed.

According to your submission, the improper payments occurred between September 27, 1989 and October 4, 1989, when Major Walker's cashiers cashed three personal checks for $700.00 each and four for $745.00 each. The checks were cashed by a service member purporting to be Private Denny W. Choate and were later returned to the finance office by the bank because of insufficient funds. Subsequently, it was discovered that the checks had been fraudulently negotiated by Private Tyler A. Kosmoski after he obtained starter checks issued to a member of the same unit. Private Kosmoski had also obtained a military identification card belonging to Private Choate (apparently the picture of Choate resembled Kosmoski) and inscribed each blank starter check with Private Choate's name, social security number, unit name, address, money amount, and signature. November 8, 1989, Private Kosmoski was tried and convicted by General Court Martial for the fraud.

Major Walker was the disbursing officer officially responsible for the account, and both he and the cashiers who actually made the payments are liable for the amount of the loss. Under 31 U.S.C. Sec. 3527(c) (1988), this Office has the authority to relieve a disbursing official from liability when an improper payment was not the result of bad faith or lack of reasonable care by the official. The good faith and reasonable care of a supervisory disbursing official such as Major Walker is shown by evidence that the official implemented and maintained adequate procedures and controls to avoid errors and safeguard public funds. The good faith and reasonable care of the cashier who actually made the payment can be shown by evidence that the individual complied with established procedures and that nothing occurred which should have made that person suspicious of the fraud. B-239154, Nov. 30, 1990.

Major Walker maintained adequate standard operating procedures by requiring cashiers to ask for proper identification, to check that the soldier has at least 60 days left in service and that the soldier is not on the bad check list, among other procedures. These procedures were properly maintained in that Major Walker required his cashiers to become familiar with them and to follow any updates or special instructions. Cashier Gabriel Alfaro, who cashed at least one personal check for Private Kosmoski, stated that he followed these procedures and that "there was no doubt in his mind that the picture on the ID and the person he cashed the check for were one and the same." /1/

It is not clear from the record whether Cashier Alfaro handled all of the checks cashed by Private Kosmoski. In his statement, Alfaro refers to only one check, and there is some indication in the court martial transcript submitted with the record that a cashier other than Alfaro may have dealt with Kosmoski. If other cashiers were in fact involved in this deficiency, then relief should also be requested for them for the amounts they cashed, and information should be supplied as to whether they followed procedures. In the meantime, we are suspending the running of the statute of limitations under 31 U.S.C. Sec. 3526(g) (1988).

The improper payment here was the result of skillfully executed criminal activity beyond the control of either the cashier(s) or the finance officer and which even the most carefully established and effectively supervised system cannot entirely prevent. B-230118, Mar. 1, 1988. The file also indicates that collection action was initiated as we require under 31 U.S.C. Sec. 3527(c), which the Army should continue to pursue when possible. Consequently, relief is granted to Major Walker for the full amount and to Cashier Alfaro for amounts he actually cashed.

/1/ Although adequate check cashing procedures were followed we note that additional improvements can be made to the procedures submitted with the file. In a similar relief case, B-239154, November 30, 1990, a cashier letter of instruction from the Army's 11th Area Finance Support Center limited personal check cashing to $745 per day per account for all personnel. The procedure required that "the cashier will question any amount which seems excessive for the check writer (i.e. an E-1 writing a personal check for $745.00 2 or 3 days in a row)." In the present case it appears that Private Kosmoski cashed three starter checks-- one for $745.00, and two for $700, at different times during the same day at the finance office. He also cashed several more checks for similar amounts within a few days at the same office. Improved procedures such as those just mentioned could help avoid the fraudulent negotiation of checks for large amounts in a brief time span, especially considering the amount of time it apparently takes for a soldier's name to appear on the bad check list.