B-957, FEBRUARY 3, 1939, 18 COMP. GEN. 639

B-957: Feb 3, 1939

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CLOSED" BANK IN AN EFFORT TO OBTAIN A LARGER PERCENTAGE LIQUIDATION OF THEIR CLAIMS THAN OTHERWISE POSSIBLE IS THE RESPONSIBILITY OF THAT OFFICER. 1939: THERE WAS RECEIVED YOUR LETTER OF JANUARY 25. THE DRAFT WAS DRAWN ON THE BANK OF NEW YORK AND TRUST COMPANY IN FAVOR OF THE TREASURER OF THE UNITED STATES OF AMERICA FOR THE PURPOSE OF TRANSMITTING CONSULAR FEES COLLECTED AT TAMPICO. THE BANCO DE TAMPICO WAS CLOSED BY THE MEXICAN BANKING COMMISSION AND IS NOT EXPECTED TO REOPEN. IT IS STATED THAT THE CREDITORS OF THE BANK BELIEVE A MORE EXPEDITIOUS AND SATISFACTORY SETTLEMENT MAY BE EFFECTED PRIVATELY THAN TO AWAIT LIQUIDATION PROCEEDINGS THROUGH THE COURTS WHICH WOULD ALLEGEDLY RESULT IN RECOVERY OF A SMALL PERCENTAGE OF THEIR CLAIM AND THEY ARE THEREFORE MAKING EVERY POSSIBLE EFFORT TO BRING ABOUT A PRIVATE LIQUIDATION.

B-957, FEBRUARY 3, 1939, 18 COMP. GEN. 639

TRANSMISSION OF PUBLIC FUNDS - BANK FAILURE - ACCOUNTABLE OFFICERS LIABILITY INVOLVING PRIVATE CREDITORS' LIQUIDATION NEGOTIATIONS AN OFFICER ACCOUNTABLE FOR GOVERNMENT FUNDS BEING RESPONSIBLE UNDER HIS BOND FOR THE SAFEKEEPING OF PUBLIC MONEYS COMING INTO HIS POSSESSION, AND THIS LIABILITY BEING UNAFFECTED BY LACK OF NEGLIGENCE WHEN LOSS OF FUNDS OCCURS AND EXCUSABLE FOR LOSSES DUE ONLY TO ACTS OF GOD OR THE PUBLIC ENEMY, THE MATTER OF A VICE CONSUL ENTERING INTO PRIVATE NEGOTIATIONS WITH OTHER CREDITORS OF A ,CLOSED" BANK IN AN EFFORT TO OBTAIN A LARGER PERCENTAGE LIQUIDATION OF THEIR CLAIMS THAN OTHERWISE POSSIBLE IS THE RESPONSIBILITY OF THAT OFFICER, AND FOR HIS DETERMINATION, AND NOT A MATTER FOR AUTHORIZATION BY THE GENERAL ACCOUNTING OFFICE, THE OFFICER BEING DIRECTLY RESPONSIBLE FOR ANY LOSS CAUSED BY THE DISHONORING OF THE DRAFT PURCHASED FROM THE "CLOSED" BANK IN THE TRANSMITTING TO THE TREASURY OF THE INVOLVED GOVERNMENT FUNDS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF STATE, FEBRUARY 3, 1939:

THERE WAS RECEIVED YOUR LETTER OF JANUARY 25, 1939, AS FOLLOWS:

JACK D. NEAL, AMERICAN VICE CONSUL, TAMPICO, MEXICO, HAS INFORMED THE DEPARTMENT THAT ON NOVEMBER 5, 1938, HE PURCHASED FROM THE BANCO DE TAMPICO, S.A., A BILL OF EXCHANGE NO. 35673 IN THE AMOUNT OF $229.50. THE DRAFT WAS DRAWN ON THE BANK OF NEW YORK AND TRUST COMPANY IN FAVOR OF THE TREASURER OF THE UNITED STATES OF AMERICA FOR THE PURPOSE OF TRANSMITTING CONSULAR FEES COLLECTED AT TAMPICO, FOR DEPOSIT IN THE TREASURY OF THE UNITED STATES. ON NOVEMBER 23, 1938, THE BANCO DE TAMPICO WAS CLOSED BY THE MEXICAN BANKING COMMISSION AND IS NOT EXPECTED TO REOPEN. THE BANK OF NEW YORK AND TRUST COMPANY REFUSED TO HONOR THE DRAFT FOR THE REASON "BANK REPORTED LOSED" AND RETURNED IT TO MR. NEAL.

A CLAIM FOR THE $229.50 HAS BEEN FILED WITH THE MEXICAN BANKING COMMISSION WHICH HAS TAKEN CHARGE OF THE ASSETS OF THE CLOSED BANK. IT IS STATED THAT THE CREDITORS OF THE BANK BELIEVE A MORE EXPEDITIOUS AND SATISFACTORY SETTLEMENT MAY BE EFFECTED PRIVATELY THAN TO AWAIT LIQUIDATION PROCEEDINGS THROUGH THE COURTS WHICH WOULD ALLEGEDLY RESULT IN RECOVERY OF A SMALL PERCENTAGE OF THEIR CLAIM AND THEY ARE THEREFORE MAKING EVERY POSSIBLE EFFORT TO BRING ABOUT A PRIVATE LIQUIDATION.

HOWEVER, IN ORDER TO KEEP THE NEGOTIATION OUT OF COURT A PRIVATE LIQUIDATION MUST GUARANTEE 60 PERCENT TO THE CREDITORS AND IT IS POSSIBLE IN THESE CIRCUMSTANCES THAT MR. NEAL MAY BE ASKED TO WAIVE 40 PERCENT OF HIS CLAIM IN ORDER TO ASSIST THE PRIVATE LIQUIDATION.

IT IS UNDERSTOOD, OF COURSE, THAT IN THE ABSENCE OF LEGAL AUTHORITY, EITHER EXPRESS OR IMPLIED, THAT NO PUBLIC OFFICIAL HAS A RIGHT TO COMPROMISE AN INDEBTEDNESS TO THE GOVERNMENT OF THE UNITED STATES. MR. NEAL IS HELD RESPONSIBLE UNDER HIS BOND AS VICE CONSUL FOR THE SAFEKEEPING OF PUBLIC MONIES COMING INTO HIS POSSESSION. HOWEVER, RECOVERY OF A PORTION OF THE LOSS SUSTAINED BY REASON OF HIS FORWARDING PUBLIC FUNDS TO THE TREASURER OF THE UNITED STATES BY MEANS OF A COMMERCIAL BILL OF EXCHANGE, WHICH IS THE COMMONLY RECOGNIZED METHOD OF TRANSMITTING FUNDS, AND IS IN ACCORDANCE WITH THE ACCOUNTING REGULATIONS PROMULGATED BY THE DEPARTMENT, IF RESORT BE HAD TO PRIVATE NEGOTIATIONS SEEMS PROBABLE. ACCORDINGLY, THE QUESTION ARISES WHETHER THE OBLIGATION IN THIS INSTANCE WILL BE ESTABLISHED AS PRIVATE OR PUBLIC AND WHETHER THE OFFICER WILL BE AUTHORIZED TO WAIVE THE 40 PERCENT SHOULD THE OCCASION DEMAND IN ORDER TO KEEP LIQUIDATION PROCEEDINGS OUT OF THE COURTS THEREBY SAVING 60 PERCENT AND PERHAPS MORE, OR WHETHER THERE IS NO ALTERNATIVE BUT TO ACCEPT FULL RESPONSIBILITY AND AWAIT SUCH SETTLEMENT OF THE CLAIM AS MAY BE OTHERWISE EFFECTED.

IN ORDER THAT THE VICE CONSUL MAY BE PROPERLY INSTRUCTED IN THE EVENTUALITY A WAIVER IS REQUESTED, AN EARLY DECISION ON THE POINTS INVOLVED WILL BE APPRECIATED.

YOU HAVE CORRECTLY STATED THE RULE THAT THE VICE CONSUL IS RESPONSIBLE UNDER HIS BOND FOR THE SAFEKEEPING OF PUBLIC MONEYS COMING INTO HIS POSSESSION. UNITED STATES V. MORGAN, 11 HOW. 154; BOYDEN V. UNITED STATES, 13 WALL. 17. AND THIS LIABILITY IS UNAFFECTED BY ANY LACK OF NEGLIGENCE ON THE PART OF THE OFFICER WHEN LOSS OF SUCH FUNDS OCCURS. UNITED STATES V. PRESCOTT, 3 HOW. 578; SMYTHE V. UNITED STATES, 188 U.S. 156. IT IS GENERALLY STATED THAT THE OFFICER IS AN INSURER OF THE PUBLIC FUNDS TURNED OVER TO HIM, AND IS EXCUSABLE FOR LOSSES DUE ONLY TO ACTS OF GOD OR THE PUBLIC ENEMY. UNITED STATES V. THOMAS, 15 WALL. 337. THIS RULE, WHICH IS DERIVED BOTH FROM THE COMPREHENSIVE REQUIREMENTS OF THE STATUTES (22 U.S.C. 99, 31 ID. 484, 495) AND FROM THE POSITIVE UNDERTAKINGS CONTAINED IN THE OFFICER'S BOND, HAS BEEN SPECIFICALLY APPLIED TO LOSSES DUE TO FAILURE OF BANKS WHERE, FOR EXAMPLE, FUNDS HAVE BEEN DEPOSITED. SEE THE CASES COLLECTED IN THE NOTES APPEARING AT 22 L.R.A. 449 AND 93 A.L.R. 819. IN NATIONAL SURETY CO. V. SALT LAKE COUNTY (C.C.A. 8TH, 1925), 5 FED./2D) 34, CERT.DEN., 269 U.S. 578, WHERE SUCH SITUATION OCCURRED UNDER THE UTAH LAW, IT WAS HELD THAT THE OFFICER'S DUTY TO THE STATE WAS TO MAKE DEPOSIT IN FULL, WHILE THE PRIMARY LIABILITY OF THE DEFUNCT BANK WAS TO THE OFFICER WHO MADE THE DEPOSIT. SEE ALSO 6 COMP. GEN. 404 AND A-50841, JULY 8, 1937, AND PARTICULARLY AS TO THE FOREIGN SERVICE OFFICERS, A-19312, AUGUST 5, 1927; A-29150, SEPTEMBER 5, 1933; AND A-43251, AUGUST 22, 1932.

AS APPLIED TO THE PRESENT MATTER, THE PRIMARY LIABILITY OF THE BANK OF TAMPICO, S.A., IS TO THE PRINCIPAL ACCOUNTING OFFICER OF THE CONSULATE AT TAMPICO, AND THE DIRECT RESPONSIBILITY FOR ANY LOSS CAUSED BY THE BANK'S FAILURE IS HIS, IN VIEW OF WHICH, ANY COMPROMISE OF HIS CLAIM UPON THE BANK IS HIS RESPONSIBILITY AND FOR HIS DETERMINATION. WHILE HE IS FREE TO BE GUIDED BY SUCH ADVICE AS YOU MAY CARE TO GIVE HIM, NEITHER SUCH ADVICE NOR ANY ACTION WHICH THIS OFFICE MIGHT TAKE AT THIS TIME CAN OPERATE TO RELIEVE HIM OF HIS ACCOUNTABILITY FOR THE FULL AMOUNT OF THE CONSULAR FEES COLLECTED. ANY SHORTAGE IN THE RESULTING REMITTANCE OF CONSULAR FEES WILL BE FOR FURTHER CONSIDERATION WHEN HIS ACCOUNTS FOR THE PERIOD IN QUESTION ARE SETTLED, THE AMOUNTS RECOVERED FROM THE BANK, UNDER COMPROMISE, OR OTHERWISE, TO BE DEPOSITED, OF COURSE, AND CREDITED TO THE ACCOUNT. 40436, SEPTEMBER 29, 1932.