A-13216, A-59110, DECEMBER 3, 1937, 17 COMP. GEN. 462

A-13216,A-59110: Dec 3, 1937

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WILL BE SUPPLEMENTED TO INCLUDE THE FURNISHING TO THE TREASURER OF THE UNITED STATES OF COPIES OF ALL SUCH DEMAND LETTERS WRITTEN BY THIS OFFICE. 1937: REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 8. THE FIRST OF THESE LETTERS POINTED OUT THAT YOUR REQUEST TO THE BANK WAS NOT FOR FUNDS BUT FOR INFORMATION AND THAT IN COLLECTING AND CREDITING THE AMOUNT THE BANK HAD ACTED UPON ITS OWN VOLITION. THE SECOND LETTER STATED THAT THE REQUEST THAT THE AMOUNT OF THE CHECK BE REMITTED TO YOUR OFFICE WAS IMPROPER AND "IS NOT TO BE ACCEPTED AS IN ANY WISE CHANGING THE ESTABLISHED PROCEDURE IN THIS CLASS OF CASES.'. THE LETTER OF YOUR OFFICE DATED JULY 7 STATED IN PART: "IT WAS AN INADVERTENCE THAT THERE WAS NOT FOLLOWED IN THE CITED CASES THE PROCEDURE REFERRED TO IN LETTERS A-59110.

A-13216, A-59110, DECEMBER 3, 1937, 17 COMP. GEN. 462

CHECKS - NEGOTIATION BY OTHER THAN INTENDED PAYEE - RECLAMATION PROCEDURE THE PROCEDURE FOLLOWED BY THE GENERAL ACCOUNTING OFFICE IN CONNECTION WITH CHECKS SO INDORSED THAT IT CLEARLY APPEARS THE PAYEE'S NAME DIFFERS FROM THE NAME OF THE PAYEE SHOWN ON THE FACE OF THE CHECK- - AS DISTINGUISHED FROM CASES WHERE THE PAYEE'S INDORSEMENT HAS BEEN FORGED--- OF MAKING DEMAND DIRECTLY UPON THE CASHING BANK, AND, IN CASES OF FORGED CHECKS, OF REFERRING THE MATTER TO THE SECRET SERVICE DIVISION, TREASURY DEPARTMENT, WITH SUBSEQUENT TRANSMISSION TO THE TREASURER OF THE UNITED STATES FOR THE USUAL RECLAMATION PROCEEDINGS IF THE SECRET SERVICE DIVISION REPORT ESTABLISHES, IN EFFECT, A PRIMA FACIE CASE OF FORGERY, WILL BE SUPPLEMENTED TO INCLUDE THE FURNISHING TO THE TREASURER OF THE UNITED STATES OF COPIES OF ALL SUCH DEMAND LETTERS WRITTEN BY THIS OFFICE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, DECEMBER 3, 1937:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 8, 1937, AS FOLLOWS:

LETTERS OF YOUR OFFICE TO THE TREASURY DEPARTMENT DATED MARCH 22, 1935, JANUARY 13, AND JULY 1937, RELATE TO PROCEDURE INVOLVED IN REQUESTING REFUNDS FROM DEPOSITORY BANKS ON ACCOUNT OF CHECKS DRAWN ON THE TREASURER OF THE UNITED STATES BEARING FORGED ENDORSEMENTS OR OTHERWISE IMPROPERLY NEGOTIATED. THE FIRST OF THESE LETTERS POINTED OUT THAT YOUR REQUEST TO THE BANK WAS NOT FOR FUNDS BUT FOR INFORMATION AND THAT IN COLLECTING AND CREDITING THE AMOUNT THE BANK HAD ACTED UPON ITS OWN VOLITION. THE SECOND LETTER STATED THAT THE REQUEST THAT THE AMOUNT OF THE CHECK BE REMITTED TO YOUR OFFICE WAS IMPROPER AND "IS NOT TO BE ACCEPTED AS IN ANY WISE CHANGING THE ESTABLISHED PROCEDURE IN THIS CLASS OF CASES.'

THE LETTER OF YOUR OFFICE DATED JULY 7 STATED IN PART:

"IT WAS AN INADVERTENCE THAT THERE WAS NOT FOLLOWED IN THE CITED CASES THE PROCEDURE REFERRED TO IN LETTERS A-59110, DATED FEBRUARY 4, 1935, A- 13216, A-59110, DATED MARCH 22, 1935, AND A-13216, A-59110, DATED JANUARY 13, 1937, TO YOU, RELATIVE TO REQUESTING REFUNDS FROM DEPOSITORY BANKS IN RECLAIMING FUNDS ON ACCOUNT OF FORGED INDORSEMENTS OF CHECKS DRAWN UPON THE TREASURER OF THE UNITED STATES. THE EMPLOYEES CONCERNED ARE BEING ADVISED IN THE MATTER.'

IN ITS TRANSCRIPT OF THE TREASURER'S ACCOUNT FOR SEPTEMBER 30, 1937, THE FEDERAL RESERVE BANK OF NEW YORK CREDITED $14.89 WITH THE FOLLOWING EXPLANATION: PHOTOSTATIC COPY OF TREASURY CHECK NO. 13,056,032 63/01/30 DATED DEC. 24, 1936, TO ORDER OF JOSEPH NOTO, DRAWN ON TR. U.S. WHICH WAS RETURNED DIRECT BY YOU TO CENTRAL HANOVER BK. TR.CO.N.Y. WE ARE ATTACHING A COPY OF A LETTER RECD. BY CENTRAL HANOVER BK. TR.CO., N.Y., FROM GENL. ACCOUNTING OFFICE, TREAS. DEPT., WASH.D.C., AS PER OUR TELEPHONE CONVERSATION.'

THE COPY OF THE LETTER OF YOUR OFFICE, DATED SEPTEMBER 8, 1937, MISC.- 0641142-EAR, READS AS FOLLOWS:

"THERE IS ENCLOSED A PHOTOSTATIC COPY OF THE ABOVE DESCRIBED CHECK.

"YOUR ATTENTION IS INVITED TO THE FACT THAT JOSEPH NOTO IS DESIGNATED AS PAYEE. HOWEVER, THE CHECK WAS CASHED BY YOU ON DECEMBER 29, 1936, ON THE ENDORSEMENT OF JOSEPH NOT ON.

"THE PAYEE HAS EXECUTED AN AFFIDAVIT ALLEGING NONRECEIPT OR NONNEGOTIATION OF THE ABOVE DESCRIBED CHECK.

"THEREFORE, IT IS REQUESTED THAT THE AMOUNT OF THE CHECK BE FORWARDED TO THIS OFFICE BY CHECK, DRAFT, OR MONEY ORDER MADE PAYABLE TO THE "THE UNITED STATES," IN ORDER THAT PROPER SETTLEMENT MAY BE MADE WITH THE CORRECT PAYEE.'

IN A LETTER TO THE TREASURY DATED OCTOBER 18, THE FEDERAL RESERVE BANK OF PHILADELPHIA TRANSMITTED CORRESPONDENCE RECEIVED FROM YOUR OFFICE WITH THE OBSERVATION THAT:

"SINCE WE DO NOT UNDERSTAND WHY THEY WROTE DIRECT TO THE FIRST NATIONAL BANK OF EVERETT, PENNSYLVANIA, WE ARE ENCLOSING HEREWITH CORRESPONDENCE FOR YOUR PROPER DISPOSITION.'

THE ENCLOSURES WERE YOUR LETTER DATED OCTOBER 14, TO THE FEDERAL RESERVE BANK (MISC.-F-0681792-ARA) AND A COPY OF YOUR LETTER OF THE SAME DATE TO THE FIRST NATIONAL BANK, EVERETT, PENNSYLVANIA, FROM WHICH THE FOLLOWING IS QUOTED:

"YOUR ATTENTION IS INVITED TO THE FACT THAT CHARLEY MEARKLE IS DESIGNATED AS PAYEE. HOWEVER, THE CHECK WWS CASHED BY YOU ON THE ENDORSEMENT OF CHARLEY MARKLE.

"THE PAYEE HAS EXECUTED AN AFFIDAVIT ALLEGING NONRECEIPT AND NONNEGOTIATION OF THE ABOVE DESCRIBED CHECK.

"THEREFORE, IT IS REQUESTED THAT THE AMOUNT OF THE CHECK BE FORWARDED TO THIS OFFICE BY CHECK, DRAFT OR MONEY ORDER MADE PAYABLE TO "THE UNITED STATES.'"

PREVIOUS LETTERS OF THE TREASURY TO YOU DATED FEBRUARY 14, 1935, NOVEMBER 2, 1936, AND MAY 28, 1937, REQUESTED YOUR COOPERATION IN HANDLING RECLAMATION MATTERS WITH BANK ENDORSERS THROUGH THE OFFICE OF THE TREASURER OF THE UNITED STATES, AND YOUR REPLIES ABOVE REFERRED TO INDICATED YOUR AGREEMENT WITH THE TREASURY'S POSITION ON THE SUBJECT.

BECAUSE THE TREASURER IS DRAWEE OF THE CHECK, IT IS EVIDENT THAT HE SHOULD HAVE NOTICE OF CLAIMS OF IRREGULARITIES AND SHOULD NOTIFY ENDORSERS.

THE AMOUNT RECEIVED THROUGH THE FEDERAL RESERVE BANK OF NEW YORK IN THE CASE OF JOSEPH NOTO IS BEING HELD IN THE TREASURER'S RECLAMATION SUSPENSE ACCOUNT, SYMBOL 891-817, PENDING RECEIPT OF YOUR ADVICE AS TO ITS PROPER DISPOSITION.

CLAIMS FILED IN THIS OFFICE UPON THE BASIS OF CHECKS THE PROCEEDS OF WHICH HAVE BEEN RECEIVED BY PERSONS OTHER THAN THE RIGHTFUL PAYEES FALL UNDER TWO SEPARATE AND DISTINCT GROUPS SUBSTANTIALLY AS FOLLOWS:

1. WHERE THE PAYEE'S INDORSEMENT HAS BEEN FORGED.

2. WHERE THE NAME INDORSED ON THE CHECK IS NOT THE PAYEE'S NAME SHOWN ON THE FACE OF THE CHECK--- AS DISTINGUISHED FROM CASES INVOLVING A FORGED PAYEE'S SIGNATURE.

AS TO GROUP 1 THE PRACTICE HAS BEEN TO REFER THE MATTER TO THE SECRET SERVICE DIVISION, TREASURY DEPARTMENT, FOR INVESTIGATION AND REPORT. UPON STUDY OF THE INVESTIGATIONAL REPORTS AND OTHER EVIDENCE IT IS ASCERTAINED WITH REASONABLE CERTAINTY THAT THE PAYEE'S INDORSEMENT WAS FORGED, AND THUS ESTABLISHING IN EFFECT A PRIMA FACIE CASE OF FORGERY, THE CASE IS THEREAFTER FORWARDED TO THE TREASURER OF THE UNITED STATES FOR THE USUAL RECLAMATION PROCEEDINGS LOOKING TO RECOVERY OF THE AMOUNT OF THE INVOLVED CHECK. IT IS WITH RESPECT TO THAT CLASS OF CASES THAT YOU HAVE BEEN ADVISED IN THE CITED LETTERS OF THIS OFFICE THAT THIS OFFICE WOULD NOT REQUEST "REFUNDS FROM DEPOSITORY BANKS IN RECLAIMING FUNDS ON ACCOUNT OF FORGED INDORSEMENTS OF CHECKS DRAWN UPON THE TREASURY OF THE UNITED STATES.' (QUOTATION FROM LETTER OF JULY 7, 1937.)

WITH RESPECT TO GROUP 2, HOWEVER, WHERE IT CLEARLY APPEARS THE INDORSEMENT OF THE PAYEE'S NAME DIFFERS FROM THE NAME OF THE PAYEE AS IT APPEARS ON THE FACE OF THE CHECK, SHOWING RATHER CONCLUSIVELY THAT THE CHECK WAS NOT INDORSED AS DRAWN, THUS DISPENSING WITH THE USUAL SECRET SERVICE INVESTIGATION REQUIRED IN FORGERY CASES SUCH AS THOSE INCLUDED UNDER GROUP 1, THE LONG STANDING PRACTICE OF THIS OFFICE IN SUCH CASES HAS BEEN TO MAKE DEMAND DIRECTLY UPON THE CASHING BANK. THE RESULT IN THESE CASES HAS BEEN MOST SATISFACTORY FROM THE STANDPOINT OF EXPEDITION, ECONOMY, AND OF ADEQUATE PROTECTION OF THE INTERESTS OF ALL PARTIES CONCERNED. THE CITED LETTERS OF THIS OFFICE DID NOT INVOLVE THIS CLASS OF CASES.

AN ANALYSIS OF THE TWO CASES PRESENTED IN YOUR LETTER WILL DISCLOSE THAT THEY FALL WITHIN THE PURVIEW OF GROUP 2.

IN THE CHARLEY MEARKLE CASE, UPON RECEIPT OF THE PAYEE'S LETTER ALLEGING NONRECEIPT, THE INDORSEMENT ON THE PAID CHECK WAS EXAMINED AND WHILE IT IS NOT ENTIRELY LEGIBLE IT WAS NOT REGARDED AS CLEARLY A GROUP 2 CASE, NAMELY,"NOT INDORSED AS DRAWN.' ACCORDINGLY, AS A GROUP 1 CASE, THE REGULAR FORGERY PROCEDURE WAS UNDERTAKEN PURSUANT TO A 59110, OF FEBRUARY 4, 1935, THAT IS TO SAY, BY LETTERS DATED OCTOBER 2, 1937, THE SECRET SERVICE WAS REQUESTED TO INVESTIGATE THE MATTER, THE ADMINISTRATIVE OFFICE WAS ASKED TO FURNISH A REPORT, AND THE FEDERAL RESERVE BANK WAS NOTIFIED OF THE PENDING INVESTIGATION. THE LETTER TO THE FEDERAL RESERVE BANK REQUESTED THAT THE INDORSING BANKS BE NOTIFIED AND STATED SPECIFICALLY:

* * * ATTENTION IS DIRECTED TO THE FACT THAT THIS COMMUNICATION HAS AS ITS PURPOSE THE NOTIFICATION OF INDORSING BANKS OF THE INVESTIGATION RELATIVE TO THE POSSIBLE WRONGFUL NEGOTIATION OF THE CHECK AND DOES NOT CONSTITUTE A REQUEST FOR REFUND OF THE AMOUNT INVOLVED.

THEREAFTER, REPLY FROM THE FEDERAL RESERVE BANK WAS RECEIVED, INDICATING THAT THE CHECK HAD BEEN CASHED IN ERROR BY ONE CHARLEY MARKLE AND THAT HE WAS READY TO REPAY THE AMOUNT, THIS INFORMATION HAVING BEEN FURNISHED BY THE CASHING BANK (THE FIRST NATIONAL BANK OF EVERETT, PA.). IT THEN BEING APPARENT THAT THE CHECK WAS INDORSED "CHARLEY MARKLE" INSTEAD OF CARLEY MEARKLE, AS DRAWN--- CLEARLY A GROUP 2 CASE--- A DEMAND LETTER WAS WRITTEN TO THE CASHING BANK AT EVERETT, PA. ONLY FOR ITS INFORMATION, THE FEDERAL RESERVE BANK WAS FURNISHED A COPY OF THAT LETTER.

IN THE CASE OF JOSEPH NOTO, WHILE THE PAPERS WERE FORWARDED TO THE TREASURY DEPARTMENT ON OCTOBER 29, 1937, FOR RECLAMATION AND WERE NOT RETURNED WITH YOUR LETTER, SUPRA, THERE IS SUFFICIENT INFORMATION HERE TO INDICATE WHAT TOOK PLACE, TO WIT: UPON RECEIPT OF THE PAYEE'S CLAIM ALLEGING NONRECEIPT IT WAS NOTED THAT THE CHECK WAS INDORSED "JOSEPH NOT ON" INSTEAD OF JOSEPH NOTO, AS DRAWN, AND ACCORDINGLY--- THIS BEING A GROUP 2 CASE--- THE USUAL DEMAND LETTER WAS WRITTEN TO THE CASHING BANK, THE CENTRAL HANOVER BANK AND TRUST CO. OF NEW YORK. THAT LETTER, AFTER CALLING ATTENTION TO THE ERRONEOUS INDORSEMENT AND OF THE PAYEE'S CLAIM OF NONRECEIPT, REQUESTED "THAT THE AMOUNT OF THE CHECK BE FORWARDED TO THIS OFFICE.' THROUGH ERROR, THE CENTRAL HANOVER BANK AND TRUST CO. TURNED THE AMOUNT OF THE CHECK OVER TO THE FEDERAL RESERVE BANK, AND SAID BANK CREDITED IT IN THE ACCOUNT OF THE TREASURER OF THE UNITED STATES. WHEN THE FEDERAL RESERVE BANK SO ADVISED THIS OFFICE, THE CHECK AND FILE WERE FORWARDED TO THE TREASURER FOR ACTUAL COLLECTION OF THE INVOLVED AMOUNT AND THE TRANSMITTAL OF SAME TO THE PAYEE.

I BELIEVE THE FOREGOING WILL CLARIFY THE APPARENT MISUNDERSTANDING BY YOUR DEPARTMENT REGARDING THE HANDLING OF THE TWO CLASSES OF CHECKS INDICATED BY THE TWO GROUPS, SUPRA. HOWEVER, IN ORDER THAT THE TREASURER'S OFFICE MAY BE INFORMED OF THE IRREGULARITIES ARISING IN THE CASHING OF CHECKS COMING WITHIN GROUP 2 HEREAFTER THIS OFFICE WILL BE PLEASED TO FURNISH THE TREASURER WITH COPIES OF ALL DEMAND LETTERS WRITTEN BY THIS OFFICE IN SUCH CASES. SUCH PROCEDURE APPEARS SUFFICIENT TO SATISFY THE SUGGESTION IN THE PENULTIMATE PARAGRAPH OF YOUR LETTER.

AS TO THE LAST PARAGRAPH OF YOUR LETTER, YOU ARE ADVISED THAT IT APPEARING THE AMOUNT IS STILL DUE THE PAYEE OF THE INVOLVED CHECK, THE AMOUNT RECOVERED BY THE TREASURER THEREON AND NOW HELD IN THE RECLAMATION SUSPENSE ACCOUNT MAY BE TRANSMITTED TO THE PAYEE AT HIS LAST ADDRESS OF RECORD.