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ARMY FINANCE OFFICER IS RELIEVED OF LIABILITY FOR IMPROPER PAYMENTS BY UNKNOWN SUBORDINATES RESULTING FROM CASHING OF FRAUDULENTLY ENDORSED PERSONAL CHECKS. INDIANA 46249 THIS IS IN RESPONSE TO YOUR REQUEST OF JUNE 5. THE REQUESTED RELIEF IS GRANTED. THE CHECKS WERE RETURNED DUE TO INSUFFICIENT FUNDS. THE LOSSES RESULTING FROM PFC WILLIAMS' ACTIONS WERE REFLECTED ON MAJOR MALCOM'S STATEMENTS OF ACCOUNTABILITY FOR DECEMBER 1982 AND MAY 1983. MAJOR MALCOM IS PERSONALLY LIABLE FOR DEFICIENCIES IN HIS ACCOUNTS CAUSED BY PAYMENTS MADE BY HIS SUBORDINATES. WE HAVE GRANTED RELIEF TO THE DISBURSING OFFICER UPON A SHOWING THAT HE PROPERLY SUPERVISED HIS SUBORDINATES BY MAINTAINING AN ADEQUATE SYSTEM OF PROCEDURES AND CONTROLS TO SAFEGUARD THE FUNDS.

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B-219124, JUL 15, 1985, OFFICE OF GENERAL COUNSEL

DISBURSING OFFICERS - RELIEF - ERRONEOUS PAYMENTS - NOT RESULT OF BAD FAITH OR NEGLIGENCE DIGEST: UNDER 31 U.S.C. SEC. 3527(C) U.S. ARMY FINANCE OFFICER IS RELIEVED OF LIABILITY FOR IMPROPER PAYMENTS BY UNKNOWN SUBORDINATES RESULTING FROM CASHING OF FRAUDULENTLY ENDORSED PERSONAL CHECKS, SINCE HE MAINTAINED AND SUPERVISED EFFECTIVE CONTROL SYSTEM AND ADEQUATELY SUPERVISED STAFF.

MR. CLYDE E. JEFFCOAT: PRINCIPAL DEPUTY COMMANDER U.S. ARMY FINANCE AND ACCOUNTING CENTER INDIANAPOLIS, INDIANA 46249

THIS IS IN RESPONSE TO YOUR REQUEST OF JUNE 5, 1985, THAT RELIEF BE GRANTED, UNDER 31 U.S.C. SEC. 3527(C), FOR IMPROPER PAYMENTS IN THE AMOUNT OF $990, CHARGEABLE TO THE ACCOUNT OF MAJOR J. A. MALCOM, FINANCE OFFICER, 3RD AREA FINANCE SUPPORT CENTER, WUERZBERG, GERMANY. FOR THE REASONS SET FORTH BELOW, THE REQUESTED RELIEF IS GRANTED.

THE IMPROPER PAYMENTS INVOLVED PERSONAL CHECKS DATED JULY 2, 1982 AND JULY 10, 1982, DRAWN ON AN ACCOUNT IN THE NAME OF PRIVATE FIRST CLASS (PFC) GREGORY D. TRAYNOR. THE CHECKS WERE RETURNED DUE TO INSUFFICIENT FUNDS. ACCORDING TO THE RECORD, A SUBSEQUENT INVESTIGATION REVEALED THAT BLANK CHECKS AND HIS MILITARY IDENTIFICATION CARD HAD BEEN STOLEN FROM PFC TRAYNOR. USING THE IDENTIFICATION CARD, WHICH HE HAD ALTERED, PFC CEDRIC L. WILLIAMS FRAUDULENTLY ENDORSED AND NEGOTIATED THE CHECKS IN QUESTION. /1/ THE INVESTIGATION FAILED TO ESTABLISH THE IDENTITY OF THE CASHIER OR CASHIERS WHO CASHED THE CHECKS, BECAUSE THE CHECKS CONTAINED NO CASHIER IDENTIFYING INITIALS. THE LOSSES RESULTING FROM PFC WILLIAMS' ACTIONS WERE REFLECTED ON MAJOR MALCOM'S STATEMENTS OF ACCOUNTABILITY FOR DECEMBER 1982 AND MAY 1983.

AS A DISBURSING OFFICER, MAJOR MALCOM IS PERSONALLY LIABLE FOR DEFICIENCIES IN HIS ACCOUNTS CAUSED BY PAYMENTS MADE BY HIS SUBORDINATES. HOWEVER, UNDER 31 U.S.C. SEC. 3527(C) THIS OFFICE HAS AUTHORITY TO GRANT RELIEF FROM LIABILITY UPON A DETERMINATION THAT THE PAYMENTS DID NOT RESULT FROM BAD FAITH OR LACK OF DUE CARE ON HIS PART. B-213874, SEPTEMBER 6, 1984. SEE GENERALLY 54 COMP.GEN. 112 (1974).

IN CASES WHERE A SUBORDINATE ACTUALLY DISBURSES FUNDS, WE HAVE GRANTED RELIEF TO THE DISBURSING OFFICER UPON A SHOWING THAT HE PROPERLY SUPERVISED HIS SUBORDINATES BY MAINTAINING AN ADEQUATE SYSTEM OF PROCEDURES AND CONTROLS TO SAFEGUARD THE FUNDS, AND TOOK STEPS TO SEE THAT THE SYSTEM WAS EFFECTIVE AND BEING FOLLOWED. SEE, E.G., B-217637, MARCH 18, 1985.

ACCORDING TO YOUR LETTER REQUESTING RELIEF, "*** PROPER PROCEDURES FOR CASHING CHECKS WERE IN EFFECT AT THE TIME," AND "MAJ MALCOM MAINTAINED AN ADEQUATE SYSTEM OF CONTROLS TO SAFEGUARD THE FUNDS FOR WHICH HE WAS ACCOUNTABLE." THE RECORD SUPPORTS THESE ASSERTIONS. INSTRUCTIONS IN EFFECT AT THE TIME THE FORGED CHECKS WERE CASHED DID NOT REQUIRE CASHIERS TO INITIAL THE NEGOTIABLE INSTRUMENTS THEY CASHED.

THE IMPROPER PAYMENTS IN THIS CASE WERE THE RESULT OF CRIMINAL ACTIVITY-- PRESENTING FALSE IDENTIFICATION AND FRAUDULENTLY ENDORSED CHECKS-- OVER WHICH MAJOR MALCOM HAD NO CONTROL. EVEN THE MOST CAREFULLY ESTABLISHED AND EFFECTIVELY SUPERVISED SYSTEM CANNOT PREVENT EVERY CONCEIVABLE FORM OF CRIMINAL ACTIVITY. SEE B-217637, SUPRA.

THERE IS NOTHING IN THE RECORD TO INDICATE THAT THE IMPROPER PAYMENTS WERE THE RESULT OF BAD FAITH OR LACK OF REASONABLE CARE ON THE PART OF MAJOR MALCOM. ACCORDINGLY, RELIEF IS GRANTED, AS REQUESTED.

WE NOTE THAT COLLECTION EFFORTS AGAINST PFC WILLIAMS HAVE BEEN UNSUCCESSFUL TO DATE, BUT NOW HAVE BEEN REFERRED TO THE COLLECTIONS DIVISION FOR CONTINUED AGGRESSIVE COLLECTION ACTIONS, IN ACCORDANCE WITH THE PROCEDURES OUTLINED IN 62 COMP.GEN. 476 (1983).

/1/ THE RECORD SHOWS THAT PFC WILLIAMS WAS TRIED AND CONVICTED BY GENERAL COURT-MARTIAL FOR THESE UNLAWFUL ACTS, WAS DISCHARGED FROM THE ARMY, SERVED HIS SENTENCE, AND WAS RELEASED FROM CONFINEMENT.

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