Wednesday, January 17, 2007

Review Your Bank Statements!

The Baseball Crank has a post about a baseball player whose funds were embezzled from his bank checking account. When the player opened the account, he signed forms by which he agreed to the bank's rules and regulations concerning the account. He also instructed the bank to hold his monthly account statements, i.e., not to send them to his home or to a third party (such as an accountant).

The player ordered checks, which were sent his residence. There, an "employee" of the player -- not the bank -- obtained possession of them and began forging checks, depleting the account (and other accounts tied to the checking account).

When the player ultimately discovered the embezzlement and loss, he sued the bank. The bank asserted as a defense (among others) that the player's claim was barred because he had failed to report the loss within thirty days after the bank made the first bank statement reflecting the fraud available to him, as required by the bank's rules and regulations. The court upheld this defense and dismissed the player's suit. It was irrelevant that the player had not actually received the monthly statements, because it was he who had instructed the bank not to send them.

Commenters at the Crank's site are outraged, although much of the outrage may be attributable to the fact that they think that the forger was a bank employee. He was not. The forger was the player's employee. That said, however, people should know that this scenario happens over and over again, and the decision is utterly routine. Virtually all banks have similar rules requiring checking account customers to report irregularities within sixty or thirty days (sometimes less), and courts regularly enforce these rules.

Small businesses are most often the victims of such frauds, usually by their bookkeepers, but the rules apply to individual checking account customers as well. Even where the facts are sympathetic to the account holder (the invalid senior whose life savings are stolen by a home healthcare attendant, for example), the account holder almost always loses.

The moral of the story: review your monthly bank account statements!

Finally, it's worth noting that the player did not sue the bad guy, his former employee who forged the checks. Why? I'd guess it is because the forger had fled or had no money. In these situations, the bad guy (or gal -- and there are many) is often a gambler, drug user, or other species of extreme spendthrift. The stolen funds are almost always spent and unrecoverable.

No comments:

Post a Comment

Related Posts with Thumbnails