City looks for $1 million check
The Big Blue Bus wants its million bucks back. City officials wonder where the bus system’s million dollars disappeared to after someone stole a check out of the mail and cashed it.
But even more than finding the culprit who cashed it, the city’s battle is now figuring out who is responsible for paying it — the bank that cashed it or the bank it originated from.
Earlier year, Los Angeles County sent a check to the Big Blue Bus for its share of sales tax revenue. But it was stolen out of the U.S. Postal system and was cashed at a Colorado bank.
The City of Santa Monica and L.A. County have now successfully entered into a Colorado lawsuit between the two banks that handled the check for $1,075,408.08 and cashed it. A state judge of the Denver District Court last week also ordered the lawsuit to move forward.
The lawsuit was filed nearly six months ago by First National Bank of Colorado, which cashed the check, against Denver-based Robert W. Baird & Co. and Bank of America — the bank handling L.A. County’s account — to determine who is responsible for paying the funds.
Robert W. Baird & Co., a brokerage house used by the check casher, had asked the lawsuit be delayed until U.S. Postal inspectors complete their investigation and find the person who cashed the check. However, the judge felt the result of the investigation would not change the liability of cashing an unendorsed check, according to Deputy City Attorney Jeanette Schachtner.
“Ultimately, from the city and county perspective, we feel we have an ironclad argument why the money belongs to us,” Schachtner said. “The bank has warranties and shouldn’t be cashing checks that have not been endorsed.
“Litigation will proceed as litigation does,” she added. “We are, from our end, hoping to pursue this rather aggressively. We think it’s an open and shut case.”
L.A. County Attorney Thomas M. Tyrell said the banks have an uphill battle to prove they aren’t liable.
“There are extremely complex rules revolving around (cashing checks),” Tyrell said. “Barring something that would point to direct fault on the part of the county or the city, we don’t anticipate any impact.”
“There’s some accountability that way.”
“It’s our safest and most secure (system),”
Santa Monica officials first noticed the money was missing when they conducted a routine audit at the end of the 2001 budget, which was done about this time last year.
That audit also shows two other checks totaling $67,000 from the Metropolitan Transportation Authority are missing and are presumed stolen. The MTA Inspector General is investigating the disappearance of the two checks.
Postal inspector Mike McCarthy, who is part of a team of investigators working on the case, said the theft of the $1 million check may be the work of an international ring that pays for unendorsed checks. A person not connected to the ring steals the check and is given either a percentage of the check’s amount or a flat fee, McCarthy said. Then the network of criminals finds a way to cash the check.
“It’s the largest that I have heard of here in Los Angeles,” McCarthy said. “There could be checks that have been stolen that are higher, but I haven’t heard of them.”
“It’s the largest that I have heard of here in Los Angeles.There could be checks that have been stolen that are higher, but I haven’t heard of them.” — he said. — MIKE McCARTHY U.S. Postal inspector
In the case of Big Blue Bus’ check, the thieves did all of their banking electroni-cally. The account set up at Robert W Baird & Co. was in the name of “Big Blue Bus Tours,” and the signature card on file is the forged signature of John Catoe, the Big Blue Bus’ former director.
“To you and I, it’s a huge sum of money, and to the city it’s a huge sum of money,” Schachtner said. “But to the banking industry, I don’t know that a million dollar check gets any more attention than the thousands of other big digit checks they deal with on a regular basis.”
McCarthy said while the postal system is trustworthy, it is not fool proof. He advised that large sums of money should be sent via registered mail. Though it may take a little longer to arrive at its destination, anyone who handles the envelope has to sign for it.
In the meantime, county officials will continue to send large sums of money through the mail. They maintain that sending checks through the mail is completely safe. However, they did start depositing large sums electronically with the Big Blue Bus.
“The county board of supervisors over a year ago began promoting systems under which certain of our payments would be able to be paid to some of our contractors and other clients by electronic transfers,” Tyrell said. “And that is in place, but the county is a vast enterprise. And a changeover like that is not an easy one to make.”
L.A. County collects sales tax revenue earmarked for mass transit systems and divides them among all the bus and rail operators throughout the county. Those checks, which tend to be six and seven figures, are routinely sent first-class mail through the postal system.
Originally published in the Santa Monica Daily Press print edition on August 26, 2002. Read the original PDF.