Checking out: City opts to settle for $750K
CITY HALL — City Hall is out $440,000 after a check intended for the Big Blue Bus, and worth more than $1 million, was cashed.
Nearly three years later, city officials have decided to cut their losses and settle with the banks they feel are responsible for letting $1 million in taxpayer money slip through their hands.
First National Bank of Colorado, which cashed the check; Robert W. Baird & Co., a financial management company; and Bank of America, which handles Los Angeles County’s transportation account, have agreed to pay Santa Monica a collective $750,000.
Deputy City Attorney Jeanette Schachtner said city officials decided to settle the case because it was too expensive to continue in a lawsuit that would determine who is responsible.
City Hall, which hired outside legal counsel, has racked up $190,000 in attorneys’ fees over the last few years to fight its case.
According to Schachtner, settlement was an appropriate course of action considering the uphill nature of the battle.
“The problem is that the banks are out of the money because the proceeds were sent offshore, and the banks don’t want to assume responsibility, and Santa Monica doesn’t believe it should because we rely on the banks to protect us from theft and stolen checks,” Schachtner said. “But it was costing all sides a lot of money, the case was being hotly litigated, and we did-n’t have a trial date until next year.
“It was beneficial to all sides to resolve it.”
Los Angeles County collects sales taxes earmarked for mass transportation 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 through the postal system.
When city officials noticed the money missing in 2001, they immediately went after the banks.
That prompted a lawsuit filed in early 2002 by First National Bank of Colorado, which cashed the check. First National Bank sued Denver-based Robert W. Baird & Co., which issued the check for the Big Blue Bus. Bank of America also was sued because it handled the Los Angeles County’s account. The intent of the lawsuit was to determine who was liable for cashing the check, and therefore, responsible for paying City Hall back. In August of 2002, attorneys with Santa Monica and Los Angeles County successfully entered into the lawsuit between the banks.
Santa Monica first noticed the money was missing when it conducted a routine audit at the end of the 2001 budget. The same audit shows that two other checks totaling $67,000 from the MTA are also missing and presumed stolen.
Postal inspector Mike McCarthy, who initially handled the case, felt the theft of the $1 million check may be the work of an international ring that pays for unendorsed checks. The person unconnected to the ring steals the check and is given either a percentage of the check’s amount or a flat fee. Then, the criminal network finds a way to cash the check.
Officials wouldn’t comment as to whether or not the U.S. Postal Service still believes an international ring may be responsible.
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.
Robert W. Baird & Co. had asked the lawsuit be delayed until U.S. Postal Inspectors completed their investigation and found the culprits. However, the culprits were never found and the judge felt the result of the investigation would not change the liability of cashing an unendorsed check.
Thomas M. Tyrell, the LA County attorney handling the case, said the banks would have had difficulty in court trying to prove the money belongs with them. They would have had to show the county or the city were directly at fault for the check being cashed. According to Tyrell, the evidence didn’t suggest that.
Renee Focht, public information officer for the U.S. Postal Service’s Los Angeles investigation division, said no suspects have been identified in the case, which remains open.
McCarthy advised when sending large sums of money through the postal system to send it 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.
And while the county maintains sending large checks through the mail is completely safe, they have begun depositing large sums electronically for the Big Blue Bus.
Originally published in the Santa Monica Daily Press print edition on November 11, 2005. Read the original PDF.