Altered vs. Counterfeit Item
by Ken Golliher, BOL Guru
Ken Golliher recently received this question and wanted to share it with our BOL Users.
Question: We recently had a check in excess of $50,000 returned to us as an "altered item" more than a month after the drawee bank had paid it. (The account into which it was deposited here is "gone.") We could see no evidence of alteration and asked the drawee bank to send us another of their customer's checks for comparison. The second item they sent showed a different payee, date and amount, but it was the same check number. All the language on the check they sent was in a different typeface. Finally, the comparison check had been stamped "Paid" by the drawee bank. We went back to them for an explanation, but they have stopped communicating with us beyond insisting that we breached our warranty to them that the check deposited with us had not been altered. Any observations?
Answer from Ken:
Somebody at the other bank appears to be clever, very clever.
It appears that a thief made a copy of the original check, which was then paid as drawn. The thief then revised the copy into the one that you accepted for deposit. However, the concept of alteration applies only to changes in an item drawn by a customer. The check you accepted for deposit appears to be a simple counterfeit.
The "clever" part comes in because if the drawee bank had accurately returned your item as a "counterfeit" or "forged drawer's signature," the midnight deadline would apply and you would have protested it as a late return. By returning it as "altered item," they step around the midnight deadline. The loss that would have been theirs now appears to be yours. Sending you what is apparently the original item for comparison foils the plot.
My grandfather told me: "Never assume dishonesty when stupidity is an equally plausible excuse." It was good advice, I don't think stupidity has a chance here. My estimation is that the folks at the other bank know exactly what they are doing, they just did not expect you would ever have enough information to figure it out.
Your attorney needs to take it from here. Presumably, you have an affidavit of alteration from the drawee bank's customer. Your attorney should contact the customer directly, citing a routine inquiry. Along with some other questions, he or she will ask if the original check was paid as drawn. If they say it was, I would prepare a corrected affidavit for their signature saying the original check was paid and that the second check is an apparent, revised copy. Thus armed, I would then go back to the drawee bank with a full load of righteous indignation.
Generally, the language in affidavit is clear, to a banker. However, the average customer might sign an affidavit of alteration without fully understanding that a counterfeit would be handled differently. Only the drawee bank has a financial incentive for classifying the check as an alteration rather than a counterfeit - the customer should recover either way.
From now on, I will suggest that banks independently verify the facts in an affidavit of alteration before relying on it.
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