07.06.01 - Forgery

Effective Date: 09/12/02

Revised 01/01/13

Reference: 810 ILCS 5/4-207

Policy Statement:

None

Overview:

Pursuant to the Illinois Commercial Code, the Illinois State Treasurer as a drawee (an entity or person ordered in a draft to make payment) may obtain reimbursement on forged state warrants presented to the Treasurer from financial institutions under a breach of presentment warranty claim. 810 ILCS 5/4-207. When financial institutions present state warrants to the Treasurer for payment, by law they guarantee that they are authorized to obtain payment. Since a forged warrant does not represent a payee's valid authorization, the financial institution presenting the forged warrant has breached their presentment warranty and must reimburse the Treasurer.

In order to reimburse the rightful payee (or in circumstances of fraud, to reimburse the State) the Treasurer will make presentment warranty claims against financial institutions that accept forged state warrants. When warrants issued from a State agency are forged, the payee(s) will often contact the agency or CCR&R rather than the Treasurer to seek reimbursement. As the State agency or CCR&R is the main contact between the payee and the Treasurer, the agency or CCR&R becomes instrumental in the investigation and reimbursement of the warrant. The following will list the documents that are necessary to initiate a forged warrant claim and briefly explain the agency's or CCR&R's role in the claim's process.

Procedures:

Forgery
Forgery occurs when someone falsely reproduces another person's signature as endorsement on a State warrant in order to fraudulently collect the funds remitted via the warrant. When a provider maintains that he or she did not cash a paid warrant and did provide services, staff must start a forgery investigation.
1. Obtain a Copy of a Cashed Warrant
  1. If a provider questions receipt of funds for a specific warrant, a copy of the cashed warrant must be obtained from the Illinois Office of the Comptroller (IOC). The following information is needed in order to obtain the correct warrant copy:
    1. The SSN/FEIN of the payee;
    2. The voucher number for the warrant(s) in question;
    3. The date(s) of service;
    4. The dollar amount of the warrant;
    5. The warrant number.
  2. The request for a copy of a cashed warrant should be directed to Office of the Comptroller, Records Department, via fax at 217/557-0815. The name of the subsidy specialist requesting the warrant must be clearly indicated on the fax along with the CCR&R name, address, and phone number.
2. Verification of Endorsing Signature
  After the warrant copy is obtained, the provider must verify that the endorsing signature is not his/hers and sign documents as detailed in C below, Documentation Needed to Initiate a Forgery Investigation. The provider may verify the endorsing signature by:
  1. Coming in to the CCR&R;
  2. Going to the nearest Local Office;
  3. Receiving a claim packet via mail.
3. Documentation Needed to Initiate a Forgery Investigation
  The following documents must be completed by a payee to make a forged warrant claim:
  - Forgery of State Warrant Cover Letter - The purpose of this form is to give the payee detailed directions in completing the forgery forms. The CCR&R may choose to print this cover letter on their letterhead.
  - Forged Warrant Affidavits - The payee must sign and have notarized three (3) affidavits attesting that the payee did not endorse the relevant warrants, authorize another to endorse, or receive or authorize another to receive any kind of benefit from the warrants.
  - Treasurer's Direct Deposit Authorization for Forgery Reimbursement - If the Treasurer is successful in obtaining reimbursement, the payee may choose to have the forgery reimbursement deposited directly into a bank account of their choice via electronic ACH payment with this form.
  - Forged Warrant Investigation Claim Form - The claim form helps the Treasurer's Office, as well as the United States Postal Inspector, in the investigation of the forgery claim. The payee must complete the claim form by providing a detailed explanation of how they discovered that a forgery had occurred in their name.
  - Two Forms of Identification - The payee must bring or mail two forms if identification. One must be a picture ID (driver's license, state ID, military ID) and the other must be a social security card.
  - Self Addressed Return Envelope - If the provider receives the claim packet in the mail, the self-addressed return envelope helps to ensure that the completed claim form packet is returned to the agency. The CCR&R must affix their name and address to the envelopes.
    After receipt of the above documents, staff must review the packet's contents to ensure that:
    - the claim form is completed correctly;
    - there are 3 affidavits that are signed and notarized;
    - a copy of the payee's driver's license or state ID is enclosed; and
    - the front and back copies of the warrants are enclosed.
      If any of the claim forms are incomplete or missing, the packet will be returned to the CCR&R for completion.
      Staff must make one copy of all documents for the case record. The original documents must be sent to:
      Department of Human Services
      Bureau of Child Care & Development
      ATTN: Fraud, Forgery, & Overpayment Section
      401 S. Clinton, 3rd Floor
      Chicago, IL 60607
      The Bureau of Child Care & Development will review and forward all of the above documents to the Treasurer's Office.
4. Treasurer's Office Responsibilities
  After all the necessary documents are received, the Treasurer's Office will make a preliminary investigation into the claim. Within 5 days after receipt of the completed packet, the Treasurer will notify the agency if there is enough evidence to pursue the claim.
  At this preliminary stage, the Treasurer may determine that the evidence does not support a breach of presentment warranty claim. This determination may be made prior to sending the "Request for Reimbursement" to the financial institution. In this case, the Treasurer will notify the agency of the Treasurer's decision. The agency then notifies the payee that the preliminary investigation revealed that there was not enough evidence to pursue a claim. The agency may modify and use the "Negative Status Letter" to inform the payee of the denial. At this time the claim will be closed. However, if the agency obtains additional information that supports the claim, this new information may be submitted to the Treasurer's Office for reconsideration. The agency must bring the claim within the 3-year statue of limitations (see conclusion for detailed timelines).
  If the Treasurer decides to pursue a breach of warranty claim, the Treasurer will assign a case number to the file. A "Request for Payment" letter is sent to the financial institution with one original affidavit and a clear copy (front & back) of the paid warrant. The Treasurer then notifies the agency with a "Positive Status Letter." The agency may modify and use this letter to notify the payee that the Treasurer has decided to pursue the forged warrant claim.
  The financial institution that accepted the forged warrant and received payment from the Treasurer's Office is allowed a total of 75 days to reimburse or respond with evidence to deny the claim. If there is no response after 45 days, a reminder letter is sent to the financial institution allowing an additional 30 days to respond. If the financial institution does not respond to the reminder, the claim is turned over to the Treasurer's Legal staff.
  The financial institution may deny reimbursement by asserting various defenses. If the Treasurer's Office determines the denial is sufficient, the claim will be closed and the agency will be sent notice of the closure and copies of the denial evidence. The agency will notify the payee of the denial including any evidence or documents supporting the denial. If the denial is based on a legal issue, the Treasurer's legal staff will determine whether to close or continue the claim.
  If a financial institution reimburses the Treasurer's Office for a breach of presentment warranty claim, the Treasurer's Office will then reimburse the payee. If the payee completed the Treasurer's Direct Deposit Authorization, the Treasurer's Office will requisition the Treasurer's Banking Division to make electronic payment to the payee's specified account. The payee will receive a letter verifying reimbursement and the agency will receive a copy of that letter. If the payee chose not to receive an electronic payment, a draft will be issued and sent to the agency, who will forward the draft to the payee. Prior to receiving the draft, the agency will be notified via email of the reimbursement. The agency will sign and return to the Treasurer's Office an "acknowledgment receipt," certifying that they received the draft. Any time money is recouped back to the State on behalf of the issuing agency, the agency must be notify the Illinois Comptroller and the IRS to amend the payee's income earnings.
Fraud
For the purposes of these procedures, cases of fraud differ from forgery only in that the named payee is not the rightful owner of the funds and the agency will receive reimbursement.
For fraud cases, the Treasurer's Direct Deposit Authorization of Forgery Reimbursement is not necessary. However, the Department of Human Services' CFO or Inspector General must complete 3 Forged Warrant Agency Affidavits, which is substantively different from the payee's affidavits. If the intended payee is not fictitious, then the named payee must complete and sign the payee affidavit. Additionally, the Treasurer's Office will need a summary or case history detailing the factual background of the fraud. All other procedures will follow the guidance set forth above.
Conclusion
Time is of the essence. While it is the Treasurer's intention to reimburse all payees of forged warrants and all state agencies in fraud cases, the Treasurer cannot guarantee that the funds will ever be remitted. However, the CCR&R, and payee's continued cooperation and assistance in the matter are crucial to our efforts. An essential aspect of this process is the timeliness of our actions. The Illinois Commercial Code requires the Treasurer to notify financial institutions of a claim for breach of presentment warranty within 30 days after the Treasurer has reason to know of the breach, otherwise the financial institution is discharged to the extent of any loss caused by the delay in notice. 810 ILCS 5/4-207. In addition, the statute prevents the Treasurer from bringing a claim 3 years after the Treasurer's Office knows or has a reason to know of a violation of the presentment warranties. 810 ILCS 5/4-111. Therefore, prompt notification to the Treasurer is paramount towards a successful resolution of a forged warrant claim.