Forged Endorsement: Deposit Of Two-Party Checks Into Law Firm Account

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Question:

We have a customer who is a personal injury attorney. It is not unusual for him to deposit very large settlement checks into his business account. These checks are made out to his client and himself as their attorney. I believe he is endorsing their name and then his own. On all of the checks, the endorsements look the same. I brought it to the tellers' attention that they are accepting checks that I believe to be possibly forged endorsements. One of them said they think he has POA on his clients. Should we required him to provide us a copy of the POAs before allowing him to deposit the checks?

Answer:

It's very common (although by no means always the case) for an attorney-at-law to be attorney-in-fact for the client, perhaps with specific limits on that agency relationship (such as collecting payments, etc.)

That said, you would not be wrong to ask the attorney to make certain that the endorsement for, say, John Q. Public, read "John Q. Public, by Ima Lawyer, POA," and then further add the firm's endorsement separately. In that way, there is no question that the lawyer is purporting to hold a POA. From that point onward, I'd treat these checks just as I would any other 2-party check deposited to the account of one of those parties. I'd weigh the risk that the "other payee" didn't actually endorse and might come after the bank with a forged endorsement claim. What are the law firm's deposits like? What's the likelihood there is a suit waiting to happen? What's the risk?

After all, are you going to challenge the firm's assertion it holds the POA? If they are the ubiquitous "good customer," you might ask them how these arrangements work (are there POAs backing these endorsements?), but after they give you the answer, you are probably not going to ask to see each POA document.

First published on BankersOnline.com 08/4/03