Power of Attorney: Protecting Against Fraud

Question:

We had a situation occur that we were not sure how to handle. Mr. Doe is in jail and has given his sister Power of Attorney to handle his worker's compensation checks. The POA is very limited and states that it is effective thru 5/31/02. Yesterday the sister (POA) presented the check and the POA and wanted to cash the check. We refused because she was not our customer. Today she was back with her husband, and her husband wanted to add her name to his account and deposit the worker's comp. check for $9000 into the checking account. We refused to let her do this as well. How should we have handled this situation? POA's always seem confusing to me when we have no way of knowing if the funds will be managed for the benefit of the person giving the power of attorney.

Answer:

I see a third issue. Even if the POA is genuine, if you allow the sister who is the attorney-in-fact to take the check and deposit it into an account other than an account owned by the principal, you could be deemed to be on notice of breach of fiduciary duty and could be liable to the principal for his loss, assuming he never gets the benefit of the proceeds of the check.

First published on BankersOnline.com 5/06/02