Pub. 2 2013 Issue 1

checks back and forth between accounts in multiple banks for the purpose of hiding the fact that the accounts, in total, have a negative balance, often called check kiting, is a dishonest act. Force balancing or manipulating bank records with false information is a dishonest or fraudulent act. Ano- tary signing as notary, swearing a person appeared before them when the person was not present, is a dishonest or fraudulent act. The bank should never decide to ignore any dishonest or fraudulent act by an employee. Pleading guilty to a dishonest or fraudulent act is conclusive evidence that the person committed the dishonest or fraudulent act. No explanation later given for pleading guilty (to reduce legal expenses or to receive a lesser penalty, for example) can rebut the conclusive evidence that the employee pled guilty to committing a dishonest or fraudulent act. There is no distinction in the bond language between misdemeanor convictions and felony convictions for dishonest or fraudulent acts. The automatic termination of bonding for that employee applies whether the dishonest or fraudulent act is a misdemeanor or a felony. Banks, or directors or officers, often learn of a dishonest or fraudulent act that an employee committed even though no criminal charges have been brought. Learning of the dishonest or fraudulent act still results in termination of the bonding for that employee, even if no criminal charges are ever brought. Generally, a bank has no alternative but to terminate the employment of any person upon learning that such person committed a dishonest or fraudulent act of any kind. A bank may discover a dishonest or fraudulent act that an employee committed which might be considered minor and which occurred many years ago. In such cases the bond still automatically terminates as to that employee. However, the bank could send a written request to the insurance company asking that the particular incident be waived, and the company could agree in writing to bond the employee even though the employee committed a specific dishonest and fraudulent act. Normally, the bonding company will require a written statement from the employee explaining what act was committed and also providing any extenuat- ing circumstances. Waiving the provision of the bond for a particular incident is possible, but rare. Bonding companies are unwilling to do so in most cases because agreeing to bond a person who is known to have committed a dishonest or fraudulent act can substantially increase risk. Even if the bonding company agrees to bond the individual, the bank is still in an awkward position if later it changes bonding companies. The bank must remember it needs to request and receive from the new insurance company a waiver of the provision for that particular incident or the employee will again not be bonded. For more information, call KS Banker Surety Co. at (785) 228-0000. 12 l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s continued frompage 10 201 3 Lending Conference March 7 & 8 Wichita Hyatt Regency For more information contact Julie Taylor: jtaylor@ksbankers.com 785-232-3444