Thursday, July 12, 2012

Playing With The House's Money

It turns out that July has been quite the month for big news in Iowa.  When I was back home, I heard that an audit found that the University of Iowa payroll department issued over-payments totaling nearly $650,000 during the previous school year.  Now, the lucky recipients of those payments have to pay back the excess funds, either through payroll deductions or via direct billing from the university.

The article mentioned that the audit uncovered a total of 338 payroll over-payments.  That really makes you wonder why the university needed an audit to uncover the problem--didn't a single person come forward?  I don't know if it was 338 different people who received over-payments, but at least some of them had to notice, and it's surprising that not a single do-gooder pointed out that their paycheck mysteriously increased.

  Overpaying employees for more than 160 years.

On the surface, receiving a windfall from an artificially high paycheck sounds fantastic--who wouldn't want more money for the same amount of work?  But even though many months have passed between the time the payments were issued and someone figured out what had happened, these things always seem to get uncovered.  (Though, in all fairness, I guess we don't hear about incidents like this that go undetected...)

Anyway, I'm willing to bet that some of the people who received over-payments didn't even notice.  People with direct deposit who don't pay much attention to the ins and outs of their bank transactions and account balances could easily have let this slide.  You've gotta feel a little bad for the unfortunate employees who had no idea this was happening and now find themselves holding an unexpected bill from the U of I.  But I guess that's a good reminder in why you should pay attention to your bank account...

On the other hand, this is a hilarious miscalculation for those who knew they were getting paid too much, remained silent thinking this would go undetected, and spent the money.  If they don't have the money to reimburse the university, it looks like it's wage garnishment time.  And if any of those employees lost their jobs at the university and are I said, hilarious.

Here's my personal philosophy.  If you realize you're getting overpaid and decide to go the dishonest route and say nothing about it, at least have the common sense to hold onto the money.  There's a good chance someone's going to eventually uncover the error and you'll have to return it.  So if you're going to remain silent, at least enjoy the ride and collect a paltry interest rate on the overpaid funds until someone discovers the error and you're forced to plead ignorance and return the money.  Taking a more "aggressive" approach with this accidental can lead to serious problems, as a recent story illustrates.

A Detroit man named Ronald Page held a checking account with a regional bank called Lasalle Bank.  To say that Mr. Page was not wealthy would be an understatement--he had only a few hundred dollars in his checking account...but that was about to change.  What do banks do best?  Buy other banks.  Several years ago, Bank of America (the self-proclaimed "Bank of Opportunity") acquired Lasalle Bank, and in the process of transferring cusomters' account information, BoA made a costly error.  Costly for everyone involved, it would turn out.

A computer glitch at the Bank of Opportunity presented Page with the opportunity to withdrawal unlimited funds from the bank's ATMs without any overdraft restrictions.  When he discovered this, Page did the only logical thing and withdrew more than $1.5 million between late 2008 and early 2009.  Had he kept the money and deposited it into a savings account, the interest alone would have been staggering--this was back in the days when interest rates weren't fractions of a part of a tenth of a percent.  I wonder if Bank of America would have noticed if he deposited the money back into his own account...and could they still charge him with theft of bank funds?

After withdrawing all that money, Page tried parlay his new found wealth into an even larger fortune by heading to the blackjack table.  Needless to say, things didn't turn out as he'd planned--all Page succeeded into doing was earning compound interest on his own stupidity.  Over the course of two weeks, he gambled away all $1.5 million, and BoA discovered the missing cash.  Unable to repay his ill-gotten debt, Page now faces more than a year in jail for theft of bank funds.


Interestingly, the only reason Page isn't facing a longer prison sentence is because the U.S. Attorney's office placed part of the blame on Bank of America, because it was their computer error that presented Page with the opportunity to steal all that cash in the first place.  That sounds like faulty logic to me, but as a bank customer, I do find it incredibly annoying when banks merge, change everyone's account numbers, staff their branches with ignorant tellers, and add a bunch of new fees.

And it would seem that the University of Iowa has plenty of problems of its own.  The university audit claims that the $650,000 in over-paid wages was an increase of $73,000 from the previous school year. What are they doing down there?!  A one-time error of this size is bad enough, but it sounds like faulty payroll controls are as much a part of the school year as spring break and finals week.  That's pretty weak for an institution that publishes the salaries of all its employees online.

This just goes to show you what not to do when accidental monies show up unexpectedly.  I'm not here to preach the virtues of honesty, but if you decide to keep the cash and hope that the missing funds go undetected, at least have presence of mind to invest conservatively in case your luck runs out.

Here are a few links to the stories:

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