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Mellon Pays $18.1M Over Loss of Returns

November 27, 2002

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PITTSBURGH (AP) _ Mellon Financial Corp. said Wednesday it has paid the federal government $18.1 million over the loss of 70,000 tax returns that apparently were hidden or destroyed by harried employees.

The tax returns, worth $1.2 billion, disappeared last year at a Pittsburgh processing center operated by Mellon, one of several banks under contract to the Internal Revenue Service to handle returns.

Last year, Mellon paid the Treasury Department $12.8 million to cover lost interest from the missing returns. Recently the bank paid an additional $5.3 million to cover the government’s administrative costs.

Mellon eventually found some of the taxpayer checks and returns from the April peak-processing period in a storage room. But other returns have never been found.

Officials said there was no indication of theft. Rather, Mellon said employees may have hid or destroyed returns because they were behind in their work.

Four Mellon bank managers lost their jobs after the incident, 106 bank employees were laid off, and the processing operation was shut down.

Because of the incident, workers at the nation’s 10 bank-operated centers for processing tax returns have to undergo an FBI fingerprint check.

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On the Net:

Mellon Financial.: http://www.mellon.com

Treasury Department: http://www.treas.gov

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