1st Interstate Goofs on Tax Forms, Including Those of Man in Charge

Make a mistake at work and the last person you want to find out is the boss.

It was bad enough when a computer foul-up caused First Interstate Bank to send out erroneous or duplicate federal tax forms to 24,000 shareholders at 25 major Western companies.

But the problem got worse when bank employees discovered that one of the recipients was Harold J. Meyerman, a senior executive at First Interstate and the person with ultimate responsibility for the department that had messed up.

“They knew they had a problem, but when they found out Meyerman’s form was involved it became very sensitive,” said one insider at the Los Angeles bank who asked that his name be withheld.

The difficulties involved 1099 forms, which are used to report non-salary income, including income from stock dividends. First Interstate processes the forms for its own shareholders and, as a business, for hundreds of other big companies.

This year, about 7,500 of the forms went out with incorrect figures for income, and an additional 16,500 people received duplicate forms. The bank discovered the problem earlier this month when confused stockholders began calling First Interstate and the other companies involved.

Bank executives Friday played down the magnitude of the incident. Russell A. Snow, an executive vice president, said no inaccurate information was reported to the Internal Revenue Service and that all the shareholders affected have received letters explaining the situation.

It was Snow who had to report the foul-up to Meyerman, who is president of First Interstate Ltd., the bank’s corporate banking arm. Meyerman said he was unaware that he had received duplicate forms before Snow’s visit about two weeks ago.

“I didn’t even know I had a problem,” he said. “My secretary had put the 1099s into my tax file, and then one day Russ Snow came in and told me about it.”

Two Kinds of Errors

Snow and another executive, Vern Kozlen, explained that First Interstate installed a sophisticated new computer program last year to handle issuing 1099s for about 300,000 shareholders in many companies, as well as to perform other functions.

When the program was used last month to begin churning out the 1099s for the first time, some computer quirks left over from the previous system caused two kinds of mistakes, the executives said.

Some shareholders were mailed duplicate forms and some received forms that misstated their dividend income by as much as 20%. About 5,800 of the mistakes were blamed on bad information provided by another company, and the remainder were tracked to the computer program, Kozlen said.

Among the companies whose shareholders were affected were some major First Interstate customers, including Tucson Electric Power, oil refiner Tosco Corp. and Times Mirror, the publisher of the Los Angeles Times.

“Some of our shareholders received duplicates and others got incorrect information,” said Roger Yohem, director of public affairs for Tucson Electric. “We got several telephone calls from shareholders, but we feel it is pretty much resolved by working with the bank.”

Although First Interstate said the problem was caused by computer glitches, the assistant vice president in charge of the department involved resigned this week.