San Francisco resident Matthew Shinnick tried to sell a pair of mountain bikes on Craigslist late last year. He attracted a buyer, received a check in the mail -- and ended up handcuffed by police in a downtown Bank of America branch and jailed for almost 12 hours.

BofA calls the bizarre episode "an unfortunate series of events" and says that "clearly and without equivocation, Bank of America regrets what occurred." But the bank says it was only doing its duty by notifying the cops when a bad check surfaced.

It also says Shinnick has no grounds to sue for thousands of dollars in legal costs because of a 2004 state Supreme Court decision that shields institutions and people from liability when reporting suspected crimes to the police.

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Legal experts say that BofA is right about Shinnick's lack of recourse and that incidents like this, while unusual, could happen with greater frequency as Craigslist, eBay and other online services increasingly become hunting grounds for fraudsters and identity thieves.

Craigslist founder Craig Newmark acknowledged that cases of wrongful arrest are "an increasing possibility" and said the onus is on institutions like BofA "to show a greater commitment to customer service."

Shinnick, 38, told me he'd received an e-mail in December from someone who said he was in Canada and was willing to pay a total of $600 for the two bikes offered on Craigslist.

"We never talked in person," Shinnick said. "We just corresponded by e-mail over a series of weeks."

The buyer finally said he was going to cut a check on his company's Bank of America business account and arrange to have the bikes shipped north. Shinnick said he received a check for $2,000 shortly after Christmas and was informed that the extra cash was to cover shipping costs "and for my trouble."

Shinnick, it appears, was a victim of the classic "Nigerian 419" scam, adapted in this case to sucker in unwary Craigslist users.

Typically, the scam involves a bogus check being sent by a fraudster as a part of a transaction. The transaction is subsequently canceled and, before the bank has spotted the check as a phony, the fraudster requests some or all of his money back -- money that the victim unknowingly pays out of his own pocket.

Shinnick said he wasn't aware of the scam while he was negotiating to sell his bikes -- his first foray onto Craigslist. But he was made suspicious by the unexpectedly large payment.

"That was kind of a red flag because it's a lot of money," he said. "I didn't want to deposit it into my account because I didn't want it to bounce."

So Shinnick, who resides on Nob Hill, stopped by a BofA branch near Union Square in early January. He said he asked a teller if sufficient funds existed in the BofA business account to cover the check.

"She said it was a valid account and that there were funds to cover it," Shinnick recalled. "I said, 'Great,' and asked to cash the check."

He signed his name on the back.

What Shinnick didn't know is that he'd just become party to a crime. The bank account may have been real but the check was phony.

What he also didn't know is that, according to the police report for the case, a warning had been placed in BofA's computer system to watch for fraudulent checks drawn on the account in question.

The teller contacted the business and was informed that no check had been written to Shinnick for $2,000 or any other amount. She immediately passed the check to the branch manager.

"I saw him talking on the phone and staring at me," Shinnick said. "A few minutes later, four SFPD officers came into the bank. They didn't say a thing. They just kicked my legs apart and handcuffed me behind my back."

The police report for Shinnick's arrest says he was taken into custody "for the safety of the bank employees as well as the bank customers."

Shinnick said he was never read his rights. He said he was instructed by one of the cops to keep his mouth shut and not say anything. Shinnick said he remained handcuffed in the bank lobby for about 45 minutes while the police spoke with BofA workers.

"As people were coming in to do their banking, I was in plain view of everyone," he recalled. "I was absolutely mortified."

Shinnick was taken to Central Station on Vallejo Street, according to the police report. He said he was taken by van about an hour and a half later to the Hall of Justice on Bryant Street.

At the Hall of Justice, Shinnick said, he was finally allowed to call his parents after almost five hours in custody. He said he was photographed and fingerprinted, and then strip-searched and given an orange jumpsuit to wear.

"I was so humiliated, it was beyond belief," he recalled. "It was an absolute, living nightmare. I felt like I was going to be one of those people who gets caught in the system and has no way of getting out."

Shinnick said he was placed in a cell with about a dozen other inmates, mostly drug dealers and drug users.

"It was a small cell," he said. "One guy was unconscious underneath the one toilet that was there for all of us to use. There was only one bed to sit on. I sat on the ground."

Shinnick was finally released around 11:30 p.m., after his father paid $4,500 of $45,000 in bail. Within 24 hours, the district attorney's office dropped all charges against Shinnick.

In July, a San Francisco Superior Court judge ruled that Shinnick was innocent by "findings of fact" -- a decision that essentially erases all record of the case.

But by this time, Shinnick said, he'd spent about $14,000 clearing his name. He wanted that money back and he felt BofA should pay it.

BofA felt otherwise. Earlier this month, a bank vice president, William Minnes, wrote to Shinnick's lawyer to say that "Bank of America can certainly understand that your client is angry at the bank."

However, he said, BofA has no legal liability in the case because of the 2004 Supreme Court ruling. Minnes warned that "litigation would not prove financially beneficial" to Shinnick.

Minnes declined to comment when reached by phone this week.

The Supreme Court case, Hagberg vs. California Federal Bank, was remarkably similar to Shinnick's. It involved a woman who presented an unusually large check for deposit from her stockbroker.

A teller believed the check was phony and called the police. The check turned out to be real, but by then the police had arrived and had handcuffed the woman.

The woman subsequently sued for damages, but the court ruled that all reports to the police are absolutely privileged. In other words, no liability can be connected to telling police of a suspected crime, whether real or not.

"The court wants to protect people when reporting criminal activity," said Paul Glusman, a Berkeley attorney who has written about the Hagberg case. "But this can be abused. At this point, there's nothing that will protect ordinary citizens from a false police report."

Jennifer Becker, a San Francisco attorney who specializes in malpractice cases, stressed that the intent of the court's decision is important. There shouldn't be repercussions for reporting a suspected crime, she said.

But Becker observed that incidents of wrongful arrest "could get totally out of hand with online commerce and eBay and all the opportunities for fraud."

Shinnick, who works as a salesman in a San Francisco clothing store, said it's up to banks not to call the police until they're certain that a crime has been perpetrated -- and that the person standing there is a crook and not a victim.

"I've been in retail for 18 years," he said. "I know about customer service and dealing with fraud. The way to handle something like this is to take the person into a back room and work things out before you call the police."

Shinnick said he feels doubly violated: once by his wrongful arrest and a second time by BofA's refusal to compensate him for his losses.

"It's infuriating," Shinnick said. "And if this could happen to me, it could happen to anyone. That's what's so scary about this."