NEW YORK -- Paul Diaz, the manager of a Bronx supermarket, began detecting the strange $1 bills last Monday. Some tiny number-letter combinations on the face and back were missing or in the wrong place, George Washington's hairline was receding excessively and a white spot under his right eye should not have been there.
He took the bills to the bank. Tellers thought they were counterfeit, so he stopped accepting them from customers. Hundreds of odd $1 bills were turned away in the next few days.
The word spread. Across the metropolitan area, other stores began spotting discrepancies and refusing to take the bills. In the Miami area, merchants and consumers also began shying away from funny-looking $1 bills.
For six weeks now, it happens, concerned citizens across the East have been calling the Secret Service, the nation's watchdog against counterfeit currency, to inquire about the suspicious bills.
In recent days, the volume of calls from stores, banks and ordinary people mounted steadily into the thousands.
Yesterday, alarmed over the spreading public perception that millions of counterfeit $1 bills were in circulation, the New York field office of the Secret Service issued an unusual statement saying that the strange-looking ones are not counterfeit, only the result of a new, cheaper printing process.
And the Treasury Department's Bureau of Engraving and Printing in Washington also issued an unusual advisory to assure the public of the authenticity of some 200 million $1 bills -- nearly 4 percent of the nation's $1's -- that it had printed and sent to Federal Reserve Banks to put into circulation throughout the East since June 1992.
The circumstances suggested a couple of intriguing mysteries: Why did it take the public 17 months to detect the changes? And how did the word spread like wildfire in New York and Miami once they were spotted?
But there seemed to be less mystery about the changes themselves. Some were technical, relating to the Treasury's own codes on bills.
But others appear to have been inadvertent and touch on what the American public has long assumed was an inviolable truth about its currency: that its quality was, and always would be, uniform.
"In all my years of experience, I've never seen the U.S. Mint making errors like that," said Mr. Diaz, the manager of a Pioneer Supermarket in East Tremont, the Bronx, who noted white blotches on Washington's head and on bordering leaves, where delicately traced lines had appeared on old $1 bills, and said they were so blemished they looked counterfeit.
Bureau officials defended the high-tech, high-speed printing on what it calls a prototype web-fed intaglio press, which more than triples the output of bills by using larger sheets of paper and by printing on both sides at once instead of one side at a time. They called the process necessary to meet the needs of a growing money supply.
The bureau acknowledged that the new notes "look slightly different," with some code numbers on the face and back eliminated or moved. But Norma Opgrand, a spokeswoman, defended the bureau's quality control and said she could not comment on or account for blemishes that Mr. Diaz and other merchants and consumers had noticed.
"I can't speak to that because I haven't seen those notes," Ms. Opgrand said, "but our product is a world currency, recognized for the highest standards, and we will continue to meet those standards. Our research and development is working constantly on achieving the best quality product."
Ms. Opgrand said the only official changes made in the $1 bill when the new press was put into service 18 months ago were the elimination of the plate location, or check number, from the lower right and upper left sides of the face, and the movement of the plate location number on the back from just below the E in the big ONE to just above that E.
Blotches like those described by Mr. Diaz and others, she said, would be a violation of the bureau's quality control. "If in fact they exist, somebody missed pulling them out in the quality control process," she said. "They shouldn't have left the bureau if the notes are as described."
Ms. Opgrand said the bureau had issued a notice to the public about the changes in June 1992, but apparently it got little publicity or went unnoticed by the public. Since then, the bills have been used to replace worn-out bills, finding their way into circulation through Federal Reserve branches in New York, Boston, Richmond, Atlanta, Miami, Detroit, Cleveland and Chicago.
Why New York and Miami?
She said she had no idea why the public had suddenly awakened to the changes in New York and Miami.
"I can only speculate," she said. "To me it reflects how people relate to a lot of different things. Perhaps people in New York and Miami are more used to looking more closely at their currency. The average American is not that familiar with the currency."
James Heavey, the special agent in charge of the Secret Service field office in New York, issued the unusual advisory yesterday assuring the public that the $1 bills with unfamiliar features were genuine.
As a result of "an effort to reduce the costs of printing," Mr. Heavey said, the Bureau of Engraving "has begun using a more simplified and less expensive procedure of doing so which has slightly changed some features of these bills."
James Kaiser, a spokesman for the New York office of the Secret Service, which is also a part of the Treasury Department, said in an interview that his office had received "a massive amount of inquiries, hundreds upon hundreds of calls" in recent weeks from "people thinking they have bad notes."
He and other Treasury officials noted that counterfeiters almost never produce fake $1 bills, preferring $10s, $20s, $50s or $100s as more profitable and efficient, even though shopkeepers more closely examine larger bills and almost never look twice at a $1 bill.
The sudden upsurge in calls was not bad, Mr. Kaiser said. "It shows the public is aware. It's encouraging."