In the Matter of the Suspension and	June 10, 1983
 Proposed Debarment of

 NATHAN DAL SANTO
 1182 Elm Street
 at
 Kankakee, IL 60901-5434 

 P.S. Docket No. 15/130;
 P.S. Docket No. 16/33

 APPEARANCE FOR POSTAL SERVICE:
 					Michael J. Vandamm, Esq.
					Law Department
					United States Postal Service
					Washington, DC 20260-1117

 APPEARANCE FOR RESPONDENT:
				 	Charles H. Hall, Esq.
					Young, Welsch, Young & Hall
					408 North Vermilion Street
					P.O. Box 583
					Danville, IL 61832-0583

 Cohen, James A.  

On April 6, 1983, a hearing was held before the Judicial Officer on the suspension and proposed debarment of Respondent from Postal Service contracts based on an indictment and subsequent conviction of submitting fraudulent claims under nine Postal Service highway transportation contracts. ^1/ Cause for the debarment previously was determined to have been established by the conviction order, in accordance with §§ 1-604.1b(1) and (c)(2) of the Postal Contracting Manual (PCM).

The hearing was held at Respondent's request to allow evidence regarding Respondent's contention that he did not personally retain funds obtained pursuant to this scheme, and regarding his present responsibility to participate as a contractor with the Postal Service (id.).

Respondent testified on his behalf; the Postal Service did not present any witnesses. Respondent also filed a letter from his Probation Officer and transcribed testimony by character witnesses who testified at a prior hearing at the Transportation Management Office in Oakbrook, Illinois. Both parties have filed briefs.

The Postal Service admits, and it is found, that Respondent has been in the business of hauling United States Mail under contract with the Postal Service since 1939 and that "during those years he established a reputation as a good, reliable contractor" (Tr. 36). The Postal Service further admits, and it is found, that Respondent has a good reputation in his community (id.). His criminal problems and the present sanctions arise from his fraudulent certification to the Postal Service that certain drivers under nine highway transportation contracts were receiving wage increases totalling approximately $7,000. He was not paying the increases at the time (Tr. 9-12). Relying on the certification, the Postal Service "reimbursed" Respondent for the increased wages as a cost adjustment under the contracts. This money was kept in Respondent's business checking account for approximately two months before payment was made to the drivers (Tr. 13-14). There is no evidence that Respondent used these funds for his personal benefit (Tr. 14).

Respondent's testimony is confusing as to why he perpetrated this fraud (cf. Ts. 23, 25-26). However, it most logically was prompted by a reluctance to risk advancing the funds, coupled with an assumption that the Postal Service would be more likely to reimburse him for the wage increases if they were already being paid. Respondent testified, and it is undisputed, that he has not been the subject of prior criminal action (Tr. 14).

The standard for determining an appropriate period of exclusion under the PCM is present responsibility. See Peter Kiewit Sons' Co. v. United States Army Corps of Engr's, et al., 534 F. Supp. 1139 (D.D.C. 1982); Roemer v. Hoffman, 419 F. Supp. 130 (D.D.C. 1976). This is a protective standard which arises from the procurement concept of the responsible bidder. Stanko Packing Co., Inc. v. Bergland, 489 F. Supp. 947 (D.D.C. 1980). In its simplest form, a determination that a contractor is not presently responsible means "that it is not presently a good business risk for the government to do business. . ." with it. Roemer v. Hoffman, supra, 419 F. Supp. at 131. Past acts can be the basis for a determination that a contractor is not presently responsible. Roemer v. Hoffman, supra; Schlesinger v. Gates, 249 F. 2d 111 (D.C. Cir. 1957); Stanko Packing Co., Inc. v. Bergland, supra.

Under the standard of present responsibility, therefore, a debarment cannot last beyond the period of projected business risk. The PCM does not provide specific standards for assessing projected business risk in a given case except for the following guidance:

". . . debarment by the Postal Service shall be for a reasonable, definite, stated period of time, commensurate with the seriousness of the offense or the failure or inadequacy of performance. As a general rule, a period of debarment shall not exceed 3 years . . ." (§ 1-604.2). ^2/ The PCM also states that, whatever the cause

". . .the decision to debar shall be made within the discretion of the department head and shall be rendered in the best interest of the Government. Likewise, all mitigating factors may be considered in determining the seriousness of the offense . . . and in deciding whether debarment is warranted." (§ 1-604.1(c)(1)).

It is concluded that Respondent's criminal offense is sufficiently serious to warrant debarment. This offense displayed a basic lack of integrity and was perpetrated in the performance of Postal Service contracts. Moreover, Respondent's suspension based on this cause and the present extension are authorized under §§ 1-605.1 and 1.605.2 of the PCM.^3/

Section 1.605.2(c) states in part: "No suspension shall exceed 120 days. A suspension while in effect may be extended for an additional period of 120 days upon written determination of the reasons and necessity therefore."

While § 1-604.2 of the PCM indicates that a three year debarment is generally considered to be a ceiling, it is concluded that the criminal offense of fraud, unless mitigated by other circumstances, warrants exclusion for this period. Respondent has presented several arguments as mitigating his offense, which are addressed in turn:

1. "Only" $7,000 in falsely certified wage increases are involved, out of a payroll check which totaled $93,000. This argument is rejected. It is the act of fraud itself, and the lack of integrity displayed thereby, which justifies the exclusion. The serious breach of trust involved in certifying falsely is the same whatever the amount of money involved.

2. "There has not been any real injury in the sense that tax- payers' dollars were lost because the $7,000 he received was in fact paid out to the drivers and the Government evidently felt it was ap- propriate that they be paid that amount because the request was approved" (brief at 3). This argument entirely misses the point. Respondent evidently concluded that he had to resort to fraud in order to obtain the Postal Service's approval. It is quite possible that in the absence of a certification that the drivers were then being paid the increased amount, the increase - which was not mandated by law but was purely voluntary on Respondent's part - would have been denied.

3. A three year debarment would, because of Respondent's age 76 years , by "tantamount to a death sentence" (brief at 4). As noted, the criterion for debarment is not impact on the contractor but protection of the Postal Service.

4. The Probation Officer's letter (RX 1) states that Respond- ent's "likelihood of rehabilitation, although excellent while operating his his current business, would be dubious if he is deprived of his ability to earn a living." While a Probation Officer's opinion that a contractor has been rehabilitated might have some relevance to a debarment proceeding, speculation that debarment would adversely affect his future rehabilitation is not persuasive. Indeed, the possibility that Respondent is not yet rehabilitated supports the Postal Service's concern that he might not be presently responsible.

5. Respondent did not intend the funds for his personal use and ultimately paid the increases to his drivers. Although Respondent's actions may reflect a certain degree of altruism, his ultimate objective does not alter the fact that he certified falsely. Further, a question still remains as to why, if Respondent was truly concerned about obtaining the higher wages for his drivers, he allowed the money to sit in his business checking account for two months before disbursement.

6. Respondent should not be debarred because of his unblemished record of over forty years as a contractor with the Postal Service; his overall reputation within the community; and the absence of prior criminal involvement. These factors have some weight in determining a period of debarment, although conduct and reputation which predate a criminal offense must be viewed as an uncertain gauge in predicting future conduct. Although little doubt exists that Respondent regrets his criminal difficulties and the suspension and proposed debarment from contracting with the Postal Service, doubt nonetheless remains regarding whether he appreciates the significance of his action as constituting fraud. In this regard, Respondent's brief states that "What the Respondent is guilty of consists of nothing more than not using appropriate procedures to obtain the raise he wanted for his drivers" (at 3). This description of Respondent's actions is euphemistic at best. It hardly reflects the type of understanding and remorse that would instill confidence in his future integrity.

In support of its argument that a three year debarment is warranted in this case, the Postal Service cites Rodlac Trucking and Leasing, Inc., P.S. Docket No. 7/158 (P.S.D. June 5, 1980), which sustained a three year debarment based on conviction on one count of conspiracy and eleven counts of mail fraud in connection with obtaining Postal Service contracts. In that case, no prior record of performance with the Postal Service or general reputation for integrity within the community was offered as mitigating circumstances.

Based on the entire record and personal observation of Respondent at the hearing, it is concluded that a debarment period of two years is sufficient for ensuring that Respondent has seriously reflected on the severity of his offense and to eliminate any remaining doubt regarding his responsibility as a contractor. In calculating this period, Respondent has been given credit for the time he has been suspended.

Accordingly, it is ordered that the suspension be converted into a debarment on issuance of this decision and that Respondent be debarred up to and including November 2, 1984.

1/ The suspension was subsequently extended based on the pending debarment action (letter to Respondent dated February 24, 1983, from the Assistant Postmaster General, Mail Processing Department). Respondent appealed the extension but not the initial suspension, which was imposed on November 3, 1982 by letter of that date.

See Nathan Dal Santo, P.S. Docket No. 15/130 (P.S.D. on Motion for Summary Judgment, March 4, 1983) at 3-4. Accordingly, at the hearing Respondent was precluded from disputing his participation in a scheme to defraud the Postal Service (id. at 4).

2/ Except "Where statutes, Executive orders, or controlling regulations of other agencies provide a specific period of debarment, they shall be controlling." (§ 1-604.2)

3/ Section 1-605.1 states in part: "(a) A department head may, where the interest of the Government require sic , with the concurrence of the General Counsel, suspend any firm or individual:

(1) Suspected, upon adequate evidence, of -

(i) Commission of fraud or criminal offense as an incident to obtaining, or attempting to obtain, or in the performance of a public contract;