In the Matter of the Suspension and Proposed Debarment of: VIJAY PATEL and LOADING DOCK, INC., 167 Main Street at Lodi, NJ 07644-1720 P.S. Docket No. 35/28 12/29/89 Finn, Jr., James D., Acting Judicial Officer APPEARANCE FOR POSTAL SERVICE: Norman D. Menegat, Esq., Office of Contracts and Property Law, Law Department, United States Postal Service, Washington, DC 20260-1121APPEARANCE FOR RESPONDENT: Jay R. Atkins, Esq., Draesel, Sunshine, Atkins, Minassian & Tafuri, 555 Kinderkamack Road, Oradell, NJ 07649-1572
By Notice Of Suspension and Notice Of Proposed Debarment dated September 11, 1989, the Assistant Postmaster General John J. Davin (hereafter referred to as the Department Head) notified Respondents, Vijay Patel and Loading Dock, Inc., (1) that they were suspended from contracting with the United States Postal Service (Postal Service) for a period of 120 days pursuant to Postal Service Procurement Manual (PM) § 3.3.2, and (2) that under the same PM section the Postal Service was considering the debarment of each for a period of three years. The suspension and proposed debarment were based on Respondent Patel's actions of paying gratuities or bribes to a Postal Service employee in exchange for obtaining favorable consideration in the award of Postal Service contracts to Respondent Loading Dock, Inc.
By letter dated September 21, 1989, Respondents, through counsel, requested a formal hearing under 39 C.F.R. § 957.5 to contest the suspension and proposed debarment. A hearing was thereafter held on November 16, 1989, in Washington, DC, at which time Respondents presented the testimony of one witness, Mr. Patel, while the Postal Service relied upon a signed stipulation of the parties in support of its position. Oral argument was thereafter presented and the parties elected not to file post-hearing briefs.
1. Respondent Vijay Patel is an individual who resides in the State of New Jersey. Mr. Patel is the owner, sole incorporator, and sole director of Respondent Loading Dock, Inc. (Transcript (Tr.) 8, 12; Respondents' Exhibit (RX) 1).
2. Respondent Loading Dock, Inc. is a corporation formed on February 17, 1981, under the laws of the State of New Jersey (Tr. 12; RX 1).
3. Mr. Patel has a high school education. Mr. Patel worked in the field of installing loading dock equipment for approximately eight years before he formed Loading Dock, Inc. He had no experience or training as a manager prior to starting his own business. (Tr. 9-11, 28; RX 1).
4. Respondents first installed loading dock equipment for the Postal Service in 1981 as a subcontractor to a firm called Metrodock. In 1983 or 1984, Respondents began performing work for the Postal Service as a prime contractor. (Tr. 12-15).
5. Mr. Harry Weisz was a Postal Service employee who worked as an industrial engineer for the New York Division of the Postal Service from 1984 through 1987. Mr. Weisz was responsible for the installation of loading docks and scissors lifts in various postal facilities in New York. Mr. Weisz maintained regular contact with contractors. (Notice at 3).
6. In 1984 or 1985, Mr. Weisz told Respondent Patel that he would have to pay Weisz to receive additional contracts. Specifically, Weisz said "we all have to make money" and clarified this to mean that Patel would have to make monetary payment to Weisz in order to obtain future contracts. (Tr. 17, 30; Stipulations (Stip.) P3).
7. Respondent Patel made his first payments to Mr. Weisz in cash in 1984 and/or 1985. The cash payments totalled less than $2,000. (Stip. PP4, 5).
8. At some time after making the cash payments Respondent Patel informed Mr. Weisz that he did not have a sufficient cash flow to continue to make payments in cash. Mr. Weisz then suggested that Respondent Patel pay by check. From June of 1985 until December of 1987, Mr. Patel paid certain bills and debts owed by Mr. Weisz, his wife, and his father-in-law, by checks drawn on Loading Dock, Inc.'s account. Mr. Patel generally delivered the checks to Mr. Weisz at Mr. Weisz' office. The payments by check totalled $31,680.69. (Tr. 33; Stip. PP6-8, 12).
9. Mr. Weisz advised Mr. Patel that Patel could deduct the check payments to Weisz from his taxes as business expenses. Mr. Patel did not know that he could not legally deduct such amounts as business expenses. Respondent Patel's accountant was not made aware of the nature of the checks when Mr. Patel's tax returns were prepared. Since learning of the improper deductions Mr. Patel has not attempted to amend his tax returns. (Tr. 33-37).
10. Respondent Patel also gave Mr. Weisz Christmas gifts, a Sharp video cassette recorder and a coupon which would enable Mr. Weisz to obtain a five inch black and white television. (Stip. PP15-16).
11. In exchange for the payments made by Mr. Patel, Mr. Weisz assisted Respondents in obtaining Postal Service contracts. Respondent Loading Dock, Inc. received approximately nineteen Postal Service contracts for hole drilling, scissors lift and dock equipment projects during the period of 1985 through 1988. Respondent Patel did not terminate the payment scheme until the records of Loading Dock, Inc. were subpoenaed by the government. The total value of the contracts given by Mr. Weisz to Loading Dock, Inc. was approximately $200,000. (Tr. 20-22; Stip. PP9-11).
12. In 1988, Respondent Patel received a subpoena covering all documents pertaining to work performed for the Postal Service. In August of 1988, Respondent Patel met with the United States Attorney to discuss his cooperation with a criminal investigation involving Mr. Weisz. Respondent Patel was granted immunity from criminal prosecution in exchange for his cooperation. Accordingly, Respondent Patel supplied the United States Attorney with his cancelled checks and explained the nature of the arrangement he had with Mr. Weisz. Respondent Patel has not been prosecuted criminally. (Tr. 37-39).
13. On September 11, 1989, the Department Head issued the Notice Of Suspension and Notice Of Proposed Debarment against Respondents. The Department Head determined Mr. Patel's payments of gratuities or bribes to be a "serious irregularity in [Respondents'] business dealings . . . [and to] indicate a lack of business honesty and business integrity that would seriously and directly affect [Respondents'] responsibility as a contractor." (Notice at 4).
The Postal Service rests its determination to suspend and debar Respondents on PM § 3.3.2 e. and i. Those provisions allow for suspension and/or debarment for a ". . . cause [action] of such serious and compelling nature, affecting responsibility as a contractor as may be determined [by the Department Head or Postal Service] to warrant [suspension or debarment]." The Postal Service contends that Respondents' activities regarding the scheme of payments to obtain contracts are sufficiently serious and of a compelling nature to render Respondents not responsible to contract with the Postal Service.
In support of its position the Postal Service cites the illegal nature of the scheme, its duration, Respondents' failure to notify government officials of Mr. Weisz' proposition, the motivation for Respondents' cooperation with the government as being a means to avoid criminal prosecution rather than being based on a sense of duty, and the fact that Respondents have made no attempt to amend their tax returns. The Postal Service also argues that Respondents already made a complete bargain for criminal immunity in exchange for information regarding the payment scheme, and that Respondents should not now be allowed to rely on that same bargain to avoid debarment.
Respondents do not deny the facts surrounding the payment scheme, however, they do contest the imposition of the suspension and debarment. In the alternative, Respondents argue that any period of debarment should be minimal. In support of their position Respondents argue that several factors should be considered: that Respondent Patel is a small businessman, that Respondents were extorted by a corrupt government official, that Respondents' business was a fledgling when Mr. Weisz was first encountered, and that Respondents cooperated fully with the government investigation which led to the prosecution of Mr. Weisz. Respondents contend that these factors mitigate in their favor.
Payments made for assistance in obtaining contracts have been found to constitute a cause for debarment Robinson v. Cheney, 876 F.2d 152 (D.C. Cir. 1989) (bid rigging); Jack Cohen, HUDBCA No. 77-481-DB, Slip op. (Oct. 17, 1977) (gratuity); Western Contract Furnishers, P.S. Docket No. 6/6 (P.S.D. Nov. 22, 1977) (gratuities); Photo & Sound Co., P.S. Docket No. 6/8 (P.S.D. Oct. 17, 1977) (gratuities). Respondents' activities are of a similar nature. However, the debarment of a contractor requires more than a finding of a cause for debarment. There must also be a determination that the contractor lacks present responsibility. Roemer v. Hoffman, 419 F. Supp. 130, 132 (D. D.C. 1976); Recognition Equip., Inc., P.S. Docket No. 32/62 at 29 (P.S.D. Feb. 17, 1989). A determination of responsibility requires assessment of the contractor's record of integrity and business ethics, as well as the contractor's ability to perform. PM § 3.3.1 b.; 39 Comp. Gen. 468, 470 (1959); Recognition Equip., Inc., id. Further, a finding of lack of present responsibility may be based on past acts. Robert C. Gennaro, HUDBCA No. 81-632-D37, 83-1 BCA P16,141 (1982); Recognition Equip., Inc., supra. Finally, a "contractor can meet the test of present responsibility by demonstrating that it has taken steps to ensure that the wrongful acts will not recur." Robinson v. Cheney, supra, at 160.
Respondents' series of payments to a postal official in exchange for contract awards indicates a serious lack of ethics and business integrity to such a degree that they are clearly non-responsible. Respondents' arguments to the contrary are not persuasive. Respondents may have been in the early stages of developing the business, however, they engaged in the payment scheme for over two years. Findings of Facts (FOF) 7 and 8. Respondents could have terminated the arrangement at any time, however, they did not terminate the practice until subpoenaed by the government. FOF 11.
Respondents rely heavily on their cooperation with the government investigation as a factor to be considered in mitigation of debarment. Respondents' cooperation with the investigation does not of itself demonstrate present responsibility. The act of cooperation was a means of securing immunity from criminal prosecution. FOF 12. This factor demonstrates Respondent Patel's desire to protect himself, but does not mitigate his lack of business integrity. See Robert C. Gennaro, 83-1 BCA at 80,176.
Nor have Respondents shown that they have taken any steps to ensure that such conduct will not recur. Respondents have not demonstrated that internal controls have been implemented or that the organizational structure of Respondent Loading Dock, Inc. has been modified to negate the possibility that Respondents present a current or future business risk. Mr. Patel, one of the culpable parties to the bribery scheme, is still in sole control of Loading Dock, Inc. Robinson v. Cheney, supra, at 160. Respondents have not even attempted to amend the tax returns which include the illegal payments to Weisz as business expense deductions. FOF 9. Accordingly, it is determined that it is in the best interest of the public that Respondents be debarred from contracting with the Postal Service.
The Department Head requests that the debarment be for the maximum three years allowed by regulations. See PM § 3.3.2 g. The period of debarment should be commensurate with the seriousness of the offense. Id. However, neither the imposition of a debarment nor the length of the debarment should be punitive in nature. See Peter Kiewit Sons' Co. v. United States Army Corps of Eng'rs, 534 F. Supp. 1139, 1148, 1154 (D. D.C. 1982), rev'd on other grounds, 714 F.2d 163 (D.C. Cir. 1983).
Respondents present the same arguments for consideration in support of their contention that a lesser period of debarment should be imposed as they utilized to support their position that no debarment should be imposed. For the reasons stated above, Respondents' arguments are not persuasive. Considering the seriousness of Respondents' payment scheme and the lack of mitigating circumstances, a three year debarment period is appropriate. The debarment is effective as of the date of this decision, at which time the suspension automatically terminates.