September 19, 1989 In the Matter of the Petition by CORAL S. VELLOCIDO 94-1076 Lumikula Street at Waipahu, HI 96797-3937 P. S. Docket No. DCA-47 Appearance for Petitioner: Elbridge W. Smith, Esq. Smith Himmelmann 125 Merchant Street Honolulu, HI 96813-4498 Appearances for Respondent: M. Perry Johnson, Esq. Office of Field Legal Services United States Postal Service Western Division San Bruno, CA 94099-0170 Larry Koseki Manager, Labor Relations United States Postal Service Main Post Office 3600 Aolele Street Honolulu, HI 96820-9401
FINAL DECISION UNDER DEBT
COLLECTION ACT OF 1982
By timely filed petition, Petitioner, Coral S. Vellocido, requested an oral hearing on a Notice of Involuntary Administrative Salary Offsets Under the Debt Collection Act. The notice advised Petitioner that she is indebted to the Postal Service, Respondent, in the amount of $4,690.24 for giving approval to a clerk to accept an uncollectable check from a mailer who was on the 'Cash Only List." The notice further advised Petitioner of Respondent's intent to collect the indebtedness by deducting approximately $195.00 from each of Petitioner's paychecks until the debt is satisfied.
Petitioner contests the indebtedness and raises three defenses on her behalf. First, she alleges that no statutory or regulatory authority exists to support the involuntary deduction from her paycheck. Second, she contends that Respondent failed to accord her due process in that it did not adequately attempt to obtain collection from the actual debtor. Third, she contends that under the circumstances of this matter her actions were reasonable.
A hearing was held at Petitioner's request in Honolulu, Hawaii. Petitioner presented her own testimony as well as that of Postal Inspector Beatrice N. Moore and Window Clerk Supervisor Arnold Gorgonio. Petitioner also elicited testimony on cross-examination from all four of Respondent's witnesses, Postal Service employees: Edward Hazelwood, a Window Clerk; Cheryl Tanibe, Superintendent of Window Services; Iris Sobol, an Accounting Specialist; and Walter Yamamoto, Manager, Mailing Requirements.
FINDINGS OF FACT
1. In September 1988, Petitioner, Coral S. Vellocido, held the position of a supervisor, Bulk Mail Acceptance Unit, at the Honolulu, Hawaii, Main Post Office. Her unit services bulk mail accounts and physically accepts the bulk mailings. The Bulk Mail Acceptance Unit has no authority to accept payment for the mailings. The mailers are required to make all payments at the Main Office Window Service, which is also situated in the Main Post Office. (Transcript (Tr.) 114, 154-55; Exhibit (Ex.) D and G).
2. Wolf Media Group ("Wolf") was a bulk mailer whose name appeared on the September, October, and November 1988, Honolulu Division "Cash Only List." Postal Service window clerks are not allowed to accept personal checks from mailers listed on the "Cash Only List." The "Cash Only List" indicated that Wolf had given a bad check to the Honolulu Main Post Office Window Service on August 11, 1988, in the amount of $5,757.00. (Respondent's Answer Exhibit (RAX) 6, 7, and 8).
3. On Friday, November 18, 1988, Wolf brought a mailing to Petitioner. Wolf then went to the Main Office Window Service and attempted to pay for the mailing with two checks totaling more than $8,000. Since Wolf was on the "Cash Only List" the window clerk refused to accept the checks (Tr. 13-15; 114-15). Wolf contacted Petitioner, who in turn contacted Ms. Iris Sobol, a Postal Service Accounting Specialist, to ascertain if Wolf was still on the "Cash Only List" (Tr. 117-18). Ms. Sobol advised Petitioner that Wolf was on the "Cash Only List" and that Wolf should either get a letter of good credit from its bank or obtain a cashier's check. She further advised Petitioner that Petitioner could "vouch" for the checks, but warned Petitioner that if she vouched for the checks and they were returned as uncollectable Petitioner could be held financially responsible (Tr. 57). Petitioner was also advised to check Wolf's bank to see if Wolf had sufficient funds to cover the checks. Petitioner did so and found that sufficient funds did not exist (Tr. 57-58; 118). Petitioner did not vouch for the checks and they were not accepted (Tr. 118).
4. Wolf returned to the Main Post Office Window Service on Monday, November 21, 1988, with a check in the amount of $4,690.24, and told the window clerk that it had been approved by the Bulk Mail Acceptance Unit. The clerk sought advice from his supervisor, Mrs. Cheryl Tanibe, who in turn telephoned Petitioner (Tr. 15-16; 26-27).
5. In the interim Petitioner had received information from one of Wolf's agents that Wolf had a $15,000 floating line of credit with its bank (Tr. 132; 145-46). It was Petitioner's belief that Wolf's name should not have been included on the "Cash Only List" as the August bad check had been given by mistake (Tr. 115-17; 140-41).
6. The record contains somewhat conflicting versions of the telephone conversation on November 21, 1988, between Ms. Tanibe and Petitioner as to which of the two suggested that Petitioner vouch for Wolf's check. The record is clear however that Petitioner told Ms. Tanibe that she (Petitioner) would vouch for the check and that Ms. Tanibe should accept it. Ms. Tanibe did accept it and with Petitioner's knowledge wrote "Per CVS" (Petitioner's initials) on the back of the check (Tr. 26-27; 120).
7. Wolf's November 21, 1988, check thereafter was returned to the Postal Service in late November for insufficient funds (RAX 1).
8. On January 12, 1989, Ms. Tanibe wrote to Wolf and advised Wolf that its check had been returned for insufficient funds. Payment of the $4,690.24 was requested and Wolf was threatened with court action if payment was not made. Wolf did not respond to the letter (RAX 3; Tr. 51). A subsequent telephone call may have been made to Wolf by the Accounting Services Manager, as Wolf paid the Postal Service $200 in April and May 1989 (Tr. 75-76).
9. Sometime in February 1989, Petitioner went to the offices of Postal Inspector Beatrice Moore seeking advice since Petitioner feared that her pay might be offset to satisfy Wolf's debt. Although it is not the responsibility of the Inspection Service to handle civil collections, Inspector Moore sent a letter of demand to Wolf which was unanswered. The Inspector was unsuccessful in attempts to reach Wolf's principal by telephone, although Wolf was in operation in Hawaii at that time (Tr. 99-100).
10. On March 22, 1989, the Honolulu Division, Manager, Mailing Requirements wrote to Petitioner and requested payment of $4,690.24, the amount of the bad check accepted from Wolf. She was advised that "[t]his debt is based on your giving approval to a clerk to accept a check from Wolf Media Group who is on the 'Cash Only List.'" She was also advised that her failure to make the payment ($195 per pay period) would result in an involuntary salary offset (RAX-11).
11. On May 16, 1989, final demand for payment was made to Petitioner (RAX 19). On May 30, 1989 Petitioner filed a Petition for Hearing Under the Debt Collection Act, thus initiating this proceeding.
DECISION
Petitioner's first and third defenses -- that no authority exists for the setoff and that her actions were reasonable -- need not be considered in detail, as her second defense, that adequate measures were not taken to attempt to collect the $4,690.24 amount from Wolf, is meritorious.
In regard to the first defense it is sufficient to note that the Debt Collection Act (5 U.S.C. § 5514) was enacted to provide a means for the offset of a federal employee's salary to satisfy debts owed to the government 1 and that the Postal Service has adopted regulations to implement the Debt Collection Act (§§ 450-455 Postal Service Employee and Labor Relations Manual). In regard to Petitioner's third defense, as the Findings of Fact indicate, the reasonableness of Petitioner's action in vouching for the check is highly questionable.
However, the actions or inactions of Postal Service management, subsequent to the return of Wolf's check in late November 1988, preclude any recovery from Petitioner. No action of any nature was taken until January 12, 1989, when Ms. Tanibe sent the letter of demand to Wolf. Although that letter threatened initiation of court proceedings against Wolf for non-payment of the debt, no such suit was ever filed. There is some hearsay evidence in the record of a subsequent phone call to Wolf by a manager, but if so, it appears to have been one isolated instance.
It was only after Petitioner herself contacted a Postal Service Inspector in February 1989, that further attempts were made to collect the funds from Wolf by a letter of demand and telephone calls. These attempts at collection were specially made at Petitioner's request since the Inspection Service normally does not handle collection matters.
Thereafter, on March 22, 1989, approximately four months after the bad check was accepted, demand was made by Respondent on Petitioner for the payment of Wolf's debt. It cannot be said that during that four month period Postal Service management attempted collection of the debt from Wolf with any degree of peserverance. Although Wolf was threatened with a court action, none was brought. Wolf was operative in Hawaii during this period and Respondent offered no evidence that Wolf was insolvent. The debt was Wolf's, not Petitioner's. Wolf, not Petitioner, was the primary culpable party.
Under these circumstances more intensive effort should have been expended by Postal Service officials in pursuing available remedies against Wolf prior to initiation of offset proceedings against Petitioner. Respondent's failure to mitigate its damages is a barrier to its recovery.
There was no proper basis for issuing the March 22, 1989, Notice of Involuntary Administrative Offsets under the Debt Collection Act against Petitioner. The Petition is granted.
James D. Finn, Jr. Associate Judicial Officer