Appeal of P.S. Docket No. 38/13 -- JOHN R. ARNOLD AND PRIME, INTERNATIONAL CORP.

 In the Matter of the Proposed Debarment of: 

 JOHN R. ARNOLD
 AND
 PRIME INTERNATIONAL CORP.,
 2655 South La Cienega Avenue, Los Angeles, CA  90034-2606

 P.S. Docket No. 38/13

 10/02/91

 Finn, James D., Jr., Acting Judicial Officer

 APPEARANCE FOR POSTAL SERVICE: Karren M. Dickson, Esq.,
 Office of Contracts and Property Law, Law Department,
 United States Postal Service, Washington, DC  20260-1122 

 APPEARANCE FOR RESPONDENT: John R. Arnold, 2655 South
 La Cienega Avenue, Los Angeles, CA  90034-2606

POSTAL SERVICE DECISION

John Arnold (Respondent) has filed an appeal from a Notice of Proposed Debarment in which the Assistant Postmaster General, Procurement and Supply Department (Department Head), advised Respondent that he was proposing to debar Respondent personally and any company in which Respondent has a substantial interest or control, including Prime International Corporation, from contracting with the United States Postal Service (Postal Service) for a period of three years based on Respondent's guilty plea and conviction of one count of conspiracy to receive stolen government property in violation of 18 U.S.C. § 371.

FINDINGS OF FACT

1. Respondent is President and Chief Executive Officer of Prime International Corporation, a company in which he has a substantial interest and control and which contracts with the Postal Service (Notice of Proposed Debarment (Notice), ##1-2 & 4).

2. Prime International Corporation was incorporated in the State of California and subsequently suspended as a corporation on July 2, 1984, by the Secretary of the State of California for failure to file an annual statement (Hearing Exhibits (Exhs.) 4 & 5).

3. In November or December of 1987, Respondent and Thomas L. Burt (Burt), a Postal Service procurement and supply employee at the Postal Data Center in San Mateo, California, agreed that Burt would steal computer tapes from the Postal Service Warehouse in San Jose, California, and ship them to Prime International Corporation for resale to its customers (Notice, #4; Exh. 1, #1; Exh. 2, #1).

4. In exchange for stealing the tapes, Respondent agreed to pay Burt $3.00 to $3.50 for each tape stolen and shipped to Prime International Corporation (Exh. 1, #2; Exh. 2, #2).

5. On three separate occasions during a four month period beginning on April 6, 1988, Burt stole a total of 19,800 Postal Service computer tapes valued at approximately $146,000 and shipped them by freight to Prime International Corporation (Notice, #4; Exh. 1, ##3-11; Exh. 2, ##3-11).

6. After Prime International Corporation received each shipment of tapes, Respondent mailed Burt a cashier's check made payable to "Tom Burt," which resulted in a total payment to Burt of $21,600 for the 19,800 computer tapes (Id.).

7. In July 1988, after receiving a telephone solicitation from a Prime International Corporation representative offering to sell computer tapes, a representative of the State of California placed an order for the purchase of 13,750 tapes (Notice, #4; Exh. 1, #12; Exh. 2, #12).

8. After receipt of a shipment of 10,800 tapes from Prime International Corporation, the State of California received an invoice for the shipment in the amount of $82,196.64 (Notice, #4).

9. The 10,800 tapes shipped to the State of California by Prime International were subsequently identified as stolen Postal Service property (Id.).

10. By Plea Agreement dated January 23, 1991, Respondent agreed to plead guilty to one count of conspiracy to receive stolen government property in violation of 18 U.S.C. § 371, in exchange for an agreement that the United States Attorney for the District of California would not prosecute him for any other criminal activity involving his dealings with Burt and the San Jose Postal Warehouse (Exh. 3, Plea Agreement, #8).

11. On January 23, 1991, Respondent pled guilty to one count of conspiracy to receive stolen government property in violation of 18 U.S.C. § 371 and admitted that he received computer tapes stolen from the Postal Service and thereafter sold those tapes to the State of California (Exh. 3, Application for Permission to Enter Plea (Application)).

12. In a handwritten statement attached to his Application, Respondent admitted that he knew the tapes were stolen when he received them from Burt although he claimed that he did not initially know they were stolen from the Postal Service. Respondent stated however that once he discovered the tapes were stolen from the Postal Service, Burt made death threats against him and his family instructing Respondent to keep quiet (Id.).

13. On April 18, 1991, the Department Head, pursuant to authority contained in Postal Service Procurement Manual (PM) $S3.3.2(e)(4) and (f)(4), notified Respondent that he was proposing to debar him and Prime International Corporation from contracting with the Postal Service for a period of three years based on a determination that Respondent is not a responsible government contractor due to his guilty plea and conviction (Notice, ##1 & 2). The Department Head further stated that he had considered the seriousness of Respondent's guilty plea and conviction in determining that a term of three years was an appropriate length of debarment (Notice, ##1-2 & 4-5).

14. By letter dated May 21, 1991, to the Department Head, Respondent appealed the proposed debarment.

DISCUSSION & DECISION

Respondent's primary contention on appeal is that neither he nor his corporation should be debarred since he is presently a responsible contractor and the incident for which he was convicted and on which the Postal Service bases its debarment occurred over three years ago. In addition to claiming that the proposed debarment is punitive, Respondent contends that in prescribing his term of debarment the Postal Service, contrary to applicable postal procedures, did not consider any mitigating circumstances.

The Postal Service, on the other hand, argues that based on Respondent's conviction, neither he nor his corporation are currently responsible. Although the Postal Service recognizes that the passage of time may be a mitigating circumstance, it contends that such a factor merely diminishes the probative weight to be given to Respondent's prior criminal conduct. In this case the Postal Service alleges Respondent's criminal conduct was very serious in nature and demonstrated a great lack of business integrity as it involved more than minimal planning, several instances of stealing and the receipt of stolen property worth over $140,000. The Postal Service in addition contends that as further evidence of his lack of integrity, Respondent has not filed his annual corporate statement, and as a consequence his corporation has been assessed a penalty and suspended from exercising its corporate powers by the State of California. Lastly, the Postal Service asserts that Respondent has not presented any evidence of rehabilitation or remorse, as illustrated by the handwritten statement attached to his plea agreement in which he refused to admit, as late as January 1991, culpability for his crime and instead chose to blame Postal employee Burt for his actions.

Under PM § 3.3.2(e)(4), a contractor may be debarred for any act deemed by the Postal Service to be of a serious and compelling nature affecting the responsibility of the contractor. The Postal Service, in making a determination pertaining to responsibility, is required to assess the present and future business risk of a contractor based on moral integrity, honesty and ability to perform. Sol Fisher, P.S. Docket No. 37/33 at 6 (P.S.D. March 19, 1991); Recognition Equip. Inc., P.S. Docket No. 32/62 at 29 (P.S.D. Feb. 17, 1989). Past wrongdoing can be the basis for a determination that a contractor is not presently responsible, so long as mitigating factors are given due consideration. Id.

Consequently, a guilty plea and the legitimate inferences to be drawn therefrom may constitute evidence of a serious breach of trust reflecting a lack of present responsibility. Sol Fisher, at 6; see also Agan v. Pierce, 576 F. Supp. 257, 261 (N.D. Ga. 1983).

Respondent's proposed debarment is based on his guilty plea and conviction of one count of conspiracy to receive stolen government property in violation of 18 U.S.C. § 371. The Department Head determined this criminal conduct sufficiently serious and compelling to establish nonresponsibility and to serve as cause warranting debarment of Respondent.

Despite the fact that the Department Head determined that cause for Respondent's debarment exists, the decision to debar is discretionary and must be based on a determination of the best interest of the Postal Service. Sol Fisher, at 5, citing PM § 3.3.2(f)(1). Since it is in the best interest of the Postal Service to contract only with presently responsible contractors, the record in this case supports the determination by the Department Head to debar Respondent based on his finding that Respondent is not presently responsible as a result of his guilty plea and conviction. Even though passage of time between the actual crime and the subsequent debarment, in this case three years, may be a mitigating factor in considering the propriety of a debarment, this factor alone is not sufficient to outweigh the Postal Service's discretionary determination that Respondent's improper conduct and guilty plea establish that he is a present business risk and therefore, not presently responsible. See Sol Fisher, at 7 & 8.

Besides debarring Respondent, the Department Head has the discretion to also debar Prime International Corporation since Respondent's criminal and improper conduct may be imputed to any firm with which he was connected when the impropriety was accomplished within the course of his official duty or was affected by him with the knowledge or approval of the firm. PM $S3.3.2(f)(4). Based on Respondent's apparent ownership and control of Prime International Corporation during the period of his misconduct, the benefit derived by that corporation as a result of his misconduct, and the absence of any evidence that the corporation attempted to disassociate itself from Respondent's misconduct, the Department Head properly exercised his discretion in imputing Respondent's criminal conduct to Prime International Corporation for the purpose of its debarment. See Rodlac Trucking & Leasing, Inc., P.S. Docket No. 7/158 at 6 (P.S.D. June 5, 1980).

The Department Head requests that the debarment be for the maximum three years allowed by regulation. See PM § 3.3.2(g). The period of debarment should be commensurate with the seriousness of the offense. I0. 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).

While Respondent claims that the Postal Service improperly failed to consider any mitigating circumstances in prescribing his or his corporation's term of debarment, the record does not reflect, nor has Respondent shown, n1 any mitigating factors which serve as a basis for imposing a lesser period of debarment. Absent a showing of mitigating factors other than the three year passage of time since the crime occurred, the three year period of debarment of Respondent and his corporation is commensurate with the seriousness of Respondent's offense and not punitive in nature. See John R. Gnau, P.S. Docket No. 28/186 at 10 (P.S.D. June 16, 1988).

n1 Although Respondent requested an opportunity to be heard, he failed to appear at the hearing and despite being given another opportunity to be heard and to supplement the record with documentary evidence, Respondent failed to respond or submit additional evidence (See Order dated July 11, 1991).

CONCLUSION

Accordingly, the proposed debarment of Respondent and Prime International Corporation is sustained and is effective as of the date of this decision.