Appeal of P.S. Docket No. PF-31 -- BAY STATE UNIFORM COMPANY, INC.

 In the Matter of the Complaint         )  August 12, 1992 
 Against                                )
                                        )
 BAY STATE UNIFORM COMPANY, INC.        )
 51 Melcher Street                      )
                                        )
 at                                     )
                                        )
 Boston, MA 02210-1508                  )  P.S. Docket No. PF-31

APPEARANCE FOR RESPONDENT:		John Gardell
					51 Melcher Street
					Boston, MA  02210-1508

APPEARANCES FOR POSTAL SERVICE:		William J. Jones, Esq. 
					Geoffrey A. Drucker,Esq. 
					United States Postal Service
					475 L'Enfant Plaza, SW 
					Washington, DC 20260-1133

POSTAL SERVICE DECISION

Bay State Uniform Company, Inc. (Respondent) has filed an appeal from an Initial Decision in which an Administrative Law Judge found Respondent liable to the United States Postal Service, under the Program Fraud Civil Remedies Act (PFCRA), 31 U.S.C. § § 3801, et. seq., for an assessment and civil penalty totalling $20,402. The Postal Service opposes the appeal and argues that the Initial Decision should be affirmed.

Background

The General Counsel, Law Department, United States Postal Service (Postal Service), initiated this proceeding by filing a Complaint alleging that Respondent submitted to the Postal Service for payment four false claims in the form of invoices for uniform clothing items not purchased by Postal employees. The Complaint requested that Respondent be held liable, under the PFCRA, for an assessment of $421 (the amount of the loss suffered), plus a civil penalty of $20,000, or $5,000 for each false claim.^1/

The Complaint was received by Respondent on March 19, 1992, thus establishing April 20, 1992, as the date on which the Petition for Hearing was required to be filed by Respondent. Respondent's petition dated April 23, 1992, was received by the Recorder on April 28, 1992. In the absence of a timely filed petition, the Postal Service filed the Complaint with the Recorder on April 27, 1992, requesting the issuance of an Initial Decision based on the information contained in the Complaint in accordance with 39 C.F.R. § 962.4. On May 27, 1992, the assigned Administrative Law Judge issued an Initial Decision in which he concluded that Respondent had failed to timely file his Petition for Hearing and thereby denied Respondent's request for a hearing. Based on the information contained in the Complaint and the documents referred to therein, the Administrative Law Judge found that Respondent had submitted four materially false claims to the Postal Service and was liable under 31 U.S.C. § 3802(a)(1) for the assessment of $402 and a civil penalty of $20,000.

Exceptions and Discussion

Respondent filed a timely notice of appeal admitting that it submitted false claims to the Postal Service and that it failed to timely file its Petition for Hearing. However, Respondent contends the proposed penalty of $20,000 is grossly unfair for false claims totalling only $402. In addition, Respondent requests a hearing in order to show that the Postal Service's motive in bringing this action was improper.

The Postal Service has filed a timely response to Respondent's appeal requesting that the Initial Decision be affirmed. The Postal Service contends that by failing to timely file its Petition for Hearing, Respondent has forfeited its right to a hearing and to dispute the allegations in the Complaint.

Respondent on appeal has not shown that its request for a hearing should be granted. The Administrative Law Judge's conclusion that Respondent is liable under the PFCRA for the submission of four false claims is supported by the record and by Respondent's admission on appeal that it made the alleged false claims. Under these circumstances, Respondent has not shown that the Postal Service's motive in bringing this action is relevant to the outcome of this proceeding or that it in some way excuses Respondent from liability for filing the false claims. Moreover, Respondent on appeal has not shown any excusable cause for its failure to timely file its Petition for Hearing.

Nevertheless, as Respondent contends on appeal, the proposed penalty of $20,000 is greatly disproportionate to the amount of damages sustained by the Postal Service as a result of Respondent's false claims. See United States v. Halper, 490 U.S. 435, 449 (1989). The record establishes that the Postal Service has sustained actual damages in the amount of only $402.^2/ However, the Postal Service has not alleged nor otherwise shown that as a result of Respondent's false claims it has incurred ancillary costs or injuries from the fraud ^3/ approaching the proposed $20,000 penalty. While it is reasonable to conclude that the Postal Service has suffered some ancillary costs in investigating and litigating Respondent's false claims, the $20,000 penalty bears no reasonable relationship to the goal of compensating the Postal Service for its loss. See Halper, 490 U.S. at 449-50. Accordingly, it is determined that the penalty for each of the four false claims should be reduced from $5,000 to $2,500, for a total penalty of $10,000.

Conclusion

After consideration of the entire record and Respondent's exceptions to the Initial Decision, it is concluded that Respondent is liable to the Postal Service, under the PFCRA, 31 U.S.C. § § 3801-3812, for an assessment of $402, plus civil penalties in the amount of $10,000, for a total liability of $10,402. Accordingly, Respondent's appeal is granted to the extent indicated and otherwise denied. The findings and conclusions of the Initial Decision are modified and affirmed in accordance with this Decision.

                                        James A. Cohen
                                        Judicial Officer

1/ The PFCRA allows a civil penalty of not more than $5,000 for each false claim. See 31 U.S.C. § 3802(a)(1).

2/ The amount of money or the value of the benefit falsely claimed may be considered a mitigating factor in reducing the amount of a PFCRA penalty or assessment. See Nancy M. Williams, P.S. Docket No. PF-21 at 11 (I.D. Mar. 11, 1992); Sharon Boddie, P.S. Docket No. PF-6 at 10 (I.D. July 22, 1991); Willie J. Blocker, P.S. Docket PF-14 at 13 (I.D. July 15, 1992); See also 45 C.F.R. § 79.31; 52 Fed. Reg. 27423, 27432.

3/ The courts have consistently held that the government's injuries for fraud may include not only the amount of the fraud itself but also ancillary costs such as detection, investigation, litigation and enforcement. See Halper, 490 U.S. at 445; Helvering v. Mitchell, 303 U.S. 391, 401 (1938); United States v. A Parcel of Land, 884 F.2d 41, 44 (1st Cir. 1989); United States v. United States Fishing Vessel Maylin, 725 F. Supp. 1222, 1223 (S.D. Fla. 1989).