In the Matter of the Complaint Against ) June 29, 1993
                                        )
 LINDA P. PHIPPS                        )
 219 East Belcrest Road                 )
                                        )
 at                                     )
                                        )
 Bel Air, MD  21014-5319                ) P.S. Docket No. PF-48

 APPEARANCE FOR COMPLAINANT:            Geoffrey A. Drucker, Esq.
 Enforcement Division
 Law Department
 United States Postal Service
 Washington, DC  20260-1144

 APPEARANCE FOR RESPONDENT:             Mark E. Herman, Esq.
 14 W. Madison Street
 Baltimore, MD  21201-5220

This proceeding arises out of a Complaint issued by the Reviewing Official of the United States Postal Service under the Program Fraud Civil Remedies Act of 1986, Pub. L. 99-509, 31 U.S.C. § § 3801-3812, and 39 CFR Parts 273 and 962. In the Complaint, the Reviewing Official ("Complainant") alleges that Linda Phipps ("Respondent") violated 31 U.S.C. § 3802(a)(1) by making a false claim for disability compensation, contending that Respondent is liable for an assessment of $18,022 (twice the amount of the alleged false claim of $9,011) plus a civil penalty of $5,000, for a total liability of $23,022.

On November 23, 1992, Respondent timely filed a Petition for Hearing in which she denied the allegations of the Complaint. An Amended Petition was filed on December 17, 1992.

Thereafter Complainant filed a Motion for Summary Judgment together with a Memorandum of Law in Support of the General Counsel's Motion for Summary Judgment. On March 9, 1993, Respondent also filed a Motion for Summary Judgment, or Alternatively, for Partial Summary Judgment together with a Memorandum in Support. The Motions for Summary Judgment filed by both parties were denied in view of the factual issues requiring a hearing (Tr. 5).

During a conference call with the Acting Chief Administrative Law Judge on March 9, 1993, the parties stipulated to the following facts set forth in Complainant's March 2, 1993 Memorandum of Law: ¶ ¶ 1-9; ¶ 10 (except for first sentence); ¶ 12 (except for "of $320 per month"); and ¶ 13 (Order ¶ 2, March 10, 1993; Tr. 5).^1/

A hearing was held by the Acting Chief Administrative Law Judge on March 12, 1993, in Baltimore, MD. Both parties were represented by counsel. Complainant presented the testimony of Postal Inspector Steven Griggs, Jonathan Lister, and Angelina Michaud (deposition only). Both parties presented documentary evidence. After the hearing, the record was held open for the receipt of the deposition of Respondent Linda Phipps, which has been admitted into evidence.

Subsequently, both parties filed briefs which have been duly considered. To the extent indicated below, proposed findings and conclusions have been adopted; otherwise, they have been rejected as irrelevant or contrary to the evidence. The findings of fact and conclusions of law set forth below are based on the entire record herein, including the observation by the Acting Chief Administrative Law Judge of the witnesses and their demeanor, the briefs, stipulations, exhibits, depositions, and other relevant evidence adduced at the hearing:

1. Linda P. Phipps ("Respondent") is an individual who resides at 219 East Belcrest Road, Bel Air, Maryland. Prior to October 13, 1991, Respondent was known as Linda P. Bialek (Stip. ¶ 1).

2. On April 19, 1980, Respondent was hired as a Mail Clerk at the Baltimore Post Office. On November 8, 1981, Respondent suffered an on-the-job injury (Stip. ¶ 2; Deposition of Linda P. Phipps ["Phipps depo."], pp.7-8).

3. From December 28, 1981, to October 20, 1983, the Office of Workers' Compensation Programs, U. S. Department of Labor ("OWCP"), paid Respondent compensation for total wage loss (Stip. ¶ 3).

4. Beginning on October 20, 1983, the OWCP paid Respondent compensation for partial wage loss of four hours a day (Stip. ¶ 4). After that date she worked four hours a day at the Post Office until she quit in August of 1984 (Phipps depo., pp. 8, 43). She did not work again until September of 1987 (Id.). During part of this time she took some rehabilitation for her back at the request of the Department of Labor (Id. at 45). She continued to receive compensation for four hours a day.

5. She attended a Tupperware party in August of 1987 and found it to be "fun" and an opportunity to meet other women.^2/ At that time she had separated from her first husband for about two months (Id. at 9). In September 1987, Respondent signed an independent contractor agreement with Aim-Hi Party Sales, Inc. ("Aim-Hi"), a franchise operation that purchases home products from Tupperware, Inc., and sells them to independent sales representatives known as dealers and managers. From September to December of 1987, she conducted about 30 sales events and generated $7,123.30 in retail sales.^3/ (Stip. ¶ 10; Phipps Depo. p. 47; CX-1, p. 18). She filled her orders for Tupperware products through Aim-Hi (CX-1, p. 8). In 1988 she became a unit manager (CX-1, p. 9, 18, 21).

6. By February of 1988 the sales volume generated by Respondent's independent sales business, which consisted of herself and her recruits, was sufficiently high to qualify her for a van with a rental value on Tupperware's books of $320 a month. She received this vehicle from Tupperware through Aim-Hi at no cost to herself (Stip. ¶ 12; CX-1, p. 7). She used the van for both business and personal trips until June 1988 when Tupperware changed its van policy (Phipps Depo., pp. 18-19; CX-1 pp. 25-31). She also received two free nights at a hotel in Stowe, Vermont in 1988 (Phipps depo. at 19).

7. On her 1988 federal income tax return, which she filed in early 1989, Respondent listed her occupation as "sales" and her principal business as "Tupperware Sales." She listed gross receipts or sales from this business of $23,266 and showed a net profit of $485.^4/ Her travel costs were about $4,000, most of which was for car and truck expenses (Stip. ¶ 13).

8. Respondent continued to work as a Tupperware sales representative until March or May of 1989 (Phipps Depo., p. 47).^5/

9. In each of the years 1985, 1986, and 1987, OWCP sent Respondent a Form 1032 in September to complete and return (Phipps Depo. at 43).

10. On August 16, 1988, the OWCP sent Respondent a Form CA-1032 (CX-3). The cover letter sent with the form states:

The information requested is required in connection with your receipt of benefits under the Federal Employees' Compensation Act, 5 U.S.C. 8101 et seq. This information will be used to determine your qualification for continued benefits, or to determine whether an adjustment in benefits may be warranted. . . .

If you fail to answer all questions on your statement fully and accurately, your compensation benefits may be suspended.

A FALSE OR EVASIVE ANSWER TO ANY QUESTIONS, OR THE OMISSION OF AN ANSWER, MAY BE GROUNDS FOR FORFEITURE OF YOUR COMPENSATION BENEFITS AND SUBJECT YOU TO CIVIL LIABILITY . . .

DATES COVERED BY THIS STATEMENT: This statement is to cover the fifteen months prior to the date of your completion and signature. Your signature at the end of the statement certifies that all pertinent information for that period has been supplied.

(Stip. ¶ 6; CX-3).

11. Question A(2) on the CA-1032 form asks:

2. Self-Employment. Earnings from self-employment (such as . . .sales, service, operating a store, business, etc.) must be reported. Report any such enterprise in which you worked, and from which you received revenue, even if it operated at a loss or if profits were re-invested. You must show as "rate of pay" what it would have cost you to have hired someone to perform the work you did. [italics added]

(a)Were you self-employed during any time covered by this form ?
 Answer yes or No: ____

(b)If Yes, provide the following:
 Dates of self-employment:  _______________
 Description of work performed:  __________
 Number of hours worked per week:  ________
 Rate of Pay:  $___________________________
 Name of firm or business: ________________

Respondent answered "NO" to part (a) and supplied no information in part (b).

(Stip. ¶ 7).

12. Question A(3) on the Form 1032 asks: "Were you unemployed for all periods during the previous fifteen months not covered under 1 or 2 above? Answer Yes or No: __________." Respondent answered "Yes." (Stip. ¶ 8)

13. Directly above the signature line on the Form CA-1032 appears the following:

I certify that all the statements made in response to questions on this form are true, complete and correct to the best of my knowledge and belief.

Respondent signed and submitted the form on September 8, 1988. (Stip. ¶ 9).

14. Respondent's statement on the above Form 1032, that she had not been self-employed during the previous 15 months, was false since she had been working as a Tupperware dealer or manager for the previous 12 months. Respondent knew or should have known that her statement was false.^6/

15. On March 13, 1989, Respondent returned to full-time work as a postal employee. She stopped receiving workers' compensation benefits for partial disability on this date (Stip. ¶ 5).

16. Thereafter the Postal Service discovered that Respondent had falsified the Form 1032, and on December 9, 1989, suspended her from her postal employment and placed her in an off-duty, non-pay status. She was informed of her right to file a grievance under the Grievance/Arbitration procedure set forth in Article 15 of the National Agreement. (RX-2A).

17. On February 22, 1990, Respondent received a Notice of Removal effective March 26, 1990. The reasons given for the action were:

1. Falsification of Department of Labor Forms 1032 on September 8, 1988, and April 22, 1989 by stating that she was not self-employed, when she was actually working as a Tupperware dealer.

2. Improper receipt of compensation benefits of $17,517.50 plus medical expenses of $3,624.57 during the time she was a Tupperware dealer.

Again, Respondent was advised that she had a right to file a grievance under the collective bargaining agreement. (RX-2B).

18. Respondent filed two grievances which resulted in a consolidated hearing before Arbitrator Wayne E. Howard on August 16, 1990.^7/ The only issue was whether the Postal Service had "just cause" for imposing (1) off-duty without pay status and (2) removal (Tr. 55). The Postal Service presented evidence that Respondent had falsified the Form 1032 on the question regarding her self-employment, and Respondent maintained that she had not. She sought back pay of about $22,824 for the period from the date she was placed in off-duty status, December 9, 1989, to the date of the hearing, August 16, 1990 (Tr. 61, 66; Phipps depo. at 31). The Postal Service did not seek any damages in that proceeding. Although the fact that Respondent had received workers' compensation was discussed in connection with the Form 1032, it is clear that the Arbitrator was not presented with the issue of whether Respondent would have to reimburse the Postal Service for any compensation benefits that she had received (Tr. 50, 68-69).^8/

19. After hearing all the testimony, the Arbitrator suggested that termination was too severe a penalty for what Respondent had done (Tr. 49). He sent Respondent out of the room and suggested the following settlement, which was accepted and signed by the parties:

The parties agree to resolve [the grievances] on the basis that the Emergency Placement in Off Duty Status shall be removed from the record of the grievant, Linda P. Bialek [Respondent], and she shall be made whole for all loss of earnings from the date of her placement in off duty status [December 8, 1989] to the date of her Removal [March 26, 1990]. Her subsequent Removal [March 26 to August 16, 1990] shall be converted to a suspension without pay, and she shall be reinstated to her job.

(RX-2C)

20. At that time it was never mentioned that this agreement would relieve Respondent of the responsibility to pay the Postal Service any amount previously paid to her as workers' compensation (Tr. 50).^9/ By conceding that she should receive no pay from March 26, 1990 to the hearing date, August 16, 1990, Respondent conceded about six of the nine months of backpay she had originally claimed, representing about $14,600^10/ of the $22,824 (Tr. 67).

21. After the hearing, Respondent went back to work for the Postal Service (Tr. 70). She is currently employed as a permanent light-duty modified clerk working four hours a day (Phipps Depo. at 6)

1. The first issue is whether Respondent is subject to a civil penalty of $5,000 under 31 U.S.C. § 3802(a)(1) for making a false claim for disability compensation. It is concluded that Respondent's statement on the Form 1032 indicating that she was not self-employed during the 15-month period prior to submitting the form constitutes a claim and is materially false. The information required to be provided was material and pertinent to the issue of whether Respondent was totally or partially disabled. See 20 CFR § 10.303.

2. Respondent argues that since the Form 1032 is called a "statement" on the cover letter accompanying the form, that it should be considered a "statement" rather than a "claim" for purposes of the Program Fraud Civil Remedies Act (PFCRA).^11/ However, this argument must fail because the Act defines a "claim" as "any request, demand, or submission . . . made . . for . . . money." 31 U.S.C. § 3801 (a)(3)(A). The cover letter for the Form 1032 specifically states that the "information requested is required in connection with the receipt of benefits," and "will be used to determine your qualification for continued benefits, or to determine whether an adjustment in benefits may be warranted" (CX-3, p.1). Thus the benefits which had been received during the preceding 15 month period, and any future benefits, could be "adjusted" if the information provided on the Form 1032 revealed that there may have been a change in the nature and extent of disability. The Form 1032 is clearly a "claim" under § 3801 (a)(3)(A). Filomena D. Winslow, P. S. Docket No. PF-5, (PSD Sept. 13, 1990); Robert L. Baker, P. S. Docket No. PF-7 (PSD Mar. 29, 1991)

3. Respondent relies upon Neldie Nelson, P. S. Docket No. PF-3, (PSD August 19, 1992), for the proposition that a Form 1032 constitutes a "statement" rather than a claim. However, Nelson is factually distinguishable since that case involved a CA-8 form (an obvious claim for compensation) which had been filed simultaneously with the Form 1032. The CA-8 claimed benefits for an indefinite period into the future (from a specified date through "Continuing") and an OWCP employee testified that the benefits were paid based on the CA-8 rather than the Form 1032 under the unique facts of that case. Neldie E. Nelson, supra, (ID, November 16, 1990, at p. 8, 10). Also, the Judicial Officer specifically declined to overturn Filomena D. Winslow, supra, and Robert L. Baker, supra, which held the Form 1032 to be a "claim" under the PFCRA under factual circumstances similar to the instant case.

4. Respondent submitted the false statement in support of her claim knowing, or having reason to know, that it was false. As indicated in the findings of fact, her purported interpretation of the form's language is unreasonable and incredible.

5. Under these circumstances, Respondent is subject to, in addition to any other remedy that may be prescribed by law, a civil penalty of not more than $5,000 for the false claim. Complainant requests the maximum penalty. The amount of the penalty must be determined by examining all of the circumstances surrounding the false claims, including all aggravating and mitigating factors. See, S. Rep. No. 99-212, 99th Cong., 1st Sess. 18 (1985). Many government agencies have adopted a set of model regulations proposed by the President's Council on Integrity and Efficiency, which contains a list of factors which may be considered as guidance. E.g., 45 CFR § 79.31 (1988); 52 Fed. Reg. 27423, 27432. The Acting Chief Administrative Law Judge is not bound by the regulations of other agencies, but has discussed some of those factors below.

6. There is a high degree of culpability in this case. Respondent clearly knew that she was deceiving the government.

7. The amount of money falsely claimed is also an important factor to consider. In the instant case, a total of $9,011 was falsely claimed.^12/

8. Finally, in determining the amount of a penalty or assessment, the Administrative Law Judge must consider that the purposes of the statute are to recompense the government for losses resulting from false claims, to deter the making of such claims in the future, and protect the integrity of the government program in question. S. Rep. No. 99-212, 99th Cong., 1st Sess. 2 (1985).

9. After considering all of the circumstances of this claim, it is concluded that Respondent is liable for a civil penalty in the amount of $5,000.

10. The next issue is the amount of the assessment to be imposed upon Respondent under § 3802(a)(1). The statute provides, in pertinent part, that a person making such a false claim shall be subject to an assessment, in lieu of damages sustained by the United States because of such claim, of not more than twice the amount of such claim. Since Respondent made a false claim of $9,011, she is liable for an assessment of no more than $18, 022. Since it is not unreasonable to assume that the damages of the Postal Service, including the cost of investigation and litigation, have far exceeded this amount, and considering the aggravating and mitigating circumstances discussed above, it is concluded that Respondent is liable for the maximum assessment of $18,022.^13/

11. Respondent also argues that the Postal Service is estopped from bringing the instant action in view of the settlement reached in the grievance/arbitration proceeding. However, as pointed out in the Findings of Fact, that proceeding did not involve the issue of whether Respondent was required to reimburse the Postal Service for any overpaid compensation benefits, and the Arbitrator did not reach that issue. Accordingly, Respondent's contention is rejected.

12. The findings and conclusions herein are based upon the preponderance of the evidence. 31 U.S.C. § 3803(f). In summary, Respondent is liable to the Postal Service under 31 U.S.C. § 3802(a)(1) for a civil penalty of $5,000 plus an assessment of $18,022, for a total liability of $23,022.^14/

                                        Randolph D. Mason
                                        Acting Chief Administrative Law Judge

1/ Each stipulation of fact will hereafter be referred to as "Stip. ¶ ____," indicating its paragraph number in the Complainant's Memorandum of Law at pp. 2-5.

2/ Respondent claims that she got into Tupperware strictly for fun, to regain emotional stability, and to rehabilitate herself (Phipps depo. at 10-14, 38). She also says that she was "not focusing so much on earning money" (Id. at 13).

3/ Aim-Hi's sales records may not reflect a calendar year ending December 31, and may include the first few days of 1988, so the $7,123.30 sales figure for 1987 may be slightly inaccurate.

4/ Although the cost of goods sold was only 65 percent of gross revenues (CX-1, p. 44), Respondent had other expenses such as transportation and incentive gifts to her prospective dealers.

5/ There is no dispute that during the one-year period prior to submitting the Form 1032, Respondent received $9,011 in workers' compensation benefits (Respondent's Proposed Findings of Fact No. 5; Ex. 5 to Complainant's Memorandum).

6/ Respondent contends that she stated on the form that she was not self-employed because she "wasn't making any money" (Phipps depo., pp. 26, 51-52). This contention is rejected since the form clearly defines "self-employment" as including any sales enterprise even if it operated at a loss.

7/ She also contends that since she was only receiving workers' compensation for four hours a day, that OWCP was only interested in "self-employment" during that discrete four hour period ("OWCP's time"), rather than the other four hours in the day when she was capable of working ("her time"). Accordingly, she attempts to justify her failure to report her Tupperware enterprise since it took less than four hours a day and fell within "her time" rather than "OWCP's time." This contention is rejected. It would be unreasonable for her to conclude that OWCP would not want to know about any and all of her work activities in order to assess her degree of disability. In fact, the Form 1032 specifically requires the reporting of "any such enterprise in which you worked." Her alleged interpretation of the form is simply not credible.

8/ She filed separate grievances for the emergency placement into non-duty status without pay and the removal (Tr. 49).

9/ Respondent's contention that the Arbitrator "okayed" her receipt of compensation during the course of the hearing is rejected (Phipps depo. at 32). Hehad no jurisdiction over the issue and, in any event, he would not have rendered a decision before the hearing was completed.

10/ Respondent contends that she was "honestly told or led to believe" that by foregoing the back pay for the period of suspension without pay (about $14,600), that this relieved her of any obligation to the Postal Service for overpaid compensation benefits ($9,011 or $12,000, depending on the method of calculation) (Phipps depo. at 33). As indicated previously, this proceeding did not involve this issue. Accordingly, this contention is rejected.

11/ Respondent contends this figure should be $16,167 (Resp. PFOF 16) rather than $14,600; however, assuming arguendo that Respondent's calculation is correct, the result in this case would be the same.

12/ A "statement" is defined in § 3801(a)((9), in part, as a representation made with respect to a claim. Under § 3802(a)(2) a claimant who submits a false statement of this kind is subject to a $5,000 penalty but not an assessment. Inthe event it is held on appeal that the Form 1032 is a statement rather than a claim, Complainant pleads in the alternative that Respondent is liable for the latter penalty (Tr. 26).

13/ Respondent argues that the Postal Service did not suffer any damages because it would have paid the same compensation even if Respondent had disclosed the self-employment on the Form 1032. First, there is no evidence to support this contention. If Respondent had been truthful, OWCP might have re-evaluated Respondent's disability, readjusted past benefits, and stopped paying future benefits sooner than it did. Second, there is no obligation in a PFCRA case for the Complainant to prove damages. In this regard, § 3802(a)(1) specifically provides for an assessment of twice the amount of the claim "in lieu of damages sustained by the United States because of such claim . . . ."

14/ Although not binding herein, it is noted that the model regulations state that "[b]ecause of the intangible costs of fraud, the expense of investigating such conduct, and the need to deter others who might be similarly tempted, ordinarily double damages and a significant civil penalty should be imposed." E.g., 45 CFR § 79.31 (1988).

Respondent shall be given credit for any amount which she may have repaid to OWCP.