In the Matter of the Complaint ) November 18, 1994 Against ) ) 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
Respondent has filed an appeal from an Initial Decision in which an Administrative Law Judge concluded that Respondent had submitted a false claim for disability compensation and was therefore liable for an assessment and civil penalty under the Program Fraud Civil Remedies Act, (PFCRA) 31 U.S.C. § 3801 et seq. The Postal Service opposes the appeal and argues that the Initial Decision should be affirmed.
Respondent filed a reply to the Complaint denying she was liable for any assessment or penalty. Following a hearing and the submission of briefs, the Administrative Law Judge issued an Initial Decision in which he concluded that Respondent falsely indicated on the Form 1032 that she was not self-employed, when in fact she was an independent contractor engaged in the sale of tupperware for 12 of the 15 months covered by the form. As a result, the Administrative Law Judge concluded that Respondent was liable for an assessment of $18,022, and a penalty of $5,000. Respondent timely appealed the Administrative Law Judge's decision.
On appeal, Respondent contends the Administrative Law Judge erred in concluding that the Form 1032 was a claim instead of a statement and that Complainant was not required to prove damages under the PFCRA.
Respondent, in addition, contends that the Administrative Law Judge erred in concluding that Complainant was not estopped from bringing this action. Respondent also alleges that the Administrative Law Judge improperly showed favoritism to Complainant. Finally, Respondent contends that even if she is liable under the PFCRA, the Administrative Law Judge failed to properly consider the existence of mitigating circumstances in determining the amount of the assessment and penalty to be imposed. Each of Respondent's contentions are addressed hereafter.
Respondent first contends that she is not liable for an assessment because the Form 1032 is a statement instead of a claim as defined by the PFCRA.2/ In support of this contention, Respondent relies on the language of the PFCRA, the language contained in the cover letter accompanying the form and a prior Postal Service Decision, Neldie E. Nelson, P.S. Docket No. PF-3 (P.S.D. Aug. 19, 1992).
None of Respondent's contentions are persuasive. The PFCRA defines a claim as "any request, demand, or submission . . . for property, services, or money . . . or which has the effect of decreasing an obligation to pay or account for property, services, or money . . . " (31 U.S.C. § 3801(a)(3)). A statement is defined as "any representation, certification, affirmation, document, record, or accounting or bookkeeping entry made . . . with respect to a claim or to obtain the approval or payment of a claim (including relating to eligibility to make a claim . . .)" (31 U.S.C. § 3801(a)(9)). Under these statutory definitions a Form 1032 could be either a claim or statement depending on its use.
The facts presented in this case establish that the Form 1032 signed by Respondent covering the period she was engaged in tupperware sales was a claim as provided in § 3801(a)(3). Respondent initially submitted a claim for disability compensation in late 1981 (I.D. FOF 2 & 3). From 1985 - 88, Respondent was required to file annually a Form 1032 (I.D. FOF 9 & 10). Under employee compensation statutes3/ and Department of Labor regulations,4/ a failure to submit a required Form 1032 results in a suspension of benefits. The Office of Workers' Compensation Programs (OWCP) uses the information supplied on the form to determine if continuing disability benefits should be paid as well as to determine if there has been any overpayment of benefits which the recipient is obligated to repay.5/ The Form 1032 submitted by Respondent in 1988 was a request for continued payment of disability compensation. OWCP would not have continued to pay Respondent had she not submitted the form and may have required her to repay past compensation, in whole or in part, had she truthfully represented her employment status. Therefore, despite the language of the cover letter which refers to the form as a statement, the manner in which the 1988 Form 1032 was used establishes that it is a claim for which an assessment may be made.
The timing of the requirement to file Respondent's 1988 Form 1032 distinguishes this case from Neldie E. Nelson, which Respondent contends supports her position. As the Administrative Law Judge correctly found, the disability recipient in Neldie E. Nelson, was injured only a few months prior to the submission of the Form 1032 and an OWCP employee testified that in the particular circumstances of that case,6/ the Form 1032 was used merely to verify the information submitted only a few months earlier on a Department of Labor Form CA-8. In the present case, however, Respondent was injured almost seven years earlier and the Form 1032 was used as a request to continue the payment of disability benefits, not merely to verify other recently submitted information. Accordingly, Respondent's reliance on Neldie E. Nelson is misplaced and the Administrative Law Judge correctly concluded that the Form 1032 is a claim, not a statement.
Respondent next contends that Complainant failed to prove that any damage resulted from her actions. According to Respondent, a truthful disclosure of her limited involvement with tupperware sales would not have altered her entitlement to the partial disability payments she received. However, as neither OWCP nor the Postal Service had an opportunity to evaluate Respondent's claim for partial disability in light of her self-employment, it cannot be concluded that Respondent would have been entitled to the same benefits.7/ Additionally, OWCP regulations provide that if a disability recipient omits or understates any earnings on a required Form 1032, the recipient forfeits the right to compensation for any period for which the Form 1032 was required.8/ By falsely stating that she was not self-employed, Respondent was subject to this forfeiture provision and the amount paid during the period covered by the Form represents actual damages to Complainant. Finally, the PFCRA specifically allows an assessment of up to twice the amount claimed in lieu of damages.9/ Therefore, no actual damages need be shown.10/ Thus, Complainant is not required to establish that a truthful statement would have resulted in any changed benefits.
Respondent next contends that the Administrative Law Judge incorrectly held that Complainant was not estopped from bringing this action because of a settlement in an employee grievance proceeding based on the same conduct.11/ The Administrative Law Judge correctly found that the PFCRA allegations were not considered in the grievance proceeding and the settlement agreement did not include any promise to forgo other administrative remedies.12/ While Respondent may have believed no further action would be taken, the record does not establish that any conduct or statement of Complainant's led to that belief. Accordingly, the Administrative Law Judge did not err in rejecting Respondent's estoppel argument and in finding that Respondent was not precluded from bringing this PFCRA claim.
Respondent also contends that the Administrative Law Judge improperly suggested to Complainant that it amend the Complaint to include an allegation that Respondent submitted a false statement in addition to the allegation that she had submitted a false claim. However, the record does not reflect that the Administrative Law Judge acted improperly in clarifying Complainant's alternative arguments and allowing the amendment of the Complaint. Moreover, it has already been concluded that the Form 1032 is a claim rather than a statement, and therefore, Respondent was not harmed by the Administrative Law Judge's actions. Furthermore, the Administrative Law Judge allowed Respondent to submit her testimony by deposition after her unexplained and unexcused failure to appear at the hearing. Under these circumstances it cannot be concluded that Complainant received any more favorable treatment than Respondent.13/
Respondent contends that even if she is liable under the PFCRA, the Administrative Law Judge failed to consider numerous mitigating circumstances in determining the amount of the assessment and penalty. The appropriate penalty and assessment are determined by examining all of the circumstances surrounding the false claim, including all aggravating and mitigating factors.14/
In the Initial Decision, the Administrative Law Judge referred to model regulations proposed by the President's Council on Integrity and Efficiency and adopted by some agencies.15/ While neither the Administrative Law Judge nor the Judicial Officer is bound by the regulations of another agency, the model regulations provide guidance in determining the appropriate penalty and assessment.16/
Among the factors to consider are the number of false claims and the time period over which multiple claims were made, the degree of culpability, the amount of money claimed, the value of the Government's actual loss, the relationship of the actual loss to the penalty, whether there was a pattern of misconduct, whether Respondent attempted to conceal the misconduct, the potential or actual impact on the national defense or public health and safety, the degree to which Respondent involved others in the misconduct, whether Respondent cooperated in the investigation of the misconduct, the complexity of the transaction and Respondent's sophistication, and the need to deter Respondent and others from future misconduct.17/ When considering these factors and the record as a whole, the maximum civil penalty and assessment allowed by the Administrative Law Judge are excessive.
The Administrative Law Judge found that Respondent exhibited a high degree of culpability because she "clearly knew that she was deceiving the government" (I.D. COL 6). However, Respondent called attention to the inaccurate claim for benefits when she contacted OWCP to ask if her tupperware activity had to be reported on her subsequent Form 1032.18/ On that form, signed in April of 1989, Respondent did not give a yes or no answer to the question on self-employment, but instead wrote an explanation about her tupperware sales.19/ Such behavior is inconsistent with an individual who intended or "clearly knew she was deceiving the government."
In addition, Respondent filed only one false claim, did not engage in any pattern of misconduct, and did not attempt to conceal the misconduct. Although Respondent could have forfeited all rights to disability benefits for the period covered by the Form 1032 it is quite likely that had she accurately indicated her limited involvement in tupperware sales her benefits would not have been reduced.20/ As Respondent did not attempt to conceal the conduct, and in fact willingly disclosed it on the subsequently filed Form 1032, the cost to the government of investigation would appear to be minimal. Moreover, a smaller assessment and penalty combined with the previous disciplinary action21/ would appear to adequately deter Respondent and others from engaging in similar conduct in the future. Therefore, under the circumstances presented in this case a reduction in the assessment and penalty is appropriate.
Accordingly, the assessment is reduced from the maximum of $18,022 to $2,000, and the civil penalty is reduced from the maximum of $5,000 to $500, making Respondent liable for a total assessment and penalty of $2,500.22/ The Initial Decision is affirmed as to Respondent's liability and the assessment and penalty are modified as indicated.
James A. Cohen Judicial Officer
1/ The requested assessment is twice the amount of the disability compensation Respondent received during the period she was self-employed.
2/ Under 31 U.S.C. § 3802(a)(1) an individual who submits a false claim is liable for an assessment of twice the amount of the claim in addition to a civil penalty of up to $5,000. However, an individual who submits a false statement is only liable for the civil penalty (31 U.S.C. § 3802(a)(2)).
3/ See 5 U.S.C. § 8106.
4/ See 20 C.F.R. § 10.125(a).
5/ See CX-2.
6/ In Neldie E. Nelson it was specifically stated that, "although the Form EN-1032 has been found to be a statement rather than a claim in this case, that Form may nonetheless be considered a claim under other circumstances. See e.g., Robert L. Baker, P.S. Docket No. PF-7 (P.S.D. March 29, 1991); Filomena D. Winslow, P.S. Docket No. PF-5 (P.S.D. Sept. 13, 1990)." Neldie Nelson, P.S. Docket No. PF-3 at 6 n 5 (P.S.D. Aug. 19, 1992).
7/ See Neldie E. Nelson, P.S. Docket No. PF-3 at 12-13 (P.S.D. Aug. 19, 1992).
8/ 20 C.F.R. § 10.125(a).
9/ 31 U.S.C. § 3802 (a)(1).
10/ See Neldie E. Nelson, P.S. Docket No. PF-3 at 11 (P.S.D. Aug. 19, 1992); James M. Cox, P.S. Docket No. PF-18 at 10 (P.S.D. Sept. 30, 1993).
11/ Under the terms of the settlement agreement, Respondent was returned to Postal Service employment, received back pay for the time she was in an off-duty without pay status, and the time from her removal to the grievance settlement was converted to a suspension without pay resulting in a loss of $14,000 (Phipps deposition at 33-34).
12/ See James M. Cox, P.S. Docket No. PF-18 at 8-10 (P.S.D. Sept. 30, 1993).
13/ Respondent also contends that the Administrative Law Judge erred in not granting her motion for summary judgment. However, as it has been determined that Form 1032 is a claim and that it was not error to allow the amendment of the Complaint, the failure to grant Respondent's motion for summary judgment was not erroneous.
14/ See Neldie E. Nelson, P.S. Docket No. PF-3 at 13-14 (P.S.D. Aug. 19, 1992); James M. Cox, P.S. Docket No. PF-18 at 10-11 (P.S.D. Sept. 30, 1993).
15/ See 45 C.F.R. § 79.31; 52 Fed. Reg. 27423-32 (1987).
16/ Sharon Boddie, P.S. Docket No. PF-6 at 10 (I.D. July 22, 1991), aff'd, (P.S.D. Oct. 27, 1992); Neldie E. Nelson, P.S. Docket No. PF-3 at 25 (I.D. Nov. 16, 1990), aff'd, (P.S.D. Aug. 19, 1992); James Anderson Smith, Jr., P.S. Docket No. PF-26 at 7 (I.D. April 9, 1992), finalized, (Order May 26, 1992).
17/ See 45 C.F.R. § 79.31; 52 Fed. Reg. 27423 - 32 (1987).
18/ Phipps Statement, Dec. 8, 1989.
19/ Id.
20/ Respondent was only receiving partial disability payments of four hours per day during the period covered by the Form 1032 (Joint Stipulation ¶ 4) and worked approximately nine hours per week selling tupperware (Phipps Deposition at 58).
21/ See footnote .
22/ The total assessment and penalty may be offset by any repayment Respondent has made to OWCP but may not be offset by any loss in wages that resulted from the grievance proceeding. See Sharon Boddie, P.S. Docket No. PF-6 at 7 (P.S.D. Oct. 27, 1992).