In the Matter of the Petition by       )December 13, 1994
                                        )
 RUDY TOSENBERGER                       ) 
 3858 Ranfield Road                     )
                                        )
 at                                     )
                                        )
 Kent, Ohio  44240-6761                 )P.S. Docket No. AO-33

 APPEARANCE FOR PETITIONER              Ralph L. Oates, Esq.
 P. O. Box 201
 Kent, Ohio  44240-0201

 APPEARANCE FOR RESPONDENT              Andrew C. Jagusiak, Esq.
 Postal Inspection Service
 475 L'Enfant Plaza, SW
 Washington, D.C.  20260-2181

Petitioner has filed an appeal from an Initial Decision of an Administrative Judge which holds that Petitioner is indebted to the Postal Service in the amount of $10,135 as a result of his purchase and resale of misprinted stamp stock in violation of Postal Service regulations. Respondent opposes the appeal.

The Postal Inspection Service initiated this proceeding by issuing a letter of demand requiring Petitioner to pay to the Postal Service the amount of $10,320^1/ which Petitioner allegedly received from the sale of books of misprinted stamps obtained during the performance of his official duties as a Postal Service employee at the Kent, Ohio, Post Office. After the letter of demand was affirmed by the Postal Inspection Service, Petitioner filed a Petition for Review and Hearing under 39 C.F.R. Part 966. Following a hearing at which both parties were given a full opportunity to present evidence, an Administrative Judge issued an Initial Decision in which he concluded that Petitioner had purchased the books of misprinted stamps and resold them for a profit in violation of Postal Service regulations.^2/ As a result, the Administrative Judge further concluded that Petitioner was indebted to the Postal Service for the net profit he received from the sale of the misprinted stamps. Petitioner filed a timely appeal from the Initial Decision and Respondent filed a timely reply.

On appeal, Petitioner contends the Administrative Judge ignored evidence establishing that his removal from Postal Service employment and the initiation of this administrative offset action were motivated by his past union activities and violated his right to equal protection of the law. Petitioner further contends he should not be held liable for the amount claimed because there is no evidence the Postal Service suffered any monetary loss as the result of his actions. Finally, Petitioner contends he was improperly charged with constructive notice of Postal Service regulations governing the sale of misprinted stamps, and the Administrative Judge failed to address issues of entrapment, unauthorized wiretap and invasion of privacy.

Respondent contends that neither the Administrative Judge nor the Judicial Officer has jurisdiction to consider Petitioner's claims relating to his removal from Postal Service employment. Respondent, in addition, contends the evidence presented does not establish Petitioner was denied his constitutional right to equal protection of the law, the investigating officials' conduct was improper, or the administrative offset action was improperly motivated. Lastly, Respondent contends the demand against Petitioner was based on unjust enrichment, not embezzlement, and therefore, restitution should be made even though no evidence of financial loss was presented.

All of Petitioner's contentions and Respondent's responses have been considered and are addressed hereafter.

Petitioner has contended throughout these proceedings that he has been denied equal protection of the law. According to Petitioner, he was removed from his Postal Service employment and subjected to this administrative offset proceeding solely because of his past union presidency. In support of this contention, Petitioner argues he was the only Postal Service employee involved in this incident who was not ultimately reinstated to full employment.

The evidence presented does not support Petitioner's contention. On the contrary, unrebutted testimony establishes that at least one other employee was also permanently removed from employment, and required to pay to the Postal Service the profit received from the sale of defective stamps (Tr. 61-62). While other Kent Post Office employees were treated less harshly,^3/ the record suggests they were not significantly involved in the removal and resale of the defective booklets.^4/ Moreover, other than Petitioner's bare assertions, there is no evidence that the disciplinary actions against Petitioner were motivated by his past union activities. Accordingly, Petitioner has not persuasively shown that he has been discriminated against or denied his equal protection rights.^5/

Petitioner has also failed to persuasively establish that he was unaware of the Postal Service prohibition on the purchase and resale of defective stamp stock, that he was improperly charged with constructive notice of these regulations, or that upon being notified of the regulations he immediately took action to comply with those regulations. Petitioner's contentions in this regard are contradicted by his contemporaneous conduct. During an Inspection Service test in early July 1990 (Tr. 76, 89) Petitioner told an undercover Inspection Service employee that he had to turn in defective stamp booklets (Tr. 26-28, 87-88). While this test took place some time after Petitioner initially converted the defective booklets for his own profit, it was before specific instructions for handling defective stamp stock were circulated at the Kent, Ohio, Post Office (Tab Nos. 10 & 11, Exh. 6). Moreover, even after Petitioner was formally advised of the Postal Service regulations he did not attempt to retrieve and return the misprinted booklets under his control. Instead, he made several calls to a stamp dealer to arrange for the sale of a group of the misprinted booklets (Tr. 32, 39, 40-43) and willingly accepted and negotiated payment for such booklets (Tr. 40, 122).

Petitioner, in addition, had been employed by the Postal Service (or Post Office Department) in various clerical positions where he was responsible for the sale of stamps for over 26 years (Tr. 110-11). Although he may not have been aware of the exact section of the regulations pertaining to defective stamp stock, it is inconceivable that he was not aware of the Postal Service prohibition on purchasing such stamps. Moreover, uncontested testimony establishes that the specific regulations applicable to his position were readily available to Petitioner (Tr. 19, 54, 84) and he should have been familiar with their contents (Tr. 85-87).^6/ Further, all Postal Service employees are responsible for being generally familiar with the Standards of Conduct prohibiting the use of their "Postal Service office for private gain."^7/ Finally, even if we accepted Petitioner's testimony that he did not know it was wrong to purchase and resell the defective booklets, since by regulation the stamp booklets remained the property of the Postal Service,^8/ it would still be appropriate to require Petitioner to make restitution for a wrongful, even if innocent, conversion and disposal of Postal Service property.^9/

Petitioner next contends that he should not be held liable for the requested amount because he paid face value for each of the booklets and therefore, the Postal Service did not suffer any financial loss. However, as the Administrative Judge properly found, basic principles of restitution require that the profit be surrendered even when no direct financial loss occurs^10/ and the proper measure of recovery for the wrongful conversion of property is the highest value of the property during the period of conversion.^11/ Furthermore, under no circumstances should Petitioner be allowed to retain the profits he obtained as the result of his violation of Postal Service regulations.^12/ Therefore, the Administrative Judge did not err in concluding that Respondent is entitled to recover the profit obtained from the resale of the misprinted stamps.

Petitioner's final claim on appeal, that the Administrative Judge failed to address any of his contentions concerning entrapment, unauthorized wiretaps, and invasion of privacy by Postal Inspectors is equally without merit. While the Initial Decision did not specifically address any of these issues, Petitioner presented no evidence to support his contention that improper investigative techniques were employed by the Postal Inspectors. Therefore, the omission of any discussion on these issues was not erroneous.

Based on a review of the entire record and Respondent's exceptions, it is concluded that the Administrative Judge correctly determined that Petitioner is indebted to the Postal Service in the amount of $10,135 less any expenses which Petitioner can establish he incurred in connection with the sale of the misprinted stamps.^13/ Accordingly, Petitioner's appeal is denied and the Initial Decision is affirmed.

         James A. Cohen
         Judicial Officer

1/ Although the Inspection Service initially issued the letter of demand for $10,320, at the hearing they accepted Petitioner's testimony that he paid the face value for all of the booklets of misprinted stamps. As a result, the Inspection Service conceded that Petitioner was liable only for the amount of $10,135 (Tr. 128-29).

2/ See Postal Service Handbook F-1, Post Office Accounting Procedures § 426.5 which prohibits the sale or purchase of defective stamp stock. See also United States Postal Service Employee and Labor Relations Manual (ELM) § 661.3 which prohibits employees from engaging in any conduct, whether or not specifically prohibited, "which might result in or create the appearance of using [their] Postal Service office for private gain."

3/ Letters of demand to recover the profits realized on the sale of the misprinted stamps were sent to some employees (Tr. 99-103) and two employees were also suspended without pay for eighteen months (Tr. 98-100, 105).

4/ Petitioner had custody of the keys to the vending machine, was responsible for restocking it, removed the defective stamp booklets, distributed some to other employees at the time the defective stamps were discovered (Tr. 112), and placed the remaining booklets in his own stock (Tr. 113). He later sold tenbooklets to a fellow employee at a price significantly above face value (Tr. 122, 124, 127) and 37 booklets to stamp dealers for $300 to $350 per book (Id.). No evidence was presented that suggests any other employee had access to the vending machine, controlled the distribution of the defective stamps, or purchased and resold more than a few booklets.

5/ Even if the evidence supported Petitioner's contention that the failure of the Postal Service to reinstate him to full employment was motivated by his past union activities, neither the Administrative Judge nor the Judicial Officer has jurisdiction to consider the propriety of his removal from employment.

6/ Any suggestion that supervisory employees approved Petitioner's actions is also unsupported and even if supported would not excuse Petitioner's failure to familiarize himself with Postal Service regulations applicable to his position.

7/ See Postal Service Standards of Conduct, ELM § 661.3.

8/ See Postal Service Handbook F-1 § 426.51.

9/ See Restatement Of The Law Of Restitution, § 154, requiring restitution, at the election of the injured party, in the amount of the value of the innocently converted property at the time of its acquisition or disposition by the converter. See also Rochez Brothers, Inc. v. Charles R. Rhoades, 527 F.2d 891, 893 (3rd Cir. 1975), cert. denied, 425 U.S. 993 (1976) (injured party has privilege of electing damages); Gerstle v. Gamble-Skogmo, 298 F. Supp. 66, 101 (E.D.N.Y. 1969), modified on other grounds, 478 F.2d 1281 (2nd Cir. 1973) (innocent converter liable for highest value).

10/ See United States v. Exxon, 773 F.2d 1240, 1293 (Temp. Emer. Ct. App. 1985), cert. denied, 474 U.S. 1105 (1986), reh. denied, 484 U.S. 1037 (1988); Sauder v. DOE, 648 F.2d 1341, 1348 (Temp. Emer. Ct. App. 1981); Ocor Products Corp. v. Walt Disney Productions, Inc., 682 F. Supp. 90, 95(D. N. Hamp. 1988); Getty Oil Corp v. DOE, 569 F. Supp. 1204, 1218 (D. Del. 1983), modified on other grounds, 749 F.2d 734 (1984), cert. denied, 469 U.S. 1209 (1985). See also Restatement Of The Law Of Restitution, § 1(e).

11/ See United States v. Bound Brook Hospital, 251 F.2d 12, 14 (3rd Cir. 1958) (government entitled to at least the difference between the price defendant paid for improperly acquired government property and the price at which defendant sold the property). See also Gerstle v. Gamble-Skogmo, Inc., 478 F.2d 1281, 1305 (2nd Cir. 1973); Baumel v. Rosen, 412 F.2d 571, 576 (4th Cir. 1969), cert. denied, 396 U.S. 1037 (1970); Teren v. Howard, 322 F.2d 949, 953 (9th Cir. 1963) (all holding that correct measure of damage is highest value of property improperly acquired). See also Restatement of the Law of Restitution, § 151.

12/ See Snepp v. United States, 444 U.S. 507 (1980) (profits from book published in violation of agency regulations impressed with constructive trust for the benefit of the government); See also Draper v. C.I.R., 536 F.2d 944 (1st Cir. 1976) (husband who murdered wife not allowed to recover insurance proceeds); SEC v. Ferrero, No. IP 91 271 C slip op. at 17, 1993 WL 625964 (S.D. Indiana Dec. 2, 1993) (defendants ordered to pay profits realized from stock trading in violation of securities laws into United States Treasury); United States v. Bonanno, 683 F. Supp. 1411 (E.D.N.Y. 1988), aff'd, 879 F.2d 20 (2nd Cir. 1989) (defendants can be ordered to pay profits from illegal gambling activity to the United States Treasury).

13/ In the Initial Decision, the Administrative Judge ruled that Respondent could recover only Petitioner's net profit (I.D. COL 5). Thus, under the Initial Decision, Petitioner is entitled to subtract any expenses including federal, state, and local taxes which he can show he has paid (Id.). Respondent has not challenged this conclusion.