In the Matter of the Complaint Against ) October 19, 1995 ) FRANK E. RODGERS, JR. ) 9214 S. Dairy Ashford Street #2803 ) ) at ) ) Houston, TX 77099-4940 ) P.S. Docket No. PF 95-148 APPEARANCE FOR POSTAL SERVICE: Harold E. Durham, Esq. Enforcement Division United States Postal Service 475 L'Enfant Plaza, SW Washington, DC 20260-1148 APPEARANCE FOR RESPONDENT: Frank E. Rodgers, Jr., pro se 9214 S. Dairy Ashford St., #2803 Houston, TX 77099-4940
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 C.F.R. Parts 273 and 962. In the Complaint, the Postal Service alleged that Respondent violated 31 U.S.C. §3802(a)(1) by submitting five false claims for disability compensation. The Complaint asks for a $12,500 penalty ($2500 for each claim).
Respondent filed a timely Petition on May 2, 1995, denying the allegation that he had submitted any false claims. A hearing was held in Houston, Texas on August 1, 1995. The Postal Service called Postal Inspector Robert Murphy, who had investigated this case, and Mr. Rodgers testified on his own behalf. The parties stipulated to the admission of several documents, Exhibits 1-19, and also entered into a Stipulation of Fact, Exhibit 20.1 Both parties filed post-hearing briefs and reply briefs. The following Findings of Fact and Conclusions of Law are based on the entire record, including the stipulated facts, as well as on observation of the witnesses and their demeanor. For the most part, the facts are not in dispute. The issue in contention is over Mr. Rodger's claimed interpretation of the Department of Labor questionnaires alleged to have been falsely answered by Mr. Rodgers.
General
1. Postal Service employees receive compensation for work-related injuries pursuant to the Federal Employees' Compensation Act (FECA). 5 U.S.C. Chapter 81; 39 U.S.C. §1005(c). This program is administered by the Office of Workers' Compensation Programs (OWCP), U.S. Department of Labor. 20 C.F.R. Part 10.
2. A postal employee who is injured on the job completes a Department of Labor Form CA-1, describing the accident and extent of injury, and submits the form to the employee's official superior. 20 C.F.R. §10.100(a). If the injury is likely to result in absence from work beyond one day, the official superior submits a report to OWCP. 20 C.F.R. §10.102.
3. To apply for disability compensation, the employee submits Department of Labor Form CA-7, with appropriate medical evidence. 20 C.F.R. §§10.104 and 10.106. The OWCP determines what benefits will be awarded. 20 C.F.R. §10.110. 2
4. If the OWCP believes the disability to be temporary, the employee will be required to submit a Form CA-8 every two weeks. 20 C.F.R. §10.122.
5. If the disability is likely to be long term, the OWCP will place the employee on the "periodic rolls," and the employee will automatically be paid workers' compensation benefits every 28 days.
6. While an employee is on the periodic rolls, the OWCP will solicit information on earnings from other employment, or self-employment, by sending the employee Forms CA-1032 and EN-1032. 20 C.F.R. §10.125(a). The forms are designed to cover the fifteen months immediately preceding the date of submission. This information is used to determine whether the employee is receiving the correct amount of benefits, and whether the employee is fit to return to work in some capacity. 20 C.F.R. §§10.303 and 10.124.
7. If an employee "knowingly omits or understates any earnings or remuneration, the employee shall forfeit the right to compensation with respect to any period for which the affidavit or report was required." 20 C.F.R. §10.125(a); 5 U.S.C. §8106(b).
8. The Postal Service must reimburse the OWCP for any benefits paid to postal employees. 5 U.S.C. §8147.
Mr. Rodgers' Case
9. Respondent, Frank E. Rodgers, Jr., is an individual who resides at 9214 S. Dairy Ashford Street in Houston, Texas.
10. Mr. Rodgers suffered an on-the-job back injury in November 1972, while employed by the Postal Service in Detroit, Michigan. (Ex. 20).
11. In April 1974, the OWCP placed Mr. Rodgers on the periodic rolls. (Ex. 20).
12. In 1977, the OWCP determined that Mr. Rodgers was partially disabled and issued specific work restrictions. The OWCP began paying him the difference between the wages he would have earned as a postal clerk and the wages he reasonably could be expected to earn within the confines of those work restrictions. (Ex. 20).
13. Between 1977 and 1987, Respondent had various employment, including the Census Bureau and the Internal Revenue Service. He resigned from the IRS in March 1987. (Ex. 19).
14. In September 1987, Respondent began a business called Kustomized Komplaints & Consumer Investigations, and filed an assumed name certificate for that business with the Clerk of Harris County, Texas. The business was designed to help consumers solve problems and settle disputes in dealing with merchants. (Exs. 7, 20).
15. In furtherance of this business, Respondent opened a commercial bank account, installed a second telephone line in his home, listed the business in the yellow pages, had business cards printed, and issued press releases to promote the business. (Exs. 8-11, 20).
16. Although Kustomized Komplaints did attract a few clients, the business was not very successful. The total amount of money received from September 1987 to March 1994 was $2,065.00, and the most received in any one year was $405.00. (Ex. 19; Tr. 27).
17. On November 10, 1989, November 16, 1990, January 16, 1992, August 31, 1993, and April 28, 1994, Respondent completed and signed Department of Labor Forms EN-1032 that were sent to him by the OWCP. (Exs. 2-6; Tr. 34-35).
18. Form EN-1032 asks a series of questions relevant to workers' compensation benefits. On the 1989 version of the form (Ex. 2), the paragraph concerning self-employment was worded as follows:
19. The wording of the 1990 form (Ex. 3) was modified slightly, and thereafter the paragraph concerning self-employment read as follows:
20. Mr. Rodgers answered "No" to this question on each of the five forms in issue. (Exs. 2-6).
21. Part F of Form EN-1032, immediately above the signature, requires the recipient of OWCP benefits to certify that all answers to the questions are true, and that he or she understands the obligation to report "any employment" to OWCP immediately. (Exs. 2-6).
22. On February 9, 1995, the Department of
Labor made a "preliminary determination" that, as a
result of Mr. Rodgers' failure to report his self-employment earnings
between 1987 and 1994, he would be required to forfeit, and repay,
$60,492.05 in compensation benefits that had been paid to him
during that time. (Ex. 19). Mr. Rodgers' testified that he has
requested a hearing at the Department of Labor but has heard nothing
since March 1995, and believes the matter is still pending. (Tr.
63-66).
Contentions of the Parties
23. The Postal Service contends that Respondent's failure to disclose his business, Kustomized Komplaints, on the five forms was knowingly false, because the forms clearly and unequivocally required that such activity be reported.
24. Mr. Rodgers insists that none of his answers were false. (Tr. 20-22). He contends that the terms "earnings," "revenue," and "self-employment," used on the forms connote some sort of profit-making business, and that one was not required to report a business that took in such small amounts of money that the money received did not even cover expenses. (Tr. 28-34). In support of his position, Mr. Rodgers provided some Internal Revenue Code definitions, and dictionary definitions, of various terms. (Ex. 18). The instruction on the forms to report self-employment "even if operated at a loss," did not prompt Mr. Rodgers to disclose his business activity, because he equated that phrase to an entitlement to deduct "business losses" on a tax return. Based on his IRS experience, he argued that he would not have been entitled to such a deduction. (Tr. 50-51).
1. Despite Respondent's experience in working for the Internal Revenue Service,3 his definitions of terms, and the fine distinctions he attempts to draw between various terms, are unsound,4 and his rationalizations for declining to disclose his Kustomized Komplaints business are not persuasive.
2. The definition of a "claim" under the Program Fraud Civil Remedies Act includes, "[a]ny request, demand, or submission - . . . made to an authority for . . . money . . .." 31 U.S.C. §3801(a)(3).
3. Submission of a Form EN-1032 constitutes a claim for money, and each of the five forms submitted by Respondent, on November 10, 1989, November 16, 1990, January 16, 1992, August 31, 1993 and April 28, 1994, constitutes a separate claim. Linda P. Phipps, P.S. Docket No. PF-48 (P.S.D. November 18, 1994); Nina D. Newborn, P.S. Docket No. PF-64 (I.D. April 28, 1994).
4. These five forms signed and submitted by Respondent were false because he knowingly and intentionally failed to disclose his self-employment with Kustomized Komplaints. The forms were materially false because the information provided on those forms is used by the OWCP to determine whether disability compensation should be adjusted or terminated. 20 C.F.R. §10.303. The questions asked, along with the accompanying instructions (see Findings of Fact, paragraphs 18 and 19), were sufficiently clear to put the reader on notice as to what information was required. The instruction to "[r]eport any such enterprise in which you worked, and from which you received revenue, even if operated at a loss . . .," is straightforward and describes Kustomized Komplaints quite clearly. No in-depth knowledge of tax law is required, or even useful, in answering the question. Respondent's testimony demonstrated that he possessed more than enough education and insight to understand what was being asked on the forms. In addition, he specifically testified that he sought no advice or help in filling out the forms because he believed he was knowledgeable in such matters. (Tr. 61-62). Respondent's claimed interpretation of the questions on self-employment is not reasonable and is not credible. He had to have known that his "No" on each of the forms was not an honest answer to what was being asked. 5
5. Respondent is, therefore, subject under the Statute, 31 U.S.C. §3802(a)(1), to a penalty of $5000 for each false claim. In the Complaint, the General Counsel has requested a $2500 penalty for each claim. The statute also provides for an assessment up to twice the amount of the false claims. In this case, the General Counsel has not requested any assessment, presumably because the Department of Labor has initiated action to recoup $60,492.05.
6. The appropriate amount of the penalty must be determined by examining all the surrounding circumstances, including all aggravating and mitigating factors. Linda P. Phipps, supra; Neldie E. Nelson, P.S. Docket No. PF-3 (P.S.D. August 19, 1992). Many government agencies have adopted a set of model regulations proposed by the President's Council on Integrity and Efficiency, which contain a list of factors that, although not binding on the Presiding Officer, may be considered as guidance. See 45 C.F.R. §79.31, promulgated by the Department of Health and Human Services; 52 Fed Reg. 27423-32 (1987).
7. Among the factors to consider are the number of false claims and the time period over which they were made, the amount of money claimed, the value of the agency's actual loss and the relationship of the amount of civil penalty sought to that loss, the degree of Respondent's culpability, whether there has been a pattern of similar misconduct, whether Respondent attempted to conceal the misconduct, the potential or actual impact on public confidence in the management of government programs, whether Respondent cooperated in the investigation, and the need to deter Respondent and others from future similar misconduct.
8. The fact that Respondent gave false answers five times, over a period of nearly five years, is an aggravating factor, and the amount of money claimed (based on the amount of overpayment according to OWCP) is considerable. On the other hand, there is no pattern of similar misconduct, and there is no evidence that Respondent attempted to conceal his actions or that he did not cooperate with investigators. More difficult to evaluate are the actual loss to the agency, and the degree of Respondent's culpability. The General Counsel is not required to prove that Respondent's payments from OWCP would have been substantially reduced if he had disclosed his self-employment. Linda P. Phipps, supra at 7. One of the reasons for the seemingly severe penalties and forfeitures provided for by the statutes6 is that neither the OWCP nor the agency can properly evaluate a disability entitlement if the applicant files false reports. The need to deter people from filing false reports is, therefore, a strong factor to consider. On the other hand, it is highly unlikely that the minuscule amount of earnings that Mr. Rodgers failed to report would have significantly reduced his disability payments, and that fact cannot be ignored. See Phipps, supra at 10. It bears upon both the amount of loss to the agency and on the degree of culpability.
9. Another factor to consider in this case is that the OWCP has made a preliminary determination that Mr. Rodgers should repay the entire $60,492.05 that he received during the time in question, and they may lawfully require him to do so. A heavy civil penalty, in addition to that forfeiture, would be unduly harsh. Considering all the facts and circumstances of this case, I find that a penalty of $500 per false claim is appropriate.
10. The findings and conclusions herein are
based on the preponderance of the evidence. 31 U.S.C. §3803(f).
Respondent is liable to the Postal Service under 31 U.S.C. §3802(a)(1)
for a civil penalty of $2,500.00.
Bruce R. Houston Acting Chief Administrative Law Judge
2 If certain conditions are met, the Postal Service may continue to pay the employee normal wages and benefits ("Continuation of Pay") for not more than 45 days. 5 U.S.C. §8118; 20 C.F.R. §10.200. If this occurs, disability compensation from OWCP will begin once the period of Continuation of Pay expires.
3 Mr. Rodgers described his IRS experience as being a "process reviewer in the collections division," then as "automated collections system account investigator," from which he became a "classroom instructor" and "acting manager." For this last year and one-half, he was an "auditor," during which time he audited personal tax returns and some business returns of sole proprietoships. I do not find that this experience demonstrates sufficient expertise that his interpretation of the terms used on the OWCP forms should be considered authoritative.
4 For example, his explanation that he was not "operating a business," but was only "attempting" to operate a business; and his explanation that he had not "worked" in any "enterprise," because the term "worked" implies something that is "gainful," or "affirmative." (TR. 44-50).
5 In support of his argument that Form 1032 was misleading, Respondent attached to his post-hearing brief an excerpt from a 1995 verison of Form 1032, and speculates that his case may have precipitated the revision of the form to what he calls a "broader request for self-employment information." That speculation will not be addressed, but I find the changes to be very minor and not supportive of Respondent's argument. Certainly Respondent's testimony as to his rationale for interpreting the old forms the way he did not provides no basis for distinguishing the new form from the old.
6 31 U.S.C. §3802(a)(1) and 5 U.S.C. §8106(b).