In the Matter of the Petition by ) July 1, 1996 ) JAMES R. BROOKS ) 644 Shady Lane ) ) at ) ) Trenton, NJ 08619-2758 ) P.S. Docket No. PF 95-392 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: Philip J. Moran, Esq. Parkway Corporate Center 1230 Parkway Avenue, Suite 311 West Trenton, NJ 08628
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 a false claim for disability compensation. The Complaint asks for an assessment equal to twice the amount of the claim ($4,626 x 2 = $9,252), plus a civil penalty of $5,000.
Respondent filed a timely Petition for Hearing on October 31, 1995, denying that he had submitted a false claim. A hearing was held in Trenton, New Jersey on March 26, 1996. Both parties were represented by counsel. The Postal Service called three postal inspectors who investigated this case and presented a video tape of some surveillance taken of Respondent, as well as some Department of Labor documents pertinent to Respondent's disability claims. Respondent James Brooks testified in his own behalf, and also presented testimony from his wife, Pat Brooks. Respondent submitted no documentary evidence. The Postal Service filed a post-hearing brief, in the form of proposed findings of fact and conclusions of law. Respondent's attorney made a closing summation on the record at the hearing, but did not file a brief. The following Findings of Fact and Conclusions of Law are based on the entire record, as well as on observation of the witnesses and their demeanor.
FINDINGS OF FACT
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.(1)
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). 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. Instructions accompanying the form tell the employee that the information provided is to cover the fifteen months immediately preceding the date the form is signed.
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). The cover letter that is Form CA-1032 states, in capital letters:
WARNING
A FALSE OR EVASIVE ANSWER TO ANY QUESTIONS OR THE
OMISSION OF AN ANSWER MAY BE GROUNDS FOR SUSPENDING
YOUR COMPENSATION BENEFITS AND SUBJECT YOU TO CIVIL
LIABILITY, OR, IF FRAUDULENT, MAY RESULT IN CRIMINAL
PROSECUTION.
8. The Postal Service must reimburse the OWCP for any benefits paid to postal employees. 5 U.S.C. §8147.
Mr. Brooks' Case
9. Respondent James R. Brooks is an individual who resides at 644 Shady Lane, Trenton, New Jersey.
10. Mr. Brooks began working for the Postal Service in February 1986, as a tractor trailer operator. He suffered an on-the-job injury to his back and knee in June 1987. He received continuation of pay (COP) from July 2 through August 15, 1987, and then began drawing workers' compensation from the Department of Labor. Sometime thereafter, Mr. Brooks returned to work for the Postal Service in a part-time clerical job, but later suffered a recurrence of his back injury. Between August 15, 1987 and March 3, 1993, he received either total or partial disability compensation. On March 3, 1993, Mr. Brooks returned to the Postal Service for limited duty, working four hours per day, and receiving compensation from the Department of Labor for four hours per day.
11. Between November 1988 and October 1992, while he was on the "periodic rolls," Mr. Brooks completed and signed six Department of Labor Forms 1032. (PS Ex. 1).(2) On the Form 1032 signed on May 5, 1990, he reported that he was working four hours per day at the post office. (PS Ex. 4). On all the other Form 1032s, he answered "No" to questions asking whether he was employed or self-employed. (PS Exs. 2, 3, 5, 6 and 7.)
12. The period of time challenged by the Postal Service in this case is May-October 1992. During that period, Mr. Brooks collected $4,626.00 in FECA benefits - the amount alleged to constitute a false claim. The Form 1032 pertinent to that period - the one alleged to be false - was signed by Mr. Brooks on October 8, 1992 (PS Ex. 7). It contained the following reporting requirement:
PART A. EMPLOYMENT HISTORY
1. Employment other than Self-Employment. Under this heading, you must report all employment, other than self- employment, for which you received salary, wages, sales commissions, piecework, or other payment. If you performed work for which you were not paid, you must show as "rate of pay" what it would have cost the employer or organization to hire someone to perform the work you performed. The value of housing, meals, food allowance, clothing, equipment, reimbursed expenses in a business, corporation, partnership or sole proprietorship, or other things of value must be included in the rate of pay. Report separately overtime pay (that is, pay received for work in excess of forty hours per week).
a) Were you employed by an employer during the time period covered by this form? Answer Yes or No:____
b) If yes, provide the following information for each employer:
. . . . . . . . . . . . . . .
2. Self-Employment. Earnings from self-employment (such as farming, sales, 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 reinvested. You must show as "rate of pay" what it would have cost you to have hired someone to perform the work you did.
a) Were you self-employed during any time covered by this form?
Answer Yes or No:____
Respondent answered "No" to both questions. The Postal Service alleges that the answer to Question 1a was false, because Respondent was performing work at the Mirror Lounge and Restaurant in Trenton, New Jersey during the summer of 1992.
13. The Mirror Lounge and Restaurant was owned by Respondent's father-in-law, Jim Romano.(3) It was connected to a hotel that was owned and run by Mr. Romano. Respondent's wife, Pat Brooks, was the restaurant manager and principal cook. (Tr. 105, 110, 178, 184). The restaurant was open only for breakfast and lunch, Monday through Friday.
The Issue, and Contentions of the Parties
There is no dispute over the fact that Mr. Brooks spent much time at the restaurant between May and October 1992, and that he did some things that an employee might be expected to do. The issue is whether those activities amounted to "employment" that was required to be reported on Form 1032. Respondent argues that he had no regularly assigned duties or assigned hours, that he was never paid for anything that he did, that he was just trying to occupy his time with something other than watching television, and that many of the things he did should be considered just "favors" for his wife or father-in-law.
The Postal Service argues that, even though Mr. Brooks was not paid wages or salary, he was allowed to eat free meals nearly every day, that his activities in furtherance of restaurant business were too extensive to be explained away as just "killing time," and that the Form 1032 makes clear that this type of "work" must be reported.
Further Findings of Fact
14. Mr. Brooks admitted, in response to pre-hearing interrogatories (PS Ex. 10 and 11), and in testimony at the hearing, that he did the following:
a. He prepared a menu/order form on his home computer. This was an idea inspired by a visit, with his wife, to a restaurant in Florida while on vacation in July or August 1992. The Mirror Restaurant was closed for much of August, and this menu form was put into use at the restaurant in late August 1992. (Tr. 45, 117-18, 142-43; PS Ex. 8 - Aug. 31, 1992 surveillance tape).
b. On most mornings, Mr. Brooks drove his wife to the restaurant at about 5:00 AM. He began doing this because she felt unsafe after being accosted by a vagrant early one morning. (Tr. 204-06). To give him a place to stay, Mr. Romano put a lounge chair and a television in a back room. (Tr. 107-08, 194). Sometimes Mr. Brooks would return home, but he spent most days at the restaurant until his wife closed up after the lunch hour. (Tr. 120, 207). The Postal Service argues that driving his wife to work and remaining there in the early morning hours constituted work as a "security guard."
c. On an average of twice a week, Respondent would drive to a local store to pick up items needed at the restaurant. Each trip took approximately an hour, or slightly more. Mr. Romano gave Respondent money for gas. (Tr. 126, 134, 136-7; PS Ex. 11, para 13). If Respondent had not run these errands, either Mr. Romano would have would have done them, or Mr. and Mrs. Brooks would have stopped on their way home after the restaurant closed. (Tr. 200; PS Ex. 11, para 6e).
d. Occasionally, Respondent took restaurant money to the bank for deposit. He estimates he did this six to ten times, on his way home. (Tr. 140-41).
e. Respondent occasionally made bread pudding or rice pudding at the restaurant. The rice pudding was served to customers. (Tr. 110, 118, 155).
f. Mr. Brooks ate, without charge, at the restaurant nearly every day, six to ten meals per week. When he ate breakfast, he would often make it himself at the grill. Sometimes he and his wife would take salad home with them, and he sometimes took home ice cream from the self-serve machine. The average cost, to a paying customer, of a meal eaten by Mr. Brooks was approximately $3.00. (Tr. 110-11, 122-24, 135-36; PS Ex. 11, para 12).
15. In addition to the aforementioned admissions, the Postal Service relies on evidence produced through extensive surveillance by postal inspectors, accompanied by an agent from the Department of Labor. These inspectors, posing as customers and people interested in the restaurant business, visited the Mirror Lounge and Restaurant more than forty times during the summer of 1992. On thirty to thirty-five of those times, Respondent was there. (Tr. 70). In addition to engaging in conversation with Respondent and other employees during the breakfast and lunch hours, they conducted video and audio surveillance on fifteen occasions. (Tr. 17, 20, 30, 37). The total time spent observing Mr. Brooks, including the video and audio surveillance, totaled more than fifty hours. (Tr. 54). This observation and surveillance produced the following:
a. Postal Inspector Dundon observed Mr. Brooks cooking at the grill during the breakfast hour, about three or four times. She does not know whether he was cooking for himself or someone else. (Tr. 18-19, 43-44, 67-68).
b. Inspector Dundon observed Mr. Brooks mixing salad in bowls, replenishing the salad bar, and clearing items from the salad bar. She did not specify whether she observed this more than one time. (Tr. 17-18, 66-67). The video tape does not show Mr. Brooks doing this. (PS Ex. 8).
c. Inspector Dundon observed Mr. Brooks carry what appeared to be groceries from his van into the restaurant. She did not specify whether this occurred more than one time. (Tr. 18).
d. Inspector Dundon observed Mr. Brooks drive his van five to ten times, and on some occasions the inspectors followed him. She did not testify as to any occasion when they followed him on what appeared to be an errand for the restaurant. (Tr. 56-58).
e. Inspector Dundon observed Mr. Brooks fill some cups with ice cream from the self-serve machine, place covers on the cups and take them to the rear of the restaurant. The video tape also shows this. (Tr. 36, 49-50; PS Ex. 8 at counter 1:40:10). Neither Inspector Dundon's observation, nor the video tape, shows what he did with the ice cream.
f. During the August 31, 1992 video tape, Mr. Brooks is heard to say that he put the new menu/order form "on my computer," and when asked, "do you have any problems cooking with it?," replied "none at all, haven't had any problems." He goes on to explain that the waitresses highlight the form with a yellow marker, which makes it easy on "our eyes." (PS Ex. 8 at counter 58:00 to 1:01; Tr. 76).
g. During the September 17, 1992 video tape, Mr. Brooks is asked by one of the inspectors, "how long have you been cooking here?". No definitive answer is audible, but he is heard to comment on being given some on-the-job training by "Patty's father" (Mr. Romano). (Ps Ex. 8 at counter 1:31:15). Later he is asked, "are you the only cook here?," to which he replies, "yeah, I'm it." (PS Ex. 8 at counter 1:31:40). A little later, in response to comments from one of the inspectors about the good looking desserts on display, he says, "the bread pudding and rice pudding, I made." (Ps Ex. 8 at counter 1:42:10).
h. During the September 18, 1992 video tape, Mr. Brooks is heard to make a comment about being "ready for a nap," to which one of the inspectors replies that he would have "all weekend" to rest. Mr. Brooks then said he would be there "all day Sunday," cooking for the following Monday, explaining that when they cooked "big roast beefs" they had to do it a day ahead. (PS Ex. 8 at counter 2:54:15).
16. Mrs. Brooks was the principal cook at the Mirror Lounge and Restaurant during the summer of 1992, and during part of that period they also employed a short-order cook who prepared sandwiches and grill items. In addition, there was a "bus person," and two (sometimes three) waitresses. (Tr. 184, 186).
17. No one was hired to fill in for Mr. Brooks on the days he was not present, and Mrs. Brooks was not paid anything extra for tasks performed by her husband. (Tr. 188).
18. In addition to Mr. Brooks, other family members not regularly employed at the restaurant also ate free meals there on occasion. These included Mrs. Brooks' brother, sister-in-law, and their children. (Tr. 51, 177, 192).
CONCLUSIONS OF LAW
1. One of the elements of a false claim, in violation of 31 U.S.C. §3802(a)(1), is that a respondent "knows or has reason to know" that the claim is false. Violation of the statute requires scienter, i.e., there must be a proof of knowing fraud. "The requisite intent is the knowing presentation of what is known to be false." Hagood v. Sonoma County Water Agency, 81 F.3d 1465, 1477-78 (9th Cir. 1996) (interpreting the False Claims Act, 31 U.S.C. §3729(b), which contains operative language nearly identical to the Program Fraud Civil Remedies Act); State Central Committee-Independent Party of Utah, P.S. Docket No. PF-74 at 18 (I.D. August 29, 1995).
2. Even assuming that the Form 1032 should reasonably be read to require reporting of the activities Mr. Brooks was engaged in, the evidence falls short of proving that he "knew" he was giving a false answer when he declared that he was not employed.
3. I find that an even stronger argument can be made, however, that it is reasonable to conclude that Mr. Brooks activities did not equate to employment that had to be reported on the Form 1032.
4. Some of the things that Mr. Brooks did undoubtedly were helpful to his wife and father-in-law, and being able to eat some free meals obviously was a benefit to Mr. Brooks, but there is no evidence that there was any quid pro quo, i.e., work in exchange for meals. Mr. Brooks did what he did to occupy his time and to be helpful to his family. The fact that he had no regularly assigned hours or duties, but rather did whatever he wanted to do, is indicative that he was not doing anything in exchange for free meals. The fact that other family members apparently ate free meals also supports this. Also, despite the amount of time he spent at the Mirror Lounge and Restaurant, the amount of "work" Respondent did was quite minimal. Respondent admitted that he occasionally ran errands to pick up milk, orange juice, or pies, but there is no evidence that he did the major grocery buying on a regular basis. His work on the menu appears to have been a one-time event, and his making pudding was also an irregular contribution - whenever he wanted to do it. The evidence does not suggest that he was the restaurant's "dessert chef."
5. The items of evidence most damaging to Respondent are his own statements about his being a cook at the restaurant. While his effort to explain these away by claiming that he is prone to exaggerating his accomplishments, and just likes to talk, must be viewed with some skepticism, this is corroborated by Mrs. Brooks' testimony. Also, some of his statements are really not very incriminating, when viewed in light of other evidence. His statement that he was the only cook, for example, had to have been an obvious overstatement even to the inspectors, because they observed other people cooking. As for cooking "all day Sunday," the inspectors never observed him do that (Tr. 44), and Mrs. Brooks testified that no one ever went in to cook roast beef on Sundays (Tr. 198, 212). Most telling, however, is that during the fifty to sixty hours of surveillance, covering at least thirty-five different days, he was seen cooking breakfast four times, at most, with no evidence that he was cooking for anyone but himself. The vast majority of their surveillance was done during the lunch hour, and had Mr. Brooks ever been cooking during the lunch hour, one assumes that the inspectors would have looked into the kitchen and seen it. Whatever cooking Mr. Brooks did was minimal, and again not part of any quid pro quo.
6. Mr. Brooks was paid no salary or wages, nor was Mrs. Brooks salary increased because of his assistance. Reimbursement for gas is not evidence of employment, and there is nothing at all to suggest that any additional employee would have been hired if Mr. Brooks had not been around. The sentence on the Form 1032 upon which the General Counsel's argument rests is: "If you performed work for which you were not paid, you must show as 'rate of pay' what it would have cost the employer or organization to hire someone to perform the work you performed." In a case such as this, where hiring another person was probably never considered, it was reasonable for Respondent not to think that he was "employed" by the Mirror Lounge and Restaurant.
CONCLUSION
Respondent did not submit a false claim within the meaning of 31 U.S.C. §3802(a)(1), and is not liable for the penalty and assessment sought by the Postal Service.
Bruce R. Houston Acting Chief Administrative Law Judge
2. References to Postal Service documentary evidence are "PS Ex. _." References to the Transcript of the hearing will be "Tr. _."
3. The restaurant has since been closed. (Tr. 54-55).