In the Matter of the Petition by) December 10, 1997 ) DOUGLAS A. WILLIAMS ) P. O. Box 5 ) ) at ) ) Bellaire, TX 77402-0005 ) P. S. Docket No. DCA 96-347 APPEARANCE FOR PETITIONER: Jim Lee NAPUS Representative P. O. Box 390 Salado, TX 76571-0390 APPEARANCE FOR RESPONDENT: Gilbert M. Miranda Labor Relations Specialist United States Postal Service 401 Franklin Street, Rm 406 Houston, TX 77202-9401
FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982
Petitioner, the former postmaster at Bellaire, Texas, filed this Petition on September 16, 1996, after receiving a PS Form 3239, Payroll Deduction Authorization, stating the Postal Service's intention to withhold $12,893.51 from his pay. Petitioner had been issued a letter of demand for $13,443.55 on November 7, 1995, based on shortages discovered when the Bellaire Post Office was transferred from Mr. Williams
to a new postmaster in July 1995. In the Answer, filed by Respondent on October 1, 1996, Respondent noted that the alleged debt had been reduced to $12,893.51 by application of certain overages.
By Order dated October 15, 1996, because no Notice of Involuntary Administrative Salary Offsets had yet been issued, action was suspended to give the Postal Service representative an opportunity to re-examine the procedural steps that had been taken up to that time.(1) On October 22, 1996, a Notice of Involuntary Administrative Salary Offsets was issued to Petitioner by Mr. C. O. Sylvester, Manager, Post Office Operations. The Notice cited the November 7, 1995 letter of demand and reverted to the figure $13,443.55, made up of a $4,800.00 "redeemed stock shortage," and an $8,643.55 "unit reserve shortage." There was no reference to the figure $12,893.51.
The hearing in this case was delayed several times for a variety of reasons, primarily to permit Petitioner and Postal Service officials time to examine the large volume of pertinent documents, in an effort to settle the disputed debt.(2) On July 25, 1997, Mr. Louis Honore, Manager of Finance, Houston District, granted Petitioner's request that window clerks' overages in the amount of $5,493.51 be credited against the total shortage of $12,893.51.(3) This reduced the alleged debt to $7,400.00. By this time, the parties agreed that this total was made up of two identifiable increments - one of $1,600.00, and another of $5,800.00.
A hearing was held in Houston, Texas on October 7, 1997. The Postal Service presented testimony from Mr. Sylvester and two accounting supervisors, Ms. Wilks and Ms. Roberts. Petitioner testified in his own behalf, and presented testimony from a clerk, Ms. Arnold. Neither party presented any documentary evidence beyond the large volume of materials that had already been submitted with the Petition, the Answer, and supplements thereto. In accordance with a schedule agreed to at the close of the hearing, both parties filed written arguments. The following findings of fact are based on the entire record, including observation of the witnesses and their demeanor.
1. Accountability for the main stock at the Bellaire Post Office was transferred to Petitioner from Mildred Newsome in April 1994. Petitioner had been the Bellaire Postmaster for several years at that time. A shortage of $619.83 was noted, and Ms. Newsome was charged for that amount. That shortage is not in dispute in this case but, as will be discussed later, part of Respondent's argument rests on the fact that no other shortage was noted at the time of the transfer from Ms. Newsome to Mr. Williams.
2. During his tenure as postmaster, Petitioner's performance was sometimes less than satisfactory, and he was issued "letters of warning" about inadequate exercise of financial controls, and failure to follow proper procedures, on several occasions. In approximately June of 1995, at least in part at the request of Mr. Williams, a decision was made to reassign him. (Tr. 17-18; 30). In July 1995, an audit of Mr. Williams' accountability was conducted, for the purpose of transferring that accountability to Mr. Burke. Because the audit revealed a shortage of approximately $15,000.00, transfer of the account was held up so that Mr. Williams, and others, could review records and attempt to reconcile the account. Some progress was made, but the letter of demand for $13,443.55 was issued to Mr. Williams on November 7, 1995. As noted above, that amount has since been reduced to $7,400.00.
The $1,600.00 shortage
3. On December 20, 1994, the Accountable Paper Unit in Houston, Texas sent a stamp shipment to the Bellaire Post Office. (Tr. 79). This shipment originated in Washington, D. C. (Tr. 87-88). The PS Form 17 that accompanied the shipment listed 800 coils of G-Series stamps as being included. The value of each coil, which would consist of one hundred 32¢ stamps, is $32.00. Petitioner signed for receipt of this shipment on December 21, 1994, thereby adding the entire stated value of the shipment to his account. (Tr. 141, 146-47).
4. The shipping carton that would contain 800 coils of stamps is approximately 24" x 18" x 8". The coils are arranged in 16 layers, called "trays," each containing 50 coils. The carton contains a narrow perforated slot on the long side, through which the contents can be seen but not removed. Recipients are instructed to remove the tape that covers this slot, open the slot and count the trays, in order to determine that the contents of the carton matches the shipping document. If there appears to be any discrepancy, the recipient is instructed to not open the carton and to return it to the Accountable Paper Unit. (Tr. 81-82, 89-90).(4)
5. Petitioner's opening of the carton was witnessed by one of his clerks, Mr. Garnett Lewis. Lewis' signature, and the date "12-21-94," appears at the top of the Form 17 on a line printed "witness." It is standard practice to have a witness verify the contents of a stamp shipment. The line on the Form 17 listing the 800 G-Series coils is circled. Beside this, the number "750" is written, and next to it are the signatures of Mr. Williams and Mr. Lewis and the date "12-21-94." (Tr. 131-32, 139, 145; copies of the Form 17 are found at several places in the case file, most recently as part of Mr. Williams' final witness and exhibit list on September 18, 1997).(5)
6. Ms. Arnold, another Bellaire clerk, heard Mr. Williams and Mr. Lewis discussing the missing 50 coils. When they came out of the vault after opening the carton, she heard them discussing the shortage, and one or both of them told her that one of the trays was folded double. She did not see the carton or its contents herself. (Tr. 151-53).
7. At some time after opening the carton and emptying the contents, Petitioner called Ms. Wilks at the Accountable Paper Unit and reported that the carton contained only fifteen trays (750 coils). He said that one of the trays was folded double and that he had not noticed any discrepancy when counting the trays through the slot. Ms. Wilks told him to send her a Form 13, explaining in detail what had happened, and that she would then submit a request to the supplier (Bureau of Engraving) to replace the missing fifty coils. Petitioner did not follow these instructions, and did nothing about this shortage until faced with the large shortage in July 1995. (Tr. 79-80, 84, 133, 141; Wilks' statement, July 17, 1997, Atch. "J" to Respondent's final exhibit list).
8. The veracity of Mr. Williams' explanation of this shipment shortage was not seriously challenged by Respondent. His explanation is supported by Mr. Lewis' signature on the Form 17, by Ms. Arnold's testimony, and by Ms. Wilks' testimony that Mr. Williams did call and tell her what had happened. I find it to be credible.
The $5,800.00 shortage
9. Although the Notice of Involuntary Administrative Salary Offsets referred to a $4,800.00 "redeemed stock shortage," the parties seem to agree now that the entire $5,800.00 in issue pertains to redeemed stock.
10. In late 1993, the Postal Service printed a series of stamps called "Legends of the West." One edition of these was flawed and had to be recalled. By letter dated January 21, 1994, from the Accountable Paper Unit in Houston, the Bellaire Post Office, along with other post offices, was directed to return its Legends of the West stamps to the Stamp Distribution Network in Kansas City. (Tr. 34, 50, 100). This letter also instructed the recipients to return the letter, with pertinent information filled in, to the Accountable Paper Unit, and stated as follows:
Upon return of this letter, the Accountable Paper office will generate a transfer order to the SDN via the computer inventory system showing the quantity and value your office is returning.
The transfer order for Bellaire, Form 3229, was issued on January 31, 1994. (Tr. 36; copies of this document are found at several places in the record).
11. On January 24, 1994, Ms. Newsome, who was then the custodian, sent $5,800.00 worth of Legends of the West stamps back to Kansas City by registered mail. This shipment was received in Kansas City. (Tr. 38, 62, 74; Mr. Honore's July 25, 1997 letter, ¶3 and Attachment B). However, this $5,800.00 of Legends stamps was not removed from the inventory of the Bellaire Post Office. It is unclear whether this was an error by the SDN in Kansas City, the Postal Service Minneapolis Accounting Service Center, Ms. Newsome, or Mr. Williams, but it is clear that these stamps were still listed on the Bellaire main stock inventory when the account was transferred from Ms. Newsome to Mr. Williams on April 15, 1994. This is established by the testimony of Respondent's witness, Ms. Roberts, as well as Mr. Williams, and the April 15, 1994 inventory record. (Tr. 53, 101-02; Respondent's Answer, Ex. 6).
12. Sometime in September or early October 1994, Petitioner sent a copy of the January 21, 1994 letter back to Ms. Edwina Wilks in the Accountable Paper Unit, with a handwritten note at the top of the page saying, "Att Edwina -- If something was sent advising us to clear this - we missed it. We are still holding this in our inventory - Please advise. Thanks, Doug." (Tr. 104).(6) Shortly thereafter, Ms. Wilks sent Petitioner a copy of the January 31, 1994 Form 3229, with a handwritten note at the bottom saying, "Doug, enclosed is a copy of the transfer - please use this as justification. Edwina." Both Petitioner and Ms. Newsome then signed the top of the form, noting the date the Legend stamps had been sent to Kansas City (01-24-94), and the registry number.(7)
13. On October 27, 1994, for the purpose of reducing his main stock accountability, Petitioner made this entry on a PS Form 3958: "Stock Returned - $5,800.00."(8) No stock was actually returned at that time. (Tr. 66, 104). The only time pertinent to this case that stock was returned was in January 1994.
14. On January 26, 1995, because Bellaire had not actually returned any stock in October 1994, the October 27, 1994 entry mentioned above was treated by the "accounting office" as an erroneous entry, and the amount, $5,800.00, was placed in "suspense." (Tr. 57). This means that it is treated as a shortage, but in a separate accounting category - no longer counted as part of the Bellaire main stock. (Tr. 57, 66, 118-20).(9)
15. Thereafter, for reasons not adequately explained, computer printouts listing suspense items for Bellaire listed two separate items, both entered on "01/26/95" - "Error on Returned St 4,800.00," and "Station/No Support 1,000.00." These entries are found on suspense lists dated 02/03/95, 03/06/95, 07/06/95, and 09/04/95.(10)
16. There are no documents in the record that show any adjustment to Bellaire's main stock account, between January and October 1994, for the $5,800.00 Legends stamps that were returned to Kansas City. (Tr. 62-64).
Respondent's burden of proof in a case such as this is to prove that the Postal Service suffered a loss of stamp stock, or money, and that the loss occurred from an account for which the Petitioner was responsible. Respondent does not have to prove that some specific dereliction or act of negligence by Petitioner caused the loss. If this burden is met, the burden then shifts to Petitioner to show that he exercised reasonable care in the performance of his duties relative to his accountability.
The $1,600.00 shortage
Petitioner's argument is that he exercised reasonable care in opening the shipment of stamps he received on December 21, 1994, and that any loss to the Postal Service occurred before the stamps were shipped, not after they reached his account.
Respondent's argument for liability is based on Petitioner's failure to follow proper procedures, as he had been instructed by Ms. Wilks, for clearing up the claimed shortage in the shipment. Because the full amount listed on the shipping document was added to Petitioner's account, the account reflects a $1,600.00 shortage, and because Petitioner failed to document the cause of that shortage in a timely manner, he, Respondent argues, must pay the $1,600.00.
There is no question that Petitioner failed to do what he should have done upon discovering that the shipment was short, but Respondent's argument ignores the requirement that an actual loss, not just a "paper" loss, be proved. When a properly conducted inventory, or audit, shows a stock shortage relative to a previously established balance, this constitutes proof of loss unless other evidence raises sufficient doubt about the accuracy of the inventory or the previously established balance, or otherwise suggests that there may have been no actual loss. In this case, there is evidence that the previously established balance was incorrect, because Petitioner signed for more stamps than he actually received on December 21, 1994. Because he received only 750 coils, not 800, there was no $1,600.00 loss from his account.
The $5,800.00 shortage
Petitioner's argument is that the Postal Service suffered no loss because there is no "missing" stamp stock. The alleged $5,800.00 shortage, he contends, was the result of bookkeeping errors involved in the return of the Legends stamps to Kansas City, and his later attempt to clear that amount from his account in October 1994.
Respondent's position on this matter is not entirely clear. It seems to rely primarily on the fact that the Minneapolis Service Center did not generate any corresponding $5,800.00 overage, or credit, for Bellaire in January 1994, which should have happened if the Legends stamps had been shipped to Kansas City but not correctly entered into the accounting system by Bellaire. It also seems to argue that Petitioner's failure to note the shortage in April 1994 when he took over the account from Ms. Newsome indicates that there really was no $5,800.00 shortage at that time. Therefore, Respondent disputes Petitioner's claim that the return of the Legends stamps in January 1994 caused the shortage that is in issue. Instead, it argues that the shortage was caused by some unspecified error(s) that Petitioner made after that time, and that his attempt to reduce his account by $5,800.00 in October 1994 was not a valid accounting entry.
To say that there are many uncertainties in this case is an understatement, but the crux of the case is the accounting entry made by Mr. Williams on October 27, 1994. As noted in FOF #14, the accounting office rejected that entry, and their placing that $5,800.00 amount in suspense created the shortage that is the subject of this case.
Because there is no doubt that Bellaire shipped, and Kansas City received, $5,800.00 of Legends stamps in January 1994, and because there is no evidence that this amount was ever removed from Bellaire's account, the evidence of record is more supportive of Petitioner's explanation than of Respondent's theory that losses unrelated to the January 1994 shipment of Legends stamps caused a shortage. As is true with regard to the alleged $1,600.00 shortage, there is evidence that Mr. Williams failed to follow proper accounting procedures, but Respondent has not proved, by a preponderance of evidence, that the Postal Service suffered a loss of $5,800.00.
The Petition is granted. Respondent may not collect $7,400.00 from Petitioner's salary.
Bruce R. Houston Chief Administrative Law Judge
2. Both parties waived the statutory requirement for a decision within 60 days of the Petition being filed.
3. At an earlier point in the exchange of correspondence between Petitioner and Postal Service representatives, it was acknowledged that the original alleged debt of $13,443.55 had been reduced to $12,893.51.
4. Procedures for receiving and examining stock shipments, and reporting discrepancies, are found in Handbook F-1, Post Office Accounting Procedures, April 1991, Section 426.
5. Mr. Lewis has since retired from the Postal Service. Apparently, neither party attempted to procure his attendance at the hearing, or to obtain a written statement from him.
6. This document is found in the record as Attachment 20 to Petitioner's February 21, 1997 letter to Mr. Honore.
7. This document is found in the record as Attachment 21 to Petitioner's February 21, 1997 letter to Mr. Honore.
8. Form 3958 is a computer generated form used to record amounts of stock received, issued, returned, etc. (Tr. 56). This particular Form 3958 is found in the record as Attachment 22 to Petitioner's February 21, 1997 letter to Mr. Honore.
9. The document that reflects this entry is found in the record as Attachment 23 to Petitioner's February 21, 1997 letter to Mr. Honore.
10. Three of these are found in the record as Attachments 6, 7, and 26 to Petitioner's February 21, 1997 letter to Mr. Honore. The other is included in two different groups of documents filed by Respondent.