In the Matter of the Complaint Against ) January 6, 1997 ) JOHN F. ARNEY ) 6296 Scottsville Road ) ) at ) ) Franklin, KY 42134-8207 ) P. S. Docket No. PF-55 APPEARANCE FOR COMPLAINANT: Alice L. Covington, Esq. Appellate Division Geoffrey A. Drucker, Esq. Enforcement Division United States Postal Service Washington, DC 20260-1148 APPEARANCE FOR RESPONDENT: Thomas E. Clay, Esq. 2000 Kentucky Home Life Bldg. 239 S. Fifth Street Louisville, KY 40202-3213
Respondent, John F. Arney, has filed an appeal from an Initial Decision in which an Administrative Law Judge concluded that Respondent had submitted to the Department of Labor, Office of Workers' Compensation Programs (OWCP) four false claims for workers' compensation benefits and was therefore liable to the Postal Service for an assessment and civil penalty of $226,213.92 under the Program Fraud Civil Remedies Act (PFCRA or the Act), 31 U.S.C. §3801 et seq. The Postal Service opposes the appeal and argues that the Initial Decision should be affirmed.
Complainant, the General Counsel of the United States Postal Service, initiated this proceeding by filing a Complaint alleging that Respondent had failed to disclose on four Forms EN-1032 submitted to OWCP that he was self-employed as a farmer during a portion of the time he claimed and received workers' compensation benefits. As a result Complainant alleged that Respondent was liable to the Postal Service under the PFCRA for an assessment of $206,213.92, plus a civil penalty of $20,000.00, for a total liability of $226,213.92.
Respondent filed a reply to the Complaint denying that he was liable for any assessment or penalty. Following a hearing at which both parties presented evidence, the Administrative Law Judge issued an Initial Decision in which she concluded that between October 21, 1986 and September 21, 1991, Respondent had submitted to OWCP the four false claims alleged in the Complaint and therefore was liable under the PFCRA for the maximum allowable assessment and civil penalty of $226,213.92. Respondent filed a timely appeal from the Administrative Law Judge's Initial Decision.
On appeal, Respondent contends that the Administrative Law Judge erroneously concluded that Respondent was liable for an assessment and civil penalty under the PFCRA without first finding that his disability benefits would have been reduced or discontinued if he had not submitted the false claims. Respondent also argues that the assessment and civil penalty are barred by the Double Jeopardy Clause of the Fifth Amendment to the United States Constitution because Respondent had been previously tried for crimes predicated on the same facts. Finally, Respondent argues that the Postal Service has not established that he made any fraudulent representations, and even if he had, the Postal Service is estopped from recovering under the PFCRA since the forms filed by Respondent showed that he was not unemployed and the Postal Service was well aware of Respondent's farming activities during the period he was receiving disability compensation. Each of Respondent's contentions is hereafter addressed.
"I. THE REVIEWING OFFICER MADE INADEQUATE
FINDINGS IN THAT THERE WAS NO DETERMINATION AS TO WHETHER RESPONDENT'S
BENEFITS WOULD HAVE BEEN REDUCED OR THAT HE HAD REACHED A LEVEL
OF FITNESS AS TO DISQUALIFY RESPONDENT FROM RECEIVING WORKERS'
COMPENSATION BENEFITS."
Respondent contends that he cannot be held liable for filing a false "claim" under the PFCRA because the Administrative Law Judge did not find that Respondent's compensation benefits would have been reduced or discontinued if he had submitted truthful information. In support of this contention, Respondent argues that the Forms EN-1032 can only be considered a "claim" under §3801(a)(3)(C) of the Act which requires a showing that the compensation benefits would have been reduced or discontinued. Because such a showing has not been made, Respondent asserts that he is not liable for the assessment sought by the Complainant and recommended by the Administrative Law Judge.
The Administrative Law Judge was not required to find that Respondent's workers' compensation benefits would have been reduced or discontinued if Respondent had submitted truthful information on the Forms EN-1032. Respondent's submission of the Forms EN-1032 was made to OWCP to assure the continuation of the workers' compensation benefits he was receiving. Therefore, they were submissions to an authority (OWCP) for money as defined in 31 U.S.C. §3801(a)(3)(A), not §3801(a)(3)(C) as Respondent contends. Under §3801(a)(3)(A) the Administrative Law Judge was not required to find that the benefits would have been reduced or discontinued if truthful information had been submitted. Moreover, the PFCRA does not require a showing of actual damages in order for an assessment to be made. The fact that Respondent might have obtained the same benefits without making the false statement does not alter the fact that he continued to obtain benefits by using representations on claim forms he knew or had reason to know were false when submitted. Under such circumstances Respondent can be found liable for an assessment and penalty under the PFCRA.
"II. THE ISSUANCE OF AN ASSESSMENT CONSTITUTES
'PUNISHMENT' AND IS THEREFORE BARRED BY THE DOUBLE JEOPARDY CLAUSE."
Respondent argues that the assessment and civil penalties sought by the Postal Service in this proceeding constitute punishment as defined by the Supreme Court in United States v. Halper, 490 U.S. 435 (1989) and are therefore precluded by the Double Jeopardy Clause of the United States Constitution. The Postal Service contends that Respondent's double jeopardy argument is untimely, that his reliance on Halper is misplaced and that there is a rational relation between the PFCRA's goal and the sanction imposed.
Prior Postal Service decisions have addressed the double jeopardy argument and the applicability of Halper to PFCRA proceedings. The cases recognize that under Halper a disproportionate civil penalty may be found to constitute a second punishment prohibited by the Double Jeopardy Clause. However, the cases also recognize that under Halper and Helvering v. Mitchell, 303 U.S. 391 (1938), assessments in excess of actual damages are permissible where the damages are difficult to compute and include not only the amount of the false claims, "but also ancillary costs such as detection, investigation, litigation and enforcement."
The assessment and civil penalty sought in this case are not so disproportionate that they would be considered to bear no rational relation to the costs incurred by the Postal Service as the result of Respondent's false claims. Therefore they are not a second punishment prohibited by the Double Jeopardy Clause. Unlike Halper which involved false claims totaling $585.00 and an attempted penalty of $130,000.00, well over 200 times the total false claims, this case involves false claims in the amount of $103,106.96 and a total assessment and penalty of $226,213.92, just a little over twice the amount of the false claims. As the Postal Service contends, these facts do not support a conclusion that the remedial goals of the PFCRA and the sanction imposed are not rationally related. Thus, there is no basis for finding that the Double Jeopardy Clause precludes the present action.
"III. THERE WAS INSUFFICIENT EVIDENCE
THAT RESPONDENT MADE FRAUDULENT REPRESENTATIONS AND THE GOVERNMENT
IS ESTOPPED FROM RECOVERING WHEN RESPONDENT (A) INFORMED THE GOVERNMENT
THAT HE HAD ENGAGED IN FARMING; (B) THAT HE WAS NOT UNEMPLOYED;
AND (C) THE GOVERNMENT HAD INDEPENDENT INFORMATION THAT RESPONDENT
WAS ENGAGED IN FARMING ACTIVITIES."
Respondent contends that the Postal Service is estopped from recovering under the PFCRA because he provided truthful responses to his initially filed Form EN-1032 in 1982, there is no evidence that he increased his farming activities since that time, the Postal Service had actual knowledge of his activities from the inception of his disability, and he reported on three of the four Forms EN-1032 in issue that he was not unemployed. The Postal Service argues that the evidence establishes that Respondent made the false claims and that it is not estopped from presenting this PFCRA case.
Contrary to Respondent's assertion, the evidence unequivocally establishes that if the information on the 1982 Form EN-1032 was truthful, Respondent substantially increased his farming activities thereafter and continued those activities during the period covered by the four Forms EN-1032 filed between 1987 and 1990. On the 1982 form Respondent represented that he did not operate the farm himself, all cultivated land was leased out, all livestock was taken care of by someone else, and all farming operations were performed by someone else. He also represented that he had no self-employment earnings of any kind. On the other hand, Respondent's testimony, the testimony of others, his tax returns, and a Department of Agriculture form he signed in 1989 all establish that he was engaged in substantial farming activities from 1986 to 1990. Thus, the evidence establishes that Respondent substantially increased his farming activities sometime after 1982. The Administrative Law Judge therefore did not err in arriving at that conclusion.
The Administrative Law Judge also did not err in concluding that Respondent could be found liable to the Postal Service under the PFCRA even though some Postal Service officials were aware of his farming activities and there were inconsistences in the information provided on the Forms EN-1032. As the Administrative Law Judge correctly pointed out, neither the knowledge of the Postal Service officials nor the inconsistencies on the forms relieves Respondent from the obligation to provide accurate and complete information in responding to all questions asked. Respondent has presented no argument or authority to support a contrary result on appeal. Therefore, the Postal Service is entitled to recover the assessment and penalties it seeks under the PFCRA.
After consideration of Respondent's contentions
on appeal and the evidence presented, it is concluded that Respondent
is liable to the Postal Service for a total assessment and penalty
of $226,213.92.
James A. Cohen Judicial Officer