In the Matter of the Complaint Against 	)   January 15, 1997          
                                    	)
ROSE MARIE CAIN                    	)
206 Park Avenue                    	)
                                    	)
        at                          	)
                                    	)
Audubon, PA 19403-1769             	)   P.S. Docket No. PF 96-316


APPEARANCE FOR RESPONDENT:  		Peter H. Thomas, Esq.
					Fox & Fox
					Suite 706, One Montgomery Plaza
					Airy and Swede Street
					Norristown, PA 19401-4842

APPEARANCE FOR POSTAL SERVICE: 		Harold E. Durham, Esq.
					Enforcement Division
					United States Postal Service 
					475 L'Enfant Plaza, SW 
					Washington, DC 20260-1148

INITIAL DECISION

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. §3801(a)(1) by submitting a false claim for disability compensation. Specifically, the

Complaint alleged that Respondent falsely denied that she was employed while drawing workers' compensation payments. The Complaint asks for an assessment equal to the amount of the claim, $6,352.00, and a civil penalty of $5,000.00.⁽¹⁾

Respondent filed a timely Petition for Hearing on August 9, 1996, denying that she had filed a false claim. A hearing was held in Norristown, Pennsylvania on October 24, 1996. Both sides were represented by counsel. The Postal Service presented testimony from the postal inspector who investigated the case, and from the owner of a child day-care center where Respondent was alleged to have worked. Respondent testified in her own behalf, and also presented testimony from her husband and her nephew. Both sides also presented documentary evidence. The Postal Service filed a post-hearing brief, in the form of proposed findings of fact and conclusions of law. Respondent did not. The following findings of fact and conclusions of law are based on the entire record, as well as 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.⁽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). This information is used to determine whether the employee is receiving the correct amount of benefits, and whether the employee may be 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

8. The Postal Service must reimburse the OWCP for any benefits paid to postal employees. 5 U.S.C. §8147.

Ms. Cain's Case

9. Respondent, Rose Marie Cain, is an individual who resides at 206 Park Avenue, Audubon, Pennsylvania 19403-1769.

10. Ms. Cain has worked for the Postal Service since 1982, and as of January 1989 was working as a clerk at the Southeastern Mail Processing and Distribution Center in Devon, Pennsylvania.

11. On January 25, 1989, Ms. Cain suffered an on-the-job injury to her back. (Tr. 89).⁽³⁾ She filed a Department of Labor Form CA-1, and thereafter began drawing workers' compensation. During the period October 16, 1994 to January 7, 1995, she received $2,143.00 from the Department of Labor every 28 days. (Tr. 76-79, 213-14; PS Ex. 3).

12. During the years Respondent was receiving workers' compensation payments, she completed and signed Department of Labor Forms EN-1032 every fifteen months. (Tr. 91-93, 157-61, 182, 193-95).

13. The period of time challenged by the Postal Service in this case is October 13, 1994 to January 3, 1995. During that period, Respondent collected $6,352.00 in workers' compensation (FECA) benefits.⁽⁴⁾ This is the amount alleged to constitute a false claim, based on the allegation that Respondent failed to disclose she was employed during that period.

14. The Form EN-1032 pertinent to that period - the form alleged to be false - was signed by Respondent on January 29, 1995. (PS Ex. 1). It contained the following reporting requirements:

PART A -- EMPLOYMENT

15. Respondent answered "No" to all the above questions on the January 29, 1995 form. (PS Ex. 1). The Postal Service alleges that the answers to Questions 1a and 2a were false because, from October 13, 1994 to January 3, 1995, Respondent was working part-time for Magic Moments for Children, Inc. in exchange for reduced tuition for her daughter.

16. Magic Moments for Children, Inc. is a child day-care center/school in Norristown, Pennsylvania, owned and operated by Janet Ward. (Tr. 8).

17. In August 1993, Respondent enrolled her daughter Shannon, then age 3, at Magic Moments, to attend three days per week. (Tr. 12, 89-90, 94-95).

18. The tuition rate for Shannon was $76 per week, plus $4 to attend a gym class. The tuition agreement with parents requires that the full tuition be paid even if a child misses a scheduled day, or days, of attendance. (Tr. 10-11). Ms. Cain paid the tuition by check, every two weeks. The checks did not always include the gym class fee, because children did not attend this class every week, and sometimes Ms. Cain paid the $4 in cash. (Tr. 13, 101-02).

19. Ms. Cain was an active parent in various activities at Magic Moments. She spent time at the school getting to know the staff, helping at parties, and participating in field trips. (Tr. 18, 53-55, 119-20).

20. In October 1994, Janet Ward asked Respondent if she would be willing to work as a substitute staff member at Magic Moments. Respondent agreed to do so, and she and Ward agreed that Respondent would receive credit toward her daughter's tuition. Respondent told Ward she could not accept a paycheck because it might affect benefits she was receiving. (Tr. 14). Ward gave Respondent a credit of $5.50 for each hour she worked. (Tr. 18, 51).

21. Respondent filled out no written job application, and no background check, sometimes required for child-care workers, was performed. She was never a salaried employee at Magic Moments, she never had "time cards," and Ward did not keep permanent records of the days or hours that Respondent worked. (Tr. 48-49, 55-56, 59, 61).

22. Respondent's work at Magic Moments included overseeing and supervising children's activities, and preparing snacks. Because of the injury to her back, she was not required to lift or carry children. (Tr. 15).

23. Respondent did not have a regular work schedule, but Ms. Ward would notify her in advance when she was needed, depending on scheduled absences of regular staff members. Sometimes she was asked to come in on short notice, if a regular staff member had an unscheduled absence. On the days she worked, Respondent was required to be present during specified hours. (Tr. 15-17).

24. During the entire time that Shannon Cain attended Magic Moments, Respondent and her husband occasionally donated toys, snack food, and other supplies to the school. (Tr. 57, 112, 117, 144, 204, 209; Rx. 3).

25. Respondent's canceled checks show that, during the period of time is issue, she made the following payments to Magic Moments:

All the amounts that are less than $156, and the two-week period in late December for which there is no check, are the result of Ms. Ward giving Respondent tuition credit in exchange for Respondent's work at Magic Moments.⁽⁵⁾ (Tr. 27-31).

Contentions of the Parties

26. The Postal Service contends that Respondent's failure to disclose her work at Magic Moments on the January 29, 1995 Form EN-1032 was knowingly false because the form clearly and unequivocally required that such activity, in exchange for reduced tuition, be reported.

27. Respondent denies that she had any agreement with Ms. Ward to work, in exchange for reduced tuition. (Tr. 118-19). She asserts that she "assumed" Ward was giving her credit for the toys and other items that she donated, even though they had no discussion in advance about getting such a credit. (Tr. 139, 181). She said that she always paid the tuition on Monday, and that Ward would tell her on the previous Friday how much she had to pay. (Tr. 138-39, 180-81). With regard to the Form EN-1032, Respondent's testimony seemed to suggest that she should not be held responsible for its accuracy because all she did was sign it after her husband filled it out. (Tr. 92-94).

CONCLUSIONS OF LAW

1. Respondent's explanation of why she received some tuition reductions at Magic Moments is not credible, nor is her explanation that she may have been interrupted while writing checks and, as a result, made notes about donations of toys and other items with a different type pen. Ms. Ward's testimony was straightforward and credible. I can find no reason, and Respondent has offered none, why Ms. Ward would fabricate a story, under oath, about having an agreement with Respondent to give tuition credit for Respondent's working as a substitute for regular staff members at Magic Moments.

2. Respondent is responsible for all the information provided to the OWCP on the Form EN-1032 she signed on January 29, 1995. In addition to the "WARNING" noted earlier, the CERTIFICATION immediately above her signature states: "I certify that all the statements made in response to questions on this form are true, complete and correct to the best of my knowledge and belief." Anyone who signs such a certification without reading the document, or in reliance on someone else to fill it out for them, does so at their own risk.

3. 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).

4. Submission of a Form EN-1032 constitutes a claim for money. Linda P. Phipps, P.S. Docket No. PF-48 (P.S.D. November 18, 1994); Frank E. Rogers, Jr., P.S. Docket No. PF 95-148 (I.D. October 19, 1995).

5. The form signed and submitted by Respondent on January 29, 1995 was false because she knowingly and intentionally failed to disclose her employment at Magic Moments. The form makes clear that the requirement to report all work would include work in exchange for tuition credit. The information provided was materially false because this information is used by the OWCP to determine whether disability compensation should be adjusted or terminated. 20 C.F.R. §10.303.

6. Respondent is, therefore, subject under the Statute, 31 U.S.C. §3802(a)(1), to a penalty of $5,000.00 for each false claim. There is only one false claim in this case, and the Complaint asks for the maximum penalty of $5,000.00. The statute also provides for an assessment up to twice the amount of the false claim. OWCP rules provide that if a recipient of disability payments omits or understates any earnings on a Form EN-1032, the recipient may forfeit the right to any compensation for the period covered by the form. (See Findings of Fact, ¶ 7). It could be argued, therefore, that the amount of the false claim equals the full amount received by Respondent over the fifteen months covered by the EN-1032 she signed on January 29, 1995. Linda P. Phipps, supra at 6. The Postal Service has asked only for an assessment equal to the amount of workers' compensation received by Ms. Cain from October 13, 1994 to January 3, 1995 - the time during which she paid a reduced tuition at Magic Moments.

7. The appropriate amount of penalties and assessment 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); see also, Orfanos v. Department of Health and Human Services, 896 F. Supp. 23 (D.D.C. 1995).

8. 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 amount of the agency's actual loss and the relationship of the 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 pubic 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.

9. In Respondent's favor in this case are the fact that there is only one false claim, it involved a relatively short period of time, there is no pattern of similar misconduct, and the amount of money she earned for her work at Magic Moments was only a few hundred dollars. On the other hand, Respondent's attempt to conceal the falsification is an aggravating factor. Also, the need to deter people from filing false reports to OWCP is a strong factor to consider in cases such as this, even when the potential impact on workers' compensations benefits in a particular case may not have been great. Federal agencies and the OWCP cannot properly evaluate disability claims if applicants file false reports, and this does have a negative impact on public confidence in the management of government programs.

10. Finally, the Postal Service is entitled to consideration of its cost of investigation and litigation. United States v. Halper, 490 U.S. 435, 445 (1989); Helvering v. Mitchell, 303 U.S. 391, 401 (1938); John F. Arney, P.S. Docket No. PF-55 (P.S.D. at 6, January 6, 1997); Sharon Boddie, P.S. Docket No. PF-6 (P.S.D. at 8, October 27, 1992). These costs are not exceptionally large in this case, but as a percentage of the total penalty and assessment sought, they are significant.

11. The model regulations, although not binding, provide the following guidance: "Because of the intangible costs of fraud, the expense of investigating such conduct, and the need to deter others who might be similarly tempted, ordinarily double damages and a significant civil penalty should be imposed." 45 C.F.R. §79.31(a).

12. Considering all the facts and circumstances of this case, including the fact that the Postal Service has requested an assessment well below the maximum allowable under the statute, I find that a penalty of $5,000.00 and an assessment of $6,352.00 are appropriate.

CONCLUSION

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 total of $11,352.00.

						Bruce R. Houston
						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 for Continuation of Pay expires.

3. References to the hearing transcript will be "Tr. _." References to Postal Service exhibits will be "PS Ex. _," and Respondent's exhibits will be "Rx. _."

4. The Postal Service calculated this amount by using $76.53 as a daily rate ($2143/28 days) and multiplying by 83 days.

5. All these checks contain a notation in the lower left corner that they are for "school dues" for "Shannon Cain." The checks written for less than the full tuition also contain words such as "toy," "swing," "toys," and "paper." Ms. Ward did not recall that these notes were on the checks when she received them, but neither could she swear that they were not (Tr. 21-26). Some of the notes appear that they may have been written with a different pen than the main body of the check and the signature. While I cannot make a finding, from merely looking at the checks, that Respondent added these notes at a later date to bolster her case, I do find her testimony during cross-examination about why she may have used different pens not to be credible. (Tr. 126-46).