November 14, 2006
In the Matter of the Petition by
MICHAEL RICHARDS
P.S. Docket No. DCA 06-117
APPEARANCE FOR PETITIONER:
William Brown
Scialla Associates, Inc.
APPEARANCE FOR RESPONDENT:
Ralph J. DiVasta
Labor Relations Specialist
United States Postal Service
FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982
Petitioner, Michael Richards, filed
a Petition for Hearing after receiving a Notice of Involuntary Administrative
Salary Offsets from his postmaster on
A hearing was held in North Reading, Massachusetts. The Postal Service presented testimony from the Marlborough, Massachusetts Postmaster, and a financial services specialist. Petitioner testified on his own behalf and also presented testimony from a supervisor from the Stamp Distribution Office, and another supervisor from the Marlborough Post Office. Both parties relied on documents that had previously been filed and some additional documents submitted during the hearing. The following findings of fact are based on the entire record.
FINDINGS OF FACT
1. Petitioner has been a supervisor at the Marlborough, Massachusetts Post Office since 1993. For several years, and at all times pertinent to this case, he was the custodian of the unit reserve, or main stock,[1] at Marlborough. (Tr. 9-10, 24, 32, 114; Petitioner’s letter, submitted September 27, 2006).[2]
2. On March 8, 2006, the Postal Service Inspector General began an investigation of Petitioner, related to Petitioner’s cashing several checks at the Marlborough Post Office, some of which were returned for insufficient funds. On March 8, 2006, the Marlborough Postmaster took the keys to the vault where the unit reserve was stored from Petitioner, and the Post Office Operations Manager for the Massachusetts District told the postmaster that someone would come to the office on March 10 to assist the postmaster in auditing the unit reserve so that it could be turned over to another employee. The postmaster locked the gate that secured the main stock and sealed the keys, to await the audit on March 10. By letter dated March 11, 2006, the Post Office Operations Manager placed Petitioner in an off-duty status, effective March 9, 2006. (Tr. 11; IG Report; IG Ex. 7).
3. The main stock at Marlborough is contained in a locked vault that is separated in the center by a sliding metal gate that is separately locked. The outer portion of the vault is used by clerks to store their assigned cash and other things. The main stock is kept behind the locked gate. Only the main stock custodian has a key to the gate. (Tr. 19-20, 109, 120-21).
4. On March 10, 2006, with another postmaster assisting, the Marlborough Postmaster began a count of the main stock. Petitioner and the other supervisor who was to take over the stock were also present. Because of the large amount of stamp stock, and the disorganized nature of it, they aborted the audit. The gate was locked, the keys were re-sealed and a new audit, with several additional people assigned to assist, was scheduled for March 14, 2006. (Tr. 11-14).
5. On March 14, 2006, the postmaster and several others counted the stamps in the main stock vault. Much of the stamp stock was in loose quantities, contained in several plastic tubs. According to the computerized stamp stock management system, the total accountability of the main stock on that date was $617,609.76. This means that this was the total value of all the stamps expected to be found in the main stock when the audit began. (Tr. 19-21, 68-69, 118-20; PS Ex. B).
6. In addition to being responsible for maintaining the security of the main stock and issuing stamp stock to the retail unit as needed, the main stock custodian is also responsible for returning obsolete or excess stamp stock, sometimes called “redeemed stock,” to the Stamp Distribution Office for disposal. During the years that Petitioner was the custodian, a large quantity of redeemed stock had accumulated in his vault. Therefore, when the postmaster and his team began their task on March 14, 2006, they first prepared several boxes of redeemed stock for shipment to the Stamp Distribution Office. This included preparing PS Form 17s to show the denominations, quantity, and dollar value contained in each box. In total, they shipped out $140,504.27 worth of stamp stock. This reduced the main stock accountability to $477,105.49.[3] (Tr. 22, 25, 31, 40, 46, 69-71; IG Ex. 2; PS Ex. B; IG Ex. 13, pp. 113-155).
7. The amount of stamps remaining in the main stock section of the vault after the $140,504.27 was shipped to the Stamp Distribution Office was only $55,414.74, leaving a shortage of $421,690.75. Petitioner and the supervisor who was to take over as custodian of the main stock were present as observers of the audit, at least until late in the afternoon of March 14, 2006. Petitioner signed a PS Form 3294, Cash and Stamp Stock Count and Summary, indicating that he agreed with the accuracy of the count.[4] (Tr. 19, 29-32, 73, 102-03, 108, 141; IG Ex. 2; PS Exs. A and B).
8. Before the postmaster and his team counted the main stock on March 14, 2006, they also audited the retail floor stock in the Marlborough Post Office. As noted above, the main stock custodian supplies stamp stock to the retail floor unit for sale to customers. Proper procedure requires that the transaction be recorded on a PS Form 17, verified by both the main stock custodian and the designated retail clerk who receives the stamps. Also, the main stock custodian makes an entry into the POS computer system to record the amount and denomination of stamps “shipped” to the floor stock, and the retail clerk makes a similar computer entry showing the amount received. Failure to make these computer entries before the main stock or the retail floor stock is next audited would result in the main stock showing a shortage and the retail unit showing an overage. On March 14, the retail floor stock showed an overage of $27,732.80. (Tr. 15-16, 62-65; IG Ex. 13, pp. 24-29).
9. When the floor stock overage was discovered, Petitioner presented two unsigned PS Form 17s to the postmaster, showing that items of a total value of $42,800 had been shipped from the main stock to the retail floor stock. This occurred a few days before the audit and was done by Petitioner without making the required computer system entries. (Tr. 63-64, 151-53; IG Ex. 13, pp. 21-23).
10. Records showing the audit history of the Marlborough main stock while Petitioner was the custodian reflect that the account was exactly in balance on ten audits from 1997 until the March 14, 2006 audit. The accountability ranged from approximately $559,000 to over $900,000. These audits were conducted by Petitioner and various other people. The recommended main stock accountability for an office the size of Marlborough is approximately $150,000. (Tr. 26-27, 51, 86, 132, 142; IG Ex. 1; IG Ex. 13, pp. 43-85).
11. When he conducted the annual audits noted above, Petitioner did not physically count the redeemed stock that was part of his main stock accountability. The only time he counted the redeemed stock was when he first accepted it into the main stock account. After that, he merely carried forward the recorded amounts, even though the redeemed stock was not contained in sealed boxes with labels showing what each box contained, or in any other way secured to prevent tampering. (Tr. 26, 126, 143; IG Ex. 5).
12. The Postal Service has a tracking system for stamp stock shipped to post offices from a Stamp Distribution Office, and for redeemed stock shipped back to a Stamp Distribution Office from a post office. An appropriate entry must be made into the computer system each time a shipment is sent in either direction, and all shipments are by registered mail. If a shipment entered into the system is not picked up by the receiver, with an appropriate computer entry, within a specified time, the monitoring finance office makes an inquiry to the receiver and the discrepancy is resolved. (Tr. 38, 40, 61, 78-79, 86-87).
13. On May 15, 2006, Petitioner was issued a letter of indebtedness by his postmaster, stating that Petitioner owed the Postal Service $423,734.12, based on the main stock shortage discovered on March 14, 2006. The Notice of Involuntary Administrative Salary Offsets for the same amount was issued by the postmaster on July 13, 2006. (IG Ex. 13, pp. 4 and 14).
DECISION
The loss alleged in this case is extraordinarily large. Nevertheless, the case falls squarely within the standards that are routinely applied in cases of unexplained shortage. The standard for determining an employee’s liability in a case such as this provides that employees to whom postal funds and accountable paper are consigned “are held strictly accountable for any loss unless evidence establishes that they followed the postal procedures established when performing their duties.” Handbook F‑1, Post Office Accounting Procedures (November 1996), §141.
Respondent’s burden of proof in a case of unexplained shortage is to show that a loss occurred from an account for which the employee is accountable. Respondent is not required to prove any specific dereliction, or act of negligence, by the employee. 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.
There is no evidence that the audit on March 14, 2006 was not properly and accurately performed by the postmaster and his several assistants. Petitioner has no explanation for the shortage but suggests, without being at all specific, that there must have been some error in connection with the redeemed stock and that the Postal Service did not really suffer the loss it alleges. He testified that in years past he had shipped between $500,000 and $1,000,000 in redeemed stock and may not have been credited with all of it (Tr. 123). He implied that some PS Form 17s that are missing might demonstrate this.
The evidence does not support Petitioner’s theory. Indeed, the available records, and Petitioner’s testimony, contradict it. The main stock accountability was between $500,000 and $900,000 for many years, and a large quantity of redeemed stock remained in the vault for many years. The record shows that Petitioner shipped a large amount of redeemed stock to the Stamp Distribution Office in late January/early February 2006, after he was directed to do so, and corresponding records show that the Stamp Distribution Office received those shipments. The record also shows that such shipments are monitored and tracked by accounting officials. There is no evidence - only Petitioner’s speculation - that he shipped other large amounts without making computer system entries, which amounts were then not received, or not recorded, by the Stamp Distribution Office. Without some corroborative evidence to support this, it is not credible. Thus, I find that the evidence does not raise significant doubt about the correctness of the opening balance of the main stock on March 14, 2006 (see Finding #5). Therefore, Respondent has proved most of the loss that is alleged.
There are two portions of the alleged debt for which Petitioner should be given credit, however. First, Respondent’s explanation for how the $421,690.75 shortage was increased to $423,734.12, based on correction of a discrepancy in the amount shipped for destruction, was not at all clear. Petitioner is given credit for the difference – $2,043.37. Second, Petitioner’s claim that he transferred $42,800 from his main stock to the retail floor stock not long before the March 14, 2006 audit, without making the system entry that would have reduced the main stock accountability, is supported by the Form 17s and the floor stock overage found on March 14, 2006. The connection between the two is not conclusive, but is sufficient that Petitioner can be given credit for $42,800.
The other issues raised by Petitioner, i.e., that he was overburdened with work and was taking strong medication for a foot problem, do not provide a basis for relief from liability. The only remaining issue is whether there is any basis for relief for Petitioner in the last phrase of the liability standard quoted above, i.e., that he followed established procedures in performing his duties. Although there is evidence that Petitioner was considered for many years to be a good supervisor, he has not contended that he always followed proper procedures, and the evidence clearly would not support it (see Findings #9 and 11).
Respondent has proved a loss of $378,890.75 ($423,734.12 - $2,043.37 - $42,800.00). Petitioner has not demonstrated any basis for relief from liability for that amount. Respondent may collect $378,890.75.
Bruce R. Houston
Chief Administrative Law Judge
[1] Although these two terms are technically different,
there is no difference as applied to this case, and they were used
interchangeably.
[2] References to the hearing transcript are "Tr._." References to documents filed with Respondent's Answer will be identified as exhibits to the Inspector General Report of Investigation attached to the Answer (“IG Ex._.”). Additional documents submitted at the hearing are either “Pet. Ex._,” or “PS Ex._.”
[3] In late
January 2006, Petitioner had been told by a financial services specialist that
he needed to reduce the large quantity of redeemed stock in his account by
shipping it to the Stamp Distribution Office.
Available records show that from January 31 – February 6, 2006,
Petitioner returned a total of $262,744.50 in stamp stock to the Stamp Distribution
Office, and that the Stamp Distribution Office received an amount quite close
to that from Marlborough. (Tr. 56-58,
80-82, 86, 118; PS Ex. C; Pet. Ex. 1).
[4] There is some question as to whether the audit was
finished, and whether the PS Form 3294 had been completed, before Petitioner
signed it when he left for the day. Much
was made of this by Petitioner at the hearing, but this is not a critical
issue, as there is no evidence that casts doubt on the accuracy of the count. (Tr. 38, 83-85, 103, 106-07). Signing the form does not admit
liability. It simply agrees that the
count was accurate.