INITIAL DECISION

By letter dated February 15, 1996, the Postal Inspection Service initiated this matter by demanding that the Estate of Ricky E. Proue pay $37,102.73 for losses to the Postal Service from postal stock and funds for which Mr. Proue was accountable. On March 6, 1996, Petitioner requested reconsideration, and also asked for copies of any documents pertinent to the alleged indebtedness. The Postal Inspector in Charge, Chicago Division, replied on December 20, 1996, reaffirming the demand for repayment of "losses which resulted from Mr. Proue's actions while he was employed by the United States Postal Service." This letter also included a statement of the right of representative's of Mr. Proue's estate to petition for review under 39 C.F.R. Part 966.

The Petition for Review, requesting a decision on written submissions, was received on February 5, 1997. Respondent's Answer, with attached documents, was filed on March 10, 1997. By Order dated March 11, 1997, Petitioner was given until April 14, 1997 to submit evidence and arguments in reply. Respondent was also given the opportunity to supplement its submissions with sworn statements of witnesses. Respondent did so on March 24, 1997, along with some additional documents. Petitioner filed a written argument on April 14, 1997. The following findings of fact are based on the entire written record.

FINDINGS OF FACT

1. Ricky E. Proue was employed by the Postal Service from September 1974 until his death, on or about August 9, 1995. He was the postmaster at Viroqua, Wisconsin since June 18, 1988.

2. On August 8, 1995, Linda Holty, a Postal Systems Coordinator, began a routine financial review of the Viroqua Post Office. During the morning, Mr. Proue participated in the audit of the main stock, which revealed a shortage of $25,181.40.⁽¹⁾ Accountability for the main stock had not been assigned to any other employee and, as postmaster, Mr. Proue was the custodian of this stock.

3. Mr. Proue did not return to the office after a lunch break. His body was found in a wooded area fifteen miles from the post office, at approximately 5:00 p.m. the following day, August 9, 1995. The case file does not reveal the cause of Mr. Proue's death, or any other facts pertinent to it.

4. Ms. Holty, with the help of other employees, continued her review on August 9. She and Deborah Rolfe counted the individual stamp credit assigned to Mr. Proue. Both signed a PS Form 3294, Cash and Stamp Stock Count and Summary, on August 9, 1995. This shows an opening balance of $11,198.69, but only $2,663.08 on hand, for a shortage of $8,535.61.

5. Also on August 9, 1995, Postal Inspector Rosandich went to the Viroqua Post Office to assist in the audit. On August 9th and 10th, Inspector Rosandich counted the stamps and cash in two stamp vending machines for which Mr. Proue was accountable, and found a shortage of $3,385.72. The records showed a total accountability of $8,012.96, but the count revealed only $4,627.24 in the machines.

6. The three component shortages make up the total debt alleged to be owed by Mr. Proue's estate:

7. Postal Service records show that Mr. Proue's retirement account contains $41,805.51.

Contentions of the Parties

The position of the Postal Service is simply that the records show shortages in the three accounts, that Mr. Proue was responsible for each account, and that postal rules impose a strict liability standard for losses.

Petitioner's argument is that the records are insufficient to establish the opening balance in Mr. Proue's accounts, upon which the shortages are based. The argument specifically addresses Mr. Proue's individual stamp credit. Ms. Holty's report notes that this account had not been audited previously since January 14, 1993. At that time the opening balance was $6,250.18, and Petitioner argues that there are no documents to explain why the opening balance on August 9, 1995 was $11,198.69.

DECISION

Main stock and individual stamp credit

For the main stock, and for Mr. Proue's individual credit, the standards for determining liability of Postal Service employees are found in Handbook F-1, Post Office Accounting Procedures, Section 130 - Liability. In this case, subsection 132 applies to Mr. Proue because, in addition to being the postmaster, he had the assigned accountability for the main stock and his individual account. The pertinent rule is: "Employees are held strictly accountable for any loss unless evidence establishes they exercised reasonable care in the performance of their duties." ⁽²⁾

Respondent's burden of proof, in cases of unexplained shortages such as in this case, is to establish a loss, and to show that the person charged was accountable for the stock from which the loss occurred. The Postal Service is not required to prove any specific dereliction or act of negligence by the employee. There is no dispute that Mr. Proue was accountable for the main stock and his individual account. 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. Petitioner's challenge, based on the difference between the January 14, 1993 opening balance and the August 9, 1995 opening balance, does not raise doubt about the accuracy of Ms. Holty's inventory. The amount of stock in any employee's credit, from which that employee makes sales transactions daily, is fluid. The balance in January 1993 has no relation to the balance in August 1995. This balance would change daily, and Respondent is not required to track it step by step unless there is some evidence suggesting an error was made. Here, there is no such evidence. Therefore, the opening balances shown on Ms. Holty's records are accepted, and Respondent has proved the losses alleged.

Once Respondent has met its burden, the burden shifts to Petitioner to show that the employee exercised reasonable care. Petitioner has presented no evidence in this case. In addition, the full report of Ms. Holty's financial review of the Viroqua Post Office, submitted on August 25, 1995, shows that not all prescribed procedures for the handling of stock, and for record-keeping, were being followed. It cannot be concluded, therefore, that Mr. Proue exercised reasonable care in performing his duties relative to the stock in question, and Petitioner is liable for these shortages.

Vending Machines

The prescribed standard for holding employees liable for vending machine shortages is not a strict liability standard. In discussing shortages, Postal Service Handbook PO-102, Retail Vending Operational and Marketing Program (January 30, 1990), Section 653.12 states:

.12 Other Causes. Servicing personnel do not have complete personal control at all times for the assigned credit, therefore, shortages must be assumed to be the result of machine malfunction unless the following can be determined as the cause:

a. Fire, theft, robbery, errors in examination procedure, errors on forms 17, customer refunds, acceptance of bogus and/or foreign coin-like and bill-like objects, or any other procedural errors.

b. It can be established that the loss was the direct result of negligence on the part of the servicing personnel.

c. Theft, embezzlement, etc., by the servicing person (sufficient evidence to prefer charges).

As there is no evidence of theft or embezzlement by Mr. Proue, or that the shortage was the direct result of his negligence, he cannot be held liable for this shortage. Linda A. Lilly, PS Docket No. DCA 96-195 (October 31, 1996); Craig A. Wilson, PS Docket No. DCA 94-153 (February 21, 1995).

CONCLUSION

Petitioner is liable for shortages from the main stock and from Mr. Proue's individual stamp credit, a total of $33,717.01. Petitioner is not liable for the vending machine shortage. $33,717.01 may be offset from Mr. Proue's retirement fund.

Bruce R. Houston
Chief Administrative Law Judge

¹ Records show an accountability of $53,299.88, but the count on August 8, 1995 showed only $28,118.48 on hand.

² This same standard is found in the Financial Management Manual (FMM), Section 842.