In the Matter of the Proposed Debarment of          )
                                                                               )
RODLAC TRUCKING & LEASING, INC.                   )
180 Winifred Avenue                                             )
Yonkers, NY 10704                                               )                  P.S. Docket No. 7/158

APPEARANCE FOR RESPONDENT:
Morton Berger, Esq.

APPEARANCE FOR COMPLAINANT:
Michae l J. Vandamm, Esq.
Law Department U. S. Postal Service
475 L'Enfant Plaza West
SW Washington, D.C. 20260

13 Eastbourne Drive
Spring Valley, NY 10977

POSTAL SERVICE DECISION

This proceeding was initiated on January 24, 1980, by the issuance of a Notice of Proposed Debarment to Rodlac Trucking and Leasing, Inc., (Rodlac), by Michael S. Coughlin, Assistant Postmaster General, Mail Processing Department. The Notice proposed to debar Rodlac for a period of 3 years on the grounds that an officer of Rodlac, Benjamin DeMagistris, had been convicted in the United States District Court on one count of conspiracy and 11 counts of mail fraud in connection with the procurement of United States Postal Service contracts on behalf of Rodlac.

On February 7, 1980, Rodlac filed a timely request for a hearing. In its request Rodlac set forth the following grounds for contesting the proposed debarment:

"1. Benjamin De Magistris has not been an officer, director, employee or stockholder of Rodlac Trucking & Leasing, Inc. since January 15, 1980.

2. That since January 15, 1980, Benjamin De Magistris has not directly or indirectly controlled Rodlac Trucking & Leasing, Inc.

3. That the conviction of Benjamin De Magistris in the United States District Court, District of Massachusetts will be appealed to the United States Court of Appeals for the First Circuit.

4. That pending the appeal of Benjamin De Magistris the judicial process concerning his conviction has not been exhausted."

By order dated February 28, 1980, the hearing requested by Rodlac was scheduled to be held on March 24, 1980. Thereafter, the parties agreed to submit a stipulated statement of facts in lieu of the hearing. The hearing was, therefore, cancelled. On March 24, 1980, the parties submitted a stipulation of facts and a proposed briefing schedule which would allow initial briefs to be filed by April 11, 1980, and reply briefs by April 21, 1980. The briefing schedule proposed by the parties was adopted in an order dated March 27, 1980. On April 11, 1980, the Postal Service filed its brief, but no brief has been filed on behalf of Rodlac.

The findings of fact which follow are based on the stipulation filed by the parties.

FINDINGS OF FACT

From the incorporation of Rodlac in 1976, until January 15, 1980, Benjamin DeMagistris was the sole stockholder, and principal operating officer of Rodlac. Since January 15, 1980, Benjamin DeMagistris has not been an officer, director, employee or stockholder of Rodlac nor has he directly or indirectly controlled Rodlac.

On October 23, 1979, a grand jury of the United States District Court, District of Massachusetts, returned an indictment against Benjamin DeMagistris charging him with 16 counts of mail fraud and 1 count of conspiracy in connection with the procurement of certain highway route contracts. The indictment charged that, in connection with the procurement of services for the transportation of mail over various routes, Benjamin DeMagistris and another person, beginning on or about January 1, 1978, and continuing to on or about November 1, 1978:

"...devised and intended to devise a scheme and artifice to defraud and obtain money and property by means of false and fraudulent pretenses and representations from the United States Postal Service and various contractors who submitted bids for certain United States Postal Service Highway Contract Routes, who were induced by the defendants to rely upon their pretenses and representations, the defendants well knowing that said pretenses and representations were false when made, and which scheme and artifice to defraud was, in substance, as follows:

4. It was a part of the scheme that PRESTON T. PATTERSON of The Frank E. Russell Agency, said agency having a mailing address of Little Falls Mall, 4701 Sangamore Road, Washington, D.C. 20016 (hereinafter referred to as 'Patterson's office'), held himself out as a bonding agent of the Peerless Insurance Company, Keene, New Hampshire (hereinafter 'Peerless'), for Highway Contract Routes.

5. It was a part of the scheme that PATTERSON, as a bonding agent for Peerless, did receive confidential bid information from other contractors competing for certain advertised Highway Contract Routes and did fraudulently disclose said confidential bid information to DeMAGISTRIS.

6. It was a part of the scheme for DeMAGISTRIS, as the chief operating officer of Rodlac Trucking & Leasing, Inc. of Yonkers, New York (hereinafter 'Rodlac'), to use the bid information supplied to him by PATTERSON to prepare and submit the lowest bids on behalf of Rodlac.

7. It was a part of the scheme for PATTERSON, on occasion, to refuse to bond another contractor's bid which was lower than Rodlac's bid.

8. It was a part of the scheme that DeMAGISTRIS, on behalf of Rodlac, would accept certain advertised Highway Contract Routes that had been awarded to Rodlac on the basis that Rodlac was the lowest bidder, DeMAGISTRIS well knowing at the time that the information supplied to him by PATTERSON had enabled him to submit the lowest bids on behalf of Rodlac."

On January 14, 1980, Benjamin DeMagistris was convicted after jury trial on 12 counts of the indictment and sentenced to 18 months in prison and fined $5,000. The execution of the sentence was stayed pending appeal. The conviction of Benjamin DeMagistris will be appealed to the United States Court of Appeals for the First Circuit.

REGULATIONS

Section 1-604 of the Postal Contracting Manual provides in part:

"1-604 Debarment

1-604.1. Causes and Conditions for Debarment

* * *

"(b) Causes:

(1) Conviction for commission of a criminal offense as an incident to obtaining or attempting to obtain a public or private contract, or subcontract thereunder, or in the performance of such contract or subcontract.

* * *

(c) Conditions:

(1) The existence of any of the causes set forth in paragraph (b) of this section does not necessarily require that a firm or individual be debarred. In each instance, whether the offense, failure, or inadequacy of performances, be of a criminal, fraudulent, or serious nature, the decision to debar shall be made within the discretion of the department head and shall be rendered in the best interest of the Government. Likewise, all mitigating factors may be considered in determining the seriousness of the offense, failure, or inadequacy of performance, and in deciding whether debarment is warranted.

(2) The existence of a cause set forth in paragraph (b)(1) or (2) of this section shall be established by criminal conviction in a court of competent jurisdiction. In the event that an appeal taken from such conviction results in a reversal of the conviction, the debarment shall be removed upon the request of the bidder, unless other causes for debarment exist.

* * *

1-604.3 Procedural Requirements Relating to the

Imposition of Debarment.

* * *

(b)...The criminal, fraudulent, or seriously improper conduct of an individual may be imputed to the firm with which he is connected where such grave impropriety was accomplished within the course of his official duty or was effected by him with the knowledge or approval of that firm. Likewise, where a firm is involved in criminal, fraudulent, or seriously improper conduct, any person who was involved in the commission of the grave impropriety may be debarred. The decision of the Judicial Officer shall be the final agency decision. The department head initiating the debarment proceeding shall be represented by the Law Department."

DISCUSSION & CONCLUSIONS

The record clearly establishes that Benjamin DeMagistris was convicted of the commission of a criminal offense as an incident to obtaining or attempting to obtain a public contract. Under § 1-604.1(b)(1) and (c)(2) of the Postal Contracting Manual such conviction constitutes cause for debarment of Mr. DeMagistris. In view of Mr. DeMagistris' ownership and control of Rodlac and the benefit derived by the corporation from his acts, it is concluded that the conduct which gave rise to the criminal conviction was accomplished within the course of Mr. DeMagistris' official duties and was committed by him with knowledge and approval of Rodlac. Moreover, the record contains no evidence indicating an attempt by the corporation to disassociate itself from those acts prior to Mr. DeMagistris' conviction. Therefore, in accordance with § 1-604.3(b) of the Postal Contracting Manual it is concluded that the criminal conduct of Mr. DeMagistris is imputed to Rodlac.

The circumstances alleged by Respondent to mitigate against the debarment are the appeal of the conviction of Mr. DeMagistris and his lack of control, ownership ro employment in the corporation at the present time. Under § 1-604.1(c)(2) of the cited regulations, a criminal conviction in a court of competent jurisdiction serves as a proper basis to debar a contractor, notwithstanding the determination to appeal the conviction. In the event the appeal is successful the debarment will be removed upon request of the bidder unless other causes for debarment exist.

Mr. DeMagistris' lack of present control, ownership or employment in the corporation does not effectively mitigate against the imposition of the debarment. Once it has been determined that the conduct of an employee is imputed to the corporation, the corporation does not relieve itself of the responsibility for and the consequences of that conduct simply by removing the employee. Moreover, there has been no showing by Rodlac that Mr. DeMagistris has no voice in corporate affairs even though he no longer controls the corporation. There also has been no showing that he does not have some present or future financial interest in the corporation even though he is no longer the owner, a shareholder or an employee of the corporation.

For the foregoing reasons it is concluded that the proposed debarment of Rodlac is in the best interests of the Postal Service. Taking into consideration the seriousness of the offenses committed, the proposed debarment period of 3 years is reasonable. Accordingly, it is determined that Rodlac be debarred for a period of 3 years commencing June 5, 1980, and ending June 5, 1983.

James A. Cohen
Judicial Officer