In the Matter of the Petition by:

LESLIE H. ELDREDGE,
RR 2, Box 338-BB,
Norwich, NY 13815-9689

P.S. Docket No. AO-7

Thompson, Joan B., Administrative Judge

APPEARANCE FOR PETITIONER: John D. Cameron, Esq., Clippinger
Law Offices, P. O. Box 542, 13 So. Main St., New Berlin, NY
13411-0542

APPEARANCE FOR UNITED STATES POSTAL SERVICE: Andrew C. Jagusiak, Esq., Inspection Service, United States Postal Service, Washington, DC 20260-2181

INITTIAL DECISION

In this proceeding conducted under the rules of practice in 39 C.F.R. Part 966, a former employee, Petitioner Leslie H. Eldredge, challenges a determination by the Inspection Service of the United States Postal Service that he is indebted to the Postal Service for $4,200. That amount allegedly represents the value of missing main stamp stock for which Petitioner was accountable when he was employed by the Postal Service.

At the request of the parties an oral hearing was held in this matter in Binghamton, New York, on March 22, 1990. The record was left open to permit Petitioner to review previously unavailable documents and to submit any of the documents as exhibits in this proceeding. One such document, Form 1551-D (March 1985), an account book page for the accounting period from September 26 through October 23, 1987, was submitted, admitted, and is hereafter identified as Petitioner's Exhibit (Pet. Ex.) 2. The following findings of fact are based on the entire record, including the Petition, exhibits in the record, and the transcript of the hearing (Tr.).

FINDINGS OF FACT

Background

1. In 1987 Petitioner Eldredge was the Superintendent in Charge of Postal Operations (S.P.O.) at the Norwich, New York Post Office (P.O.). In July 1987 he was designated the custodian of the master (or main) stamp stock at Norwich (Tr. 57, 59, 60).

2. Early in 1988 the Postal Data Center (P.D.C.) in New York City, New York, generated a "statement of difference" between postage shipped to the Norwich P.O. on September 30, 1987, and that shown as posted in that P.O. This amounted to a shortage of postage stamps valued at $4,200 (Tr. 13). Thereafter, a Postal inspector investigated the missing stamp stock and other matters. (U.S.P.S. Ex. 8). During the investigation, Petitioner requested a grade reduction and a transfer to a bargaining-unit clerk's position in the Binghamton P.O. This was granted in April 1988 (U.S.P.S. Exs. 6, 10).

3. On April 5, 1988, the Postal Service issued a demand that Petitioner reimburse it in the amount of $4,200 for the unposted main stock stamps. Mr. Eldredge petitioned for a hearing under section 5 of the Debt Collection Act, as amended, and as implemented by 39 C.F.R. Part 961. That petition (P.S. Docket No. DCA-19) was dismissed on July 9, 1988, without prejudice pursuant to a motion by the Postal Service. That motion indicated that the letter of demand was withdrawn pending further investigation.

4. Subsequently, on September 9, 1988, the Postal Service removed Mr. Eldredge from his employment based on charges he violated regulations while he was the S.P.O at the Norwich P.O. Following a grievance filed by Mr. Eldredge and a hearing, on August 7, 1989, an arbitrator upheld the removal action. He concluded that Mr. Eldredge had "failed to account for postage valued at $4,200, misappropriated Postal Service funds, improperly caused stamp stock in the amount of $248.25 to be redeemed to him for cash, and failed to meet the Services [sic] expected level of conduct as it relates to honesty and trustworthiness." (U.S.P.S. Ex. 6 at p. 10 of the arbitrator's decision). There were no further personnel proceedings relating to Mr. Eldredge's discharge pending at the time of the hearing in this matter (Tr. 6).

5. This administrative offset procedure began with letters from the Inspection Service dated September 22, October 27, and November 24, 1989, demanding that Petitioner reimburse the Postal Service for losses totalling $4,200 for which he was accountable. Petitioner objects to the determination that a debt exists and requests that money held in his civil service retirement fund be released to him.

The Unaccounted-for Stamps

6. The Norwich P.O. had a new postmaster in July 1987 who remained for about six months when he left for personal reasons unrelated to this proceeding. The postmaster had another employee perform some duties which fell within Petitioner's responsibility. They included having the employee order from the Binghamton Stamp Distribution Office (S.D.O.) a quantity of migratory bird hunters' stamps (hereafter, bird stamps) and postage stamps (U.S.P.S. Ex. 8; Tr. 78-82).

7. On September 30, 1987, registered mail item R-249106578 was shipped to the Norwich P.O. where on October 1, 1987, it was received and signed for by Petitioner Eldredge on a Form 17. The Form 17 showed postage stock consisting of 10,000 Red Cloud stamps at a price of 10 cents each (totalling $1,000); 200 Bret Harte stamps at $5 each (totalling $1,000); and 10,000 American Wildlife stamps at 22 cents each (totalling $2,200) for a grand total of $4,200 for the postage stock. Also included in the same registered mail shipment were 300 bird stamps at $10 each ($3,000 value). (Id.; Tr. 2-4).

8. The September 30, 1987, shipment was the only one to the Norwich P.O. containing Red Cloud stamps during the period from August 17, 1987, through May 1988. An inventory count in May 1988 disclosed 9,787 Red Cloud stamps remaining from that shipment on hand in the Norwich P.O. Of that number, 9,000 were in the main stock and 787 in clerk Ackerman's "flexible credit." There were no Bret Harte or American Wild Life Stamps in the main stock at that time. (Id.) There is no evidence that they were elsewhere in the Norwich P.O.

9. All the postage stamps in registered shipment R-249106578 were received by Petitioner at the Norwich P.O. However, he did not post that stamp stock, valued at $4,200, on the "Main Stock (Or Unit Reserve Stock) Transaction Record" PS Form 3958 (June 1982), for which he had responsibility (U.S.P.S. Handbook F-1 (TL-14, 12-20-86) (hereafter Handbook F-1) § 431.222). Nor is that amount of postage shown on the "Stamp Accountability Recap" for September 30 through October 2, 1987. Petitioner did post the $3,000 bird stock on the Form 3958 for October 1, 1987, and also a different postage stock valued at $2,640 (id.; U.S.P.S. Ex. 9). Another employee changed the Form 3958 for October 1, 1987, to show the postage stock opening balance as $70,152.30 rather than the $73,452.30 written by Petitioner. The employee did not actually count the stamps in the main stock, but made the change only to conform the opening balance with the previous day's closing balance. (Tr. 92-95, 101-03).

10. Petitioner as main stock custodian was not authorized to sell postage to customers nor to post daily financial transactions of the office (Handbook F-1 § 431.21). The postmaster was responsible for the financial records, including posting receipts and debits in a cash (account) book (Tr. 83-85). A page (PS Form 1551-B) from the account book for the first accounting period (A/P 1) of fiscal year 1988 for the week from September 26 through October 2, 1987, shows the postmaster posted $3,000 worth of bird stamps and $2,640 of postage stamps as received on October 1, 1987. The page does not show the receipt of $4,200 in postage during that period or any other stock. (Pet. Ex. 1).

11. Likewise, a page (PS Form 1551-D), Part Seven of the Memorandum Record for Statement of Account for the entire accounting period 1 from September 26 to October 23, 1987, shows the only stamps received were the $3,000 in bird stamps, and $2,640 in postage stock (Pet. Ex. 2). As the Insection Service concedes (in its post-hearing response to Petitioner's Attorney's Affirmation), the page erroneously shows the postage stock as having been ordered whereas it was actually sent to the Norwich P.O. in an automatic distribution.

12. Petitioner's explanation for the unposted $4,200 in postage stock is that his failure to post the stock must have been due to human error during a very busy time for him during the month of September 1987 when the 1987 fiscal year (A/P 13) ended (on September 25, 1987), and the new 1988 fiscal year (A/P 1) began (on September 26, 1987), and all required reporting had to be accomplished. In addition, he was charged with a count of the rural routes at the same time. Therefore, he believes that $2,640 in stamp stock was sent from Binghamton on September 22, 1987, rather than September 29, 1987, and was probably received about September 23, 1987, and posted on the records for A/P 13 of fiscal year 1987. Instead of posting the $4,200, Petitioner asserts he must have erroneously posted the $2,640 again on October 1, 1987, during A/P 1 of fiscal year 1988. (Tr. 58-73).

13. Although the records for the 1987 fiscal year were not available for this proceeding, other evidence does not support Petitioner's scenario of a duplicate posting of the $2,640 postage stock in the two different fiscal year accounting periods as that stock was received on September 30, 1987, which was in the 1988 fiscal year. The receipt is shown by PS Form 3309 (U.S.P.S. Ex. 9), "Notice of Shipment - Stamp Invoice," which was signed for as received by Petitioner Eldredge on September 30, 1987. The Form 3309 pertains to item number 626 and shows a quantity of 12,000 stamps with a dollar value of $2,640. Although the form shows a shipment date of September 22, 1987, as explained by the Binghamton S.D.O. employee who shipped the stamps, the PS Form 3309 is a computerized printout showing the automatic distribution of postage stock. The shipping date may not actually reflect the date stamps are shipped from the S.D.O. and the stamps may actually be received by the receiving post office either before or after the shipping date shown. Thus, the registered receipt (Pet. Ex. 11) which was date stamped as sent to the Norwich P.O. and to other post offices from the S.D.O. on September 29, 1987, would reflect the actual shipping date of item 626 (12,000 22-cent locomotive stamps in booklets). Under normal procedures the item would have been received in Norwich the next day. (Tr. 104-08).

14. The Postal inspector who investigated this matter believed Petitioner embezzled $4,200 worth of stamps in January 1988. This belief apparently was based on her experience and knowledge concerning embezzlements, statements Petitioner had made concerning his alcoholism, other irregularities in his performance of duties, his failure to post the shipment on the records, the lack of an overage in that amount on the records, the lack of records, and some of Petitioner's records of a self audit (see, e.g., Tr. 15-30).

15. The inspector did not do a complete check of either of the fiscal years involved to determine if there were actual shortages or overages for the entire period. Nor was there proof that Petitioner had sold postage stamps to any other office or person. Petitioner did admit that he did not follow proper procedures in January 1988 to redeem $248.25 in stamps, allegedly for a business that was closing. (Id.; Tr. 43-47; U.S.P.S. Ex. 8).

16. According to the inspector's investigation report (U.S.P.S. Ex. 8), in January 1988 when Petitioner's main stock was counted by other Postal Service employees, there was an $76.50 overage in the main stock. Other evidence discloses that at that time there were also overages of $522.77, $822.55, and $9.59 in the accounts of window clerks in the Norwich P.O. for a total of $1,354.91 in the window clerk accounts. The larger amounts were unusual overages (Tr. 48-50). The main stock and the two major clerk overages were placed in a trust account. As the report of a "Financial and FLSA" review made in January 1988 also discloses, there were many financial and management practices and discrepancies which needed to be corrected in the Norwich P.O. at that time.

DISCUSSION AND CONCLUSIONS OF LAW

It is Petitioner's position that there were errors made by the postmaster and others in the Norwich P.O. which contributed to the record-keeping error, that there was not an actual financial loss, and that as postmasters may be relieved of losses for which they are accountable he also should be afforded relief.

Handbook F-1 in § 882 provides authority to relieve a postmaster from liability for financial loss if it is found that Postal Service policies, programs, and management procedures were faithfully and conscientiously enforced by the postmaster. If not, the postmaster is to be charged with the full amount of the loss, but the amount of the loss may be compromised, released, or discharged in whole or in part. The postmaster is accountable for the face value of all postage stock consigned to the post office ($S431.1). However, the responsibility for the main stock could be assigned to a main stock custodian ($S431.21), who was Petitioner.

The crucial issue in this proceeding is whether there was a loss to the Postal Service for which Petitioner is accountable. As the main stock custodian, Petitioner is "strictly accountable for any loss unless evidence establishes [he] . . . exercised reasonable care in the performance of [his] . . . duties." (Handbook F-1 § 132). This statement of accountability should be read in pari materia with the other provisions pertaining to accountability. Thus, the loss referred to is read as pertaining to an actual financial loss to the Postal Service and not simply to a mistake in record keeping for which an actual loss has not been shown.

The Inspection Service has shown that Petitioner did not post a $4,200 shipment of stamps on the main stock records although he signed a receipt for them. This is the main thrust of its case against Petitioner. It has also shown some other irregularities in Petitioner's work, all of which an arbitrator found justified Petitioner's discharge from his employment.

The failure to post the $4,200 in stamps and other evidence go to Petitioner's failure to exercise reasonable care in the performance of his duties. I conclude from all of the evidence that he did not meet that standard. Nevertheless, the proof of Petitioner's negligence or lack of reasonable care in performing his duties does not establish there was an actual loss to the Postal Service of the entire amount of $4,200.

There is no real explanation for Petitioner's failure to post the $4,200 shipment other than possible inadvertence or negligence during a busy work period for him. The evidence does not support Petitioner's theory that a shipment of postage in the amount of $2,640 was double entered in two different accounting periods in different fiscal years. Also, the record does not clearly support the Postal inspector's belief that Petitioner embezzled $4,200. That belief was based in large part on conjecture and the unavailability of records.

The fact records were missing cannot primarily be attributed to Petitioner, as the inspector would do. There was some mismanagement and disarray within the Norwich P.O. during the time in question. Records which could not be found at one time were later found during a more complete search. Furthermore, although Petitioner would be responsible for entries on Form 3958 (the main stock records), the original copies of such forms were to be retained by the postmaster (Handbook F-1 § 431.223). Changes were made by another employee on the Form 3958 for October 1, 1987. The Inspection Service has not furnished copies of the forms for other dates.

Of the unaccounted-for $4,200 postage stock signed for by Petitioner on October 1, 1987, the Bret Harte and American Wild Life stamps were not in the main stock in May 1988 and no paper trail has been shown as to their disposition. However, there were 9,000 ten-cent Red Cloud stamps in the main stock and another 787 in a clerk's flexible credit. Although it would be possible for an embezzler to use other stamps instead of the Red Cloud stamps, their existence in the stamp stock tends to be more supportive of Petitioner's position that he did not use stamps for his own purposes than the reverse being true. At least it is apparent Petitioner did not use $978.70 in Red Cloud stamps for his own purposes. It seems likely that the difference between the $978.70 in Red Cloud stamps in the inventory and the $1,000 worth of such stamps received was probably attributable to their sale by the window clerk.

The most persuasive evidence of actual loss to the Postal Service is the fact that $4,200 in postage did not appear as an overage in the main stock in January 1988 when stamp counts were made. However, there was an overage of $76.50 in the main stock in January and overages totalling $1,354.91 in the accounts of window clerks.

Offsetting differences between shortages of one employee by overages of other employees may be made by a postmaster if "a relationship between the differences exists" and there is "written agreement of the employee from whom the overage is to be withdrawn" (Handbook F-1 § 472.223). Although postage stock overages in the accounts of clerks may not be unusual, the substantial overages in two of the clerks' stamp stocks in January 1988 were unusual. The overages were substantially greater than recognized tolerances set forth in Handbook F-1 at § 472.1. Despite the unusual overages and the "statement of differences" existing between the main stock and the distribution office, apparently no effort was made by the Postal Service to ascertain the cause of the overages or if there was any relationship between the overages and the main stock status for offsetting purposes. There is no evidence of subsequent substantial overages or shortages in the postage stock prior to or as of the time Petitioner left the Norwich P.O.

At most, the Inspection Service has established that in January 1988 there was a demonstrated financial loss of $2,768.59 in unaccounted-for stamps ($4,200.00 less $1,431.41 in total stamp overages). Although $1,354.91 of the $1,431.41 overage was in window clerks' accounts, that is not a reason in these circumstances to hold Petitioner accountable for the entire paper loss of $4,200 by disregarding the overages. Petitioner has not refuted the evidence which demonstrates the financial loss, but there are enough gaps in the record and uncertainties concerning any greater loss to conclude that he should not be charged for more than $2,768.59.

Therefore, it is concluded that Petitioner is accountable for and indebted to the Postal Service for only $2,768.59 of the withheld $4,200. Attached is a Notice advising the parties of their appeal rights.