In the Matter of the Complaint Against                    )
                                                                                )
JAMES M. COX                                                       )
1687 Elliott Avenue                                                 )
                                                                                )
at                                                                             )
                                                                                )
Ashland, KY 41101-5507                                       )    P.S. Docket No. PF-18

APPEARANCE FOR POSTAL SERVICE:                  Janet E. Noble, Esq.
Law Department
United States Postal Service
Washington DC 20260-1148

APPEARANCE FOR RESPONDENT:                         Rodney S. Justice, Esq.
Wilson, Stavros and Justice
P.O. Box 807
Ashland, KY 41105-0807

POSTAL SERVICE DECISION

James M. Cox, Respondent, has filed an appeal from the Initial Decision of an Administrative Law Judge in which it was concluded that Respondent was liable to the Postal Service under the Program Fraud Civil Remedies Act (PFCRA), 31 U.S.C. § § 3801-3812, for an assessment and civil penalty in the total amount of $5,000. The Postal Service opposes Respondent's appeal.

BACKGROUND

The General Counsel, United States Postal Service, Complainant, initiated this proceeding by filing a Complaint alleging that Respondent caused a false statement to be filed with the Postal Service in order to obtain continuation-of-pay (COP) benefits for a work-related injury. Specifically, the Complaint alleged that: (1) Respondent was examined on August 2, 1990, by a Postal Service contract physician, Dr. Vuskovich, who determined Respondent was fit to return to his limited duty assignment with the Postal Service; (2) during the course of an August 9, 1990, examination, Respondent falsely told his own physician, Dr. Craythorne, that the Postal Service physician had recommended that Respondent remain on leave another three weeks; and (3) Dr. Craythorne relied on Respondent's false statement in submitting to the Postal Service a Form CA-17, Duty Status Report, stating that Respondent continued to be disabled and could not return to work until August 27, 1990. The Complaint asked that Respondent be ordered to pay a penalty of $5,000 for causing Dr. Craythorne to submit a false statement to the Postal Service.

Respondent filed his Answer and Petition for Hearing in which he denied that he made or caused to be made the false statements alleged in the Complaint. Respondent contended he was injured in a July 12, 1990, on-the-job accident and admitted applying for and receiving COP benefits. As affirmative defenses, Respondent alleged a failure of the Complaint to state a cause of action for which relief could be granted; the PFCRA proceedings were barred by res judicata as the issues were previously resolved in an action before the Merit Systems Protection Board (MSPB); and that the Complaint was barred by the doctrines of waiver and estoppel.

Thereafter, the Postal Service filed a motion to amend the Complaint which Respondent did not oppose. In the Amended Complaint, the General Counsel alleged that Respondent's August 9, 1990, submission of PS Form 3971, Request for or Notice of Absence, in which he requested COP from August 10 - 25, 1990, was a false claim. The Amended Complaint sought a $5,000 penalty plus an assessment of $2,810.88, twice the amount of compensation paid Respondent during the period August 10 - 25, 1990. Respondent was granted an opportunity to file an answer to the Amended Complaint but did not do so.

At a hearing before the Administrative Law Judge, both parties called witnesses, and Complainant introduced documentary evidence. Following the hearing, both parties were afforded an opportunity to file proposed findings of fact and conclusions of law. Thereafter, the Administrative Law Judge issued his Initial Decision in which he concluded that: (1) Respondent's request for continuation of pay from August 10 - 25 was a false claim under 31 U.S.C § 3802 (a)(1) as it was based upon Dr. Craythorne's authorization which was induced by Respondent's false statement; (2) the Postal Service's PFCRA claim against Respondent was not barred by the doctrine of res judicata, estoppel or waiver; and (3) Respondent was liable to the Postal Service for an assessment of $2,500 and a civil penalty of $2,500.

Subsequently, Respondent filed this appeal taking exception to the findings and conclusions of the Initial Decision. Complainant filed a reply to the appeal requesting that the Initial Decision be affirmed.

EXCEPTIONS AND DISCUSSION

Respondent challenges the Administrative Law Judge's finding that Dr. Vuskovich did not recommend Respondent remain on leave another three weeks and the credibility determinations that support that finding. Alternatively, Respondent argues that even if he misrepresented Dr. Vuskovich's advice to Dr. Craythorne, it was not material to his receipt of COP benefits as Dr. Craythorne would have authorized Respondent to remain off work if Respondent had advised him that he was not presently capable of returning to work.

Respondent also argues that the settlement of his appeal to the MSPB bars Complainant's PFCRA claim under principles of res judicata, estoppel and waiver. Respondent, in addition, challenges the assessment and civil penalty as excessive, contending the Administrative Law Judge failed to give sufficient consideration to Respondent's loss of wages resulting from his 30-day suspension and 60 days on leave without pay that were part of the settlement of the MSPB appeal. Finally, Respondent argues that following the hearing in this proceeding, Respondent's claim for workers' compensation benefits resulting from the July 12, 1990, injury was approved by the Office of Workers' Compensation Programs (OWCP) and that this also has a res judicata effect barring the PFCRA claim.

In response, Complainant argues that the factual findings of the Administrative Law Judge based on his determination of the credibility of the witnesses are entitled to great weight and that there is no basis for overturning his conclusion that Respondent made a false statement to Dr. Craythorne regarding Dr. Vuskovich's recommendations. Complainant also argues that Respondent's request for COP for the period August 10 - 25 was a false claim because Respondent knew it was based on Dr. Craythorne's falsely induced authorization, and the fact that Dr. Craythorne might have authorized further leave if Respondent had told him he was not able to return to work does not change the false nature of the claim actually made.

Complainant contends that the settlement of the MSPB case does not bar this PFCRA proceeding because: (1) the dismissal of the case by the Board was not a decision on the merits; (2) the postal officials entering into the settlement agreement had no authority to compromise the PFCRA claim at issue here; and (3) the agreement specifically reserved to the Postal Service the right to pursue other actions against Respondent. Finally, Complainant argues that OWCP's decision that Respondent's July 12, 1990, injury was compensable does not bar this proceeding as the issues in the two proceedings were different and because the Postal Service is not permitted to fully participate in an OWCP proceeding.

SUFFICIENCY OF THE EVIDENCE

Respondent argues that the Administrative Law Judge erred in accepting Dr. Vuskovich's testimony that he did not tell Respondent he should remain on leave for an additional three weeks. According to Respondent, Dr. Vuskovich's testimony is unreliable because he is not board certified in any field; his testimony was not substantiated by his notes; and both Respondent and his wife testified that such advice was given.

The Administrative Law Judge heard the testimony and observed the demeanor of the witnesses, and his credibility determinations are accorded great weight. Rockwell International Corp. v. NLRB, 814 F.2d 1530, 1532 n. 2 (11th Cir. 1987); Hambsch v. Department of Treasury, 796 F.2d 430, 436 (Fed. Cir. 1986; Griessenauer v. Department of Energy, 754 F.2d 361, 364 (Fed. Cir. 1985); Sharon Boddie, P.S. Docket No. PF-6 at 6 fn. 5 (P.S.D. Oct. 27, 1992), cf. Anderson v. Bessemer City, 470 U.S. 564, 574-76 (1985). Dr. Vuskovich's failure to mention in his notes the advice Respondent attributes to him is entirely consistent with the advice not having been given and does not undermine the doctor's credibility. That Dr. Vuskovich is not board certified has no bearing on his veracity. Based on his observation of the witnesses at the hearing and on the record before him, the Administrative Law Judge was fully justified in accepting Dr. Vuskovich's testimony and rejecting the testimony of Respondent and his wife. Accordingly, the Administrative Law Judge's findings regarding the testimony of the various witnesses will not be disturbed on appeal.

MATERIALITY OF THE FALSE STATEMENT

Respondent argues that even if he misrepresented to Dr. Craythorne the recommendation made by Dr. Vuskovich, that misrepresentation was not material to his receipt of COP benefits. According to Respondent, Dr. Craythorne would have authorized Respondent to remain on leave until August 27, without regard to a recommendation from Dr. Vuskovich, if Respondent had told Dr. Craythorne he was not able to return to work.

The Administrative Law Judge's conclusion that Respondent's false statement to Dr. Craythorne was the basis for the doctor's authorization that he stay off work for two more weeks is supported by the evidence. (See ID, FOF ¶ 13). Dr. Craythorne did testify that if Respondent had not told him of the Postal Service doctor's recommendation, he probably would have approved further leave for Respondent, if Respondent had stated he was not capable of returning to work for another two weeks (Tr. 145). However, the Administrative Law Judge was not required to speculate as to what might have happened had Respondent not made the false statement, and it is clear from Dr. Craythorne's testimony that it was Respondent's false statement that forestalled any further inquiry by the doctor and caused the recommendation that Respondent remain on leave until August 27. That Respondent might have obtained COP without making the false statement does not alter the fact that he made the statement and obtained the COP benefits by means of a claim which Respondent knew to be false, fictitious or fraudulent when submitted. Thus, the Administrative Law Judge correctly found this conduct to be a false claim within the meaning of 31 U.S.C. § 3802 (a)(1).

RELATION OF MSPB CASE

The Postal Service initiated action to terminate Respondent's employment as the result of the submission of the false claim for COP benefits. Respondent appealed the proposed removal to the MSPB, and the parties eventually settled that appeal before it went to hearing (Tr. 96). Under the terms of the settlement, the proposed removal was reduced to a 30-day suspension and 60 days of leave without pay. Respondent argues the Administrative Law Judge erroneously concluded that the PFCRA action was not barred by the resolution of the MSPB case.

Res Judicata

Specifically, Respondent urges, as he did before the Administrative Law Judge, that the settlement of the MSPB case is res judicata and serves as a bar to this PFCRA case. Under the doctrine of res judicata, "[a] final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Federated Department Stores v. Moitie, 452 U.S. 394, 398 (1981), see Montana v. United States, 440 U.S. 147, 153 (1979). As the party urging that the conclusion of the MSPB proceeding precludes prosecution of the Postal Service's PFCRA claim, it was Respondent's burden to demonstrate that his PFCRA liability to the Postal Service was, or even could have been, an issue actually adjudicated by the MSPB. See Hernandez v. City of Los Angeles, 624 F.2d 935, 937 (9th Cir. 1980); United States v. Burch, 294 F.2d 1, 6 (5th Cir. 1961).

The MSPB did not conduct a hearing (Tr. 96), and did not issue a final judgment on the merits of Respondent's dispute with the Postal Service. Rather, the parties entered into a settlement agreement and Respondent withdrew his appeal and all grievances related to the removal issue. (See Exh. C-19). Therefore, the Administrative Law Judge correctly concluded that the settlement of the MSPB case had not been shown to be a judgment on the merits which would preclude the Postal Service from initiating this proceeding to establish Respondent's liability under the PFCRA. See Leslie H. Eldredge, P.S. Docket No. AO-7 at 5-6 (P.S.D. Jan. 25, 1991).

Estoppel and Waiver

In addition to his arguments that the MSPB settlement precludes this proceeding, Respondent contends that the Postal Service waived, or is estopped from asserting, its PFCRA claim because its representatives failed to tell Respondent that a PFCRA action was contemplated or possible. The Postal Service representatives with whom Respondent and his counsel negotiated the settlement agreement were not aware of the possibility of a PFCRA action and, therefore, could not have advised Respondent of the possibility of this action. Additionally, and more importantly, the parties intended to settle only the removal action (Tr. 53, 96; Exh. C-19), and they did not discuss whether any other actions were contemplated or would be precluded by the settlement (Tr. 49, 96-97, 116).

Furthermore, Respondent was represented by counsel when he signed the settlement agreement, and if he wanted the agreement to preclude all future actions he should have sought to have language included in the agreement to that effect. That Petitioner may not have settled the removal action had he known this PFCRA action would be brought does not serve as a basis for giving the settlement agreement broader effect than its plain language permits. Accordingly, the Administrative Law Judge correctly found that no estoppel or waiver precluded the Postal Service from bringing this action.

ASSESSMENT AND CIVIL PENALTY

Respondent contends the assessment and civil penalty are excessive and should be reduced because the wages lost during his 30-day suspension and 60 days of leave without pay resulting from the MSPB settlement far exceed the $1,405.44 he received as a result of the false claim. Additionally, Respondent argues that the assessment and penalty should be reduced because there was a conflict in the evidence regarding whether a false statement was in fact made.

Complainant sought an assessment of twice the amount falsely claimed ($2,810.88) and a civil penalty of $5,000, the maximum amounts that could be imposed in this case under 31 U.S.C. § 3802 (a)(1). After considering the aggravating and mitigating factors, the Administrative Law Judge determined that an assessment of $2,500 and a civil penalty of $2,500 were appropriate.

Assessments in excess of the amount of the actual damages sustained are permissible since the Postal Service's damages are difficult to compute and include not only the amount lost due to the fraud itself, but also ancillary costs such as detection, investigation, litigation and enforcement. See United States v. Halper, 490 U.S. 435, 445-46, 449 (1989); Helvering v. Mitchell, 303 U.S. 391, 401 (1938). In this case, the Postal Service incurred the cost of paying the compensation to Respondent as well as the costs expended in processing, investigating and litigating the claims against Respondent. Adding the intangible cost of deterring future false claims, the assessment of $2,500 is rationally related to the goal of compensating the Postal Service and is, therefore, permissible. See United States v. Halper, 490 U.S. at 449-50; Neldie E. Nelson, P.S. Docket PF-3 at 11-12 (P.S.D. Aug. 19, 1992).

The assessment and penalty imposed by the Administrative Law Judge were specifically authorized by the PFCRA and were less than the maximum amount permitted by the Act. While the Administrative Law Judge considered the wages lost by Respondent during his 30-day suspension and 60-day leave without pay as a mitigating factor, he properly found that an assessment and penalty were still appropriate.^1/ Moreover, Respondent's lost wages do nothing to compensate the Postal Service for its damages resulting from the false claim. Finally, the conflicting testimony regarding whether Respondent made a false statement to Dr. Craythorne was resolved adversely to Respondent. Thus, this testimony cannot constitute a mitigating factor.

OWCP RULING

At the time of the hearing, OWCP had not determined whether Respondent's July 12, 1990 injury was job-related and, therefore, compensable (Tr. 72-73, 83, 88, 115). In his appeal Respondent asserts that after the hearing in this proceeding OWCP ruled that the injury was work-related and compensable and that that ruling is res judicata with regard to the findings of fraud, or at least requires that the matter be remanded to the Administrative Law Judge for consideration of the impact of the OWCP ruling.

The issue presented and decided in this proceeding is whether Respondent submitted a false claim for COP for the period August 10 - 25, 1990. Whether Respondent's injury was work-related or not has no bearing on the false claim question. On August 9, 1990, Dr. Craythorne was required to determine whether Respondent was able to return to work prior to August 27, 1990. It was Respondent's false statement that caused Dr. Craythorne to authorize two additional weeks of leave for Respondent, and Respondent's claim for COP based on Dr. Craythorne's authorization was a false claim under the PFCRA even though the original injury was work-related. Therefore, the OWCP ruling subsequent to the hearing does not bar this PFCRA claim, and there is no reason to remand this issue to the Administrative Law Judge for further consideration.^2/

CONCLUSION

After consideration of the entire record and Respondent's exceptions, it is concluded that Respondent is liable to the Postal Service under the PFCRA, 31 U.S.C. § § 3801-3812, for an assessment of $2,500 plus a civil penalty in the amount of $2,500, for total liability of $5,000. Accordingly, Respondent's appeal is denied and the Initial Decision is affirmed.

James A. Cohen
Judicial Officer

1/ Generally, personnel actions taken by the Postal Service for the same conduct that supports a PFCRA claim are not considered mitigating factors in the PFCRA case as they are a direct result of the improper conduct and constitute separate, unrelated remedies for such conduct. See Sharon Boddie, P.S. Docket No. PF-6 at 9 (P.S.D. Oct. 27, 1992). Therefore, it is not apparent that the consequences to Respondent resulting from settlement of the proposed removal should be considered mitigating factors. However, Complainant has not objected, and the determination of the Administrative Law Judge on that point will not be disturbed.

2/ In view of this conclusion, it is not necessary to decide what, if any, preclusive effect an OWCP ruling should be given in a PFCRA proceeding.