In the Matter of the Complaint Against                   )
                                                                               )
CAROLYN M. DAVIS                                             )
3159 Cherry Road, N.E.                                         )
                                                                              )
                  at                                                         )
                                                                              )
Washington, DC 20018-1611                                )   P.S. Docket No. PF-73

APPEARANCE FOR RESPONDENT:                        None.

APPEARANCE FOR POSTAL SERVICE:                 Geoffrey A. Drucker, Esq.
                                                                               Enforcement Division
                                                                               United States Postal Service
                                                                               Washington, DC 20260-1148

INITIAL DECISION

This proceeding arises out of a Complaint issued by the Reviewing Official of the United States Postal Service under the Program Fraud Civil Remedies Act of 1986, Pub. L. 99-509, 31 U.S.C. §§3801-3812, and 39 C.F.R. Parts 273 and 962. In the Complaint, the Postal Service alleged that Respondent violated 31 U.S.C. §3802(a)(1) by filing two false claims for disability compensation, in November 1989 and December 1990. The Postal Service contended that Respondent is liable for an assessment equal to twice the amount of benefits received ($56,621.54 x 2 = $113,243.08)⁽¹⁾, plus a civil penalty of $5000 for each false claim.

The Complaint was served on Respondent on April 4, 1994. On April 29, 1994, Respondent filed a letter stating that, due to the possibility of criminal charges, she was invoking her Fifth Amendment rights and generally denied all charges. This letter was treated as a Petition for Hearing. On May 4, 1994, the Postal Service filed the Complaint and moved to dismiss the Petition because it did not comply with the Rules of Practice.⁽²⁾ On May 6, 1994, the Acting Chief Administrative Law Judge granted Respondent 15 days to file an amended petition. The Judge's Order gave some direction as to what the petition needed to contain to comply with 39 C.F.R. §962.3. On June 14, 1994, the Postal Service filed a Motion for Default Judgment, based on Respondent's failure to file an amended petition. On June 29, 1994, Respondent filed an Amended Petition⁽³⁾ and, on July 7, 1994, the Judge granted her 10 days to reply to the Motion for Default Judgment. Her reply, which in essence stated only that she was under a doctor's care, had asked an Assistant Federal Public Defender to assist her, that he did so as a courtesy - not as her counsel, and that delay was due to his busy schedule, was filed on August 22, 1994.

On September 1, 1994, the Judge denied the Motion for Default Judgment and scheduled a hearing for October 17, 1994. The Judge's Order also stated that Respondent's failure to claim certified mail would not excuse any further untimeliness in making required responses, and that further failures to make timely filings or otherwise comply with the Rules of Practice would result in the imposition of sanctions under 39 C.F.R. §962.15.

A hearing was conducted in Washington, DC on October 17, 1994. Respondent did not appear, and no one entered an appearance on her behalf. The Postal Service presented the testimony of a personnel specialist on the rules and procedures pertinent to injury compensation claims, a postal inspector who investigated the instant case, and a second postal inspector who described his efforts to personally serve documents on the Respondent. Several documents, marked Exhibits A-J, with individual pages numbered from 0001 through 0102, were also received in evidence. The transcript of the hearing was received on October 28, 1994, and notice was sent to both parties that post-hearing briefs were due on November 17, 1994. In accordance with the previous Order, this notice was sent to Respondent by both certified mail, which she declined to claim, and by regular mail. The Postal Service filed a post-hearing brief on November 17, 1994. There has been no communication from Respondent.

FINDINGS OF FACT

General

1. Postal Service employees receive compensation for work-related injuries pursuant to the Federal Employees' Compensation Act (FECA). 5 U.S.C. Chapter 81; 39 U.S.C. §1005(c). This program is administered by the Office of Workers' Compensation Programs (OWCP), U.S. Department of Labor. 20 C.F.R. Part 10.

2. A postal employee who is injured on the job completes a Department of Labor Form CA-1, describing the accident and extent of injury, and submits the form to her official superior. 20 C.F.R. §10.100(a); Transcript "Tr." 18. If the injury is likely to result in absence from work beyond one day, the official superior submits a report to OWCP. 20 C.F.R. §10.102.

3. To apply for disability compensation, the employee submits Department of Labor Form CA-7, with appropriate medical evidence. 20 C.F.R. §§10.104 and 10.106; Tr. 19-20. The OWCP determines what benefits will be awarded. 20 C.F.R. §10.110; Tr. 20-21.⁽⁴⁾

4. If the OWCP believes the disability to be temporary, the employee will be required to submit a Form CA-8 every two weeks. 20 C.F.R. §10.122.

5. If the disability is likely to be long term, the OWCP will place the employee on the "periodic rolls," and the employee will automatically be paid workers' compensation benefits every 28 days. Tr. 25.

6. While an employee is on the periodic rolls, the OWCP will solicit information on earnings from other employment, or self-employment, by sending the employee Forms CA-1032 and EN-1032. 20 C.F.R. §10.125(a). This information is used to determine whether the employee is receiving the correct amount of benefits, and whether the employee is fit to return to work in some capacity. 20 C.F.R. §§10.303 and 10.124; Tr. 26-30.

7. If an employee "knowingly omits or understates any earnings or remuneration, the employee shall forfeit the right to compensation with respect to any period for which the affidavit or report was required." 20 C.F.R. §10.125(a).

8. The Postal Service must reimburse the OWCP for any benefits paid to postal employees. 5 U.S.C. §8147.

Ms. Davis' Case

9. Respondent, Carolyn M. Davis, is an individual who resides at 3159 Cherry Road, N.E., Washington, DC 20018-1611. She receipted for the Notice of Docketing that was sent to this address on May 2, 1994 and, although she has declined to receive any other certified mail sent to this address, she eventually responded to the Orders for an amended petition and for a reply to the Motion for Default.⁽⁵⁾

10. On November 29, 1984, Respondent completed a Form CA-1, claiming injury to her back from a fall while employed at Postal Service Headquarters. (Exhibit A, pp. 4-5).

11. On January 14, 1985, Respondent submitted a Form CA-7 for compensation from the OWCP. This form indicated that she had received Continuation of Pay from November 30, 1984 through January 13, 1985. (Ex. A, pp. 2-3).

12. On March 12, 1985, the OWCP accepted her claim, based on "lower back strain." (Ex. I, p. 92).

13. On November 13, 1985, the OWCP informed Respondent, by letter, that she was placed on the periodic rolls and would be paid $1643.22 every four weeks. The letter also referred to attached instructions which explained her "responsibility for seeking work which is suitable to your disabled condition and for reporting your efforts to find employment to this Office." (Ex. A, p. 10).

14. Respondent remained on the periodic rolls until the OWCP terminated compensation on May 30, 1992. (Ex. I, p. 89).

15. On November 27, 1989, Respondent filled out and signed a Form EN-1032. Part A of the form is titled "EMPLOYMENT HISTORY," and paragraph 1 states:

Employment other than Self-Employment. Under this heading, you must report all employment, other than self-employment, for which you received salary, wages, sales commissions, piecework, or other payment. . . . .

a) Were you employed by an employer during the time period covered by this form? -- Respondent answered "NO."

Paragraph 2 of the form states:

Self-Employment. Earnings from self-employment (such as farming, sales, service, operating a store, business, etc.) must be reported. Report any such enterprise in which you worked, and from which you received revenue, even if it operated at a loss or if profits were reinvested. . . .

a) Were you self-employed during any time covered by this form? -- Respondent answered "YES."

In response to questions on the form that asked for further information, Respondent stated that she had taught a two-hour class for secretaries on three occasions in November 1987, June 1988 and November 1988. She said she did this as part of her "therapy," and that she earned $500.00. (Ex. A, pp. 11-14).

16. On December 24, 1990, Respondent filled out and signed another Form EN-1032.⁽⁶⁾ In response to the same two questions, 1(a) and 2(a), quoted above, she answered "NO" to both questions. (Ex. A, pp. 15-18).

17. The period of time covered by the two Forms EN-1032 discussed above is August 27, 1988 through December 24, 1990. During this time Respondent received $54,065.34 in workers' compensation payments.⁽⁷⁾

Ms. Davis' Employment, 1988-90

18. On May 8, 1987, Respondent signed Articles of Incorporation for CAR-RIC CONSULTANTS, INC., a corporation organized under the laws of the District of Columbia. The purpose of the corporation was to conduct educational seminars concerning business and economic development, and to engage in related activity. Respondent was one of three named incorporators and directors, and the principal place of business listed for the corporation was her home address. (Ex. B, pp. 20-22).

19. On June 6, 1990, Respondent submitted a Standard Form 171, Application for Federal Employment, in application for employment with the Government of the District of Columbia to conduct group workshops for the Mayor's Youth Leadership Institute. She listed her then current employment ("5/87 to present") as the self-employed President and CEO of CAR/RIC Consultants. She indicated on the SF 171 that she worked 60 hours per week, and earned up to $25 per hour. (Ex. C, pp. 24-28).

20. On November 20, 1990, Respondent submitted an application for a part-time teaching position at Prince George's Community College in Largo, Maryland. She described her "present position" as being self-employed as President of CAR/RIC Consultants, and marked a box indicating this was full time employment. In the box pertaining to "salary," she again said $25 per hour and typed in the word "varies." (Ex. E, pp. 53-54).

21. On this same application to PGCC, Respondent listed employment as a part-time training instructor at the University of the District of Columbia from 1988 to 1989 at the rate of $28 per hour. (Ex. E, p. 55). Records obtained from the University of the District of Columbia, however, show employment there only for June 1 - July 31, 1988. (Ex. D, pp. 46-49). It appears, therefore, that this employment was not during the period of time covered by the Forms EN-1032 that are alleged to be false. (See paragraph 17 above).

22. Respondent's application to the Youth Leadership Institute was accepted and she was employed there from June 11 - August 10, 1990. The contract called for remuneration up to $4,080.00, and cancelled checks show she was paid at least $1,878.00. (Ex. C, pp. 29-35).

23. Respondent was hired by Prince George's Community College for part-time teaching in November 1990. Between November 27, 1990 and December 24, 1990 (the end of the period covered by the second Form EN-1032) she worked 66.25 hours and was paid $1,187.75. (Ex. E, pp. 57-61).

CONCLUSIONS OF LAW

The Civil Penalty

1. The definition of a "claim" under the Program Fraud Civil Remedies Act includes, "[A]ny request, demand, or submission - . . . made to an authority for . . . money . . . ." 31 U.S.C. §3801(a)(3).

2. Submission of a Form EN-1032 constitutes a claim for money, and each of the two forms submitted by Respondent, on November 27, 1989 and December 24, 1990, constitutes a separate claim. Linda S. Phipps, P.S. Docket No. PF-48 (P.S.D. November 18, 1994); Nina D. Newborn, P.S. Docket No. PF-64 (I.D. April 28, 1994).

3. The Form EN-1032 signed and submitted by Respondent on November 27, 1989 was false because she failed to disclose her self-employment with CAR/RIC Consultants. Even though she answered "Yes" to the question on self-employment, the only explanantion provided was that she taught three two-hour classes as part of her therapy, and she stated that she was unemployed for all other times during the previous fifteen months. (Ex. A, p. 11). The Postal Service also alleges that this form was false in not disclosing the part-time teaching employment at the University of the District of Columbia. However, for the reason stated in Finding of Fact 21, this employment was outside the relevant period of time and there was no requirement to report it on the November 1989 form.

4. The Form EN-1032 signed and submitted by Respondent on December 24, 1990 was false because she again failed to disclose her self-employment with CAR/RIC Consultants, and also because she failed to disclose her employment with the Youth Leadership Institute, and with Prince George's Community College.

5. It is noted that Form EN-1032 says "Earnings from self-employment [. . .] must be reported." (See Finding of Fact 15; emphasis added.) Had Respondent never performed any work on behalf of CAR/RIC Consultants, and never been paid anything for it, she would have had nothing to report on the Forms 1032. The Postal Service has presented no independent evidence of any specific earnings that Respondent derived from CAR/RIC. They must rely, therefore, on Respondent's assertions in the two job applications (see Findings of Fact 19 and 20), as proof that Respondent had self-employment earnings that she failed to report. As Respondent has presented nothing during the course of this litigation to contradict these assertions, I find this evidence to be sufficient. 6. Each of the two Forms EN-1032 was materially false because the information on those forms is used by OWCP to determine whether disability compensation should be adjusted or terminated.

7. Respondent is, therefore, subject under the Statute, 31 U.S.C. §3802(a)(1), to a penalty of $5000 for each claim. In the Complaint, the Reviewing Official has requested this amount - a $10,000 penalty.

8. The appropriate amount of the penalty, and the assessment, must be determined by examining all the circumstances surrounding the false claims, including all aggravating and mitigating factors. Linda P. Phipps, supra; Neldie E. Nelson, P.S. docket No. PF-3 (P.S.D. August 19, 1992). Many government agencies have adopted a set of model regulations proposed by the President's Council on Integrity and Efficiency, which contain a list of factors that may be considered as guidance. See 45 C.F.R. §79.31, promulgated by the Department of Health and Human Services; 52 Fed Reg. 27423-32.

9. Among the factors to consider are the number of false claims and the time period over which they were made, the amount of money claimed, the value of the agency's actual loss, the degree of Respondent's culpability, whether there has been a pattern of similar misconduct, whether Respondent attempted to conceal the misconduct, the potential or actual impact on public confidence in the management of government programs, whether Respondent cooperated in the investigation, and the need to deter Respondent and others from future similar misconduct.

10. There are only two false claims here - about one year apart, but the amount of money paid to Respondent, and lost to the agency, is substantial.

As to her culpability, Respondent has offered no explanation as to why she failed to disclose her employment, or self-employment, but there can be little doubt that she knew when she signed the forms that she was deceiving the government. The instructions as to what must be reported are clear, as are the warnings concerning the consequences of failing to report accurately.

11. There is no evidence of additional attempts to conceal the misconduct, or of any pattern of similar misconduct. Nor is there any evidence that Respondent either helped, or hindered, the investigation. Respondent has presented no matters in mitigation. Based on the amount of money involved, the degree of culpability, and the need to deter this type of fraud, it is concluded that the maximum penalty sought by the Complaint is appropriate.

The Assessment

12. The Statute, 31 U.S.C. §3802(a)(1), allows a maximum assessment of twice the amount of the claim. The amount of Respondent's claim is measured as the amount of the workers' compensation benefits paid to her during the period she falsely denied that she was employed, or self-employed. Linda P. Phipps, supra at 6; Nina D. Newborn, supra. As noted above, I calculate that to be $54,065.34. The maximum assessment, therefore, would be $108,130.68.

13. It is impossible to accurately assess the actual loss to the Postal Service in this case. A truthful disclosure of Respondent's employment, and especially her self-employment, may not have greatly reduced her disability payments. The reason for the seemingly severe statutory provision for "double damages," and for the forfeiture of compensation provision in the OWCP rules,⁽⁸⁾ of course, is that neither the OWCP nor the agency has an opportunity to evaluate a disability entitlement if the applicant files false reports. The need for deterrence is, therefore, a strong factor to consider.

14. It is unlikely that the false information submitted by this Respondent in November 1989 and December 1990 resulted in her being unjustly enriched to the full extent of the claim, i.e. $54,065.34. Therefore, I do not find that an assessment equal to twice that amount is necessary to deter her, or others, from engaging in similar conduct. I find that an assessment equal to the amount of the claim is appropriate.

CONCLUSION

15. The findings and conclusions herein are based on the preponderance of the evidence. 31 U.S.C. §3803(f). In summary, Respondent is liable to thePostal Service under 31 U.S.C. §3802(a)(1) for a civil penalty of $10,000 and an assessment of $54,065.34, for a total liability of $64,065.34.

Bruce R. Houston
Administrative Law Judge

1. These figures were amended at the hearing to be $55,491.25 x 2 = $110,982.50. The total claim against Respondent, therefore, is $120,982.50.

2. 39 C.F.R. Part 962.

3. In response to the allegations of wrongdoing, Respondent's Amended Petition stated that she neither admitted nor denied the allegations, but was relying on her Fifth Amendment rights, and that she intended to rely on the defense that charges contained in the complaint are false.

4. If certain conditions are met, the Postal Service may continue to pay the employee normal wages and benefits ("Continuation of Pay") for not more than 45 days. 5 U.S.C. §8118; 20 C.F.R. §10.200. If this occurs, disability compensation from OWCP will begin once the period for Continuation of Pay expires.

5. Since June 1994, all pleadings and orders were sent to Respondent by regular mail as well as by certified mail. In addition to the two responses noted above, a letter from a Clinical Psychologist was received on October 14, 1994, which discussed the stress caused to Respondent by these proceedings. It is concluded, therefore, that Respondent has continued to reside at 3159 Cherry Road and has received all proper notifications concerning this case.

6. The cover letter, designated Form CA-1032, sent with Form EN-1032, makes clear that the statements on the form are to cover the fifteen months prior to the date the form is signed. Although no Form CA-1032 was submitted as an exhibit at the hearing, the December 1990 letter that was sent to Respondent by OWCP was attached to the Complaint. This cover letter also contains the following:

WARNING

A FALSE OR EVASIVE ANSWER TO ANY QUESTIONS, OR THE OMISSION OF AN ANSWER, MAY BE GROUNDS FOR SUSPENDING YOUR COMPENSATION BENEFITS AND SUBJECT YOU TO CIVIL LIABILITY, OR, IF FRAUDULENT, MAY RESULT IN CRIMINAL PROSECUTION. ALL STATEMENTS ARE SUBJECT TO INVESTIGATION FOR VERIFICATION.

7. This figure, which is slightly lower than that put forth by the Postal Service at the hearing, is based on my count of the figures contained in Exhibit J, pp. 96-102.

8. 20 C.F.R. §10.125(a).