In the Matter of the Petition by                         )
                                                                        )
LINDA A. LILLY                                               )
1582 Deerfield Drive                                       )
                                                                        )
at                                                                     )
                                                                        )
Lima, OH 45805-1063                                     ) P.S. Docket No. DCA 96-195

APPEARANCE FOR PETITIONER:                   Charles Scialla
                                                                       Scialla Associates, Inc.
                                                                       453 Preakness Avenue, Suite 5
                                                                       Paterson, NJ 07502-1121

APPEARANCE FOR RESPONDENT:               Vincent P. Catalano
                                                                       Labor Relations Specialist
                                                                       Cincinnati District
                                                                       United States Postal Service
                                                                       1591 Dalton Avenue
                                                                       Cincinnati, OH 45234-9401

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

Petitioner, Linda Lilly, filed a petition for an oral hearing on June 14, 1996, after receiving a PS Form 3239, Payroll Deduction Authorization. This form noted the Postal Service’s intention to make withholdings from Petitioner’s salary to collect $2,485.08, to cover shortages in her accounts at the St. Mary’s, Ohio, Post Office, where she was a Supervisor of Customer Services. The shortages included $837.00 from the main stock account, and $1,648.08 from the stamp vending machine account, both discovered during audits in September 1995.

A hearing was held in Dayton, Ohio on September 19, 1996. The Postal Service presented testimony from John Grogean, the acting postmaster of the St. Mary’s Post Office. In addition to presenting her own testimony, Petitioner called Richard Rieger, a postal clerk; Billy Anderson, Manager of Post Office Operations for the Cincinnati District; and Postal Inspector David Wasserzug. Both sides also presented documentary evidence.¹ At his request, Petitioner’s representative was given ten days from receipt of the transcript to submit written comments, but after reviewing the transcript has opted not to submit comments. The following findings of fact are based on the entire record, including observation of the witnesses and their demeanor.

FINDINGS OF FACT

1. Petitioner became a supervisor at the St. Mary’s Post Office sometime in 1993. The postmaster, Petitioner’s immediate supervisor, was Edythe Seas. Petitioner was assigned accountability for the main stock in 1993, and accountability for the vending machine stock in late 1994 or early 1995 (Tr. 127-28).

2. On August 31, 1995, while Ms. Seas was on medical leave, Mr. John Grogean, a postmaster in a nearby community, became Officer-in-Charge at the St. Mary’s Post Office (Tr. 9-11). On September 7, 1995, Mr. Grogean performed a count of the vending machine stock and found it to be short $1,795.92 (Tr. 16). Petitioner signed a PS Form 3294, agreeing to the count (Resp. Ex. 10, pp. 10-12). A few days later, a bag of money was found in the safe and was credited to the vending account, reducing the shortage to $1,648.08 (Tr. 17-18).

3. On September 12, 1995, Mr. Grogean audited the main stock account and found a shortage of $1,605.00. A few days later, $768.00 was credited to the account when some sort of error was discovered by the Postal Service Finance Branch in Minneapolis. This reduced the main stock shortage to $837.00 (Tr. 18-19; Resp. Ex. 11).²

4. Mr. Grogean issued Ms. Lilly a Letter of Demand for $2,485.08 ($1,648.08 + $837.00) on December 27, 1995. She requested reconsideration, which was denied on February 1, 1996. (Resp. Exs. 1-4). The PS Form 3239, which triggered the Petition, is dated June 14, 1996 (Resp. Ex. 5).³

5. Petitioner was away from her job in December 1994. During this time, Ms. Seas had access to the main stock, although accountability for it was never formally transferred to her. When Petitioner returned to work in January 1995, Ms. Seas did not relinquish access (by changing the safe combination), and thereafter both Ms. Seas and Ms. Lilly had access to the main stock. (Tr. 50, 112-13, 139-40; Resp. Ex. 10, Investigative Memorandum, para. 9).

6. The postmaster, Ms. Seas, had a key to the vending machine during the entire time that accountability for the machine was assigned to Petitioner (Tr. 48, 64, 95, 141; Resp. Ex. 10, Investigative Memorandum, para. 9).

7. Ms. Seas occasionally used money from the vending machine to cash personal checks, a practice not permitted by Postal Service rules (Tr. 64-5, 96-7).

8. Petitioner questioned Ms. Seas about the propriety of Seas having access to the accounts assigned to Petitioner (Tr. 113, 141), but she did not complain about it to the next level supervisor, District Post Office Operations Manager, Mr. Anderson (Tr. 76).

9. On August 30, 1995, the day before Mr. Grogean took over the St. Mary’s Post Office, Ms. Seas did an audit of the vending machine stock without Ms. Lilly being present, and signed Ms. Lilly’s name to a PS Form 3293, Retail Vending Credit Examination, to indicate that Ms. Lilly had participated in the count. During an investigation conducted by the Postal Inspection Service, into various happenings at the St. Mary’s Post Office, Ms. Seas admitted doing this (Resp. Ex. 10, Investigative Memorandum, para. 9; Pet. Ex. 6). This PS Form 3293 also shows $1,000 more in the vending account than was actually there on August 30, 1995, because a series of numbers that add to only $1,787.13 are shown to total $2,787.13. The first digit, "1," appears to have been changed to a "2." (Resp. Ex. 10, Investigative Memorandum, pp. 13-14; Tr. 106). Although Ms. Seas never admitted changing this number with an intent to deceive anyone, she did acknowledge that she had written the number on the form (Pet. Ex. 6, p. 6).

10. Following the Inspection Service investigation in November 1995, Ms. Seas was removed from her position as postmaster, based on her falsification of the PS Form 3293, and for unsatisfactory performance of duties (Tr. 33, 73, 80, Pet. Ex. 6). Her removal was effective on January 28, 1996, and was upheld by the Merit Systems Protection Board (MSPB) on June 19, 1996 (Pet. Ex. 6).

DECISION

The Vending Machine Shortage Respondent’s position is simply that Petitioner was the assigned custodian of the vending machine stock, therefore she is liable for any shortage, apparently without regard to any other facts. This argument fails, for a number of reasons. First, the prescribed standard for holding employees liable for vending machine shortages is different from other shortages. It is not a "strict liability" standard. It requires evidence of negligence or wrongdoing by the employee. 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 procedures, 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).

The term "servicing personnel" is defined as "the inclusive term for all postal clerical employees that are assigned to support retail vending equipment." Handbook PO-102, p. GL-2. Ms. Lilly was the servicing person for the vending machine in this case.⁴ As there is no evidence of theft or embezzlement by Ms. Lilly, or that the shortage was the direct result of her negligence, she cannot be held liable. Craig A. Wilson, PS Docket No. DCA 94-153 (February 21, 1995).

Second, it is difficult to understand any rationale for charging Ms. Lilly with this vending machine shortage when it was known that the former postmaster improperly maintained access to the vending machine stock after assigning it to Ms. Lilly, used money from the vending machine to cash personal checks, conducted a purported count of the vending stock without anyone else present seven days before the audit that revealed the shortage, forged Ms. Lilly’s signature to an audit form, very probably altered the numbers on the form, and was then fired from her job for doing these very things (Pet. Ex. 6). Testimony from Postal Service officials that they had no authority not to charge Petitioner for this shortage is unacceptable.

Again, Respondent’s position is that Petitioner is liable for the main stock shortage simply because she was the assigned custodian. Unlike the standard for vending machines, however, liability for losses from main stock is governed by a strict liability standard. Handbook F-1, Post Office Accounting Procedures (April 1991), Section 130 is titled "Liability." Subsection 131 applies to postmasters, and Subsection 132 to other employees:

The postmaster consigns postal funds and accountable paper to other employees. Employees are held strictly accountable for any loss unless evidence establishes they exercised reasonable care in the performance of their duties.

In the case of an unexplained loss, as in this case,⁵ the term "strictly accountable" means that to establish a prima facie case for liability, the Postal Service must only prove that there has been a loss and 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. The burden then shifts to the employee to show that he, or she, exercised reasonable care.

There is no doubt that Petitioner was accountable for the main stock. She agrees that she was. The testimony of Mr. Grogean as to the main stock inventory he did on September 12, 1995, undisputed by Petitioner, is sufficient to prove a loss of $837.00. The contested issue is whether Petitioner exercised reasonable care in controlling the main stock. Respondent’s contention is she did not, because she permitted the postmaster to have access to it. Handbook F-1 clearly does not permit this. Section 431 deals with control of the Main Stock, and Subsection 431.31 states, "Only the Main Stock custodian shall have access to the Main Stock." Respondent acknowledges that the postmaster was at fault in gaining access - that was one of the allegations in the action to remove her - but argues that this does not relieve Petitioner from liability, because she never raised the issue to the next level supervisor, and because the custodian is ultimately responsible.

Petitioner’s contention is that she did what her supervisor, the postmaster, told her to do, and that she did not raise questions to a higher level because she feared repercussions from the postmaster. She did say that she asked questions of two other postmasters, but was told she had to do whatever her postmaster told her (Tr. 109-10). This evidence was not contradicted. She also testified that she asked Ms. Seas about changing the combination to the safe, and that Ms. Seas told her she (Seas) needed to have access and that it was okay to have such an arrangement (Tr. 113, 141). Ms. Seas was not available to testify, so Petitioner’s testimony on this point was not contradicted, but it is also not inconsistent with anything Ms. Seas told the postal inspectors during their investigation (Resp. Ex. 10). As to her own handling of the main stock, Petitioner testified that she always followed prescribed procedures when issuing stock to clerks (Tr. 110-11). Respondent presented no evidence to contradict this. By her testimony on all the above matters, Petitioner has met her burden of demonstrating that she exercised reasonable care. I do not find that Ms. Lilly’s failure to refuse to accede to the directions of the postmaster, or her failure to complain to the Post Office Operations Manager about directions she received from the postmaster, constitutes a lack of reasonable care under these circumstances.

CONCLUSION

The Petition is granted. Petitioner is not liable to the Postal Service for either the vending machine shortage, $1,648.08, or the main stock shortage, $837.00.

                                                                                       Bruce R. Houston
                                                                                       Acting Chief Administrative Law Judge

¹ References to Petitioner's exhibits will be "Pet. Ex. _," and Respondent's exhibits will be "Resp. Ex. _." References to the hearing transcript will be "Tr. _."

² The record contains no PS Form 3294 to document this audit, but Mr. Grogean testified that Petitioner was present for the count, and she does not dispute his testimony. Therefore, his testimony is sufficient to establish the results of the main stock audit.

³ Apparently, no Notice of Involuntary Administrative Salary Offsets was ever issued. Generally, that Notice is required before the Postal Service may make involuntary salary deductions, and before an employee is entitled to a Debt Collection Act hearing. 39 C.F.R. §§961.3(e) and 961.4(a); Employee and Labor Relations Manual (ELM) §452.321. However, as neither side made an issue of this, jurisdiction is based on issuance of the Form 3239 and the Postal Service's clear intention to go forward with assertion of the debt.

⁴ It is noted that the box on Form 3293, in which Ms. Seas signed Ms. Lilly's name, is labeled "Servicing Person's Signature."

⁵ Everyone involved agrees that it was improper for the postmaster to retain access to the main stock, but there is no evidence that she stole from it, or that she caused the shortage in some other way.