In the Matter of the Complaint Against            )
                                                                        )
CHARLES D. PARAMORE                               )
208 John Street                                               )
                                                                        )
at                                                                     )
                                                                        )
Clayton, NC 27520-2618                                 ) P.S. Docket No. PF-58

APPEARANCE FOR POSTAL SERVICE:         Elizabeth P. Martin, Esq.
                                                                       Enforcement Division
                                                                       United States Postal Service
                                                                       475 L'Enfant Plaza, SW
                                                                       Washington, DC 20260-1148

APPEARANCE FOR RESPONDENT:               Charles D. Paramore, Pro Se
                                                                       208 John Street
                                                                       Clayton, NC 27520-2618

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, while employed by the Postal Service as a real estate specialist, caused six false or fraudulent claims to be filed under leases of property to the Postal Service, by soliciting and accepting bribes from a construction contractor between January 1987 and June 1989.

The Complaint alleged that Respondent collected a total of $32,000 in bribes in connection with the six fraudulent claims, and asked for an assessment of twice that amount - $64,000.⁽¹⁾ The Complaint also requested the maximum penalty of $5,000 for each false claim.

Respondent's Petition for Hearing was timely filed on July 12, 1993. After some postponements of the scheduled hearing, the Postal Service filed a Motion for Summary Judgment on December 22, 1993, asserting that there were no material issues of fact in dispute, and that the Postal Service was entitled to judgment as a matter of law, both as to Respondent's liability and as to the amount of penalties and assessment sought. On February 10, 1994, the parties jointly moved to suspend the time for Respondent to respond to the motion, and to stay any ruling on the motion. The reason given was so as not to hinder possible settlement of this matter, along with resolution of some related, and unrelated, court proceedings. Motions to continue the stay were granted in April 1994, August 1994, December 1994 and March 1995. In a status report filed on September 18, 1995, the parties stated that they were unable to settle the case and requested to proceed with the Motion for Summary Judgment. Accordingly, Respondent filed his Opposition to the Motion for Summary Judgment on October 23, 1995, and the Postal Service filed its Reply on November 7, 1995.

On December 5, 1995, a Decision on the Motion for Summary Judgment was issued. Based on Respondent's criminal conviction for conspiracy and bribery in United States District Court for the Western District of North Carolina in November 1989, the Motion was granted as to Respondent's liability for violation of the statute, 31 U.S.C. §3802(a)(1), but was denied as to the amount of the penalty and assessment.

A hearing was held in Raleigh, North Carolina, on April 17, 1996, to hear evidence relevant to determining an appropriate penalty and assessment. The Postal Service presented testimony from Postal Inspectors Ridgway and Male. Respondent testified in his own behalf, and presented testimony from Patricia Davis, a trial attorney with the U.S. Department of Justice. Both sides presented many pieces of documentary evidence.⁽²⁾ Both sides filed post-hearing briefs and reply briefs.⁽³⁾ The following Findings of Fact and Conclusions of Law are based on the entire record, as well as on observation of the witnesses and their demeanor.

FINDINGS OF FACT

1. Respondent Charles D. Paramore is an individual who resides at 208 John Street, Clayton, North Carolina.

2. Mr. Paramore began working for the Postal Service in 1968 as a general mechanic. He eventually became a supervisor, and in 1986 began working as a real estate specialist. (Tr. 277-78).

3. In August 1989, Mr. Paramore was arrested and indicted in the Western District of North Carolina for conspiracy and bribery. The Indictment charged him with one count of conspiring to take bribes in the aggregate amount of $73,000 from a construction contractor, James Gainey, and seventeen counts of taking bribes in specific amounts on specific dates, from January 1987 to August 1989. Gainey, through the help of Respondent, obtained a number of construction and renovation contracts with the owners of properties that were leased to the Postal Service. The renovation and construction costs were passed on to the Postal Service through the terms of the leases. Pursuant to a plea agreement, Respondent pleaded guilty in United States District Court in November 1989 to the conspiracy count and three of the bribery counts. An addendum to the plea agreement eliminated the specific amount alleged in the conspiracy count, and simply stated that Gainey's profits on the contracts exceeded the amount received by Respondent. Respondent was sentenced to a $25,000 fine, and forty-six months confinement, followed by three years probation.

4. Although Respondent continues to contest the amount of money he was alleged to have received from the contractor (Tr. 79-80, 139-40), the Summary Judgment Decision held that his guilty plea covered the allegations contained in the

Complaint in this administrative case.⁽⁴⁾ The testimony of Postal Inspector Ridgway, along with records he obtained from Mr. and Mrs. Gainey, also supports a finding that Respondent did receive at least as much as the $33,000 alleged in this case. (Tr. 26-36; PS Exs. 3-7).

5. One of the terms of Mr. Paramore's plea agreement with the United States Attorney was that he agreed "to provide truthful information and testimony in all matters within his personal knowledge relative to the payment or receipt of money in regard to Postal Service real estate transactions," in order to help resolve other cases. In exchange for this, the Government agreed not to prosecute Mr. Paramore for any other bribes already known or which might be discovered through the information he provided. (Tr. 38; the full agreement, and its addendum, may be found in the record as exhibits 2 and 3 to the Motion for Summary Judgment, December 22, 1993).

6. Mr. Paramore reported to a Federal prison in April 1990 and served his sentence there until August 1993. (Tr. 285; Resp. Ex. 11). He did not, however, fulfill his agreement to provide truthful information, and in May 1992 he gave false testimony to a grand jury. (Tr. 62-63, 286-87).⁽⁵⁾

7. In July 1993, Respondent's attorney wrote to Justice Department attorneys to offer Respondent's cooperation in ongoing investigations. (Tr. 157-59; Resp. Ex. 5). Sometime thereafter an agreement was reached, and in January 1994 Mr. Paramore began actively assisting the postal inspectors. (Tr. 100). In November 1993, Mr. Paramore was indicted in the Middle District of North Carolina for his May 1992 perjury. He pleaded guilty and was sentenced to one additional year in prison, which he served from July 1994 to June 1995. (Tr. 63-66, 290; Resp. Ex. 11). Once he began cooperating and providing information in January 1994, he continued to do so, and was helpful to Justice Department attorneys in obtaining settlements in several other cases. (Tr. 83-84, 91, 96, 102, 170-72).

8. In July 1994, the Postal Service released approximately $8,000 to Mr. Paramore, representing his final salary payment and payment for accrued leave, that had been placed in a "hold" status since early 1990. This money was released to him because he had been cooperating with postal inspectors, with a view toward his becoming a witness in other litigation, and because he was under financial stress.⁽⁶⁾ (Tr. 83-86; Resp. Ex. 4).

9. On April 26, 1995, the United States Department of Justice entered into a Settlement Agreement with Mr. Paramore, whereby the Government agreed to release claims against Mr. Paramore that had been the subject of two civil suits brought against him. These suits were in addition to the criminal case discussed above, and were based on allegations that he had accepted illegal payments from contractors other than Mr. Gainey. Release of these claims was based on Mr. Paramore's agreement to continue to provide information, including in-court testimony if necessary, whenever requested by attorneys for the United States. It was also based on financial data provided by Mr. Paramore, showing that he had "no appreciable assets." (Tr. 170-72; Resp. Ex. 6; Resp. Ex. 25).

Investigation and Litigation Costs

10. The Postal Inspection Service spent hundreds of hours investigating this matter, from its inception in August 1989, through the criminal case and various civil cases against Mr. Paramore and others, and including this administrative case. The time spent includes that of Inspector Ridgway and other investigators, and that of Inspector Male, and others, who performed audits of some of the lease contracts. (Tr. 50-54, 220-24; PS Exs. 9 and 17). This investigation continued long past Respondent's conviction in November 1989. Federal Court litigation in at least six other cases arose from it and many of these were not resolved until after Respondent began providing information in 1994. (Tr. 68). The Postal Service values the inspectors' time at $68.97 per hour. (Tr. 53; PS Ex. 10). Inspector Ridgway calculated that the inspectors, primarily himself, spent more than 600 hours on these cases through March 1990, and nearly 6,000 hours up to the time of the hearing in this case. (PS Ex. 9). Inspector Male calculated that 2,760 hours were spent, by himself and other auditors, reviewing the costs of four of the lease contracts. He also calculated travel expenses at more than $16,000. (Tr. 220-22; PS Ex. 17). Inspector Male's calculation of the total cost, through March 1996, for the time and travel of inspectors and auditors is $622,488.57. (Tr. 224; PS Ex. 17).

11. It is difficult to accurately quantify these costs. Even though Respondent was "the hub" of the investigations, wrongdoing by other people was also investigated and litigated, and it is not fair to attribute all the costs to this respondent. (Tr. 70-72). It is also fair to conclude that not all of Inspector Male's "bottom line" figure represents cost added to the operation of the Postal Service by Respondent's wrongdoing. It is clear, however, that the investigation time, and cost, would have been reduced considerably had Respondent provided useful information earlier, in accordance with his plea agreement. (Tr. 72, 198). Respondent's argument that I should consider only investigative costs for the ten days from the first report of illegal activity until his arrest on August 11, 1989, is rejected. Even adjusting for an inflation factor in the figures presented by the Postal Service witnesses, therefore, the investigation and litigation costs attributable to Respondent's wrongdoing undoubtedly exceed the amount of assessment and penalties sought.

Excess Cost of the Leases

12. At the request of the Postal Service Law Department in late 1990, Postal Inspector Male performed audits of four of the construction/lease projects that are the subject of this case. The four were selected because they appeared to show the greatest potential for inflated costs. (Tr. 248, 266; PS Exs. 12-15).

13. Inspector Male concluded that these four lease contracts, all of which were negotiated by Respondent, were "bad deals" for the Postal Service. (Tr. 200-212). For example, he found that some of the rental rates were well above fair market value, (Tr. 205, 208; PS Exs. 13 and 14), that excessive renovation costs were paid, (Tr. 200; PS Exs. 12 and 13), and that the Postal Service was paying excessive amounts in taxes, and for parking spaces (Tr. 208-09; PS Ex. 14). Inspector Male also did a comparison of the rental rates for the mail processing facility leases handled by Mr. Paramore, with all other similar Postal Service leases in North Carolina, and concluded that the Postal Service paid $9.33 per square foot for Mr. Paramore's projects, compared to an overall rate of $3.40. (Tr. 217; PS. Ex. 16). For the four projects audited, Inspector Male's audits concluded that a total of more than $2,378,000 was "questionable," i.e., the Postal Service may have overpaid this amount. (PS Exs. 12-15).

14. To relate Inspector Male's findings to this administrative case against Mr. Paramore, however, requires some further refinement. First, not all of the questioned costs represent actual losses to the Postal Service. Some of these leases were for terms of several years, and Inspector Male's figures count rental payments over the full term. It is unclear, however, whether the Postal Service has, or will, actually pay those full amounts. For example, in the case of the so-called "Nine/Ten Carrier Annex" in Charlotte, North Carolina, litigation with the owner of that property, Mr. Godley, resulted in a reduced rental rate through settlement of the lawsuit. (Tr. 164-65). Second, not all of the costs challenged by Inspector Male can be directly connected to Mr. Paramore's wrongdoing. Assuming the auditors are correct in their assessment of some of these leases as "bad deals" for the Postal Service, it is not clear that all aspects of those deals are attributable to Mr. Paramore's acceptance of bribes. In the "Interim Carrier Annex" at Hickory, North Carolina, for example, the auditors challenged $44,800 in rental cost because the Postal Service rented through a broker, rather than directly from the owner. Perhaps Mr. Paramore did not do his job well in that case, but the evidence does not show that this particular excess cost was due to his corruption. (PS Ex. 12). Finally, not all the comparisons presented by the auditors are persuasive. The fact that the average rental cost of leases negotiated by Respondent are noticeably higher than the overall average for the area certainly raises a red flag, but it does not prove a dollar for dollar correlation between Respondent's corrupt acts and actual monetary losses to the Postal Service. Inspector Male acknowledged that differences in the types of facilities, their location, and the years the contracts were entered into, could mitigate the difference in rental rates. (Tr. 238).

15. It would be naive, however, to accept Respondent's argument that his taking bribes from a contractor resulted in no cost to the Postal Service. He asserts that the money Gainey used to pay him came from some other source, and that no money was added to any leases to cover it.⁽⁷⁾ (Tr. 279, 283). That is just not credible. In a sworn statement given to postal inspectors on August 2, 1989, Gainey states that Respondent said he would "inflate the contract amount." (PS Ex. 1). Also, Inspector Male's audits do contain challenged costs that are directly related to Mr. Paramore's acceptance of bribes. For example, on the aforementioned Hickory Annex, Mr. Gainey was paid $130,000 for renovation of the building, $55,000 of which was profit to Gainey. (Tr. 200; PS Ex. 12). The auditors also found excessive renovation costs of more than $100,000 on "Carmel Commons Station" in Charlotte, North Carolina, on which Mr. Gainey was the construction subcontractor, and Respondent was the Postal Service agent. (PS Ex. 13).

16. As in the matter of investigative costs, it is not possible to arrive at a precise figure that represents excess contract costs resulting directly from Respondent's wrongdoing. It is safe to conclude, however, that the Postal Service losses in the several contracts tainted by Respondent's acceptance of bribes were at least as great as the amount of the bribes established in this administrative case - $33,000.⁽⁸⁾

CONCLUSIONS OF LAW

1. In granting the Motion for Summary Judgment on the question of Respondent's liability, it was determined that Respondent is subject to penalties and an assessment under the statute, 31 U.S.C. §3802(a)(1).

2. The appropriate amount of penalties and assessment must be determined by examining all the surrounding circumstances, including all aggravating and mitigating factors. Linda P. Phipps, P.S. Docket No. PF-48 (P.S.D. November 18, 1994); 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, although not binding on the Presiding Officer, 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 (1987); see also, Orfanos v. Department of Health and Human Services, 896 F. Supp. 23 (D.D.C. 1995).

3. Among the factors to consider are the number of false claims (in this case, the number of contracts tainted by bribes), the time period over which the false claims were made, the amount of money involved, the value of the agency's actual loss and the relationship of the civil penalty sought to that 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, the extent, if any, to which Respondent's misconduct is balanced by his positive contributions to the agency, and the need to deter Respondent and others from similar misconduct.

4. There are several aggravating factors in this case. Respondent's degree of culpability is high. There can be no doubt that he knowingly abused his position by engaging in corrupt activities for personal gain, and that his misdeeds tainted several contracts. This type of conduct has a most serious impact on public confidence in government programs. These activities involved substantial sums of money, and continued for more than two years, ending only when he was apprehended in the act of receiving a bribe. His failure to live up to the terms of his plea agreement to provide truthful information to the United States Attorneys, no matter what his motive for doing so, greatly extended the time and expense of investigating related cases. Finally, the ancillary costs to the Postal Service, for the investigation and litigation of all these cases, as well as the excessive construction and renovation costs paid on some of the leases, were substantial.

5. Several matters in mitigation must also be considered. Respondent had a long, and relatively successful, career with the Postal Service before 1987, as evidenced by a number of awards and letters of commendation. (Resp. Exs. 13, 14, 15, and 24). Once he did begin giving accurate information to the postal inspectors and government attorneys in late 1993, his assistance was very helpful in bringing several pending lawsuits to a close. This, of course, must be balanced against the time and money required to be spent by the government's investigators because of his failure to do so earlier. The factors given most emphasis by Respondent are the severity of the sentence he received in the criminal cases, loss of health insurance (Resp. Ex. 18), being forced to sell his home, the fact that his retirement account is still "frozen," and his perception that he has gained no significant benefit from his coming forward in 1993 to cooperate with government investigators and attorneys. On this latter point, Respondent finds little benefit in his "zero dollars" settlement with the Department of Justice, as long as the Government has continued to press this administrative case.

6. Strictly speaking, economic hardship is not a mitigating factor, and the statute does not require that a Respondent's ability to pay be considered. Orfanos, supra, 896 F. Supp. 23 at 28. It was considered, however, by the Department of Justice in settling their civil lawsuits with Respondent, and I find that it is appropriate to give it some consideration here, because it is to some degree a result of other actions taken against Respondent, as part of the "big picture" of this case.

7. In response to Respondent's contention that he has already "suffered enough," there is no question that the law permits civil, or administrative, monetary sanctions to be imposed after an individual has been convicted and punished by a criminal court for the same offenses, United States v. Halper, 490 U.S. 435 (1989); Rex Trailer Co. v. United States, 350 U.S. 148 (1956); United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943); United States v. Barnette, 10 F.3d 1553 (11th Cir. 1994); Neldie E. Nelson, P.S. Docket No. PF-3 (P.S.D. August 19, 1992). The penalty and assessment provisions of the Program Fraud Civil Remedies Act have a dual purpose - to recompense Federal agencies for losses resulting from false claims (including the cost of investigating and litigating)⁽⁹⁾, and to deter the making of such claims. Pub. L. 99-509, Sec. 6102(b); 100 Stat. 1934 (1986); S. Rep. No. 99-212, 99th Cong., 1st Sess. at p. 2 (1985). The statute specifically states that violation subjects a person to the $5,000 penalty provision, "in addition to any other remedy that may be prescribed by law." 31 U.S.C. §3802(a)(1).

8. In Halper, the Supreme Court declared that the Double Jeopardy Clause of the United States Constitution protects an individual who has been punished under a criminal statute from an additional civil penalty that amounts to "punishment." The Court made it clear, however, that calculation of government losses and costs is not an exact science, and that the Government is entitled to "rough remedial justice" under the civil statutes that are designed to compensate the Government and its agencies for ancillary costs, as well as actual losses. 490 U.S. at 446. It is only when the civil penalty bears no "rational relation" to the Government's loss that Double Jeopardy comes into play. 490 U.S. at 449. A corollary principle from Halper and subsequent cases (see, Barnette, supra) is that civil or administrative penalties that follow criminal punishment for the same misconduct are limited to being "remedial." Therefore, even though a stated purpose of the Program Fraud Civil Remedies Act is "deterrence," when a respondent has already been prosecuted and punished criminally, it should be assumed that the sentence imposed in that forum satisfies the need for punishment and deterrence. The focus in a subsequent administrative case is on the agency's losses and ancillary costs, and an effort to fashion "rough remedial justice."

9. As was determined in the Findings of Fact (see paragraphs 4, 11 and 16), the Postal Service has established that Respondent received at least $33,000 in illegal payments, and has established losses and costs that are at least equal to the penalty and assessment they seek. I also do not find that the mitigating factors measurably outweigh the aggravating factors that are present here. The remaining matter, then, is what consideration to give to Respondent's apparent lack of assets.

10. In settling their civil cases for "zero dollars," the Department of Justice accepted financial data provided by Mr. Paramore, and that data remains unchallenged. Respondent's payment of the $25,000 fine as part of his criminal sentence obviously contributed to his present lack of assets, and, even though it was not labeled "Restitution" by the sentencing Judge, I find that this should be considered. On the other hand, it is also appropriate to consider the existence of Respondent's "frozen" Postal Service retirement account, even though no evidence was presented as to the amount of money in that account, and it is unclear whether this money belongs to Mr. Paramore.

11. Based on all the factors discussed above, a penalty of $4,000 per false claim, for a total penalty of $24,000, is appropriate. Likewise, imposition of the double damages provision, for an assessment of $66,000, is appropriate, but this should be reduced by the $25,000 fine imposed in the criminal case.

CONCLUSION

Respondent is liable for a penalty of $24,000 and an assessment of $41,000, for a total liability of $65,000.

                                                                                       Bruce R. Houston
                                                                                       Acting Chief Administrative Law Judge

1. At the hearing, the Postal Service was permitted to amend these amounts to $33,000 and $66,000, respectively, to correct arithmetical errors. (Tr. 316-17). The total liability sought, therefore, is $96,000.

2. References to Postal Service exhibits will be "PS Ex. _," references to Respondent's exhibits will be "Resp. Ex. _," and references to the transcript will be "Tr. _."

3. Any arguments based on facts not in evidence have not been considered.

4. The conspiracy charge alleged that Respondent took bribes to facilitate the awarding of eight construction contracts to Gainey. Those eight construction projects include the six that are the subject of the false claim allegations in this administrative case. Therefore, even though Respondent did not plead guilty to all the separate bribery counts, the essential facts regarding the six false claim allegations were incorporated within the conspiracy count, and were established in the criminal case. (Summary Judgment Decision, p. 7).

5. Mr. Paramore's explanation for this is that he wanted to cause his plea agreement to be revoked because he believed he had been unfairly sentenced under the Federal Sentencing Guidelines. The perjury, therefore, was his means of attempting to obtain a lesser sentence for his original crimes. (Tr. 287). Needless to say, this plan was not successful, and, if true, is not a good testimonial to the quality of advice one receives from "jailhouse lawyers."

6. Mr. Paramore's retirement account was also put on hold in early 1990, and those funds have not been released. (Tr. 305; Resp. Ex. 4)

7. Respondent cites a United States Claims Court decision in one of the related cases in support of this factual assertion, William C. Godley v. United States, 26 Cl. Ct. 1075 (1992). That Court's decision in favor of Mr. Godley, however, was not based on such a finding, but rather on a finding that the Postal Service did not act in a timely manner to void a contract that it knew may have been tainted. More importantly, that decision was reversed on appeal. Godley v. United States, 5 F.3d 1473 (Fed. Cir. 1993).

8. In determining Postal Service losses, it is permissible to consider all the tainted contracts, not just those named in the complaint. Orfanos v. Department of Health and Human Services, 896 F. Supp. 23, 27 (D.D.C. 1995).

9. That it is proper to include these costs is made clear in Halper, supra, at page 445. That case was brought under the False Claims Act, 31 U.S.C. §3729, a statute with similar purposes.