FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

Petitioner, Michael J. Riordan, filed a petition requesting a hearing under the Debt Collection Act of 1982, as amended, 5 U.S.C. §5514(a), after receiving a Notice of Involuntary Administrative Salary Offsets from Respondent, United States Postal Service. The Notice informed Petitioner that Respondent intended to deduct a total of $2,264.01 from his salary to make up a shortage discovered in an audit of the main stock of the Cushing, Maine Post Office when he was postmaster.

An oral hearing was held at which evidence was presented and the parties had an opportunity to make closing arguments in support of their positions.

FINDINGS OF FACT

1. Petitioner was the postmaster of the Cushing, Maine Post Office and was custodian of the main stock of that office (Transcript of Hearing, pages ("Tr.") 12-13; see Handbook F-1, Post Office Accounting Procedures, Section 144.2¹;  Respondent’s Exhibit ("RX") 9). Petitioner sold stamps directly out of the main stock, but he had established a separate credit for the postmaster relief, Julie Haynes, to use in her sales to customers (Tr. 20, 59-60, 69, 84). Petitioner had instructed Ms. Haynes to always lock her stock drawer when she left the window and to maintain security at all times (Tr. 64). Petitioner followed established procedures in issuing stamps from the main stock to Ms. Haynes, and she did not have access to the main stock (Tr. 74-75).

2. On June 26, 1996, the District Manager of Post Office Operations arrived at the Cushing Post Office to conduct an investigation into allegations that Petitioner had violated Respondent’s "zero-tolerance policy" which requires that all violence and threats of violence by its employees be promptly investigated and that appropriate action be taken to avoid workplace violence. (Tr. 19, 23, 36, 45). The allegations resulted from an altercation between Petitioner and a highway contractor’s employee in the office during which, allegedly, Petitioner made threats of violence against the contractor (Petitioner’s Exhibit 1). Based on the results of his initial investigation and interviews with those in the Cushing Post Office, the Manager of Post Office Operations placed Petitioner on administrative leave on June 26 and directed him to stay away from the post office (Tr. 19, 39).

3. Ms. Haynes was the only other Cushing employee who sold postage to customers²  (Tr. 20, 59-60, 69), but in order to be eligible to be considered for a highway contract, she had submitted her resignation to be effective close of business on June 27 (Tr. 20-21, 34-35, 44, 59). Therefore, the Manager of Post Office Operations borrowed a clerk, Tara Ripley, from a neighboring post office to operate the Cushing Post Office (Tr. 21-22, 76-77). On June 26, Ms. Haynes and Ms. Ripley counted Ms. Haynes’ credit and transferred it to Ms. Ripley (Tr. 21-22, 60-62, 77-78; RX 4).

4. On June 27, the Manager of Post Office Operations appointed Ms. Ripley to be the officer-in-charge for Cushing (Tr. 76), and proceeded to have the main stock of the post office transferred to her (Tr. 23, 78). To accomplish the transfer, it was necessary to count the main stock (Tr. 23, 78). Normally, Petitioner would have participated in such a count, but he had been barred from the post office, and he was not offered an opportunity to be present (Tr. 38-39, 42; see F-1 Handbook, Post Office Accounting Procedures, Section 433.23).

5. Employees who have been assigned responsibility for cash and stamp stock can designate another postal employee to participate in or witness a count of their stock in the event they are unavailable. Such designations are customarily done by writing the names of up to two designated witnesses on the sealed envelope in which spare keys to the safe or drawer containing the stock are secured. (Tr. 23, 24, 31, 42, 48; RX 10; see F-1 Handbook, Post Office Accounting Procedures, Section 433.23). Petitioner was aware of this procedure for designating witnesses (Tr. 101-102; RX 11). In fact, in a February 1996 audit of the operations of the Cushing Post Office, the auditor had specifically noted in his report that the key envelope did not list a witness (Tr. 53-56, 101-102; RX 11). In his response to that report, Petitioner, in March 1996, noted that he had corrected that deficiency (RX 11). Nevertheless, when the key envelope for the Cushing main stock was retrieved incident to the intended count and transfer of the stock, it was discovered that Petitioner had not identified anyone on the key envelope to witness a count of the main stock on his behalf (Tr. 23, 42, 102; RX 10). Respondent’s officials did not contact Petitioner to ask him whether he wished to designate a witness (Tr. 42).

6. The Manager of Post Office Operations designated Ms. Haynes, as the only employee of the Cushing Post Office qualified to conduct a count, to participate in the count of the main stock (Tr. 30-31, 32, 63). Ms. Ripley was the other participant because, as officer-in-charge in Petitioner’s absence, she was assuming responsibility for the main stock. On June 27, 1996, Ms. Haynes and Ms. Ripley conducted a count of the main stock and determined there to be a shortage of $2,243.42 (Tr. 13-16, 32-33, 63, 78-79, 104; RX 5). During the count, either Ms. Haynes or Ms. Ripley occasionally had to turn away from the stock to conduct transactions with customers at the counter (Tr. 51-52, 56-57, 86-87). Warren Cutter, a Postal Systems Coordinator, whose duties included the transfer of main stock from an outgoing postmaster to a new postmaster or officer-in-charge and conducting financial audits, was present during the count (Tr. 101, 107, 114). When the count disclosed such a large shortage, Mr. Cutter sealed the drawers containing the main stock so it would not be disturbed until another count could be conducted (Tr. 101-104).

7. On July 1, 1996, a second count of the main stock was conducted, this time by Ms. Ripley and Mr. Cutter, after Mr. Cutter confirmed from the seals he had previously placed on the stock that it had not been disturbed (Tr. 33, 80-81, 101, 105; RX 6). By then, Ms. Haynes was no longer employed by Respondent (Tr. 33-34), and Petitioner was neither invited to be present nor called to designate a witness. The July 1 count revealed a shortage in the main stock of $2,264.01 (Tr. 16, 105; RX 6). Knowing that the first count had disclosed a substantial shortage, Ms. Ripley and Mr. Cutter were especially careful in conducting the second count (Tr. 16-17, 105-106, 112). However, again, Ms. Ripley occasionally left the count to serve customers at the window and did not have the stock in her sight at every moment, and Mr. Cutter, on one occasion went to the parking lot to speak to Petitioner, specifically asking Petitioner whether he knew of any more stock at the post office that they should count (Tr. 87-92, 109-110, 112-113).

8. Petitioner was aware that the main stock was being counted, yet there is no evidence that he ever complained to those conducting the count of a lack of a designated witness or that he at any time during his conversations with the Manager of Post Office Operations or Mr. Cutter identified a person he wished to witness the count.

9. Records of the previous six counts of the main stock (one in 1995, four in 1994 and one in 1993) reflected small shortages ($35 being the largest) in stock totaling $7-10,000 (Tr. 83; RX 3). For the four most recent, dating back to May of 1994, Petitioner had performed the counts without a witness, although the earliest two had been witnessed by Ms. Haynes (Tr. 83, 98-99, 121).

10. "Postmasters are accountable for the face value of all postage stock consigned to their offices." Handbook F-1, Post Office Accounting Procedures, Section 431.1; see Tr. 11).

11. The F-1 Handbook, Section 131, describes the circumstances under which a postmaster will be held liable for a Postal Service financial loss:

"When an accountable financial loss occurs and evidence shows the postmaster conscientiously enforced USPS policies and procedures in managing the post office, the Postal Service grants relief for the full amount of the loss. When evidence fails to show the postmaster met those conditions, the Postal Service charges the postmaster with the full amount of the loss."

12. When acting as the custodian of the main stock, postmasters, as other employees assigned stamp accountabilities, "are held strictly accountable for any loss unless evidence establishes they exercised reasonable care in the performance of their duties" (F-1 Handbook, Post Office Accounting Procedures, Section 132; accord Financial Management Manual, Sections 341.2, 842.12, 842.2).

13. On August 5, 1996, Respondent issued Petitioner a Letter of Indebtedness seeking payment of $2,264.01³ (RX 1). When Petitioner did not pay as demanded, Respondent, on January 17, 1997, issued Petitioner a Notice of Involuntary Administrative Salary Offsets (RX 2), and Petitioner timely filed his petition for a hearing.

DECISION

Petitioner argues that the counts by which Respondent determined the amount of the alleged debt were flawed. First, he complains that, contrary to the requirements of the F-1 Handbook, he was not allowed to be present for the counts and Respondent failed to ask him who he desired as a witness in his absence. Further, he alleges that those counting the stock did not keep the stock under observation at all times and that there is a possibility that the counts were inaccurate or stock could have been taken. He contends that he operated the post office carefully and consistent with what he understood were Respondent’s requirements.

Respondent argues that Petitioner’s absence from the counts was justifiable because Respondent had properly excluded Petitioner from the post office and that it had no duty to do more than review the key envelope to ascertain whether Petitioner wished a chosen witness to participate in the count. It urges that the counts were conducted properly and that the determination of the shortage is accurate. Finally, it urges that Petitioner failed to exercise reasonable care.

Under the circumstances of this case, Respondent did not breach any duty to Petitioner regarding his presence or representation at the counts of the main stock. Respondent conceded that under usual circumstances, Petitioner, as custodian of the main stock, would have participated in the counts incident to transferring the stock to Ms. Ripley. However, as part of Respondent’s investigation into threats of violence allegedly made by Petitioner, Respondent reasonably excluded Petitioner from the premises until the investigation could be concluded. Therefore, Petitioner was not available to participate personally in the counts, and because it was necessary to transfer the main stock to Ms. Ripley so she could run the office in Petitioner’s absence, it was not possible to delay the count. Therefore, Respondent did not violate Petitioner’s rights by conducting the counts without him.

If Petitioner had designated a witness on the key envelope, PS Form 3977, as allowed by Postal Service rules (Finding 5), that witness would have been called to attend the counts. However, Petitioner had not so designated a witness. Only four months before the counts, Petitioner had been specifically notified that the key envelope for the main stock did not identify a designated witness and advised of the need to have such a witness listed, but he failed to do so, even though he responded to the February audit report stating that he had corrected the deficiency (Finding 5). Further, Petitioner knew the counts were being conducted and was in touch with those in charge of the counts, yet there is no evidence that at that time he objected to the conduct of the counts without his witness present or ever attempted to designate someone to act as his witness (Findings 2, 7, 8). Therefore, while the better practice might have been to give Petitioner yet another opportunity to designate a witness, under the circumstances of this case, the Postal Service did not breach any duty it owed Petitioner regarding his representation at the counts.

Additionally, Respondent presented particularly persuasive testimony from all of the participants in the counts that demonstrated that the counts were properly conducted and accurate. Although one or the other of the counters had to leave for short periods of time (Findings 6, 7), there is nothing other than Petitioner’s speculation to suggest that stock was taken or miscounted during either of the counts. Based on the evidence in the record, Respondent has established that there was a shortage in the amount of $2,264.01 in the main stock of the Cushing Post Office that constituted a loss to Respondent.

As Respondent has demonstrated that it has suffered a loss due to a shortage in Petitioner’s accountability, Petitioner will be liable unless he establishes that he exercised reasonable care in the management of the main stock (Findings 10, 11, 12). There was little evidence presented on this issue at the hearing. However, Petitioner asserted that he exercised reasonable care in management of the main stock, and the meager evidence on this point supports that assertion. Petitioner maintained exclusive control of the main stock, properly assigned stock to the postmaster relief, and he instructed her properly regarding security of her stock (Finding 1).

Petitioner’s failure to enter the name of a witness on the key envelope does not show that he failed to exercise reasonable care. The section of the F-1 Handbook Respondent relies on, 433.23, only provides that an employee "should furnish" the names of two designated witnesses. Assuming that the section is applicable to Petitioner as a postmaster, it does not require that he provide names of designated witnesses. As discussed above, by not doing so, under the circumstances of this case Petitioner gave up the opportunity to have a designated witness present at the count of his stock, but it was not a material violation of Respondent’s procedures or a lack of reasonable care to leave the key envelope blank.

Respondent’s witness testified that Petitioner should not have been selling stock directly out of the main stock as he was, but the F-1 Handbook seems to allow such practice in post offices as small as Cushing (See F-1, Post Office Accounting Procedures, Sections 435.4, 436.2, 437.2). Thus, while establishing a separate account may have been a preferred practice, Respondent has not shown that Petitioner’s failure to do so violated Postal Service rules or constituted a lack of reasonable care.

In conclusion, the evidence shows that Petitioner exercised reasonable care with respect to his management of the main stock, and, therefore, he is not liable for the loss. The petition is sustained.

Norman D. Menegat
Administrative Judge

¹ The F-1 Handbook was revised effective November 1996. However, because the events relevant to this case arose under the old version, as discussed at the hearing, the April 1991 edition applies. References in this decision to the F-1 Handbook are to the 1991 edition.

² A rural carrier and a highway contract carrier also worked out of the post office, but they were out on their routes during the day and did not conduct postage transactions in the post office (Tr. 69).

³ In assessing a stock shortage against the custodian, it is customary for Respondent to take the results of the second count, assuming that the second count would have been done with more care since those counting would know in advance that there was a possible shortage (Tr. 16-17, 105-106, 112).