P. S. Docket No. PF 96-349
November 05, 1997
In the Matter of the Complaint Against )
)
BRADY LEE SMITH )
417 Jax Estates Drive North )
)
at )
)
Jacksonville, FL 32218-2509 ) P. S. Docket No. PF 96-349
APPEARANCE FOR RESPONDENT: Michael J. Rosen, Esq.
2400 South Dixie Highway
Miami, FL 33133-
APPEARANCE FOR POSTAL SERVICE: Harold E. Durham, Esq.
Civil Practice Section
United States Postal Service
475 L'Enfant Plaza, SW
Washington, DC 20260-1127
Jeannette L. Bisson, Esq.
Mid-Atlantic Office
United States Postal Service
400 Virginia Avenue, SW, Suite 650
Washington, DC 20024-2730
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 knowingly depositing several hundred thousand postcards into the mail, for processing by the United States Postal Service, bearing metered postage that he knew had not been paid for. The Postal Service contends that Respondent is liable for an assessment equal to twice the amount of unpaid postage ($146,544.53 x 2 = $293,089.06), plus a civil penalty of 30¢ for each piece of mail bearing unpaid postage that was successfully entered into the mailstream (771,287 x $.30 = $231,386.10) for a total liability of $524,475.16.
Respondent was served with the Complaint on May 16, 1996, and filed a Petition for Hearing on September 16, 1996.(1) A hearing was held in Miami, Florida on May 8-9, 1997. Both sides were represented by counsel. The Postal Service presented testimony from a retired, former supervisor at the Miami General Mail Facility, a retired postal inspector who had investigated this case in 1991, and the postal inspector currently assigned to the case. Respondent testified in his own behalf, and both sides presented documentary evidence. Both sides filed post-hearing briefs and reply briefs. The following findings of fact and conclusions of law are based on the entire record, including observation of the witnesses and their demeanor.
FINDINGS OF FACT
1. The Bible Deliverance Church was incorporated in Florida in November 1984. Respondent Brady Lee Smith was named on incorporation documents as president and a director. (Complaint, ¶3; Petition for Hearing, ¶3; Transcript, 316, 358).(2)
2. At all times relevant to this case, Bible Deliverance Church had a place of business at 11021 N.W. 27th Avenue, Miami, Florida. (Comp. ¶4; Pet. ¶3). Brady Lee Smith was the pastor. (Tr. 312).
3. On October 13, 1988, Ms. Mack, on behalf of Bible Deliverance Church, applied for a postage meter license. (PS Ex. 1). A license was issued on December 12, 1988, and Bible Deliverance Church acquired postage meter #PB-875212. (PS Ex. 2).
4. A postage meter is a device that prints postage in amounts selected by the user. Postal customers cannot buy meters, but must rent them from an approved manufacturer, after obtaining a license from the Postal Service. Meter #PB-875212 is a mechanical meter manufactured by Pitney Bowes Corporation. It has an ascending and a descending register. The ascending register is a running total of all postage printed by that meter. The descending register displays the amount of paid-for postage remaining on the meter, which is available to the user. Each time the meter is used the descending register is decreased by the amount used, and the ascending register increases by an equal amount. Added together, the numbers on the ascending and descending registers constitute a "control total," which remains constant until more postage is purchased and added to the descending register. (Tr. 167-71).
5. When the descending register reaches a certain point ($2.00 on meter #875212), the meter is designed to "lock out," and the customer is unable to use the meter until more postage is purchased. The meter must then be re-set by a postal employee, by adding the amount of purchase to the descending register. In some cases, meters have failed to "lock out." Such meters are said to "jackpot," which means that the descending register trips and returns to the maximum amount of possible postage ($9,999.99 on meter #875212), and will continue to print postage without actually being re-set. It is also possible for a person to tamper with a mechanical meter in such a way as to defeat the internal mechanisms of the meter. (Tr. 220-24).
6. In 1991, records of purchases for a postage meter were kept on a PS Form 3610, and in a computerized record system called CAMS (Centralized Automated Meter System). A CAMS report for a particular meter would show each date the meter was re-set, and the post office where it was re-set. It would also show the amounts on the ascending and descending registers before re-setting, the amount of postage purchased, the amount on the descending register after re-setting, and the control total. (Tr. 170, 188-89, 208-10; PS Ex. 6).
7. The CAMS record for meter #875212, dated May 30, 1991, shows that it was leased to Bible Deliverance Church, that the last purchase of postage was for $300.00 on May 8, 1991, and that the descending register after that purchase read $422.12. The record also shows seven postage purchases in 1990, for a total of $2,550.00. (PS Ex. 6).
8. Beginning in mid-May 1991 the Miami General Mail Facility (GMF) began receiving a large volume of postcards bearing postage imprinted by postage meter #875212. (Tr. 16). Postal employees gather and maintain data on mail volume in order to measure work productivity. Mr. John Hickey was in charge of this function at the Miami GMF in 1991. (Tr. 11-13). The postcards were delivered to the GMF in Postal Service "trays," which are box-like cartons used to carry large amounts of mail. (Tr. 66-67). At some point, Mr. Hickey and one of his associates counted the number of postcards contained in one tray and found it to be 3,325. They also ran a tray of cards through a "bar code sorter," and an OCR (Optical Character Reader - a piece of mail processing equipment that counts pieces of mail), which recorded very close to the same number, so thereafter they used 3,325 as the number of cards in a tray. (Tr. 33-35, 75-76).
9. Mr. Hickey was required to report this volume, and type, of mail to his superiors in order to keep accurate work productivity records. (Tr. 17, 100). When he and his associates made daily notes on the quantity of these postcards, they would make a photocopy of one of the cards and attach it to their notes. (Tr. 100).
10. Records maintained by Mr. Hickey and his associates show the following, as the volume of postcards received (Tr. 32-58; PS Exs. 28-39):
Date Number of Trays Number of Postcards
May 14 21 69,825
May 15 19 63,175
May 17 21 69,825
May 20 40 133,000
May 21 17 56,525
May 22 13 43,225
May 23 24 79,800
May 24 40 133,000
May 25 11 36,575
May 28 41 136,325
May 29 42 139,650
Jun 3 8 26,600
Jun 5 12 39,900
309 1,027,425(3)
Most of the daily notes, which contain the above numbers, have attached to them a photocopy of a postcard metered by meter #875212. All these postcards, colored pink or green (Tr. 16, 38), were offers to provide "red hot lucky numbers," or a "special hot lucky number," and listed a 1-900 telephone number to call, for a $10.00 fee. Many of the cards had the name "Bishop B. L. Smith" at the bottom. (PS Ex. 28-32, 34, 36-39).
11. At some time in late May 1991, Mr. Hickey reported to his superiors the unusually large volume of mail being processed that bore metered postage printed by meter #875212. (Tr. 60-61). During this same general time period, but beginnning some days later than the #875212 postcards began to be noticed, the Miami GMF also received a large volume of similar postcards metered by another postage meter - #3307253. (Tr. 79-80). Mr. Hickey and his associates took no actions to insure that any particular tray, or group of trays, contained cards all metered by the same meter. (Tr. 91, 99-100). There is no allegation that Respondent was responsible for postcards metered by the other meter.
12. On May 30 and 31, 1991, a Postal Service supervisor, Mr. Dingman, spoke with Postal Inspector McNamara about the large volume of postcards metered by #875212. Inspector McNamara reviewed the CAMS report for meter #875212 (see FOF #7), and then began an investigation, which included surveillance of the premises occupied by Bible Deliverance Church (Tr. 104-07). Inspector McNamara was also in charge of investigating Holy Temple Church, which was the licensee of the other postage meter mentioned above.(4) The two investigations were run simultaneously, as a joint investigation. (Tr. 112-14, 119).
13. During the surveillance, persons were observed coming out of Bible Deliverance Church carrying mail trays containing colored cards, placing the trays into a car and delivering them to the Miami GMF. (Tr. 107-08, 162). Respondent Smith was not one of the persons observed. (Tr. 129-30).
14. On or about June 6, 1991, Inspector McNamara requested that postal officials detain all mail with the imprint of meter #875212. This was done, and the mail was placed in locked containers and stored in a van at the Miami GMF. (Tr. 109-10, 132). Sometime thereafter, Inspector McNamara, with the assistance of the United States Attorney, obtained a warrant to seize and examine the detained mail. (Tr. 109-10; 176-77). Part of this examination was to identify the meter number. No special effort had been made to separate cards bearing meter #875212 from those bearing meter #3307253, but Inspector McNamara examined the trays to make certain that each tray contained cards all from the same meter. He observed no trays with cards from the two meters mixed together. (Tr. 110, 161-63). The number of postcards from meter #875212 that were detained was approximately 330,000.(5) (Tr. 173.) They are similar in nature to the cards that Mr. Hickey had previously attached to his notes on the daily volume, i.e., they offered lucky numbers for a small fee, or donation, some suggesting that God was providing these numbers, or the days on which to buy them. Many, but not all, of the cards had the name "Bishop B. L. Smith" printed at the bottom. (PS Ex. 41).
15. Next, Inspector McNamara obtained a warrant to search the premises of Bible Deliverance Church and seize evidence. This warrant was executed by the Postal Inspection Service on June 25, 1991. (Tr. 111, 180).(6) Postage meter #875212 was seized, and later examined at the Postal Inspection Service crime laboratory. No evidence of physical tampering was found. (Tr. 187).
16. In addition to the meter itself, other items and materials present at the Bible Deliverance Church premises at 11021 N.W. 27th Avenue showed that a large printing and mailing operation was being conducted there. These included other pieces of equipment, and a large supply of paper, which are visible on a video tape made during the search. (Tr. 181-84; PS Exs. 46 & 47). The inspectors also seized several canceled checks and business receipts pertaining to the postage meter and the printing operation. (Tr. 180; PS Exs. 8-14). Respondent Smith was not present during the search. (Tr. 131).
17. All the postcards that included Respondent Smith's name at the bottom directed recipients to call the "Luck Line," 1-900-740 LUCK (5825), at a $10.00 charge, to obtain a lucky number. Some of the cards stated that these numbers came from "The Luck Line Headquarters in Las Vegas, Nevada." (PS Exs. 28, 29, 34, 37, 38, 39, 41). Respondent Smith acknowledges that he designed and wrote these cards, as a means of raising money. (Tr. 314, 326-27, 354, 411-12, 511). He also recorded the messages that callers who dialed the 1-900 number would hear. (Tr. 422-23).
18. Other cards, also imprinted by meter #875212, had different 1-900 numbers and different, but similar, messages. Some of them had other names at the bottom, including "Reverend Burt," "Prophet Lawrence," and "Rev. Prophet Samuel." (PS Exs. 31, 41).(7) Respondent Smith disclaims any knowledge of, or responsibility for, these other cards.
Contentions of the Parties
The General Counsel contends that the circumstantial evidence is sufficient to establish that Respondent Smith was responsible for the printing and mailing operation conducted by Bible Deliverance Church, and that he knew that the vast amounts of postage being printed by meter #875212 had not been paid for.
Respondent does not dispute that postage far in excess of what had been purchased for meter #875212 was used by someone. He argues, however, that the evidence is insufficient to prove that Respondent Smith was responsible for this, or even aware of it. He also argues that the General Counsel has not proved that all the alleged postcards had postage printed by meter #875212, rather than some other meter, or that, of the number that were printed by meter #875212, all of those are connected to Respondent Smith.
By the following findings of fact, in addition to the facts stated above, I find that Respondent Smith is responsible for a substantial majority of the postcards at issue in this case.
19. Money raised through responses to the postcards came to Respondent through a company called Advanced Telecom Services (ATS). As the cards stated, callers were charged $10.00 per call. ATS records for the period November 1990 through April 1991 show a total of 40,085 calls to the "Luck Line" (1-900-740-5825), and a net total of $308,566.24 due to the account of Bishop B. L. Smith, after deductions for AT&T charges, taxes, and ATS charges. (PS Exs. 19-23, 26). Respondent Smith was aware that this money was coming in. (Tr. 329, 514-15).(8)
20. Much of the mailing and printing equipment, other than the postage meter itself, was purchased by Respondent Smith and Reverend Vines in New Jersey, before Bible Deliverance Church moved to Miami. (Tr. 357, 408-09). Reverend Vines was an Associate Minister of Bible Deliverance Church. On August 2, 1984, Reverend Vines signed a memorandum, also signed by Respondent Smith, relinquishing "all rights, responsibility, and claims to all equipment and ownership in the Bible Deliverance Church," and stating his intention that "Bishop Smith be the full owner and controller of all equipment." In reference to "equipment," this memorandum mentions a "Printing Press" and an "Addressograph Computer." (PS Ex. 18).
21. On occasion, Respondent Smith ordered supplies for the printing operation, and ordered the purchase and repair of equipment. He also signed checks for these purposes. (Tr. 356-57, 425-37, 513; PS Exs. 8, 9, 11-13).
22. From late 1990 through May 1991, Respondent Smith signed at least 59 checks on a Bible Deliverance Church account, totaling more than $28,000.00. (PS Ex. 14). These did not all deal with printing supplies or equipment, and many were for cash, but they demonstrate that Respondent Smith was directly involved in Bible Deliverance Church financial matters.
23. Respondent Smith wrote, and signed, a note dated May 9, 1991, quoted in full as follows:
FROM THE DESK OF BISHOP B . L. SMITH
Gentlemen:
In business we must be men. For we all have the same opportunities to make as much money as the next man. Since we all have the same opportunity we must share the operation cost. Below is a itemize cost:
PAPER CUTTER - $1900. Rev Hill $450.00
Rev Devine $450.00
LABELING MACHINE - $2050. Rev. Hill $500.00
Rev. Devine $500.00
SCANNER to put names in Computer: Rev. Hill $500.00
Rev. Devine $500.00
To Repair Computer $4500. Rev. Hill $800.00
Rev. Devine $800.00
All of the above items are a one time charge only.
ATTENTION: All night workers there will be a $150.00 charge for Light Bill a Month.
All Supplies - 20% For Rev Devine, and Rev Hill, such as
INK - POSTAL MACHINE PRINTING INK STENCILS
TO SHARPENING KNIVES FOR PAPER CUTTER and other items which may be needed to complete a job.
The Car which is used for the last step, Rev. Henry Jackson says, that each man must contribute $2000. each month. BEGIN JUNE 1st. Which comes to $500.00 a week. It's up to each individual as how much he wants to drive, there will be no exceptions.
Also there will be a 20% on all equipment repair.
P.S. Yours truly Bishop Smith will appreciate receiving all one time Money within the next 60 DAYS.
Thank you very much, May God Bless You In Your Effort.
Bishop B. L. Smith (PS Ex. 16).
24. The "Rev. Devine" referred to in this note is the same person as the Reverend Vines mentioned in FOF #20. (Tr. 439). Reverend L. B. Hill was the "Asst. Pastor" of Bible Deliverance Church. (PS Ex. 18).
25. On May 31, 1991, Respondent Smith signed another note, listing various expenses, including "service printer," "ink," "postage repair," "Pitney," and "cutter machine repair." The names "Hill" and "Vine" appear at the top of the listing, and the following is stated just above Respondent's signature: "The amounts below has not been tooken (sic) care of, which need your immediate attention as soon as possible. $450.00 Paper Cutter, $500.00 Label Machine, $800.00 Repair on Computer." (PS Ex. 17). These amounts are the same amounts listed in the May 9, 1991 note, set forth in FOF #23. Both these documents establish Respondent Smith's intimate involvement in the mailing operation being conducted on the premises of Bible Deliverance Church. Also, among the many canceled Bible Deliverance Church checks introduced into evidence are a February 12, 1991 check for $1,900.00, with the note "cutter" on the check stub; an April 5, 1991 check for $4,500.00, with the note "comp. repair" on the check stub; and an April 16, 1991 check for $2,050.00. (Tr. 443-48; PS Ex. 51). These match some of the itemized amounts on May 9, 1991 memo. Respondent Smith's testimony (Tr. 440) that the May 9, 1991 note was written as some sort of joke ("Being a minister we play a lot of jokes on people."), and that the itemization and dollar amounts had no basis in fact, is not at all credible. Also, the large number of Bible Deliverance Church checks signed by Respondent (see FOF #22), even if he sometimes signed checks in blank, for use by other people in his absence, belie his claim that he devoted all his attention to preaching and counseling, and had little or no knowledge of the church's business and financial affairs. Respondent's testimony that other people were carrying on this enterprise without his knowledge is not credible.
26. In arguing that the evidence is insufficient to establish his liability for the unpaid postage, Respondent relies heavily on a comparison to the case of Samuel Wylie, noted earlier. He is correct in stating that there were a number of facts in that case that tied Mr. Wylie directly to the use of the postage meter licensed to Holy Temple Church, and that many of those facts are absent here. However, the matters discussed in FOF #17 and FOF #19-25, demonstrate that Respondent Smith was intimately involved in this mailing operation, and the large amount of revenue it was producing. Even if he did not personally obtain the meter, or personally participate in cutting paper, printing postage on the cards, and delivering the cards to the Miami GMF, he was clearly aware that all these things were being done, and that many thousands of postcards were being printed and mailed in furtherance of his scheme to raise money. And even if he did not physically tamper with the postage meter, to enable the printing of unpaid postage, he knew the meter was being used to print postage on his postcards, and he had to know that he and his associates were using thousands of dollars of postage that had not been paid for.
The Number of Postcards
27. The number of false claims alleged in the Complaint (1,357,425)(9) is based on the number of postcards, imprinted by meter #875212, that were delivered to the Miami GMF. The dollar amount of damages alleged ($146,544.53)(10) is based on the number of those cards that were successfully entered into the mail stream, imprinted with postage that had not been paid for. Respondent argues two points here. First, he contends that the Postal Service has not proved that all the postcards it has charged to Respondent were really imprinted by meter #875212. This is because similar cards, imprinted by meter #3307253, were being received at the Miami GMF during the same time period, and no witness testified with any certainty that the two groups were counted separately. Second, he argues that, even if he is held responsible for the cards with his name and 1-900 number on them, the evidence shows that other people (e.g., Sam Wylie - "Prophet Samuel") also used meter #875212 to print postage on their postcards, without Respondent's knowledge or approval (see FOF #18). Therefore, he argues, he cannot be liable for the unpaid postage on those other cards and it is not possible to determine how many postcards belong in either category.
28. As for the total number of postcards with postage printed by meter #875212, I find Inspector McNamara's testimony to be persuasive that cards from different meters were not mixed together, and that the cards counted as meter #875212 cards were all imprinted by that meter. I am less confident, however, about the accuracy of the counts, because of the difference in the numbers reported by Mr. Hickey and the numbers testified to by Inspector Ward (see note 5). Using Inspector Ward's figure of 2,558 cards per tray, the total would be approximately 1,120,404.(11) Subtracting the 330,00 that did not enter the mail stream leaves 790,404. The paid-for postage on meter #875212 ($422.12) was sufficient to print postage on 2,221 postcards.(12) The remainder, 788,183, were mailed without postage that had ben paid for. In the Complaint, the General Counsel stated that "as a matter of discretion," Respondent Smith was charged with mailing only 771,287 postcards with unpaid postage.(13) It is not clear how this number was arrived at, but because it is not possible to be absolutely precise as to the number of cards, and because I am convinced that Respondent Smith was responsible for at least that many cards, I shall accept 771,287 as the total number of cards mailed with metered postage that had not been paid for. Therefore, the amount of unpaid postage used by Respondent was $146,544.53.(14)
29. As for whether the evidence is sufficient to hold Respondent responsible for all the cards imprinted by meter #875212, I find that it is. Postal Service Exhibits 16 and 17 (see FOF #23-25) show that Respondent Smith was not only aware that his associates were participating in this money-making scheme, using the printing and mailing equipment at Bible Deliverance Church, but that he was the one allocating the costs and expenses involved.
30. In the post-hearing briefs, both parties have addressed the matter of "piercing the corporate veil." This is a term used by courts to hold an individual stockholder or officer liable for the debts of a corporation when to do otherwise would result in an injustice. It is based on a factual finding that the corporation and the individual are really not separate entities. National Labor Relations Board v. Kansas City Roofing, 2 F.3d 1047, 1051-52 (10th Cir. 1993). The General Counsel offers this as an alternative basis for liability, i.e., that Mr. Smith was the "alter ego" of Bible Deliverance Church, and should be held liable for any activity carried on in the name of the church. The General Counsel makes a persuasive argument, factually, but as I find that Respondent Smith had personal knowledge of the false claims in this case, I need not reach the "corporate veil" argument.(15)
CONCLUSIONS OF LAW
1. The Program Fraud Civil Remedies Act defines a "claim" as "any request, demand, or submission . . . made to an authority for property, services, or money
. . . ." 31 U.S.C. §3801(a)(3)(A). Depositing mail with the Postal Service constitutes a "claim" for services under the Act. Richard M. Tice, P.S. Docket No. PF 94-52 (P.S.D. February 21, 1997; I.D. December 22, 1994); Shelby T. Clark, Sr., PS Docket No. PF 96-174 (I.D. September 26, 1996).
2. One of the elements of a false claim, in violation of 31 U.S.C. §3802(a)(1), is that a respondent "knows or has reason to know" that the claim is false. This term is further defined in the statute to include "actual knowledge" that the claim or statement is false, "acts in deliberate ignorance of the truth or falsity," and "acts in reckless disregard of the truth or falsity." 31 U.S.C. §3801(a)(5). The General Counsel has met the required burden of proof that Respondent had knowledge of the false claims in this case.
3. Anyone who deposits mail into the postal system implicitly represents that the mail contains sufficient, paid-for postage. Because Respondent knew that only a very small fraction of the postage he and his associates were using between May 14 and June 6, 1991 had been paid for, his continued use of the postage meter to print postage on mail to be deposited with the Postal Service demonstrates an intent to deceive the Postal Service, and constitutes a series of false claims. Each piece of mail is a separate claim under the Act. Clark, supra; Dorothy Jones, P.S. Docket No. PF-61 (I.D. December 8, 1994); Frank Pepper, P.S. Docket No. PF-54 (I.D. April 9, 1993).
4. Even assuming that Respondent did nothing to cause the meter to malfunction, this does not relieve him from liability under the PFCRA for knowingly using postage that had not been paid for. See United States v, Wurts, 303 U.S. 414 (1938); United States v. McLeod, 721 F.2d 282 (9th Cir. 1983); Scolnick v. United States, 331 F.2d 598 (1st Cir. 1964); Tice, supra.
5. Respondent is, therefore, liable under the Act. 31 U.S.C. §3802(a)(1). The Act permits an assessment up to twice the amount of the false claims. In this case the false claims equal the amount of postage due on those postcards that were entered into the mail stream - $146,544.53 (see FOF #28), and the General Counsel has asked for the maximum assessment - $293,089.06. The Act also calls for penalties of up to $5,500 for each false claim.(16) In this case, the General Counsel has asked for a penalty of $231,386.10 - 30¢ for each piece of mail that was entered into the mail stream.(17)
6. 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).
7. 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 amount of the agency's actual loss and the relationship of the 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, and the need to deter Respondent and others from similar misconduct in the future.
8. The scope, and nature, of Respondent's mailing operation are aggravating factors. Attempting to mail hundreds of thousands of postcards bearing postage that he knew had not been paid for was a large scale fraud. A large portion of the total number of cards was used as a basis for the false claim allegations, but it is also proper to consider the fact that Respondent deposited even more cards, and apparently was prepared to continue doing so had he not been stopped by the postal inspectors. Orfanos v. Department of Health and Human Services, 896 F. Supp. 23, 27 (D.D.C. 1995). The subject matter of the postcards is also an aggravating factor. Bible Deliverance Church may in some ways be a legitimate religious organization, but attempting to sell lottery numbers to gullible consumers, making several references to blessings from God, is hardly an altruistic endeavor deserving of any deference. Respondent argues that there is no evidence to support this characterization of Respondent's enterprise. To the contrary, the cards themselves constitute such evidence.
9. Finally, the Administrative Law Judge must consider that the purposes of the Program Fraud Civil Remedies Act are to recompense Federal agencies for losses resulting from false claims (including the cost of investigating and litigating),(18) 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 model regulations, although not binding, provide the following guidance: "Because of the intangible costs of fraud, the expense of investigating such conduct, and the need to deter others who might be similarly tempted, ordinarily double damages and a significant civil penalty should be imposed. " 45 C.F.R. §79.31(a). The need for deterrence is especially important in cases such as this. People should be discouraged from attempting to obtain "free" mail service by fraudulent means.
10. A mitigating factor here is that there is no proof that Respondent tampered with the postage meter. Taking advantage of a meter that "jackpotted" would be less egregious than using tools to cause the meter to malfunction. There was also testimony that Respondent suffers some serious health problems. Though this is not related to the false claims, it merits some consideration in determining an appropriate penalty.
11. The Postal Service has not attempted to put a price tag on its costs of investigating and litigating this case, but it is apparent that a significant amount of time and manpower was involved. Considering all the factors discussed above, an assessment equal to twice the amount of postage due ($146,544.53 x 2 = $293,089.06) is appropriate. A significant penalty is also called for, based on what I find to be a high degree of culpability on the part of Respondent, and the strong need to deter this type of activity. As noted earlier, this was a large scale fraud, involving a large amount of money. I find that the penalty requested is excessive, however, and is not necessary in this case to serve the purpose of deterrence. There is no established formula for determining an appropriate penalty in cases such as this. Because of the extremely large number of "claims," comparison to most other cases involving failure to pay proper postage, and attempting to levy a specific amount of penalty per claim, is not very helpful.(19) The case of Samuel Wylie, heretofore noted, is a comparable case, involving many thousands of similar postcards.(20) A $60,000.00 penalty was imposed in that case and, weighing all the factors discussed above, I find it to be appropriate here.
CONCLUSION
The findings and conclusions herein are based on the preponderance of evidence. 31 U.S.C. §3803(f). Respondent is liable to the Postal Service under 31 U.S.C. §3802(a)(1) for a total of $353,089.06.
Bruce R. Houston
Chief Administrative Law Judge
1. The Rules of Practice, 39 C.F.R. §962.3, and the Statute, 31 U.S.C. §3803(d)(2), require that a petition be filed within 30 days of receipt of the Complaint, but the Postal Service agreed to extend that time while the parties discussed settlement. After settlement stalled, the Postal Service eventually moved for a default judgment. Because the filing deadline had become uncertain, it was ruled that the Petition was not untimely (Order, September 24, 1996).
2. Hereafter, references to the Complaint will be "Comp," references to the Petition will be "Pet," and references to the transcript will be "Tr. _." Postal Service exhibits will be "PS Ex." and Respondent's exhibits will be "Rx."
3. For consistency, I have used the 3,325 figure for all of these calculations. Mr. Hickey's records contain a few different numbers. For example, for the May 15 mailing his total was 64,800, based on weight, and for the June 5 mailing his number was 39,526, based on the OCR reading. These differences are insignificant.
4. Holy Temple Church, and its meter #3307253, were the subjects of a separate case brought by the Postal Service under the Program Fraud Civil Remedies Act. Samuel Wylie, P.S. Docket No. PF 96-348 (I.D. March 19, 1997).
5. The arithmetic here is different from Mr. Hickey's testimony. Postal Inspector Ward, the current custodian of the investigative records, testified that there were 129 trays of meter #875212 cards, which equaled 330,000. This computes to about 2,558 cards per tray.
6. At the same time, a second group of postal inspectors executed a search warrant at the premises of Holy Temple Church. Inspector McNamara himself participated in this search, but not the search at Bible Deliverance Church (Tr. 111-12).
7. Both parties agree that "Rev. Prophet Samuel" is Samuel Wylie, whose case is referred to in note 4, supra. The other two names were not further identified.
8. PS Ex. 26 consists of two checks from ATS, one for $60,570.66, January 29, 1991, payable to Bible Deliverance Church; the other for $56,562.21, March 31, 1991, payable to B. L. Smith.
9. This number is calculated by adding the numbers from FOF #10 to the number of cards detained after June 6, 1991 (see FOF #14). It is slightly smaller than the total number alleged in the Complaint, ¶15.
11. 2,558 x 438 trays = 1,120,404. Using this smaller number to estimate the total cannot be prejudicial to the Respondent.
12. $422.12 (see FOF #7) ÷ $.19 = 2,221.
14. 771,287 x $.19 = $146,544.53.
15. As a matter of law, I have some doubt that this doctrine would be applicable here as a separate theory of liability, not requiring proof of knowledge on the part of an individual respondent. An action under the Program Fraud Civil Remedies Act for a false claim is not a matter of collecting a corporate debt. On the other hand, a corporate official, acting in an official capacity, may be liable under the Program Fraud Civil Remedies Act if he knew claims were false and caused them to be made. United States v. Aerodex, Inc., 469 F.2d 1003, 1008 (5th Cir. 1972); United States v. Lorenzo, 768 F. Supp. 1127, 1132-33 (E.D. Pa. 1991).
16. The $5,000 penalty provided for in the original statute has been adjusted for inflation, in accordance with the Federal Civil Penalties Inflation Adjustment Act, 28 U.S.C. §2461 note. 39 C.F.R. §273.3.
17. 771,287 x $.30 = $231,386.10.
18. John F. Arney, P.S. Docket No. PF-55 (P.S.D. at 6, January 6, 1997); Bay State Uniform Company, Inc., P.S. Docket No. PF-31 (P.S.D. at 4 n.3, August 14, 1992). (Editor's Note: Correct date for Bay State P.S.D. is August 12, 1992).
19. See, e.g., Shelby T. Clark, P.S. Docket No. 96-174 (I.D. September 26, 1996); Dorothy Jones, P.S. Docket No. PF-61 (I.D. December 8, 1994); Frank Pepper, P.S. Docket No. PF-54 (I.D. June 21, 1993); Thomas Priebe, P.S. Docket No. PF-44 (I.D. November 10, 1992).
20. Samuel Wylie, P.S. Docket No. PF 96-348 (I.D. March 19, 1997).