In the Matter of the Petition by

DENNIS C. HUGHES
1136 Rainbow Drive

             at

Martinez, CA 94553-4714

P. S. Docket No. DCA 01-266

APPEARANCE FOR PETITIONER:
Dennis C. Hughes
1136 Rainbow Drive
Martinez, CA 94553-4714

APPEARANCE FOR RESPONDENT:
Adam Alvarez
Labor Relations Specialist
United States Postal Service
1675 7th Street, Room 421-1
Oakland, CA 94615-9405

Petitioner, Dennis C. Hughes, filed a Petition for Hearing after the Postal Service began withholding money to recover for a shortage of $16,780.65 in a unit reserve account for which he was responsible.

A hearing was held in San Francisco, California on October 1, 2001.¹  The Postal Service presented testimony from Arturo Fonseca, a financial specialist who participated in an audit of Petitioner's unit reserve account, and Russell Teves, the former Postmaster of Alamo, California. Petitioner testified in his own behalf, and both parties relied on documents that had been filed with the Petition, the Answer, and supplemental filings. The following findings of fact are based on the entire record.

1. Petitioner was the customer service supervisor at the Alamo Post Office in Oakland, California from 1984 through sometime in 2000 when he went on medical leave pending retirement (Tr. 104).² 

2. In approximately 1996, the Alamo Post Office became what is known as a "postal store" in which postal products, including stamps, are available to customers on open shelves much like any retail store. Under this arrangement, no postal employee is personally accountable for stamp stock. Because large losses were incurred, management decided to segment the inventory by creating a unit reserve account that would be assigned to an individual, who would then use the unit reserve to replenish the "floor stock" for sale to customers. On October 27, 1999, Mr. Fonseca and Petitioner conducted an audit and Petitioner became the custodian of the unit reserve account in the amount of $86,794.95. As such, Petitioner was personally accountable for the unit reserve stock. Petitioner signed a PS Form 3294, Cash and Stamp Stock Count and Summary, indicating that he agreed with the accuracy of the count of the unit reserve. (Tr. 9-12, 30, 43-46, 97; Supp. AE-2 through AE-5).

3. On February 2, 2000, in preparation for turning over the unit reserve account from Petitioner to the postmaster, Russell Teves, Mr. Teves, Petitioner, and Mr. Fonseca conducted an audit of the unit reserve. Alamo records showed that the opening balance, i.e., the amount that should have been present, was $112,899.74, but only $58,288.61 was present - a shortage of $54,611.13. Petitioner signed a PS Form 3294, Cash and Stamp Stock Count and Summary, indicating that he agreed with the accuracy of the count. (Tr. 13-15, 49-50, 98; AE-2; Supp. AE-6, AE-14).

4. The "floor stock," i.e., the stamp stock at Alamo that was not part of the unit reserve, was not counted on February 2, 2000, but it was counted close to that date, both before and after, and revealed a large overage. A PS Form 571, used to report financial discrepancies to the Postal Inspection Service, was completed by Mr. Teves on February 2, 2000 to report the $54,611.13 shortage. In the "Remarks" section he noted that a "preliminary postal store count revealed an overage of $31,000.00." (Tr. 21, 26-27, 35, 76-77; Supp. AE-16).

5. The postmaster issued Petitioner a letter of demand for $54,611.13 on February 2, 2000. Eventually, the postmaster gave Petitioner credit for a store overage of $26,445.48, and also for $11,385.00 being held in a trust account, thereby reducing the alleged loss to $16,780.65. (Tr. 54-55, 77; AE-8, AE-9).

6. During the time Petitioner was custodian of the unit reserve, he may on occasion have failed to timely enter unit reserve transactions into the system, and he did not always verify the amounts of stock he entered into the system as being issued from the unit reserve to the floor stock. (Tr. 86, 102-03, 107).

7. In letters to the postmaster, dated February 9, 2000 and April 3, 2000, in which he stated that there "was not always time to do the job completely," and made reference to the large shortages in the store, Petitioner requested all the PS Form 3958s and other records from October 28, 1999 through January 31, 2000. Form 3958 is a daily recap of stock transactions in the unit reserve. The postmaster gave Petitioner access to all the records available in the office, but not all Form 3958s were there. (Tr. 70-71, 90-91, 95-96, 111; AE-3, AE-4, AE-6, AE-7, AE-8).

8. A unit reserve custodian is responsible for insuring that accurate records of all transactions are entered into the system and that the account is in balance each day.³ 

The standard for determining an employee’s liability in a case such as this provides that employees to whom postal funds and accountable paper are consigned "are held strictly accountable for any loss unless evidence establishes that they followed the postal procedures established when performing their duties." Handbook F-1, Post Office Accounting Procedures (November 1996), §141.

Respondent’s burden of proof in a case of unexplained shortage is to show that a loss occurred from an account for which the employee is accountable. Respondent is not required to prove that any specific dereliction or act of negligence by Petitioner caused the loss. When a properly conducted inventory, or audit, shows a stock shortage relative to a previously established balance, this constitutes proof of loss unless other evidence raises sufficient doubt about the accuracy of the inventory or the previously established balance, or otherwise suggests that there may have been no actual loss.

In this case, Petitioner does not dispute the fact that he was accountable for the unit reserve, nor does he dispute that the audit was properly conducted and showed a shortage of $54,611.13.

Respondent's position is simply that a loss has been established and that Petitioner has demonstrated no basis for relieving him of the strict liability standard set forth in the regulation.

Petitioner has not argued that he should be relieved of liability based on his having followed established postal procedures, as set forth in the standard of liability, and the evidence would not support such a conclusion (see Findings 6-8).

Petitioner makes several arguments. First, he contends that the Postal Service has acted inconsistently in charging him with this loss, after having written off much larger losses during the time no one was accountable for stock in the postal store. There are no facts to make clear the circumstances surrounding these other losses and, furthermore, it appears that the unit reserve was created specifically to change the situation where no person was accountable for any portion of the stamp stock at Alamo. The two situations are not comparable and this argument provides no basis for relieving Petitioner of his accountability.

Next, Petitioner concedes that errors made by himself or others may have caused the shortage and overages, but argues that there may have been other errors that could be used to show even larger overages which might negate the entire shortage. He argues that he was deprived of the opportunity to explore this possibility because not all records for the period October 27, 1999-February 2, 2000 were available. Petitioner's theory is speculative, he has not made clear what records he did see and what he did not, and he has not presented any evidence to show even a likely possibility that missing records would have been helpful to him.

Petitioner also argues that the postmaster and finance officials should have counted the floor stock on February 2, 2000, the same day the unit reserve was counted. He cited no regulatory requirement for that, however, and I have found none. Mr. Teves recalled that the floor stock was counted both shortly before and shortly after February 2. Mr. Teves gave Petitioner credit for a $26,445.48 floor stock overage. There is no basis here for simply assuming that there would have been a larger overage on February 2. However, when Respondent chooses one figure over another in offsetting overages against shortages, part of Respondent's burden in proving the amount of a loss is to show why the offset number it chose was correct. In this case, Respondent gave no explanation for why the credit was not $31,000.00 - the figure reported by Mr. Teves on the PS Form 571. I find it appropriate to give Petitioner an additional credit for $4,554.52 - the difference between $31,000.00 and $26,445.48.

Finally, Petitioner argues that he was not provided sufficient security for his unit reserve because the stock would not always fit in the available safe and because the wire cage around the room in which the safe was kept had no roof. As to the latter point, there is no evidence as to how this would enable an unauthorized person to gain access to the unit reserve stock, or that anyone would be able to get into the room undetected. As to the former, there is contradictory testimony and Petitioner did not prove that the safe was inadequate. As to both points, the evidence does not support a conclusion that management failed in its responsibility to provide Petitioner with adequate security for his stock.

For the reason discussed above, Petitioner's liability is reduced by $4,554.52, leaving a total of $12,226.13. The Petition is granted in part and denied in part. Respondent may collect $12,226.13 from Petitioner. Any money that has already been withheld from Petitioner must be credited toward this amount.

Bruce R. Houston
Chief Administrative Law Judge

¹ A video hearing was conducted by the undersigned Administrative Law Judge from Arlington, Virginia. All other participants, including the court reporter, were present in a conference room at the hearing site.

² References to the hearing transcript are "Tr._." References to documents included under Tab 4 to Respondent's Answer will be "AE-_." References to documents included in the supplement to Respondent's Answer will be "Supp. AE-_."

³ Handbook F-1, Post Office Accounting Procedures (November 1996), §§426.71 and 426.72.