In the Matter of the Petition by

EMIL A. MAGNUSON
P.O. Box 1857

at

Rapid City, SD 57709-1857

P.S. Docket No. DCA 02-440

APPEARANCE FOR PETITIONER:
William Brown
12 Mount Run
Tinton Falls, NJ  07753-7674

APPEARANCE FOR RESPONDENT:
Nels W. Truelson
Labor Relations Specialist
United States Postal Service
P. O. Box 7560
Sioux Falls, SD  57117-7560

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

            Petitioner, Emil Magnuson, filed a timely Petition for Hearing after receiving a Notice of Involuntary Administrative Salary Offsets dated September 9, 2002, from his postmaster.  This Notice stated the Postal Service's intention to withhold $20,200 from Petitioner's salary to recover a shortage in an account for which Petitioner was responsible.

            A hearing was held in Rapid City, South Dakota on December 5, 2002.^[1]  The Postal Service presented testimony from Reva Paulson, a postal systems coordinator, Linda Nation, a clerk in Petitioner’s post office, Dan Doran, the Rapid City Postmaster, and Bob Taylor, Manager of Accounting Operations.  Petitioner testified in his own behalf and also called Leah Hanson, another clerk, and Brian Fenske, a customer.  Both parties also relied on documents filed with the Petition and the Answer.  The following findings of fact are based on the entire record.

FINDINGS OF FACT

            1.  Petitioner has been a Postal Service employee for twenty-five years.  He has been the customer services supervisor (retail supervisor) at the Rapid City Post Office for approximately ten years.  As such, he is also the custodian of the unit reserve stock.  (Tr. 55-56, 99, 182-83; PS Ex. 19).^[2]

            2.  When Petitioner was scheduled to be absent for more than a few days, his practice was to turn over the keys to the vault and the section where the unit reserve was kept to one of his clerks, Ms. Nation or Ms. Hanson.  They did this without a formal transfer of accountability.  There is conflicting testimony as to whether they did a complete count of the unit reserve when it was turned over to the clerks and turned back to Petitioner.  If complete counts were done, no records were kept that show the amount of stock in the account when control of it changed hands, and the clerks signed nothing to indicate that they were accepting accountability for the unit reserve.  (Tr. 66-68, 75, 78, 100, 115, 138, 147-48, 160, 183-84; PS Exs. 16, 17 and 20).

            3.  On or about April 10, 2002, prior to Petitioner departing for a short period of active military duty with the South Dakota National Guard, he, Ms. Nation and Ms. Hanson counted the unit reserve in preparation for Petitioner turning the account over to Ms. Hanson.  The account was apparently in balance, but Ms. Hanson did not sign any document accepting accountability for the unit reserve, and there are no documents to show what amount of stock was in the unit reserve at that time.  (Tr. 59, 75, 138, 160).

            4.  When Petitioner returned from military leave on or about April 17, 2002, he and Ms. Hanson noted that the unit reserve appeared to be short 20 coils of “Canal Boat” stamps.  Again, the record is unclear as to whether they actually counted the entire unit reserve or whether they did a “spot check” of major inventory items.  Canal Boat stamps are 10¢ stamps and each coil contained $1000 of stamps.  These are large coils, described as being the size of a movie reel.  (Tr. 55-56, 62, 76, 95, 184).

            5.  At the time pertinent to this case, a local mailing business called “Fenske’s” purchased large quantities of Canal Boat stamps from the Rapid City Post Office.  This is the only customer to whom these stamps were regularly sold.^[3]  Although Ms. Hanson does not recall being involved in any sale to Fenske’s during the time she had control of the unit reserve, Petitioner assumed that the 20 coils must have been sold to Fenske’s.  Therefore, in the POS system, Respondent’s computerized stamp stock management system, Petitioner transferred the 20 coils out of the unit reserve and into the floor stock.  Had the assumption been correct, this action was correct, as sales cannot be made directly from the unit reserve.  (Tr. 62, 79, 100, 173-74; PS Ex. 16).

            6.  On May 25, 2002, a regularly scheduled audit of the floor stock was conducted by Petitioner and Ms. Nation.  They found the floor stock to be short $19,938.43.  (Tr. 63-65, 142, 185; PS Exs. 6-8).

            7.  On discovery of the floor stock shortage, a review of records by Petitioner and Ms. Paulson revealed no record of a sale of $20,000 of Canal Boat stamps to Fenske’s during the pertinent time frame.  They concluded, therefore, that those stamps should not have been transferred from the unit reserve to the floor stock as discussed above, but that there was a $20,000 shortage in the unit reserve.  Petitioner and Ms. Paulson reviewed records of stock shipments in and out of the unit reserve, records of all sales to Fenske’s and other financial records, but found nothing to account for the missing 20 coils of Canal Boat stamps.  (Tr. 26-28).

            8.  A later review by the District Accounting Office of shipments of Canal Boat stamps to Rapid City showed 12 coils on hand at the beginning of the fiscal year and 560 coils shipped to Rapid City by the stamp distribution office (SDO), for a total of 572.  498 coils were sold to Fenske’s and 40 were returned to the SDO, leaving 34 in Petitioner’s unit reserve account.  When the shortage was discovered, only 14 coils were present.  (Tr. 148-49; PS Ex. 16).

            9.  On about June 17, 2002, Petitioner and Ms. Paulson visited the Fenske Company to ask the company’s assistance in determining whether the company might have received the 20 coils in error.  Mr. Fenske and others with whom they spoke were cooperative but stated that it would be difficult for them to determine how many of these stamps they used during a given time period.  Mr. Fenske agreed to provide copies of any pertinent records that they could find.  (Tr. 29-30, 55, 188, 218-19).

            10.  On August 19, 2002, the postmaster issued Petitioner a Letter of Debt for $20,200, and on September 9, 2002, he issued the Notice of Involuntary Administrative Salary Offsets for the same amount.  The $200 portion of this is based on a shortage of one coil of 2¢ “Woodpecker” stamps that is listed in a report submitted by Mr. Taylor, but Respondent presented no evidence to show how this alleged loss was determined.  (PS Exs. 16, 18, and 21).

            11.  While this case was in preparation for hearing, and because Fenske’s had provided no useful information in the meantime, Postmaster Doran and Petitioner visited Fenske’s again in November 2002.  Thereafter, Fenske’s did send some documents concerning their mailing activities, but nothing they sent provided any indication that they had received the missing 20 coils of Canal Boat stamps.  Mr. Fenske testified that, on the day of the hearing, he had sent the last of all the pertinent records they could find.  (Tr. 107-11, 179).^[4]    

            12.  PS Form 17 is a document used to record a transfer of stamp stock from one account to another.  When entries are made in the POS computer system, the computer generates this form.  Computer entries should be made at the time of a transfer.  The procedure used by Petitioner and his staff, prior to changes made after the events of this case were reviewed, was to use a manual Form 17 when stock was withdrawn from the unit reserve.  Later, the transfer would be entered into the POS system.  The reason for this was that there was no computer terminal in the vault where the unit reserve is stored.  (Tr. 61, 80, 149; PS Exs. 16, 17, and 20). 

            13.  Large orders for Fenske’s are often delivered to Fenske’s by a post office employee.  When stamp stock was removed from the unit reserve to fill a Fenske order, the stock was sometimes left unsecured for a short time in the vault before the delivery person picked it up.  The unit reserve was always locked up within the vault, but several employees had access to the outer portion of the vault.  This procedure was also changed after July 2002.  (Tr. 70, 82, 150-51, 154; PS Exs. 16, 17, and 20).      

DECISION

            Respondent’s position is simply that the evidence clearly establishes a loss of 20 coils of stamps, worth $20,000, from the unit reserve account, and that as custodian of the unit reserve Petitioner is accountable for that loss.  Respondent also argues that the evidence shows that Petitioner did not follow established Postal Service procedures in managing the unit reserve account.  Specifically, Respondent points to the failure to enter stamp stock transfers into the POS system contemporaneously with the actual transfer, the practice of leaving stamp stock unsecured while awaiting delivery to Fenske’s, and the fact that Petitioner gave other people access to the unit reserve while it was still accountable to him.

            Petitioner’s principal argument is that someone other than himself should have done more to investigate the most probable cause of the loss, i.e., that Fenske’s erroneously was given 20 more coils than they paid for.  Petitioner also argues that, although he may not have used the correct forms, he and his clerks always did a full count of the unit reserve when transferring control.  Although he does not argue that Ms. Hanson should be charged with the loss, he argues that he should not be held liable because the loss almost certainly occurred while she had control of the unit reserve.

            As custodian of the unit reserve account, Petitioner is held to the standard set out in Postal Service Handbook F-1, Post Office Accounting Procedures (November 1996), §141, which states 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.”

            As to the argument that Petitioner had turned over the account to Ms. Hanson when he left for military duty, I conclude that he did not do it in a way that would relieve him of the accountability.  Merely not using the correct forms would not preclude a finding that the accountability was transferred, but it is clear in this case that neither Petitioner, nor Ms. Hanson, nor Ms. Nation believed that accountability was being transferred.  Petitioner’s written response to Mr. Taylor’s report and recommendations says as much (see PS Ex. 17, ¶1), plus there are no written records of the transfer.

            As to the argument that the postmaster, the Postal Inspection Service, or someone else should have pursued Fenske’s more vigorously, I can find no basis here for relieving Petitioner of liability.  It was Petitioner who, on discovery that 20 coils were missing from the unit reserve inventory in mid-April, made the incorrect assumption that they had been sold to Fenske’s.  He apparently did this without checking any records to confirm the sale, but waited several weeks until the floor stock count revealed an actual loss.  Perhaps he could have been given more assistance in soliciting help from the Fenske Company, but in the absence of any evidence of wrongdoing by Fenske’s, or any hard evidence that they inadvertently received more stamps than they paid for, all anyone could do was to request their help.  As the person responsible for the unit reserve account, Petitioner would seem to be the appropriate person to make the request, as he did, and also to follow up as necessary.

            Under the standard of liability quoted above, the evidence does not support relieving Petitioner of liability on the basis that he followed established procedures.  Even though Petitioner has apparently been a reliable employee for many years, the evidence in the record shows that some of his procedures relating directly to the issues in this case were not in accordance with established rules.  He gave others access to the unit reserve, he did not make required POS entries in a timely manner, and he allowed stamp stock to sit unsecured for short periods of time.

            Respondent has proved a loss of $20,000 from Petitioner’s account, and Petitioner has not established a basis for relieving him of liability.  Other than the alleged loss of the additional $200, the Petition is denied.  Respondent may collect $20,000 from Petitioner’s salary.

Bruce R. Houston
Chief Administrative Law Judge

[1]  The hearing was conducted by the undersigned Administrative Law Judge via speaker telephone from Arlington, Virginia.  All other participants, including the court reporter, were present in a conference room at the hearing site, with the exception of one witness, Mr. Fenske, who testified by telephone from another location in Rapid City.

[2]  References to the hearing transcript are “Tr._.”  References to numbered exhibits attached to Respondent’s Answer are “PS Ex._.” 

[3]  Fenske’s used these stamps, along with 2¢ “Woodpecker” stamps, on reply envelopes placed inside outer envelopes containing solicitations for three non-profit organizations for which Fenske’s did mailing.  (Tr. 133-34, 178).

[4]  Because the Canal boat stamps were used by Fenske’s on reply envelopes contained inside their mailings, rather than as postage on Fenske’s mailings, the Fenske mailing statements that are part of Postal Service records are not helpful.  (Tr. 111-13, 134).