Appeal of

CARLOS DELBREY

Under Contract No. 428461-82-W-0121
PSBCA No. 4115

APPEARANCE FOR APPELLANT:
Michelle M. Garcia-Perez, Esq.

APPEARANCE FOR RESPONDENT:
Geraldine O. Rowe, Esq.

OPINION OF THE BOARD

            Appellant, Carlos Delbrey, has filed a timely appeal from a contracting officer’s final decision asserting a claim against Appellant in the amount of $104,403.76 in missing postal revenue and stamp stock at the contract postal unit operated by Appellant under his contract with Respondent, the United States Postal Service.  At the election of the parties, the appeal is being decided on the record in accordance with 39 C.F.R. §955.12.

FINDINGS OF FACT

            1.  On July 6, 1982, Appellant was awarded Contract No. 428461-82-W-0121 to operate a contract postal unit (CPU) at “La Cumbre” Urbanization, Rio Pedras, Puerto Rico.  The contract was for an indefinite term and obligated Appellant to provide postal services to the public, including the sale of postage and money orders.  (Appeal File Tab (AF) 1).

            2.  The contract’s General Provisions, at clause 7, INSPECTION OF THE CONTRACT WORK, provided as follows:

“The COR [Contracting Officer’s Representative] shall periodically review the Contractor’s performance to assure the Contractor is performing in accordance with postal rules and regulations.  The COR will immediately bring to the attention of the Contractor all unsatisfactory service.  If the Contractor continues to perform unsatisfactorily, the Contracting Officer will formally notify the Contractor in writing of the deficiencies and that the continued unsatisfactory performance may be cause for termination of the contract.”  (AF 1).

            3.  The contract’s specifications (Specification Requirements, Contract Stations, Contract Branches, and Community Post Offices, (Form 7311, January 22, 1982)), provided, in part:

“18.  The contractor shall be personally responsible, accountable and answerable for the faithful performance and discharge of all the duties and obligations assumed by him in this contract, whether or not he personally conducts the Contract Unit.  The contractor shall be chargeable with all acts and omissions of his employees who assist in the conduct of the Contract Unit.

19.  All monies received from the operation of the Contract Unit are the property of the U.S. Postal Service and are not the property of the contractor.  Such monies shall not be commingled with personal or other funds of the contractor, and shall not be used for any purpose other than in connection with the postal duties and functions of the Contract Unit.  The contractor shall account for such monies at the close of each day’s business.”  (AF 1).

            4.  On or about May 25, 1995, the Accounting Office of the Caribbean District of the Postal Service discovered that there were substantial discrepancies between the money order amounts reported as sold by Appellant’s CPU and the actual amounts of the money orders cashed by postal customers.  Money orders had been issued by Appellant’s CPU in amounts substantially larger than the amounts shown on the CPU’s receipts and its daily financial reports of transactions submitted to Respondent at the close of business each day.  In some instances money orders were issued and not reported as issued.  As a result, Respondent ultimately paid out a greater amount of money when the money orders were cashed than the amount of money remitted to the Postal Service by Appellant for the sale of the money orders.  The money order accounting discrepancies were reported to the Postal Inspection Service (Calderon Declaration).

            5.  The Postal Inspection Service commenced an investigation which determined that Appellant’s CPU had failed to report and remit to Respondent $90,479.31 in money order revenue during fiscal year 1995 (Calderon Declaration).

            6.  This amount was determined by comparing the information contained on Postmaster Accountability reports prepared by the Postal Service’s St. Louis Accounting Service Center with the daily accounting of money order revenue reported by Appellant.  The Postmaster Accountability reports were issued every two months and contained the amount and date sold for each money order issued by post offices and CPUs in the Caribbean District, including the La Cumbre CPU.  The comparison disclosed the amount of revenue collected by Appellant for money orders sold which Appellant did not report.  (Calderon Declaration; AF 6-17)

            7.  In conjunction with the analysis of unreported and underreported money orders, the Postal Inspection Service conducted a financial review of the La Cumbre CPU on August 1, 1995 (along with a recount on August 16, 1995).  This review disclosed a $6,840.74 shortage in the station’s accountability,^[1] a separate stamp shipment shortage of $4,573.00, as well as a prior shortage of $2,510.71, carried in a suspense account.  (Tanner, Quinones and Rodriguez Declarations; AF 18, 23, 25, 32, 34; Supplemental Appeal File Tab (SAF) 5).

            8.  On August 15, 1995, the contracting officer terminated the contract on one day’s notice (AF 22).  The Board upheld this termination decision.  Carlos D. Delbrey, PSBCA No. 3892, 97-2 BCA ¶ 29,239.

            9.  On May 28, 1997, the contracting officer issued a final decision demanding from Appellant repayment of $104,403.76 in unreported money order revenue and other cash and stamp stock shortages.  Appellant timely appealed the final decision.  (AF 34-36).

DECISION

            Respondent argues that, in accordance with paragraphs 18 and 19 of the contract’s specifications, Appellant is strictly liable for $104,403.76 in missing money order revenue, postal funds and stamp stock.  Appellant does not dispute the amount of loss, but argues that Respondent was negligent in monitoring Appellant’s money order sales and that this negligence caused the ensuing loss.

            We find no merit to Appellant’s arguments in this appeal.  Under the contract, Appellant was strictly liable to the Postal Service for revenue losses resulting from underreported or unreported money order sales as well as for stamp stock shortages.  See Ronald K. Stanley, PSBCA No. 4156, 99-2 BCA ¶ 30,412 and cases cited therein.

            Appellant has simply repeated in this appeal many of the same arguments he raised in his earlier appeal.  These arguments are again rejected.  In Appellant’s earlier appeal of the decision to terminate his contract on one day’s notice we found that Respondent acted properly with respect to its obligation to inspect the CPU, and acted timely to uncover the money order improprieties.  Carlos D. Delbrey, PSBCA No. 3892, 97-2 BCA ¶ 29,239.

            Appellant raises one new argument in this appeal that was not previously raised, and rejected by the Board, in the earlier decision.  Appellant argues that when a money order is issued, the original and one copy are given to the purchaser of the money order and the remaining copy is sent to the Postal Service.  Therefore, Appellant argues that it had no way of knowing the amount of each money order issued since it did not retain a copy for its own records.  However, we have previously held that it is incumbent on Appellant, as the CPU contractor, to establish and implement procedures to ensure that its employees properly report and account for all blank money orders issued to them by the Postal Service.  Ronald K. Stanley, supra.  Appellant could and should have imposed money order accounting procedures to protect himself from losses caused by the actions of his employees.  See Jaehee Yoshimoto, PSBCA No. 2315, 2749, 92-1 BCA ¶ 24,504.

            Finally, we reject Appellant’s argument that, because it has alleged tortious conduct on the part of Respondent, the substantive law of Puerto Rico is the governing law.  In the first instance, there was no tortious conduct on the part of Respondent.  Moreover, this appeal arises from a federal contract in which the Postal Service has asserted a contract claim against Appellant in the amount of $104,403.76.  Since federal contracts are to be given uniform interpretation and application under federal law, the rights and obligations of parties to this contract cannot be governed by the law of Puerto Rico. See Simpson Transfer and Storage Corp., ASBCA No. 24,750, 82-2 BCA ¶ 15,949.

            Accordingly, Appellant is liable to repay the Postal Service the sum of $104,403.76.  The appeal is denied.

William K. Mahn
Administrative Judge
Board Member

I concur:
James A. Cohen
Administrative Judge
Chairman

I concur:
David I. Brochstein
Administrative Judge
Vice Chairman

[1]  Appellant’s employee participated in the audit and concurred in the accuracy of this figure (Tanner Declaration; AF 18)