A-97711, APRIL 17, 1939, 18 COMP. GEN. 788

A-97711: Apr 17, 1939

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THE FINAL AUDIT IS A DUTY IMPOSED ON THE GENERAL ACCOUNTING OFFICE BY THE ACT OF JUNE 10. THE AMOUNT CHARGEABLE TO A FORMER POST-OFFICE CLERK WHO MISAPPROPRIATED POSTAL-SAVINGS FUNDS IS NOT LIMITED TO THE ACTUAL CASH EMBEZZLED. SUCH ADDITIONAL AMOUNT AS IT WAS NECESSARY FOR THE GOVERNMENT TO PAY BY REASON OF THE ISSUING TO THE DEPOSITORS OF CERTIFICATES BEARING INTEREST ADJUSTED IN ACCORDANCE WITH THE APPLICABLE LAW AND REGULATIONS FROM THE DATES OF THE DEPOSITS UNTIL COLLECTION OF THE EMBEZZLED AMOUNT WAS MADE. THE AMOUNT OF THE SAID INTEREST IS PROPERLY FOR CHARGING IN THE POSTMASTER'S ACCOUNTS. AS FOLLOWS: REFERENCE IS MADE TO A RECENT DECISION OF THE POST OFFICE DEPARTMENT DIVISION OF YOUR OFFICE DATED AUGUST 23 ADDRESSED TO THE THIRD ASSISTANT POSTMASTER GENERAL RELATING TO THE EMBEZZLEMENT OF POSTAL SAVINGS FUNDS BY FORMER CLERK JOSEPH EGGERT OF THE UNIVERSITY CENTER STATION.

A-97711, APRIL 17, 1939, 18 COMP. GEN. 788

POST OFFICE DEPARTMENT - POSTAL-SAVINGS FUNDS - EMBEZZLEMENT AND GENERAL ACCOUNTING OFFICE AUDIT JURISDICTION - LIABILITY FOR INTEREST IN CONNECTION WITH POSTAL-SAVINGS FUNDS EMBEZZLED WHILE THE ACT OF JUNE 25, 1910, 36 STAT. 814, AS AMENDED, WHICH PROVIDES FOR ESTABLISHMENT OF POSTAL-SAVINGS DEPOSITORIES, VESTS IN A BOARD OF TRUSTEES THE ADMINISTRATIVE FUNCTIONS THEREOF, INCLUDING THE ADMINISTRATIVE AUDIT, THE FINAL AUDIT IS A DUTY IMPOSED ON THE GENERAL ACCOUNTING OFFICE BY THE ACT OF JUNE 10, 1921, 42 STAT. 24. THE AMOUNT CHARGEABLE TO A FORMER POST-OFFICE CLERK WHO MISAPPROPRIATED POSTAL-SAVINGS FUNDS IS NOT LIMITED TO THE ACTUAL CASH EMBEZZLED, BUT INCLUDES, ALSO, SUCH ADDITIONAL AMOUNT AS IT WAS NECESSARY FOR THE GOVERNMENT TO PAY BY REASON OF THE ISSUING TO THE DEPOSITORS OF CERTIFICATES BEARING INTEREST ADJUSTED IN ACCORDANCE WITH THE APPLICABLE LAW AND REGULATIONS FROM THE DATES OF THE DEPOSITS UNTIL COLLECTION OF THE EMBEZZLED AMOUNT WAS MADE, AND WHERE COLLECTION HAS BEEN EFFECTED FROM THE EMBEZZLER, BY THE POSTMASTER INVOLVED, IN THE AMOUNT ACTUALLY EMBEZZLED ONLY, THE AMOUNT OF THE SAID INTEREST IS PROPERLY FOR CHARGING IN THE POSTMASTER'S ACCOUNTS.

COMPTROLLER GENERAL BROWN TO THE POSTMASTER GENERAL, APRIL 17, 1939:

THERE HAS BEEN CONSIDERED YOUR LETTER OF SEPTEMBER 3, 1938, AS FOLLOWS:

REFERENCE IS MADE TO A RECENT DECISION OF THE POST OFFICE DEPARTMENT DIVISION OF YOUR OFFICE DATED AUGUST 23 ADDRESSED TO THE THIRD ASSISTANT POSTMASTER GENERAL RELATING TO THE EMBEZZLEMENT OF POSTAL SAVINGS FUNDS BY FORMER CLERK JOSEPH EGGERT OF THE UNIVERSITY CENTER STATION, CLEVELAND, OHIO. THE CREDIT OF THIS FORMER CLERK IN THE CIVIL SERVICE RETIREMENT FUND WAS CHARGED WITH THE AMOUNT OF EGGERT'S EMBEZZLEMENTS. HOWEVER, UPON REVIEWING THE ACTION OF THE DEPARTMENT, THE POST OFFICE DEPARTMENT DIVISION OF YOUR OFFICE INSTRUCTED THE POSTMASTER AT CLEVELAND TO DEBIT HIS NEXT POSTAL-SAVINGS ACCOUNT WITH THE SUM OF $13.95 REPRESENTING COMPENSATORY INTEREST ON THE EMBEZZLED FUNDS.

THE DIVISION OF POSTAL-SAVINGS PROTESTED THIS DECISION UNDER DATE OF JULY 27, POINTING OUT THAT THE BASIS OF THE POST OFFICE DEPARTMENT DIVISION'S LETTER TO THE POSTMASTER WAS AN ALLEGED INABILITY OF THE UNITED STATES TO EARN THE COMPENSATORY INTEREST ON THE FUNDS INVOLVED BECAUSE THEY WERE NOT ON DEPOSIT, WHEREAS HAD THE FUNDS NOT BEEN EMBEZZLED THERE WAS LITTLE LIKELIHOOD THAT THEY WOULD HAVE BEEN DEPOSITED AT INTEREST FOR THE REASON THAT AT THE TIME OF THE MANIPULATION OF THESE FUNDS THERE WERE NO BANKS QUALIFIED TO RECEIVE THEM IN CLEVELAND, AND QUALIFIED BANKS IN OTHER PARTS OF THE COUNTRY WERE ACCEPTING ONLY A SMALL PORTION OF FUNDS AVAILABLE.

THE DIVISION OF POSTAL SAVINGS LIKEWISE POINTED OUT THAT UNDER A CORRECT INTERPRETATION OF THE ACT UNDER WHICH IT OPERATES THE BOARD OF TRUSTEES HAS ABSOLUTE CONTROL OF POSTAL-SAVINGS FUNDS RECEIVED AS DEPOSITS AT POSTAL-SAVINGS DEPOSITORY OFFICES AND IS CLOTHED WITH THE POWER TO MAKE ALL NECESSARY AND PROPER REGULATIONS FOR THE RECEIPT, TRANSMITTAL, CUSTODY, INVESTMENT, AND REPAYMENT OF SUCH FUNDS. IT WAS POINTED OUT THAT THE GENERAL ACCOUNTING OFFICE HAD NOT BEEN GIVEN AUTHORITY TO DIRECT THE METHOD IN WHICH POSTAL-SAVINGS FUNDS SHOULD BE INVESTED OR TO FIX THE RATE OF INTEREST WHICH THE INVESTMENT SHOULD YIELD.

NOTWITHSTANDING THE PROTEST WHICH SEEMS TO HAVE BEEN BASED ON SOUND LEGAL PRINCIPLES, THE POST OFFICE DIVISION IN ITS LETTER DATED AUGUST 23 REAFFIRMED ITS POSITION IN THE MATTER AND INSISTED THAT ITS ORIGINAL INSTRUCTIONS TO THE POSTMASTER BE CARRIED OUT.

INASMUCH AS THE LETTER OF THE POST OFFICE DEPARTMENT DIVISION TO THE POSTMASTER AND THE POSITION TAKEN BY THAT OFFICE ARE REGARDED AS ESSENTIALLY UNSOUND, IT IS REQUESTED THAT YOU REVIEW THE ACTION OF THE POST OFFICE DEPARTMENT DIVISION WITH A VIEW OF REMOVING ANY CHARGE WHICH MAY HAVE BEEN PLACED AGAINST THE ACCOUNTING POSTMASTER AT CLEVELAND, OHIO, ARISING OUT OF HIS FAILURE TO COLLECT INTEREST ON THE AMOUNT INVOLVED.

THE PERTINENT FACTS UNDER WHICH THE CLAIM AGAINST EGGERT AROSE ARE STATED IN LETTER OF MARCH 16, 1938, FROM THE CHIEF INSPECTOR, POST OFFICE DEPARTMENT, TO THE PRESIDENT, UNITED STATES CIVIL SERVICE COMMISSION, IN PART AS FOLLOWS:

AN INVESTIGATION MADE BY POST-OFFICE INSPECTORS DISCLOSED THAT EGGERT APPROPRIATED TO HIS OWN USE $631.96, CONSISTING OF $174.26 IN POSTAL FUNDS; $305.00, THE PROCEEDS FROM POSTAL-SAVINGS CERTIFICATES ENTRUSTED TO HIS CARE BY THE PATRON TO WHOM THEY WERE ISSUED; $2.70 IN INTEREST ACCRUING ON THESE CERTIFICATES AND $150.00 IN CASH RECEIVED BY HIM FROM ANOTHER PATRON IN PAYMENT FOR CERTIFICATES OF THIS KIND. THE POSTMASTER AT CLEVELAND HAS BEEN APPROPRIATELY INSTRUCTED TO MAKE ADJUSTMENTS WITH THE TWO DEPOSITORS, AND WHEN THIS HAS BEEN DONE, IT WILL, TOGETHER WITH THE LOSS IN POSTAL FUNDS, CREATE A SHORTAGE IN THE POSTMASTER'S ACCOUNTS IN AN AMOUNT EQUAL TO THAT STOLEN BY THE FORMER EMPLOYEE.

IN A STATEMENT SWORN TO BY EGGERT UNDER DATE OF AUGUST 20, 1937, HE AGREED AS FOLLOWS:

IN THE EVENT I AM UNABLE TO RAISE THE SHORTAGE OF $174.26 AS DISCLOSED IN MY FIXED CREDIT ACCOUNT ON AUGUST 19, 1937, AND THE DEFICIENCY OF SOME $305, PLUS INTEREST COLLECTED BY ME FROM THE POSTAL SAVINGS ACCOUNT OF ANTIONETTA LANESE, HEREBY STATE I AM WILLING THAT TOTAL SHORTAGE BE MADE UP FROM MY RETIREMENT FUND.

THE POSTMASTER AT CLEVELAND, OHIO, WAS ADVISED BY THIRD ASSISTANT POSTMASTER GENERAL IN LETTER OF MARCH 10, 1938, TO ADJUST THE POSTAL SAVINGS ACCOUNTS OF THE TWO DEPOSITORS INVOLVED IN THE FOLLOWING MANNER:

IT APPEARS THAT MR. EGGERT DID NOT ISSUE POSTAL-SAVINGS CERTIFICATES FOR THE SUM OF $150 LEFT WITH HIM ON JUNE 23, 1937, BY MISS BEARCH SIMONIAN. ACCORDINGLY, AFTER SHE HAS COMPLETED THE USUAL APPLICATION (FORM PS 600), CERTIFICATES AMOUNTING TO $150 SHOULD BE ISSUED TO MISS SIMONIAN WHICH SHOULD BEAR THE CURRENT DATE AS THE ISSUE DATE AND JULY 1, 1937, AS THE INTEREST DATE. A NOTATION READING "LETTER OF THIRD ASSISTANT POSTMASTER GENERAL DATED MARCH 10, 1938," SHOULD BE PLACED ABOVE THE INTEREST DATE ON EACH CERTIFICATE TO EXPLAIN THE UNUSUAL ASSOCIATION OF DATES. THE ISSUANCE OF THE CERTIFICATES SHOULD BE ENTERED IN YOUR RECORDS IN THE USUAL MANNER AND THEN DELIVERED TO THE DEPOSITOR. IN ORDER TO COMPLETE THE RECORDS OF THIS OFFICE, PLEASE ADVISE ME WHEN THIS TRANSACTION HAS BEEN COMPLETED.

REGARDING POSTAL-SAVINGS CERTIFICATES AMOUNTING TO $305 ISSUED TO MRS. ANTONIETTA LANESE AND MANIPULATED BY FORMER CLERK EGGERT, THIS OFFICE, UPON RECEIPT OF INFORMATION AS TO THE SERIAL NUMBERS OF THE CERTIFICATES INVOLVED, WILL DISALLOW CREDIT FOR THE PAYMENT OF THE CERTIFICATES IN QUESTION. THE CERTIFICATES WILL THEN BE REISSUED AND THE REISSUED CERTIFICATES FORWARDED TO YOUR OFFICE FOR DELIVERY TO THE DEPOSITOR. THE INTEREST EQUITY OF MRS. LANESE WILL BE PRESERVED THROUGH THE REISSUE OF THE CERTIFICATES.

THE ACT OF JUNE 25, 1910, 36 STAT. 814, PROVIDES FOR THE ESTABLISHMENT OF POSTAL-SAVINGS DEPOSITORIES AND "CREATES A BOARD OF TRUSTEES FOR THE CONTROL, SUPERVISION, AND ADMINISTRATION OF POSTAL SAVINGS DEPOSITORY OFFICES.' UNDER THE PROVISIONS OF SAID ACT, AS AMENDED, IT IS CLEAR THAT ADMINISTRATION OF ALL FUNCTIONS OF THE POSTAL SAVINGS, DEPOSITORIES, INCLUDING ADMINISTRATIVE AUDIT, IS VESTED IN THE BOARD OF TRUSTEES, BUT UNDER THE PROVISIONS OF THE ACT OF JUNE 10, 1921, 42 STAT. 24, THE FINAL AUDIT IS A DUTY IMPOSED ON THE GENERAL ACCOUNTING OFFICE. SEE 34 OP.ATTY.GEN. 83.

ON FINAL AUDIT OF THE POSTAL-SAVINGS ACCOUNT OF THE POSTMASTER AT CLEVELAND, THE OFFICE IN WHICH EGGERT WAS EMPLOYED AT THE TIME OF HIS DEPREDATIONS, IT WAS ASCERTAINED THAT THE AMOUNT OF THE CHARGES RAISED AGAINST HIM DID NOT INCLUDE ALL INTEREST CHARGES FROM THE TIME THE FUNDS WERE MISAPPROPRIATED UNTIL COLLECTION FROM THE AMOUNT TO EGGERT'S CREDIT IN THE RETIREMENT FUND; IN VIEW OF WHICH THE POSTMASTER AT CLEVELAND WAS DIRECTED TO DEBIT HIS NEXT POSTAL-SAVINGS ACCOUNT WITH $13.95 TO COVER SUCH INTEREST. THE THIRD ASSISTANT POSTMASTER GENERAL OBJECTED TO THE RAISING OF SUCH A CHARGE IN THE POSTAL-SAVINGS ACCOUNT OF THE POSTMASTER AT CLEVELAND, STATING IN LETTER OF JULY 27, 1938, BFC-MLB, TO THIS OFFICE, IN PERTINENT PART:

IT IS NOTED THAT YOUR OFFICE INSTRUCTED THE POSTMASTER TO DEBIT HIS NEXT POSTAL-SAVINGS ACCOUNT WITH $13.95, PURPORTED TO REPRESENT LOSS INCURRED THROUGH THE INABILITY OF THE UNITED STATES GOVERNMENT TO EARN COMPENSATORY INTEREST ON THE FUNDS INVOLVED ($457.70) BECAUSE THEY WERE NOT ON DEPOSIT.

HAD THESE FUNDS NOT BEEN EMBEZZLED, THERE IS LITTLE LIKELIHOOD THAT THEY WOULD HAVE BEEN DEPOSITED ON AN INTEREST BEARING BASIS FOR THE REASON THAT AT THE TIME OF THE MANIPULATION THERE WERE NO BANKS QUALIFIED TO RECEIVE THEM IN CLEVELAND, AND SUCH BANKS THROUGHOUT THE COUNTRY WHICH WERE QUALIFIED WERE ACCEPTING ONLY A SMALL PORTION OF THE FUNDS AVAILABLE.

THE INTERPRETATION BY THIS OFFICE OF THE ACT APPROVED JUNE 25, 1910, IS THAT THE BOARD OF TRUSTEES HAS ABSOLUTE CONTROL OF POSTAL-SAVINGS FUNDS RECEIVED AS DEPOSITS AT POSTAL-SAVINGS DEPOSITORY OFFICES AND IS CLOTHED WITH THE POWER TO MAKE ALL NECESSARY AND PROPER REGULATIONS FOR THE RECEIPT, TRANSMITTAL, CUSTODY, INVESTMENT, AND REPAYMENT OF THE FUNDS DEPOSITED IN SUCH POSTAL-SAVINGS DEPOSITORY OFFICES. IN OTHER WORDS, THIS BUREAU HOLDS THAT IT IS NOT WITHIN THE PROVINCE OF THE GENERAL ACCOUNTING OFFICE TO DIRECT THE METHOD IN WHICH POSTAL-SAVINGS FUNDS SHALL BE INVESTED OR TO FIX THE RATE OF INTEREST THE INVESTMENTS SHALL YIELD. THEREFORE SEEMS APPARENT THAT IT SHOULD BE OF NO CONCERN TO THE GENERAL ACCOUNTING OFFICE WHETHER THE BOARD OF TRUSTEES LENDS ANY PARTICULAR DEPOSIT TO BANKS, INVESTS IT IN GOVERNMENT SECURITIES, OR ELECTS TO LEAVE IT WITH OTHER SURPLUS FUNDS ON HAND TO MEET WITHDRAWALS. ACCORDINGLY, THIS OFFICE TAKES EXCEPTION TO YOUR INSTRUCTIONS TO THE POSTMASTER AND HAS INFORMED HIM THAT THE DEBIT ENTRY OF $13.95 SHOULD NOT BE MADE IN ANY OF HIS ACCOUNTS.

WHILE THE REASON GIVEN FOR RAISING THE CHARGE OF $13.95 MAY HAVE BEEN MISSTATED, THE STATEMENT SENT TO THE POSTMASTER SHOULD HAVE FULLY CLARIFIED THE MATTER, IT BEING SHOWN THEREIN THAT THE INTEREST ITEMS MAKING UP SAID AMOUNT REPRESENTED INTEREST WHICH THE GOVERNMENT WAS OBLIGATED TO PAY THE DEPOSITORS DUE TO THE ANTE-DATING OF THE CERTIFICATES IN THE CASE OF ANTONIETTA LANESE AND TO THE PAYMENT OF INTEREST IN THE CASE OF BEARCH SIMONIAN FOR A PERIOD PRIOR TO THE DATE OF THE CERTIFICATES AS CONTEMPLATED BY THE INSTRUCTIONS IN LETTER OF MARCH 10, 1938, SUPRA, SO AS TO PRESERVE THE EQUITIES OF THE DEPOSITORS WITH RESPECT TO INTEREST.

THE ACTION REQUIRING THE ADJUSTMENTS AS MADE APPEARS TO BE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 7 OF THE ACT OF JUNE 25, 1910, SUPRA, THAT INTEREST AT THE RATE OF 2 PERCENT PER ANNUM SHALL BE ALLOWED AND ENTERED TO THE CREDIT OF THE DEPOSITOR.

THE AUTHORITY OF THE BOARD OF TRUSTEES TO ADMINISTER POSTAL-SAVINGS FUNDS AND TO PROVIDE FOR THEIR RECEIPT, TRANSMITTAL, CUSTODY, INVESTMENT, AND REPAYMENT, IS NOT QUESTIONED AND IS NOT INVOLVED IN THE PRESENT CASE. THE ONLY QUESTION HERE INVOLVED IS AS TO THE AMOUNT WHICH SHOULD BE CHARGED TO AN EMBEZZLER WHO IS APPROPRIATED POSTAL SAVINGS FUNDS. THE AMOUNT CHARGEABLE TO HIM AND WHICH SHOULD HAVE BEEN COLLECTED UNDER THE METHOD ADOPTED TO ADJUST THE INTEREST ON THE TWO ACCOUNTS INVOLVED IS NOT LIMITED TO THE AMOUNT OF ACTUAL CASH EMBEZZLED, BUT INCLUDES, ALSO, SUCH ADDITIONAL AMOUNT AS IT WAS NECESSARY FOR THE GOVERNMENT TO PAY BY REASON OF THE ISSUING OF CERTIFICATES BEARING INTEREST FROM THE DATES OF DEPOSITS MADE BY THE DEPOSITORS--- IT BEING ASSUMED THAT THE INTEREST AS SO ADJUSTED WAS IN ACCORDANCE WITH LAW AND THE REGULATIONS OF THE BOARD OF TRUSTEES.

IT SHOULD BE READILY APPARENT FROM THE FOREGOING THAT THE CHARGE OF $13.95 MADE IN THIS CASE IS IN NO WAY DEPENDENT UPON ANY CONJECTURE AS TO WHETHER INTEREST ON THE FUNDS EMBEZZLED WOULD HAVE BEEN EARNED IF SAID FUNDS HAD BEEN ON DEPOSIT WITH THE GOVERNMENT, OR WHETHER SAID FUNDS WOULD OR WOULD NOT HAVE BEEN INVESTED WITH INTEREST ACCRUING THEREON DURING THE PERIOD SAID FUNDS WERE IN THE HANDS OF THE EMBEZZLER. THE CHARGE MERELY REPRESENTS THE ACTUAL COST TO THE GOVERNMENT TO MAKE GOOD TO THE DEPOSITORS THE AMOUNTS EMBEZZLED BY THE FORMER CLERK, AND SUCH AMOUNT SHOULD HAVE BEEN COLLECTED FROM HIM.

SINCE THE POSTMASTER AT CLEVELAND FAILED TO COLLECT SUCH AMOUNT WHEN ADJUSTMENTS WERE MADE IN THE ACCOUNTS OF THE DEPOSITORS HE IS PROPERLY CHARGEABLE THEREWITH.

ACCORDINGLY, FOR THE REASONS HEREIN STATED THE ACTION HERETOFORE TAKEN BY THIS OFFICE IN THE MATTER MUST BE AND IS SUSTAINED.