B-217114.6, Jul 24, 1990

B-217114.6: Jul 24, 1990

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APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Liability - Debt collection DIGEST: The joint liability of an accountable officer and an employee who obtained fraudulent travel reimbursements is not affected by the agency returning amounts improperly collected from the employee. Kane was the Chief of Finance and Accounting at the Buffalo. A series of fraudulent travel expense reimbursement claims were paid to a number of Buffalo District Office employees. Kane is jointly liable with the employees for the amounts owed to the United States as a result of the fraudulent reimbursement claims. Have relieved Mr. We may relieve accountable officers of their strict liability for deficiencies in their accounts upon a showing that the deficiencies were not caused by either bad faith or the lack of due care on the part of the officer.

B-217114.6, Jul 24, 1990

APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Liability - Debt collection DIGEST: The joint liability of an accountable officer and an employee who obtained fraudulent travel reimbursements is not affected by the agency returning amounts improperly collected from the employee. As part of its efforts to recover the fraudulent reibursements, the U.S. Army Corps of Engineers withheld a regular compensation check from the employee without complying with the requirements of 5 U.S.C. Sec. 5514 (1988). Correcting the administrative error by releasing the withheld check does not affect the liabilities of either the employee or the accountable officer.

The Honorable Henry J. Nowak House of Representatives

Dear Mr. Nowak:

This responds to your request of December 4, 1989, that we address certain concerns raised by your constituent, Mr. Paul F. Kane. From 1980 to 1982, Mr. Kane was the Chief of Finance and Accounting at the Buffalo, New York, District Office, North Central Division, U.S. Army Corps of Engineers. During that time, a series of fraudulent travel expense reimbursement claims were paid to a number of Buffalo District Office employees. As an accountable officer, Mr. Kane is jointly liable with the employees for the amounts owed to the United States as a result of the fraudulent reimbursement claims.

Mr. Kane asks whether the collection actions taken against Mr. Peter F. Schmid, one of the employees who submitted fraudulent travel reimbursement claims, have relieved Mr. Kane of some of his joint liability. For the reasons stated below, we conclude that Mr. Kane remains jointly liable with Mr. Schmid for the amount of $200.

As discussed in more detail in 65 Comp.Gen. 858 (1986), we considered a request under 31 U.S.C. Sec. 3527 (1988) to grant Mr. Kane relief from part of his liability for $22,848.22 in fraudulent travel claims paid out of his account. Under section 3527(c), we may relieve accountable officers of their strict liability for deficiencies in their accounts upon a showing that the deficiencies were not caused by either bad faith or the lack of due care on the part of the officer. We granted Mr. Kane relief for fraudulent payments made before January 1, 1982, but denied relief for the $15,332.50 in payments made after that date. /1/ The basis for our decision was that Mr. Kane had not exercised due care in making payments after he was informed of the nature of the travel fraud scheme being used by the employees. 65 Comp.Gen. at 862. In response to Mr. Kane's request that we reconsider our decision, we affirmed our partial denial of relief in B-217114.5, June 8, 1990, a copy of which is enclosed.

Of Mr. Kane's $15,332.50 joint liability, $200 represents a small portion of the thousands of dollars Mr. Schmid is liable for because of his participation in the fraud scheme. Although Mr. Kane is jointly liable to the United States for that amount, the Corps of Engineers still has a responsibility to carry out collection actions against Mr. Schmid. U.S.C. Sec. 3527(d). Mr. Kane asserts that he should no longer be held liable for the $200 because the Corps did not aggressively pursue collection actions against Mr. Schmid and inappropriately returned certain funds to Mr. Schmid it had collected from him. In this regard, Mr. Kane surmises that the Corps may have decided to collect amounts from him rather than Mr. Schmid and the other employees who engaged in the fraud. The record before us indicates that the Corps' efforts to collect from Mr. Schmid have been adequate.

The record shows that on June 11, 1984, Mr. Schmid pled guilty to a misdemeanor charge resulting from the travel fraud scheme. Although the Buffalo District Office generally sought to have restitution orders included in the sentences of employees who were convicted or pled guilty, Mr. Schmid was only given a one year term of probation, and no restitution order was issued. The Corps formally asked the United States Attorney for the Western District of New York to pursue civil collection action against Mr. Schmid, but the U.S. Attorney declined to do so. The Corps eventually collected about $6,000.00 from Mr. Schmid through offsets against travel reimbursements, his final paycheck, severance pay, and lump sum payments for annual leave upon his November 23, 1984, termination.

Moreover, the record submitted to us shows that the actions taken against Mr. Schmid were typical of the collection efforts the Corps made against other employees. In fact, in a "Memorandum For Record," the Assistant District Counsel for the Buffalo office noted that the Commander of the Buffalo District had specifically requested the U.S. Attorney to seek restitution as a part of the sentences or probation orders given to employees who committed fraud. The reason given in the memorandum for seeking restitution was to help ensure that Mr. Kane would not be required to repay the improper payments. In light of these efforts, we cannot agree with Mr. Kane that the Corps failed to pursue adequate collection actions against Mr. Schmid.

With respect to any funds returned to Mr. Schmid, the record submitted to us in this matter shows that, as a part of its collection efforts, the Corps mistakenly withheld a paycheck from Mr. Schmid. The Buffalo District office sought to collect some of the improper payments made to Mr. Schmid by an offset against his final paycheck and any lump sum leave payments Mr. Schmid was due upon his termination from the Corps. However, the Corps' Civilian Payroll Office withheld one of Mr. Schmid's regular paychecks in addition to his final paycheck and payment for accrued leave. /2/

Collection of amounts owed the United States by offsetting against regular compensation payments is subject to the requirements of 5 U.S.C. Sec. 5514 (1988), while collection by offset against final paychecks and lump-sum payments of accrued annual leave when there has been no antecedent offset against current salary is subject to the requirements of 31 U.S.C. Sec. 3716. 64 Comp.Gen. 907 (1985). The record submitted to our office shows that both the Buffalo District Office and the Northern Division Office of the Corps determined that Mr. Schmid's regular paycheck had been withheld in violation of the requirements of 5 U.S.C. Sec. 5514. For example, the Corps withheld the entire amount of the paycheck for current salary while section 5514 generally limits the amount which the United States can withhold from a federal employee's paycheck to 15 percent of the employee's pay remaining after deducting amounts required by law to be withheld. The Deputy District Commander therefore ordered the withheld check to be released to Mr. Schmid. In our view, returning the check to Mr. Schmid was appropriate. The action Mr. Kane complains of merely corrected an administrative error in the Corps' collection efforts, and does not affect the liabilities of either Mr. Schmid or Mr. Kane.

/1/ Our decision reported the amount of Mr. Kane's liability to be $15,232.49. The amount was corrected and our decision was modified by our letter, B-217114.3, February 10, 1987.

/2/ Letters from Mr. Kane and his successor to the Civilian Payroll Office requested that "any check due Mr. Schmid" be forwarded to the Buffalo District.