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Navy deserted who presented fraudulent ravel orders were not the result of the bad faith or lack of reasonable care of a U.S. The Finance and Accounting Officer exercised proper supervision through maintaining and enforcing an informal policy requiring his subordinates to bring to his attention any orders which were not marked "ORIGINAL ORDERS.". Since the Naval Investigative Service is required by a Memorandum of Understanding between the Department of Justice and the Department of Defense Directive on fraud cases against the Defense Department. Were made to a deserter from a Navy ship who requested travel expense advances based on forged travel orders. Your request is based on our authority to relieve disbursing officials under 31 U.S.C.

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B-234962, Sep 28, 1989

APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Disbursing officers - Relief - Illegal/improper payments - Travel allowances DIGEST: 1. Five improper travel advances, totalling $10,692, paid to a U.S. Navy deserted who presented fraudulent ravel orders were not the result of the bad faith or lack of reasonable care of a U.S. Marine Corp Finance and Accounting Officer or his subordinates. The Finance and Accounting Officer exercised proper supervision through maintaining and enforcing an informal policy requiring his subordinates to bring to his attention any orders which were not marked "ORIGINAL ORDERS." The record also shows the subordinates questioned the fraudulent orders presented by the deserter and only paid the advances when authorized by the Finance and Accounting Officer. APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Illegal/improper payments - Fraud - Debt collection - Statutory compliance 2. The U.S. Navy satisfied the collection requirements of GAO's accountable officer cases by referring fraudulently obtained travel advances to the Naval Investigative Service. The Finance and Accounting Officer referred the fraud to the Naval Investigative Service. Since the Naval Investigative Service is required by a Memorandum of Understanding between the Department of Justice and the Department of Defense Directive on fraud cases against the Defense Department, we view the referral to the Naval Investigative Service as sufficient compliance with the Federal Claims Collection Standards for purposes of this request for relief.

The Honorable H. Lawrence Garrett, III Secretary of the Navy Department of the Navy:

This responds to your March 17, 1989 request that we relieve Captain (CPT) William J. Viets (the Disbursing Officer at the Marine Corps Logistics Base, Barstow, California) and three of CPT Viets' subordinates of their personal responsibility for five improper payments made out of CPT Viets' accounts. The five payments, totalling $10,692, were made to a deserter from a Navy ship who requested travel expense advances based on forged travel orders. Your request is based on our authority to relieve disbursing officials under 31 U.S.C. Sec. 3527(c) (1982). As explained below, we grant relief to CPT Viets and his subordinates.

The improper payments in this case resulted from a fraudulent scheme carried out by Data Systems Technician Third Class (DS3) Sidney J. Lindley, USN. DS3 Lindley deserted from his assignment on the USS Carl Vinson on July 31, 1986. On five occasions from September 3, 1986, through March 17, 1987, DS3 Lindley requested and received travel advances from the Military Pay/Travel Pay Section under CPT Viets' responsibility. These requests for travel advances were made on the basis of three sets of forged travel orders. The three sets of orders (which stated that they were prepared on July 1, 1986, October 21, 1986, and February 27, 1987) directed DS3 Lindley to report to a Honeywell facility in Phoenix, Arizona for a total of 330 days of factory computer repair training, from August 2, 1986 to June 28, 1987.

The pertinent dates, amounts of advances received and Military Pay/Travel Pay Section personnel involved each payment are as follows:

Date Amount Travel Clerk/Voucher Examiner

Sept. 3, 1986 $1,692 Private Tina M. Byers

Dec. 3, 1986 $2,250 Ms. Jane A. Craig

Jan. 8, 1987 $2,250 Ms. Jane A. Craig

Feb. 2, 1987 $2,250 Private Tina M. Byers

Mar. 17, 1987 $2,250 Lance Corporal S. J. Dana

The statements of Ms. Craig, Pvt. Byers, and Corp. Dana indicate that they each questioned the orders presented by Lindley because the orders were not stamped with the notation "ORIGINAL ORDERS." The statements of Pvt. Byers and Corp. Dana show that they raised the matter with Ms. Craig, and the statements of all three show that they did not pay Lindley travel advances until CPT Viets approved the orders. Since your submission in this case did not contain a copy of an applicable standing operating procedure, we contacted Ms. Craig to ask her about the procedures in effect at the time of the loss. Ms. Craig stated that orders which were not stamped as originals would be submitted to the Disbursing Officer before a travel advance would be paid. The Disbursing Officer would authorize payment if the signature on the orders appeared to be genuine. This procedure appears to have been followed in this case.

Ms. Craig also informed us that she questioned Lindley about his orders. In response to her questioning, Lindley stated that his family lived north of Barstow, and that the long-term nature of his training "assignment" would cause him to travel frequently between his home and his training site in Phoenix.

CPT Viets discovered that these payments were made on fraudulent orders in May of 1987, after the Navy office which was being charged for the advances questioned the expenditures. CPT Viets then notified the Marine Corps Finance Center and the Naval Investigative Service (NIS) of the fraud, and on May 28, 1987, the Commanding General of the Marine Corps Logistics Base in Barstow, California ordered an investigation.

The statute which authorizes this Office to relieve CPT Viets and his subordinates states:

"The Comptroller General may relieve a present or former disbursing official of the agency responsible for a deficiency in an account because of an illegal, improper, or incorrect payment, and credit the account for the deficiency, when the Comptroller General decides that the payment was not the result of bad faith or lack of reasonable care by the official. However, the Comptroller General may deny relief when the Comptroller General decides the head of the agency did not carry out diligently collection action under procedures prescribed by the Comptroller General."

31 U.S.C. Sec. 3527(c) (1982). Your request that we relieve CPT Viets states that the payments were not made by him directly, but rather by his subordinates.

"The basic rule is that a disbursing agent, officially responsible for an account, is personally liable for the wrongful payments made by his subordinates. In such cases, we grant relief to the supervisor upon a showing that the disbursing officer properly supervised his employees. Proper supervision is demonstrated by evidence that the supervisor maintained an adequate system of procedures and controls to avoid errors and that appropriate steps were taken to ensure the system's implementation and effectiveness."

62 Comp.Gen. 476, 480 (1983).

Typically, we have based our conclusions about proper supervision upon evidence such as the applicable standard operation procedures, and statements of the subordinates and the supervisor explaining the procedures and how they were implemented. B-222392, November 12, 1986. In this case, although there was no written standing operating procedure, we conclude that CPT Viets properly supervised his subordinates. All three subordinates questioned the orders presented to them and, in accordance with the informal policy, obtained CPT Viets' authorization to pay the requested travel advances. The policy described by Ms. Craig, and the statements of all three subordinates, show that CPT Viets maintained and enforced procedures and controls designed to prevent this type of loss. The fact that Lindley's skillful perpetration of the fraud succeeded in obtaining the improper advances does not mean that the office was improperly supervised. See B-229275, January 15, 1988.

We also conclude that the improper payments made by Ms. Craig, Pvt. Byers and Corp. Dana not the result of their bad faith or lack of reasonable care. As discussed above, each of these three officials questioned Lindley's orders and obtained approval before paying the requested advances. In addition, Ms. Craig questioned Lindley, and received a plausible answer, as to why he was requesting an advance at a location which was some 400 miles from his assigned training site. Based on this questioning of the orders, and based on the approval obtained by each of them, we conclude that these three subordinates of CPT Viets did not act in bad faith or with a lack of reasonable care. See B-221940, October 7, 1987.

Since we conclude that the improper payments were not the result of bad faith or the lack of reasonable care, our decision to grant relief depends upon whether the Navy undertook the diligent collection action specified by 31 U.S.C. Sec. 3527(c). Our decisions have specifically outlined the collection actions we require.

"We will exercise our discretion under section 3527(c) and grant relief only where there is evidence that a diligent collection effort has been made. In order to show that such effort has been made a relief request must demonstrate compliance with the Federal Claims Collection Standards issued jointly by the General Accounting Office (GAO) and the Department of Justice."

62 Comp.Gen. at 478. The Federal Claims Collection Standards require that "any claim as to which there is an indication of fraud" should be promptly referred to the Department of Justice. 4 C.F.R. Sec. 101.3. The Department of Justice may then, in its discretion, return the matter to the agency for handling in accordance with the standards. Id.

The record in this case does not show whether the evidence of Lindley's fraud against the United States was referred to the Department of Justice. However, the record does show that CPT Viets notified the NIS of the fraud soon after he discovered it. Further, we note that a Memorandum of Understanding between the Department of Defense and the Department of Justice requires the NIS to confer with the Department of Justice when the NIS identifies a fraud against the Department of Defense which would warrant federal prosecution. Enclosure 1 to Department of Defense Directive 5525.7, January 22, 1985. Since the NIS was required to confer with the Department of Justice when it was informed of the fraud perpetrated by Lindley, we view CPT Viet's referral of the fraud to the NIS as compliance with the Federal Claims Collection Standards, at least so far as this request for relief is concerned. Accordingly, we grant relief to CPT Viets and his subordinates.

However, it appears from the record in this case that the issue of collecting back the amounts fraudulently obtained by Lindley was never adequately addressed. The record shows that, within 13 months after his fraud was discovered, Lindley was arrested by civilian authorities, turned over to the Navy, court-marshalled, sentenced, imprisoned, and released. The record does not reflect any effort to collect the debts owed by Lindley during that time, nor does it reflect any determination by the Department of Justice that the debt should be compromised or terminated. To avoid this type of debt collection oversight in the future, we urge the Department of Defense and the Department of Justice to better coordinate their fraud investigation and prosecution activities to take into account the debt collection responsibilities set out in the Federal Claims Collection Standards.

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