Benefits fraud backfires

If you are looking for a shortcut to riches, don't try to swindle the workers' compensation system, or you'll wind up in rags.

A number of postal workers have learned - to their chagrin - that stiff fines and financial penalties await those who try to defraud the U.S. Postal Service by filing false workers' compensation claims.

One such case involved John Arney, a USPS employee who filed a workers' compensation claim with the Labor Department's Office of Workers' Compensation Programs (OWCP). Arney claimed that an injury sustained while doing his job prevented him from working and earning money.

The general counsel (GC) of the U.S. Postal Service filed a complaint against Arney claiming that Arney had failed to disclose to OWCP that he was self-employed as a farmer for part of the time he claimed and received workers' compensation benefits. That's a no-no. You cannot claim compensation for a job-related injury if you are working.

Because of Arney's false statements, the GC said Arney had been overpaid and was liable to USPS for $206,213.92, plus a civil penalty of $20,000, for a total liability of $226,213.92. Arney filed a reply to the complaint denying that he was liable for any overpayment or penalty.

Following a hearing at which both parties presented evidence, an administrative law judge concluded that between Oct. 21, 1986, and Sept. 21, 1991, Arney had submitted four false claims to OWCP, as stated in the complaint. Therefore, Arney was liable for the $226,213.92 assessed by the GC.

Arney immediately appealed the judge's decision to the Postal Service Judicial Office (PSJO). He said the judge erroneously concluded that he was liable for an assessment and civil penalty and contended that the judge first had to determine whether his disability benefits would have been reduced or discontinued if he had not submitted the false claims. In other words, Arney's defense was that the question of whether he made false statements was not relevant because it had no bearing on his eligibility for workers' compensation benefits.

Arney also argued that USPS had not established that he made any fraudulent representations. And even if he had, USPS is barred from any recovery under the law because the forms previously filed by Arney showed that he was not unemployed and that USPS was well aware that Arney was engaged in farming activities during the period he was receiving disability compensation.

Sounds like a formidable defense, doesn't it? Think again.

PSJO picked apart Arney's defense point by point (John F. Arney; P.S. Docket No. PF-55; Jan. 6, 1997). First, it ruled that the administrative law judge was not required to determine that Arney's workers' compensation benefits would have been reduced or discontinued if Arney had submitted truthful information. Arney's submission of information was made to OWCP to assure the continuation of the workers' compensation benefits he was receiving. Therefore, they were claims for compensation and were covered by a different section of the law than the one Arney sought to invoke. Under the operative section, the judge was not required to determine that the benefits would have been reduced or discontinued if truthful information had been submitted.

Moreover, the law does not require a showing of actual damages to the government in order for an assessment to be made, PSJO ruled. The fact that Arney might have obtained the same benefits without making the false statement does not change the fact that he obtained benefits by making false representations on claim forms.

I guess the logic here is that if you lie on a claim for benefits, you are disqualified from entitlement to benefits.

Different Tack

Arney also contended that USPS was barred from recovering any overpayment from him because he provided truthful information in his initial claim in 1982. Arney said there was no evidence that he increased his farming activities since that time, adding that USPS had actual knowledge of his farming activities from the inception of his disability. He also asserted that on three of the four follow-up forms he filed, he stated that he was not unemployed.

Contrary to Arney's assertion, PSJO determined that the evidence unequivocally established that Arney's initial claim indicated that he must have substantially increased his farming activities afterward and continued those activities during the period covered by the four follow-up reports filed between 1987 and 1990. On the 1982 claim, Arney said he did not operate the farm himself; all the cultivated land was leased out; and all livestock and farming operations were managed by someone else. He also indicated that he had no self-employment earnings.

On the other hand, Arney's subsequent testimony, the testimony of others, his tax returns and an Agriculture Department form he signed in 1989 all established that he was engaged in substantial farming activities from 1986 to 1990. Consequently, the evidence clearly established that Arney had indeed substantially increased his farming activities sometime after 1982, and the administrative law judge had not erred in arriving at that conclusion.

The judge also did not err in concluding that Arney could be found liable to USPS, even though some postal officials were aware of his farming activities and there were inconsistencies in the information provided on the claims he submitted. As the judge pointed out, none of this relieved Arney from the obligation to provide accurate and complete information in responding to all questions asked.

If Arney had told the truth, he still may have been found to be entitled to workers' compensation. But because he filed a false claim, he immediately became ineligible for compensation, regardless of his ability or inability to work. After consideration of Arney's contentions on appeal and the evidence presented, PSJO concluded that Arney was liable to USPS for the total assessment and penalty of $226,213.92.

This case illustrates the validity of the expression, "Honesty is the best policy."

--Bureaucratus is a retired federal employee who contributes regularly to Federal Computer Week.

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