Acting Comptroller General Elliott to the President, United States Civil Service Commission, May 8, 1942:

I have your letter of April 22, 1942, as follows:

The Commission has before it a question involving interpretation of section 5 (a), act of January 24, 1942 (Public No. 411).

This section amends section 7, act of May 29, 1930, by vesting title to annuity, upon attaining age 62, in an officer or employee who is separated from service after serving five years or more. If such separation is involuntary not by removal for cause on charges of misconduct or delinquency, the employee may elect at age 55 (or at date of separation if subsequent to that age) an annuity equal to the present worth of an annuity beginning at age 62. Upon any such separation, the individual account of the employee is retained in the retirement fund and draws interest at 3% compounded annually until beginning date of annuity, unless he elects to receive refund covering his service up to and including January 23, 1942.

Decisions by your office have been uniform in holding that a sum otherwise due from the retirement fund in the case of an employee separated under conditions entitling him to refund could be diverted to satisfy a Government claim even though the individual did not himself file application therefor, or that a person eligible for annuity would be required to reimburse the United States from his annuity payments. The law then in effect, however, accorded no annuitable rights to persons separated after serving only five years except in cases of total disability for useful and efficient service.

Your decision is, therefore, respectfully requested whether an employee separated under conditions outlined in the second paragraph above, who leaves his money in the retirement fund for future annuitable purposes is subject to having his account diverted to satisfy a bona fide Government indebtedness, or whether the department involved must wait to recover the indebtedness from the annuity payments when due (or for the lump sum payable to the estate if the former employee dies in the meantime).

Section 5 of the act of January 24, 1942, Public Law 411,56 Stat. 16, provides, in pertinent part, as follows:

SEC. 5. Section 7 of the said Act of May 29, 1930, as amended, is hereby repealed, and in lieu thereof the following is substituted:

"(a) Should any officer or employee to whom this act applies, after having served for a total period of not less than five years and before becoming eligible for retirement become separated from the service, such officer or employee shall be paid a deferred annuity beginning at the age of sixty-two years, computed as provided in clauses (1) and (2) of section 4 (a) of this act: Provided, That any such person involuntarily separated from the service not by removal for cause on charges of misconduct or delinquency may elect to receive an immediate annuity beginning at the age of fifty-five or at the date of separation from the service if subsequent to that age having a value equal to the present worth of a deferred annuity beginning at the age of sixty-two years, or at age of separation if subsequent to age sixty-two, computed as provided in section 4 of this act; Provided further, That nothing in this act shall be so construed as to prohibit the refund of deductions, deposits, or redeposits made prior to the effective date of this act with interest thereon, or of any voluntary contributions made under the provisions of section 10 of this act, with interest: And provided further, That all moneys, except voluntary contributions, so refunded an officer or employee must be redeposited with interest before such officer or employee may derive any annuity benefits based on the service covered by the refund."

As stated in the third paragraph of your letter, it is the settled rule that (1) the amount to the credit of a former employee in the retirement fund, or (2) the amount of his retirement annuity installments may be applied in liquidation of his indebtedness to the United States (4 Comp. Gen. 521; 9 id. 465; 10 id. 225; 11 id. 363; 16 id. 161; id. 1017;

id. 1101; 17 id. 391; id. 518; 19 id. 88; id. 721; O'Leary v. United States, 82 C. Cls. 305; Boerner v. United States, 30 Fed. Supp. 635; affirmed on appeal, 117 F. (2d) 387; United States v. United States Fidelity & Guaranty Company, 35 Fed. Supp. 959), also, that if the amount to the credit of an employee in the retirement fund be due and payable to a former employee, no application for refund is necessary to authorize the United States to apply such amount in liquidation of the indebtedness to the United States (16 Comp. Gen. 962). However, it has been held that the amount in the retirement fund to the credit of an employee may not be used for the purpose of offset so long as he remains in the service. 19 Comp. Gen. 705, 708; decision dated June 11, 1941. B-16420, to you; and decision dated August 9, 1937, A-87351. See, also, United States v. United States Fidelity and Guaranty Company. supra, in which it was stated at page 962:

*** Furthermore, it can well be questioned whether the United States could. for any obligation owing to it, attach the retirement fund credit of one of its employees who was continuing in its employment. But, when an employee has been dismissed, and the portion contributed by him is payable to him, I am decided that a different rule governs, that the United States can withhold an amount equal to the arrearage. There then remained no bar to the application of this amount to the indebtedness of Hamilton to the United States.

Under the provisions of section 7 of the retirement act, as amended by section 5 of the act of January 24, 1942, supra, an employee who has served a total period of 5 years or more and is separated from the service after the date of the act may not withdraw from the retirement fund the amount deducted from his salary, for retirement purposes. on and after the date of the act; and he may elect to leave in the retirement fund the amount which was deducted for retirement purposes prior to the date of the act, said amount, together with the amount deducted on or after the date of the act, to remain available as the basis for an annuity at the age of 62 years. In line with the decisions hereinbefore cited-which are to the effect that the amount to the credit of an employee in the retirement fund is not available for set-off to liquidate an indebtedness of the employee to the United States while the employee remains in the service-it is concluded that the portion of the individual account in the retirement fund to the credit of a former employee as a result of retirement deductions made on and after January 24, 1942, is not available for set-off; and that the portion of his individual account in the retirement fund as a result of retirement deductions made prior to January 24, 1942, is available for set-off only in the event the former employee elects to receive refund and makes claim for the amount thereof. However, annuity payments if and when due will be available for set-off. Also, if the former employee dies prior to becoming eligible for an annuity, any amount in the retirement fund otherwise payable to his estate will be available for set-off.

When a debt is reported to the Civil Service Commission in a case of the class herein discussed a caveat should be placed against the individual account of the employee in the retirement fund with a view to collection in accordance with the rules herein stated.

(B-25560)

SET-OFF-RETIREMENT DEDUCTIONS—UNSUPPORTED SUSPICION OF THEFT OF GOVERNMENT FUNDS

An administrative finding based solely upon suspicion that a former postal employee was responsible for shortages in the accounts of other employees because he had previously been found guilty of theft of Government funds in his own custody and had had access to the funds in the custody of the other employees does not established a prima facie case against the former employee such as would justify setting off the amount of the shortages against the amount to his credit in the retirement fund. 19 Comp. Gen. 88, distinguished.

Acting Comptroller General Elliott to the President, United States Civil Service Commission, May 8, 1942:

Reference is made to your letter of February 12, 1942 (file R-488412 Ret: WJ: DO), as follows:

This office is in receipt of a retirement record account (Form 2806) in the case of Roy F. Daentl, former clerk, Post Office Department, Madison, Wisconsin. The total amount of deductions is $1,829.93.

A letter has been received from the Post Office Department relative to the shortage in fixed stamp credits amounting to $109.22.

Mr. Daent has been fully advised of the claim filed against him and has protested the proposed set-off of $109.22 in liquidation of his indebtedness. All correspondence pertaining to this claim is forwarded herewith for verification and issuance of instructions.

It will be appreciated if you will return the inclosed correspondence with your reply, which this office would like to have in duplicate.

In letter of November 5, 1941 (43657-M), to you, the chief post office inspector reported as follows:

Reference is made to your letter of June 27, 1941, (WJ: etc.) concerning the retirement money due Roy F. Daentl, former clerk, Madison, Wisconsin.

An inspection of the East Side Station of the Madison, Wisconsin, post office on June 17, 1941, disclosed a shortage of $142.25 in the fixed stamp credit of Daentl. He executed an affidavit admitting the embezzlement of funds and explained how he was able to cover the shortages. He stated that when his credit was checked he exhibited a requisition for the approximate amount of the shortage and after his cash had been counted he removed that amount in cash and made a requisition to the main post office by the next registered dispatch. He used this method each time his credit was checked by a supervisor. The shortage was made good.

Previous shortages had been occurring in the fixed stamp credits of other employees of the East Side Station. One clerk had replaced shortages of $22.70 and another $156.52. It was disclosed that these employees sometimes left their drawers unlocked during short absences and it is believed that Daentl, in view of the nature of his assignments, had opportunity to steal funds therefrom without detection whenever he was so disposed. Affidavits have been made by the two employees that they sustained shortages in their fixed stamp credits totaling $179.22. Since Daent is an admitted thief, little credence can be placed in his denial of responsibility for these shortages.

The Third Assistant Postmaster General, Division of Stamps, has held administratively that Daentl is accountable for $109.22 of the shortages, which is established by records on file in the post office, the balance of $70.00 being disregarded

because no records of loss can be produced. He has instructed the postmaster at Madison to set aside $109.22 as a special trust fund pending set-off of this amount from Daentl's retirement money.

It will be appreciated if you will have $109.22 due Daentl deposited in the Treasury to the credit of the postal account of Walter J. Hyland, postmaster, Madison, Wisconsin. Kindly advise this bureau of the action taken.

The balance due Daentl may be released insofar as this bureau is concerned. Daentl's last known address is 2421 Willard Avenue, Madison, Wisconsin. A copy of this letter and pertinent reports and papers have been referred to the General Accounting Office, Postal Accounts Division.

In letter of October 24, 1941, from the Third Assistant Postmaster General to the chief post office inspector, wherein the evidence in the case submitted by the inspector was administratively analyzed, it was stated:

The receipt is acknowledged of your letter of October 18, transmitting a copy of the report of Inspector M. G. Eberlein, in case of above number and accom panying papers, relating to the responsibility of Roy F. Daentl, former clerk in the Madison, Wisconsin, post office, for shortages in the stamp credits of other clerks in that office.

A careful review has been made of the evidence submitted in this case and. while there is no actual proof that the shortages in the credits of Clerks Edward W. Dowdle and Alfred J. Lund are chargeable to depredations on the part of former Clerk Daentl, the latter's dishonesty has been established by reason of the known misappropriation of funds in his own credit. It has also been disclosed that this former employee, by reason of the nature of his assignments, was in a position to steal without detection from the other credits had he been so disposed.

The shortages supposedly attributable to former Clerk Daentl are stated in the report as follows:

In consideration of the various facts presented in this case, this office concurs in the views expressed by the inspector to the effect that justification exists for the reimbursement of the above employees, who have made good the shortages from personal funds, from retirement funds now due former employee Daentl, so far as the prior existence of such shortages is definitely established by records on file in the post office. As no such records can, it is understood, be produced in connection with the alleged shortages of $40.00 and $30.00, respectively, in the credit of Clerk Dowdle, due apparently to lax post office methods, it is the opinion of this office that these amounts should be disregarded in the final settlement.

It is recommended, therefore, that steps be taken to file claim against the retirement fund of former Clerk Daentl of the Madison, Wisconsin, post office, in the amount of $109.22 for reimbursement purposes on the above basis.

Attached hereto is copy of letter of this date to the Postmaster, Madison, Wisconsin, directing the withdrawal of $109.22 from current post office receipts to be held in a special trust fund pending the outcome of the action being taken to obtain a like set-off from the retirement fund of former employee Daentl.

Under date of February 6, 1942, the former employee, Roy F. Daentl, advised the Civil Service Commission as follows:

Replying to your letter of January 19th, 1942, as filed in R-488412, Ret: WJ: DG.

I am amazed at the suggestion that there be deducted from my retirement fund account the amount of $109.22 under the claim of alleged "indebtedness to the Government." There is positively no such indebtedness on my part to the Government. I am aware of the fact that shortages were found in the fixed credits of both Clerks Dowdle and Lund of the East Side Station, Madison. Apparently Inspector M. G. Eberlein is seeking to assist these clerks in trying to get me to make up their shortages. This I positively refuse to do because I have had nothing to do with the shortages of which they are guilty. If such a deduction as you suggest should be made from my account, how can such an act of dishonesty by officials of the Government be excused?

It is true that under the pressure of constant illness among the members of my family a shortage was found by the inspector in the fixed credits in my own account at the station. For this failure on my part I am deeply sorry and have paid dearly. When my case was settled in court not one word was said about charging me with the shortages found in other clerks' accounts. Why not? They know there is no evidence of my guilt in their affairs. And now that my case was closed they resort to the trickery of trying to deduct their shortages from my account at your office. What kind of conduct is that? I therefore appeal to your sense of justice to use the powers of your office to see that this request be cancelled. I will welcome an impartial investigation of the whole matter. Would it not be possible for your commission to send or appoint an impartial investigator to examine all the facts in this case before further action is taken? No application is being filed by me for return of my retirement fund account inasmuch as I am seeking reinstatement into the postal service to which I have given most of my life. Awaiting your reply,

In decision of July 21, 1939, to you, 19 Comp. Gen. 88, it was held as follows (quoting from the syllabus):

Where the administrative office has reported the facts in connection with depredations on the mails together with a finding that a former postal employee is responsible for the loss sustained by the Government, a prima facie case is established which may not be overcome by the former employee's mere categorical denial with no evidence in support thereof, and the amount found due the United States may be set off against an amount otherwise due the former employee from the retirement fund.

While the rule stated in the above-quoted decision has been applied consistently to cases involving substantially identical facts, there is for noting here that the administrative finding of Daentl's responsibility for the shortage in two other employees' accounts is based solely upon suspicion, and rests upon Daentl's having been proven to have been dishonest in respect of his own accounts. No evidence has been disclosed in any way connecting Daentl with the shortages in the two other employees' accounts, which shortages heretofore have been made good by them thus having the effect of rendering the Government whole in the matter. Neither the fact that Daentl was found guilty of theft of money from Government funds in his own custody, nor the fact that he could have stolen funds in the custody of other employees if he had been so disposed, may be accepted by this office as sufficient to conclude that the Post Office Department has established a prima facie case against Daentl under the rule stated in the quoted decision. See 7 Comp. Gen. 593; 18 id. 524. In the case considered in the decision of July 21, 1939, 19 Comp. Gen. 88, the syllabus of which is quoted above, as well as in other cases considered by this office and by the courts where it has been held that the retire