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United States Department of Labor
Employees’ Compensation Appeals Board
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F.H., Appellant
and
DEPARTMENT OF THE
AIR FORCE, WARNER ROBINS AIR FORCE BASE, GA, Employer
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Docket No. 07-1379
Issued: November 24,
2008
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Appearances: Case
Submitted on the Record
Steven Harrell, Esq., for the appellant
Office of Solicitor, for the Director
DECISION AND ORDER
Before:
ALEC J. KOROMILAS,
Chief Judge
DAVID S. GERSON,
Judge
MICHAEL E. GROOM,
Alternate Judge
JURISDICTION
On April 25, 2007
appellant, through his attorney, filed a timely appeal from a January 31,
2007 merit decision of the Office of Workers’ Compensation Programs finding
that he forfeited his entitlement to compensation. Pursuant to 20 C.F.R.
§§ 501.2(c) and 501.3, the Board has jurisdiction over the merits of this
case.
ISSUE
The issue is whether the
Office properly determined that appellant forfeited his entitlement to compensation
for the periods January 30, 1996 through April 30, 1997 and
June 21, 1997 through September 21, 1998 because he failed to report
earnings from employment.
FACTUAL HISTORY
On December 6, 1994
appellant, then a 40-year-old electronics engineer, sustained injury to his
right lumbosacral spine while pushing a computer terminal. He stopped work on
December 7, 1994. The Office accepted appellant’s claim for lumbar
strain and an aggravation of pars defect. It placed him on the periodic rolls
effective June 6, 1995.
By decision dated
December 8, 1995, the Office terminated appellant’s compensation effective
that date on the grounds that he had no further employment-related disability.
In a decision dated April 9, 1997, an Office hearing representative
reversed the December 8, 1995 decision. The Office reinstated him on the
periodic rolls effective January 25, 1996.
On April 30, 1997
appellant signed an affidavit of earnings and employment (Form EN1032) covering
the prior 15-month period. The form advised that he must report all employment
or self-employment from which he received “a salary, wages, income, sales
commissions, piecework, or payment of any kind.” The EN1032 form notified
appellant that he was obligated to immediately report any employment to the
Office and that fraudulently concealing or failing to report income could
subject him to criminal prosecution. On the April 30, 1997 EN1032 form,
he indicated that he did not work for an employer during the previous 15 months
but was self-employed. Appellant specified that he had rental houses which he
paid “to have repaired and managed.” He asserted that he earned no profit from
the rental houses and that as a result of his injury he had to hire someone to
perform repairs. Appellant did not list any earnings from employment or self
employment. On September 21, 1998 he signed another EN1032 form covering
the previous 15-month period. Appellant indicated that he was not employed or
self employed but did repair and manage several rental houses. He maintained
that the rental houses were not profitable. Appellant specified on the EN1032 form
that he had no earnings from employment.
On April 3, 2000 an
investigator with the employing establishment requested information from insurance
companies about appellant’s dates of employment and earnings. On April 6,
2000 Empire General Life Assurance Corporation provided a listing of commissions
paid to him from 1997 to 2000. The company noted that appellant’s one policy
written with the company had been terminated for lack of payments of premiums.
He earned $26.41 in 1997 and $7.13 in 1998. On April 7, 2000 Life USA submitted a copy of appellant’s signed agency agreement but noted that he had not been
paid any commissions. On April 11, 2000 Penn Mutual Life Insurance
Company (Penn Mutual) related that appellant “has been under an agents’
contract since April 3, 1997. He earned $1,650.00 in 1997, $5,049.00
in 1998 and $1,934.85 in 1999. A Form 1099 reporting miscellaneous income for
tax purposes from Penn Mutual indicated that he earned $2,640.00 in 1997,
$8,019.00 in 1998 and $2,858.15 in 1999 in nonemployee compensation. On
April 11, 2000 First Penn-Pacific Life Insurance Company related that
appellant worked for the company as an independent contractor effective
August 20, 1997 but did not have any earnings. The company submitted its
agency appointment agreement, signed by appellant on August 3, 1997.
On April 12, 2000 Nationwide Mutual Insurance Company indicated that it
had appellant listed as a broker but did not have tax statements. He was
terminated in 1998. On April 28, 2000 Celtic Life Insurance Company submitted
copies of cancelled commission checks and appointment information from
August 1, 1999 to the present. On May 26, 2000 Transamerica Life Companies
(Transamerica) provided commission statements from August 1999 to
April 2000, copies of cancelled checks and a 1099 for 1999. Appellant
signed a contract application to work as an independent producer with Transamerica
on April 9, 1999. On the application, he indicated that he had
worked as an insurance agent or broker for 20 years and had represented First
Colony Life since 1981, Jackson Mutual Life Insurance Company since 1985 and
Penn Mutual since 1996.
In a September 8, 2000
investigative memorandum, a special agent with the employing establishment
related that appellant worked as a self-employed insurance agent.
Appellant had earnings from 12 different insurance companies totaling $5,347.03
in 1997, $6,105.48 in 1999 and $565.81 in 2000.
By decision dated
September 7, 2001, the Office found that appellant forfeited his
entitlement to compensation for the periods January 30, 1996 through
April 30, 1997 and June 21, 1997 through September 21, 1998
because he failed to report earnings from employment. It found that he earned
$5,347.03 in 1997, $13,205.26 in 1998, $6,105.48 in 1999 and $565.81 in 2000
but did not report his earnings on EN1032 form dated April 30, 1997 and
September 21, 1998. The Office determined that the forfeiture created
an overpayment of $100,740.53 in compensation and notified appellant of the
preliminary overpayment finding that he was at fault in its creation. It also advised
him of its preliminary determination that he received an overpayment of $7,856.84
as he had outside earnings from May 1 through June 20, 1997 and from September 22,
1998 through February 26, 2000 while receiving compensation for total
disability. The Office informed appellant of its preliminary determination
that he was at fault in the creation of the overpayment.
Appellant and his spouse
completed a federal income tax return (Form 1040) in 1996. In a Schedule C,
Profit or Loss from Business (Sole Proprietorship), accompanying the 1996 Form
1040, he indicated that he earned $11,537.00 in his business of insurance/sales.
Appellant deducted $10,731.00 in expenses for a total profit of $806.00. In a
handwritten Schedule C attachment, he listed insurance income in 1996 of
$320.32 with United of Omaha, $10,245.66 with First Colony Life, $242.64 with
Life of Virginia, $170.13 with Jackson National Life, $20.08 with Zurich,
and $528.15 with Empire General. Appellant attached statements showing that in
1996 he earned $217.35 from Life of Virginia, $528.15 from Empire General and
$1,134.25 from Jackson Life.
In a 1997 Schedule C-EZ, Net
Profit from Business (Sole Proprietorship), accompanying appellant’s 1997 Form
1040, appellant listed a net profit from insurance/sales of $815.00. In a 1997
Schedule C, Profit or Loss from Business (Sole Proprietorship), he provided his
principal business or profession as insurance/sales. Appellant listed
$6,337.00 as gross receipts on sales and $6,396.00 in expenses. In a 1998
Schedule C, accompanying his 1998 Form 1040, appellant indicated that he earned
$8,547.00 in gross receipts or sales in the business of insurance/sales. He
deducted $6,200.00 in expenses for a total profit of $2,347.00.
On October 2, 2001
appellant requested a prerecoupment hearing. On March 26, 2002 Penn Insurance
& Annuity indicated that it did not pay appellant any income in 1997, 1998
and 1999. The company noted that it was a subsidiary of Penn Mutual and that
payroll records “would indicate that payments are made through the parent
company, Penn Mutual Life.”
Appellant’s attorney submitted
a statement showing gross earnings from insurance companies. Appellant
indicated that he earned a total of $5,347.03 in 1997, $13,205.26 in 1998,
$7.098.37 in 1999 and $26,064.99 in 2000 from various insurance companies,
including Penn Mutual and Penn Insurance & Annuity. The attorney maintained
that appellant earned an average of $39.09 per week during this period and
received an overpayment of $1,118.08. On April 9, 2002 the Office
received a copy of an insurance policy dated October 21, 1997. The
policy listed appellant as the servicing agent.
In a report dated April 2,
2002, Dr. Donald S. Meek, a clinical psychologist, diagnosed a
learning disorder not otherwise specified and an adjustment and pain disorder.
He found that appellant appeared to have problems processing visual information
and with his memory. Dr. Meek stated, “He may therefore have difficulty
processing information via visual and auditory processes and become
confused in emotionally laden situations.” He advised that appellant could “manage
his legal and financial affairs appropriately.”
At the hearing, held on
April 9, 2002, appellant’s attorney contended that appellant only serviced
contracts that he had previously sold rather than selling new insurance
contracts. Counsel also maintained that appellant did not receive money from
Penn Insurance and Annuity. He noted that appellant bought several policies
for himself and his mother which were counted as income. Council contended
that when his earnings were averaged he had only a $1,018.00 overpayment of
compensation. Appellant testified at the hearing that he had dyslexia and
learning disabilities. He maintained that he did not actively earn money from
selling insurance but only serviced existing clients. Appellant submitted a
Form 1099 for Penn Mutual which he alleged showed commissions that he was paid
on a life insurance policy that he purchased for himself. He also purchased a
long-term care insurance policy for his mother. Appellant earned $2,347.00 in
1998 from selling insurance and $2,871.00 in 1999. He did not solicit for new
customers but would make change that existing clients wanted to make to their
policies, such as increasing the amount of their insurance. Appellant had about
35 to 40 clients. He did not see his earnings as sales commissions because he
was not selling insurance but instead servicing existing clients.
By decision dated
February 23, 2003, the Office hearing representative affirmed the
September 7, 2001 forfeiture decision and finalized the finding that
appellant received an overpayment of $100,740.53 for the periods
January 30, 1996 through April 30, 1997 and June 21, 1997
through September 21, 1998 based on the forfeiture of compensation and
that he was at fault in the creation of the overpayment.
He concluded that appellant’s earnings from insurance commissions were not de
minimus as he earned $11,537.00 in 1996, $6,337.00 in 1997 and $8,547 in
1998. The hearing representative also found that appellant had not established
that he was incapable of understanding the form due to his dyslexia.
On February 20, 2004
appellant, through his attorney, requested reconsideration of his forfeiture of
compensation. Counsel argued that his earnings selling insurance constituted
dissimilar employment and would not have affected his workers’ compensation
benefits. The attorney also argued that appellant viewed his earnings as
passive as it “substantially involved policy renewals….” He argued that
appellant did not willfully conceal earnings as he reported them to the Federal
Government on his income tax returns. Counsel argued that appellant’s
cognitive impairment affected his ability to understand and complete the EN1032
form.
He also disputed including the commissions earned from the sale of insurance
policies for appellant and his mother as income. The attorney submitted a
report dated April 1 and 2, 2003 from Dr. Meck, who diagnosed a
learning disorder not otherwise specified. Dr. Meck found that appellant may
require additional time on timed tasks and again found problems processing
visual and auditory information and impaired memory in comparison to his
intellect.
By decision dated May 11,
2004, the Office denied modification of its prior decision.
On May 5, 2005 appellant
again requested reconsideration. He argued that he earned only $8,130.72 for
the period in question largely by servicing existing life insurance contracts.
Appellant reported all income on his federal tax return. He contended that a
conspiracy existed between his former spouse and the employing establishment to
bring fraud charges against him and ruin him financially. The employing
establishment retaliated against him because he exposed breaches in
environmental regulations. Appellant submitted evidence regarding civil actions
between himself and his wife in 2000 and 2002. He also submitted documents and
orders relating to an individual’s removal of solid waste from the employing establishment.
In a December 2, 1996 consent order, the state Department of Natural
Resources penalized the individual for allowing open dumping. On March 6,
1997 a geologist with the state Department of Natural Resources noted that the
individual had disposal contracts with the employing establishment, but that
the employing establishment stopped work on the disposal contract when notified
of the consent order. In a letter dated April 26, 2005, Penn Mutual
indicated that it paid appellant $2,640.00 in 1997 and $8,019.00 in 1998.
By decision dated
December 19, 2005, the Office denied appellant’s request for
reconsideration on the grounds that it was untimely and did not establish clear
evidence of error. By decision dated February 24, 2006, it denied his request
for a hearing under 5 U.S.C. § 8124 as he had previously requested reconsideration
of his claim. After further consideration, by decision dated April 7,
2006, the Office denied modification of its May 11, 2004 decision. It
noted that appellant had timely requested reconsideration and thus reviewed the
merits of his claim. The Office determined that he had not established that he
was unable to comprehend the reporting requirements outlined on the EN1032 form.
It noted that the amount of the overpayment was $100,740.53 as appellant
forfeited the entire amount of the compensation he received for the periods
January 30, 1996 through April 30, 1997 and June 21, 1997
through September 21, 1998.
On March 31, 2006
appellant appealed to the Board. On August 18, 2006 the Board set aside
the December 19, 2005 decision and remanded the case for the Office to
consider appellant’s timely request for reconsideration under 20 C.F.R. § 10.606(b)(2).
The Board found that the Office’s April 7, 2006 decision, issued while the
Board had jurisdiction over the case, was null and void.
By decision dated
January 31, 2007, the Office denied modification of its May 11, 2004
decision. It noted that it had previously addressed appellant’s contention
that he was not competent to complete the EN1032 form. The Office also found
that he had not submitted evidence showing a conspiracy against him by his
former wife or retaliation by the employing establishment for exposing
hazardous waste.
LEGAL PRECEDENT
Section 8106(b) of the Federal
Employees’ Compensation Act provides that an employee who “fails to make an
affidavit or report when required or knowingly omits or understates any part of
his earnings, forfeits his right to compensation with respect to any period for
which the affidavit or report was required.”
The Board has
held that it is not enough merely to establish that there were unreported
earnings or unemployment. Appellant can be subjected to the forfeiture
provisions of 5 U.S.C. § 8106(b) only if he “knowingly” failed to report
employment or earnings.
The term “knowingly” as defined in the Office’s implementing regulation, means “with
knowledge, consciously, willfully or intentionally.”
ANALYSIS
The Office found that
appellant forfeited his entitlement to compensation from January 30, 1996
through April 30, 1997 and June 21, 1997 through September 21,
1998 because he failed to report earnings from employment on a Form EN1032. On
April 30, 1997 and September 21, 1998 appellant signed a Form EN1032
covering the prior 15-month periods. On the forms, he indicated that he did
not perform any work for an employer but had rental houses which he managed at
a loss. Appellant listed no earnings from employment or self-employment.
On September 8, 2000 a
special agent with the employing establishment notified the Office that
appellant worked as an insurance agent. She submitted responses to inquiries
regarding his earnings from various insurance companies. Tax forms completed
by appellant reveal that he earned $11,537.00 from insurance/sales in 1996,
$6,337.00 in 1997 and $2,347.00 in 1998. An insurance policy dated
October 21, 1997 listed him as the servicing agent. Appellant thus had
unreported earnings from employment during the time periods covered by the EN1032
form dated April 30, 1997 and September 21, 1998.
Appellant contends that his
earnings were substantially less when expenses were deducted from his gross
earnings and were not sufficient to affect his wage-earning capacity. He
further disagreed with the exact amount that he earned during the relevant
period. Appellant asserted that he did not work for Penn Insurance and Annuity
and that the Office should not have included the commissions he received on the
sale of insurance contracts he purchased for himself and his mother. Office
regulations, however, provide that, if an employee knowingly omits or
understates earnings or work activity in making a report, he or she shall
forfeit the right to compensation with respect to any period for which the
report was required.
There is no provision for offset or payment based on the amount of income
actually received. Whether the employee makes a profit on his activities is
also not relevant.
Additionally, the earnings appellant received from the sale of insurance
contracts he purchased would constitute income from commissions.
Appellant can be subject to
the forfeiture provision of section 8106(b) only if he “knowingly” failed to
report earnings or employment. The Office has the burden of proof to establish
that a claimant did, either with knowledge, consciously, willfully, or
intentionally, fail to report earnings from employment.
Appellant completed EN1032 forms which advised him that he must report both all
employment and all earnings from employment and self-employment. The EN1032 form
clearly stated that he could be subject to criminal prosecution for false or
evasive answers or omissions. The factual circumstances of record, including his
signing of strongly worded certification clauses on the EN1032 form, provide
persuasive evidence that he “knowingly” understated his earnings and employment
information.
Appellant’s filing of a tax return advising the Internal Revenue Services of
income generated by his business is persuasive evidence that he knew that he
had income from employment. He misrepresented his earnings and, therefore,
forfeited his right to all compensation for the periods January 30, 1996
through April 30, 1997 and June 21, 1997 through
September 21, 1998.
Appellant contended that he did
not knowingly fail to report earnings as he did not actively sell insurance but
serviced existing contracts. The EN1032 form, however, clearly provide that
all earnings, including those from commissions, must be reported. Appellant characterized
his earnings as passive. His activities, however, were not those of a passive
investor. Appellant actively participated in servicing insurance contracts by providing
changes and renewals of existing contracts.
Appellant asserted that he was
unable to understand the forms because he has dyslexia. He submitted reports dated
April 2, 2002, April 1 and 2, 2003 from Dr. Meck, who diagnosed
a learning disorder not otherwise specified and an adjustment and pain
disorder. Dr. Meck opined that appellant had difficulty processing
information and had memory problems. In his April 2, 2002 report, however,
he found that appellant could “manage his legal and financial affairs
appropriately.” Appellant has not submitted evidence establishing that he was
mentally incapacitated or otherwise incompetent to handle his affairs at the
time that he signed the EN1032 form on April 30, 1997 and
September 21, 1998.
Appellant further alleged that
the employing establishment and his former spouse conspired against him. He
submitted court documents relevant to civil actions between himself and his spouse
and documents relevant to an environmental investigation by the state. This is
not relevant, however, to the pertinent issue of whether the Office established
that appellant knowingly omitted earnings from employment or self employment
during the period covered by the April 30, 1997 and September 21,
1998 EN1032 form. The Board finds that the Office met its burden of proof and
thus properly determined that he forfeited his entitlement to compensation.
CONCLUSION
The Board finds that the
Office properly determined that appellant forfeited his entitlement to compensation
for the periods January 30, 1996 through April 30, 1997 and
June 21, 1997 through September 21, 1998 because he failed to report
earnings from employment.
ORDER
IT
IS HEREBY ORDERED THAT the decision of the Office of Workers’ Compensation
Programs dated January 31, 2007 is affirmed.
Issued: November 24, 2008
Washington, DC
Alec J.
Koromilas, Chief Judge
Employees’
Compensation Appeals Board
David S.
Gerson, Judge
Employees’
Compensation Appeals Board
Michael E.
Groom, Alternate Judge
Employees’
Compensation Appeals Board