A postmaster in South Dakota has been ordered to pay a civil judgment of $353,441.42 to the United States for defrauding the United States Postal Service (USPS). In United States v. Christeson, Judge Karen E. Schreier of the United States District Court for the District of South Dakota granted summary judgment in favor of the government, finding that the defendant intentionally and falsely certified that he was issuing refunds when in fact, he was keeping the money for his own purposes. Of note, the court found that under the False Claims Act, a $353K judgment was NOT grossly disproportional to the $8,970.71 that the post master stole from the USPS.
The Underlying Fraud Allegations
From 2010 to 2015, Craig Christeson served as the postmaster in two different South Dakota post offices. The USPS sells postage meters to permit customer to print out their own postage. When an envelope is put through a postage meter, but the resulting postage strip is not used, the resulting postage meter strip is said to be “spoiled.” When this occurs, a customer may bring the spoiled postage meter strip to the post office and receive a refund or credit.
As the postmaster, Christeson was responsible for verifying and issuing refunds to customers. Sometime in 2013, Christeson began falsely certifying that he had received spoiled postage meter strips from customers when he had not. He would then print a money order in the name of the fake customer, cash the money order at the post office, and keep the money. The USPS suffered damages totaling $8,970.71. Christeson pled guilty to the criminal charges against him and was sentenced to probation and to pay restitution. There was then a civil False Claims Act case brought against him.
The Court’s Findings on the Excessive Fines Clause
The court found that Christeson’s guilty plea in his criminal case included admissions that established the essential elements of an FCA cause of action. Accordingly, the court granted summary judgment. Turning to the damages calculation, the judge found that the proper damage award was the statutory treble damage figure ($8,970.71 x 3 = $26,912.13), plus the civil penalties (minimum penalty amount of $5,500 multiplied by 61 claims =$335,500), minus the amount paid in restitution ($8,970.71). Thus, the court found that Christeson must pay the government $353,441.42 under the FCA. Given that the amount calculated was approximately thirty-nine times the actual damages suffered by the USPS, the court performed an Excessive Fines Clause analysis. The court found that the judgment was not excessive, nor grossly disproportional because (1) the intentional fraud lasted for multiple years (2) the judgment sought is the minimum within statutory limits, and (3) each of Christeson’s sixty-one violations was an independent instance of intentional misconduct.
This case illustrates that the damages provisions of the False Claims Act can be onerous. It also serves as an example that it never pays to cheat the post office.