Petition for Writ of Certiorari — Kennedy v. General Services Administration

MAR

i

JOSEPH F. SVAN

: CLE «

No.

|

IN THE SUPREME COURT

of the

UNITED STATES

Term 1986

Kathleen Kennedy

Petitioner,

vs.

General Services Administration (GSA)

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE FEDERAL CIRCUIT

ELIZABETH G. LEAVY

CARROLL, BURDICK & MCDONOUGH

One Ecker Building, Suite 400

Ecker and Stevenson Streets

San Francisco, CA 94105

(415) 495-0500

Attorneys for Petitioner

QUESTIONS PRESENTED FOR REVIEW

x May a federal employee be

dismissed for the negligence of a sub-

ordinate where there was no finding that

the delegation of duties to that sub-

ordinate was negligent in and of itself?

y Can a federal employee be

dismissed for an alleged participation in

the omission of significant information

from an official report intended for

Congress where such participation consists

only of the employee's failure to "whistle

blow" on her superior?

il

TABLE OF CONTENTS

Questions Presented

Opinion Below

Jurisdiction

Statement of the Case

Appendix A - Opinion of the United

States Court of Appeals for the

Federal Circuit, Decided

December 19, 1985

Appendix B - Initial Decision of

the Full Merit Service Protection

Board, Decided November 30, 1983

Appendix C = Opinion and Order for

the Merit Systems Protection Board,

Dated January 8, 1985

iil

TABLE OF AUTHORITIES

Cases

Crofoot v. United States

Government Printing Office,

761 F.2d 661 (Federal Circuit

1985)

Mizerak v. Adams,

682 F.2d 374 (2d Cir. 1982)

Statutes

5 v.8.€. § 750i

Ss U.S.C. -§ 7501(a)

§ U.S.C. § 7701(a)

S$ U.S... § Fre terti)

5 U.S.C. § 7701(c)(1)(B)

$5 U.8.€. §°779stB ti)

28 U.S.C. § 1254(1)

Page

WO

15

~J

ho

No.

IN THE SUPREME COURT

of the

UNITED STATES

Term 1986

Kathleen Kennedy

Petitioner,

vs.

General Services Administration (GSA)

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE FEDERAL CIRCUIT

TO THE JUSTICES OF THE SUPREME COURT OF

THE UNITED STATES:

Petitioner Kathleen Kennedy respect-

fuly prays that a Writ of Certiorari issue

to review the judgment of the United

States Court of Appeals for the Federal

a

. \

Circuit which affirmed the decision of the

Merit Systems Protection Board sustaining

Petitioner's removal from Federal Service

and for an order reversing the removal.

OPINION BELOW

The opinion of the United States

Court of Appeals for the Federal Circuit

was ordered not published in a printed

volume and is reproduced in Appendix A to

this Petition. The prior order of the

full Merit Systems Protection Board is

unreported and is reproduced in Appen-

dix B. The opinion and order of the

presiding official for the Merit Systems

Protection Board is unreported and is

reproduced in Appendix C.

JURISDICTION

The judgment of the United States

Court of Appeals for the Federai Circuit

was entered on December 19, 1985. Juris-

diction of this Court is invoked under 28

U.S.C. § 1254(1).

|

3

STATEMENT OF THE CASE

In September 1982, after almost ten

years of unblemished service with the fed-

eral government, Petitioner, Kathleen A.

Kennedy, was dismissed from her position

as Region 9 Leasing Branch Chief and from

employment with the General Services

Administration (GSA) after the branch

inadvertently failed to provide a required

360-day notice to exercise an option to

renew a lease for the government in a San

Francisco office building. The GSA

charged Petitioner with (1) negligent

administration of Region 9 leases and

(2) omission of material information from

a document intended for Congress.

Ms. Kennedy appealed the GSA's deci-~

Sion to dismiss to the Merit Systems

Protection Board pursuant to 5 U.S.C.

§ 7701(a). In July 1983, a 4-day eviden-

tiary hearing was held in San Francisco

before the Honorable Edward G. Reidy,

oy

acting as presiding official for the

board. Pursuant to 5 U.S.C. § 7701(c)

(1)(B), the government had the burden of

proving, by a preponderance of the evi-

dence, that the charges against Petitioner

were true, that there was a nexus between

the taking of disciplinary action against

Appellant and the efficiency of the serv-

ice, and that the particular penalty

selected -- removal -- was appropriate.

The evidence before the presiding

official showed that the option was missed

because a computerized lease file con-

tained an erroneous renewal date, which

date had been entered into the computer

seven years before Petitioner took her

position as Leasing Branch Chief. The GSA

did not argue before the Merit Systems

Protection Board that Petitioner was

responsible for the faulty input or that

prior to the discovery of the missed

option she had any information that the

5

lease file in fact contained faulty in-

formation.

The evidence showed that Ms. Kennedy

had delegated the responsibility for

ensuring the accuracy of the particular

lease file to one of her subordinates, a

GS-12 leasing specialist who was assigned

to the lease pursuant to the organiza-

tional structure of Region 9. GSA argued

before the Board that Ms. Kennedy should

have personally reviewed lease files to

check the accuracy of the information for

all the leases (over 700) for which

Region 9 Leasing Administration was respon-

sible. Thus GSA essentially argued, and

the Board accepted, the proposition that

Petitioner had a personal duty to ensure

that no mistakes were made by any of her

subordinates. Thus, in essence, the Board

accepted the GSA's argument that, despite

the existence of a bureaucratic structure

which contemplated delegation of authority

6

to subordinates, Ms. Kennedy, as super-

visor, was absolutely liable for any

mistakes of her subordinates, even if the

delegation of authority to the subordinate

was proper. Thus, the Board held Peti-

tioner responsible for the fact that her

subordinate failed to notice the faulty

lease information, despite the fact that

it made no finding that petitioner was

negligent in her delegation of authority

to the subordinate.

With respect to the charge regarding

the alleged "participation" in the omis-

Sion of significant information from an

official report intended for the Congress

of the United States, the evidence before

the Board established without dispute that

Petitioner neither prepared the “official

report" in question -- a prospectus -- nor

ordered the omission of any information

from the prospectus.

7

The main thrust of the GSA's argument

regarding this supposed participation in

the omission of material from the pro-

spectus was that Petitioner, who, like

several other people who were not disci-

plined, knew of the omission, should have

reported the omission to an authority

higher than her superior. The Merit

Systems Protection Board accepted the

Board's finding despite the fact that

Petitioner showed that she reasonably

believed that her superior had contacted

the proper authorities in Washington

regarding this omission of data.

Ms. Kennedy appealed the decision of

the Merit Systems Protection Board to the

Court of Appeais for the Federal Circuit,

pursuant to 5 U.S.C. § 7703(b)({1).

ee

8

REASONS FOR GRANTING THE WRIT

AP The Holding Of The Presiding

Official Of The Merit Service

Protection Board And The

Subsequent Affirmance By The

Federal Circuit Court Of

Appeals Creates A Rule That

Supervisors May Be Removed

For The Mistakes Of Their

Subordinates Even Where The

Delegation Of Duty To That

Subordinate Was Reasonable.

The Federal Circuit's affirmance of

the decision by the Merit Service Pro-

tection Board has possibly devastating

implications for the continued functioning

of the system of federal service.

The Board's decision is tantamount to

a holding that the director of every

agency, department and division in the

federal government should be held respon-

Sible for the mistakes of his or her

subordinates even if the superior has

properly delegated duties within the chain

of command and is not personally respon-

Sible for any of the mistakes. Such

9

decision violates all standards applicable

to removal of employees from the federal

service.

Under 5 U.S.C. § 750l(a) and 5 U.S.C.

§ 7701(c)(1) the Merit Systems Protection

Board may uphold an agency's decision for

removal only if that decision is supported

by a preponderance of the evidence and

will serve to promote the efficiency of

the service. Courts have interpreted

these statutes to require the agency to

prove that in fact the employee committed

the act with which he is charged. Cro-

foot v. United States Government Printing

Office, 761 F.2d 661 (Federal Circuit

1985). An agency action which is based on

an unsupported premise must be set aside.

Mizerak v. Adams, 682 F.2d 374 (2d Cir.

1982).

In this case, there was never any

finding that Petitioner had been respon-

sible for the original inaccurate input of

10

data into the computer system. Further,

there was never any finding that Peti-

tioner was made aware of the inaccuracy of

data. There was also no finding that the

organization of Petitioner's agency, which

organization was in place before Peti-

tioner became head of the agency, was an

improper organization.

The uncontroverted evidence before

the Board showed that Petitioner had

specifically ordered the leasing spe-

Clalist in charge of the lease to verify

the accuracy of the leasing data, paying

particular attention to data regarding

option renewal requirements (the data that

in fact had been inaccurately inputted in

the system) by checking the original

leasing documents to ascertain that the

data in the computer was consistent with

the data in the original file. Petitioner

received a report from the leasing spe-

Clialist that she had verified the data

aa

and that it was accurate. At no time did

the government argue that Petitioner had

not made this assignment or received this

report, or that Petitioner had any reason

to believe that the specialist was inca-

pable of performing her assigned duties.

Thus, the only grounds for the deci-

Sion for removal was that such removal was

justified because a subordinate to whom

Ms. Kennedy had made a justifiable delega-

tion had inexplicably made an error. Such

a finding ignores the reality of govern-

ment administration. Petitioner had a

right, and in fact a duty, to work within

the framework of the administration of

which she was a branch chief. The struc-

ture of this system mandated that the

details of any lease, including the one at

issue in the case, were to be managed by

the high-level, experienced leasing spe-

Cialist. It cannot be said that the

efficiency of the service will be served

12

by removing all federal employees who work

within the organizational structure of

their agency. This Court must provide

guidance in the proper interpretation of

cause to remove a federal employee to the

Federal Circuit (the only court of appeals

to whom federal employees may appeal in

cases not involving discrimination).

Zz The Decision Of The Federal

Circuit Creates A Rule

Justifying Removal Of Any

Federal Employee Who Fails

To "Whistle Blow"

The decision of the Federal Circuit

Court of Appeals affirmed the Merit

System's Protection Board's removal of

Petitioner for "participating" in the

omission of information from a prospectus

intended for Congress. This finding of

supposed participation was entirely un-

Supported and in fact was contradicted by

all the record evidence. The head of

Region 9 planning, who was responsible for

preparation of the prospectus, Petitioner's

———

13

supervisor (who was also supervisor of the

planning branch), and Ms. Kennedy herself

all testified that she had no authority

over the Planning Branch. All testified

that she could not have ordered anyone in

the Planning Branch to remove data from

the prospectus. Both the head of the

Planning Branch and Ms. Kennedy's super-

visor, Joseph Yiakis, testified that, in

fact, it was Yiakis who ordered the head

of the Planning Branch to remove the

information.

It is significant to note that the

head of Planning, who was in fact respon-

Sible for the preparation of the prospec-

tus, and deleted the information, was not

removed from her employment with the

federal government.

Ms. Kennedy's alleged participation

in the omission consisted merely of the

fact that she knew her supervisor had

ordered the deletion. The uncontroverted

14

evidence showed that Ms. Kennedy reason-

ably understood by statements made by

Yiakis that he had informed the proper

authorities about the deletion.

The decision of the Federal Circuit

in affirming the decision of the Board

places a novel burden on federai em-

ployees. Pursuant to this decision, any

federal employee may be removed merely for

knowing about the possibly improper acts

of fellow employees even if he or she does

not participate.

CONCLUSION

The decision of the Merit System's

Protection Board and the affirmance by the

Federal Circuit Court of Appeals have

introduced novel and insupportable ele-

ments into the law of federal employment.

Pursuant to these decisions, no federal

employee may now safely delegate authority

pursuant to the organizational structure

of his or her agency. Furthermore, every

15

employee who fails to “whistle blow" on

his or her supervisor is subject to re-

moval. The decisions involved in this

case indicate that an agency can remove a

federal employee for acts for which she

was not responsible, using a "guilt-by-

association" standard. It is incumbent

upon this Court ~:o instruct the Federal

Circuit Court of Appeals that such a

standard violates the standards for re-

moval for federal employees set forth by

Congress in 5 U.S.C. § 7501.

Respectfully submitted,

CARROLL, BURDICK & MCDONOUGH

wy Aecpah eeee

Elizabeth G. Leavy ]

One Ecker Buiiding, Suite 400

Ecker and Stevenson Streets

San Francisco, CA 94105

(415) 495-0500

16

CERTIFICATE OF SERVICE

A copy of the foregoing Petition for

Writ of Certiorari with accompanying

appendices was mailed this date to

Renn C. Fowler, Esq.

General Services Administration

525 Market St., 28th Flr., 9L

San Francisco, CA 94105

and to

Office of the Special Counsel

Merit Systems Protection Board

1120 Vermont Avenue, NW

Washington, DC 20419

and to

David Cohen, Esq.

Director, Commercial

Litigation Branch

Civil Division

U.S. Dept. of Justice

Washington, DC 20530

Attn: Second Floor

Classifications Unit

Dated: March 17, 1986

4 /

eal fA C Pee "

stay mein G. LEAVY i

b

—

——————

Appendix A

Note: This opinion will not

be published in a printed volume

because it does not add

Significantly to the body of law

and is not of widespread legal

interest. It is a public

record. It is not citable as

precedent. The decision will

appear in tables published

periodically.

United States Court of Appeals

for the Federal Circuit

KATHLEEN A. KENNEDY, Appeal No.

85-2165

Petitioner,

Vv.

GENERAL SERVICES

ADMINISTRATION,

SPB Decision

)

)

)

)

)

)

)

)

)

) M

) No. SFO7528310148

Respondent.

DECIDED: December 19, 1985

Before MARKEY, Chief Judge, and BALDWIN and

NIES, Circuit Judges.

PER CURIAM.

———— eee

DECISION

The decision of the Merit Systems

Protection Board (board) sustaining

petitioner's removal for negligent

administration of leases and for

participating in the deliberate omission

of Significant information from an

official report intended for the Congress

of the United States, is affirmed.

OPINION

Petitioner's arguments are adequately

treated in the board opinion dated

January 14, 1985. We affirm on the basis

of that opinion.

SRNR 0 a i ie te

Appendix B

UNITED STATES OF AMERICA

MERIT SYSTEMS PROTECTION BOARD

KATHLEEN A. KENNEDY,

Appellant

DOCKET NO.

SF07528310148

Ve

GENERAL SERVICES

ADMINISTRATION,

Respondent

me ee ee ee ee

INITIAL DECISION

By: Edward J. Reidy Date: November 30, 1983

Administrative

Law Judge

With Appearances By:

Elizabeth Leavy, Esquire, for a

Renn C. Fowler, Esquire, for re

INTRODUCTION

On November 5, 1982, appellant was

removed from her position as Chief,

B-2

Leasing Branch, Real Estate Division,

Public Building Service, General Services

Administration, (GSA) Region 9, San

Francisco, California, for (a) negligent

administration of Region 9 leases am (b)

participating in a deliberate omission of

significant information from an official

report intended for Congress. When

removed, appellant was a GM-14. Her

timely appeal has been assigned to me for

processing and issuance of an initial

decision. Oral hearing was held in San

Francisco on July 11-14, 1983. Both

appellant and respondent filed post-

hearing briefs later discussed.

BACKGROUND

On behalf of several agencies GSA

leases space at 211 Main Street, San

Francisco. The original lease covering

this property was executed in 1972. Since

then the lease has undergone changes and

today 211 Main contains some 338,000

PUBLISHER'S NOTE:

The Following Pages Were Unavailable for Filming:

cease:

RE HIE PORTE

B-4

Because they were subject to different

negotiations and terms, the renewal notice

date for Units 2 and 3 was on or about

June 25, 1982.?

While reviewing the lease at 211 Main

preparatory to issuance of a prospectus>

as a condition precedent to renewal, GSA

staff in San Francisco discovered in early

May of 1982 that the March renewal date

evidently had gone by without necessary

notice of GSA's intention to renew having

been given to the landlord. Alarmed over

the prospect of such a serious oversight,

various realty specialists and

intermediate supervisors made close and

personal studies of the lease. Once it

appeared unmistakable that the oversight

had in fact occurred, their superiors were

2Multi-unit leases are no longer

permitted. (IV-584)

75 prospectus is a document containing

advance information about leases under

consideration by GSA.

|

B-5

notified on May 28. This is the date on

which appellant first was made aware of

the omission. She promptly notified her

own supervisor, Joseph Yiakis, of the

problem and he directed her to make a

personal verification of the apparent

oversight. She did. On about June 4 she

reported to him the renewal date on Unit l

clearly had been missed.

Interestingly, her close analysis of

records covering the 211 Main property

also revealed to appellant that some 5

years previously GSA had overlooked the

same lease option renewal date. Buoyed by

the the discovery that, in 1977, the same

landiord had been persuaded by GSA staff

to waive the notice period without

financial penalty to GSA, appellant and

her supervisor were encouraged to try to

salvage the wreckage of the missed date by

seeking a comparable waiver in 1982.

(III-477; IV-698, 699)

on

B-6

During most of June and July

appellant and Yiakis tried unsuccessfully

to persuade the landlord again to waive

the notice proviso as he had in 1977.

While negotiating with the landlord they

did not advise any of their senior staff

of the oversight. By July 22 it became

evident that this effort had failed. It

was at this time that senior officials of

Region 9 were notified of the missed lease

option date. (III-448, 495; IV-705-707)

There followed an investigation into the

circumstances of the missed lease option

and, as a result, penalties were meted out

to a number of personnel. Appellant was |

removed. So was Yiakis.

THE APPELLANT

At the time appellant was removed in

November of 1982 she had accumulated 10

years of Federal service and had performed

at increasingly important positions.

Throughout her entire career Kennedy had

B-7

received performance evaluations of either

outstanding or highly successful. Indeed,

her most recent supervisor (Yilakis)

characterized her as the best person in

GSA in performing duties as leasing branch

chief. Notably, the charges here are the

only clouds which appear on her entire

career with the Federal government.

On April 15, 1982, GSA underwent a

reorganization Prior to that time what

was the Leasing Branch in the Real Rotate

Division had been the Acquisition Branch

in the Space Management Division. The

duties and responsibilities of the newly

named branches remained the same, and so,

while Kennedy was actually removed from

her position of Chief, Leasing Branch,

during certain of the time periods

relevant she was Chief, Acquisition

Branch. Among the duties of the Leasing

Branch were (1) preparation of lease

prospectuses in conjunction with the

ee

B-8

planning staff; and (2) administration of

the regional lease program.

In addition to her assignment as

branch chief, appellant was a warranted

contracting officer. As such, she was one

of but a few GSA officials authorized to

enter into and administer contracts on

behalf of the Federal envexcnent. She was

the central figure of the leasing process

and could execute extensive leases and

commit the government to expenditures

without limitation. It was, to be sure, a

very important job for which she held

Significant and concomitant responsibility.

(1-190; 158-160) In particular she was

personally responsible for proper negotia-

tion and administration of leases and the

contracting officer is charged with the

affirmative duty of acting on renewal

options. (Agency Brief 50, 56) In this

assignment she was vested with a broad

range of discretion. (Agency Brief, 52)

B-9

RECITATION OF FACTS

The narrative conveniently begins

with a memorandum dated August 24, 1981,

wherein Central Regional Office (CRO), or

Washington headquarters, alerted Region 9

about leases expiring in 1983 which might

require prospectus preparation.“ That

same memorandum also sought information

concerning renewal option dates and urged

Pegion 9 to exercise care in preparing

prospectuses. (I-36, 37; RX-3) In fact,

although 211 Main was listed without an

option renewal date the memorandum

nonetheless did indicate the lease would

expire on June 21, 1983. (I-39) When, in

the fall of 1981, a prospectus was

. For all leases with an average annual

fair rental value exceeding $500,000.00,

GSA must obtain approval from Congress to

commit the monies. That approval is

obtained by submitting to the appropriate

committees a prospectus detailing the

salient facts about the lease under

consideration. (Respondent's Exhibit 22,

or RX=-22)

a

B-10

prepared for 211 Main it contained a

number of errors, the most cogent of which

was omission of the 360-day advance notice

requirement. Customarily these notice

periods are included in prospectuses.

(I-79, 80, 82, 115) This oversight was

detected in the CRO planning division

which advised Region 9 that it would, by

means of a footnote, insert the missing

information into the prospectus. (I-79,

80) When the Chief of Region 9's planning

branch was notified of the omission she

informed another staff member who said he

would advise Kennedy that CRO had to alter

the prospectus. (I-80, 112) In addition,

staff personnel in the planning branch

were told to contact the appropriate case

worker on Kennedy's staff in order to

check the lease for 211 Main and verify

cence and for all that the renewal date was

correct. (I-92) Staff personnel in

planning felt that the oversight was

B-11

likely caused by an error in the Form 620,

or lease digest. (I-106) Even though

appellant's staff was aware of the need of

CRO to correct the prospectus and the

reason, it is not clear Kennedy was

specifically told. By the same token, I

find that she was not ignorant of the

problem because of the modest size of the

office and the frequency of staff

contacts.

Later, (on or about May 25, 1982) it

became necessary to withdraw those

prospectuses prepared in 1981 and early in

1982 because they had not yet been acted

on by Congress and some updating” was

necessary. (I-40; 127) Included was

211 Main. A subsequent memorandum from

CRO, dated June 4, 1982, gave general

directions concerning the updating of

prospectuses and pointed out that the

lease at 211 Main had a renewal notice

date. (I-42) That memorandum also

al

B-12

directed that any prospectus submitted

should be in final form, that is to Say,

ready for submission to the Congress.

(I-42-44) In this connection, it is the

practice of CRO to forward prospectuses to

Congress once it completes a review unless

substantial alterations are necessary.

(I-55) If, however, there is a lapse

between the time CRO receives a prospectus

and when it is submitted to the Congress,

CRO usually will check with the

Originating region for any possible

changes. (I-50)

GSA has, in recent years, undertaken

a number of initiatives in search of

better ways to conduct its mission. One

is greater reliance upon computers. As is

particularly germane here, GSA now makes

substantial use of the public building

service information system (PBS/IS), a

broad-based collection of computerized

information. Input is generated by each

B-13

region and the data bank is retained at

the central computer facility. (I-38)

Among the uses to which the PBS/IS has

been put is its retention of data relating

to leases of public buildings. In turn,

the information with respect to leases is

used in prospectus preparation.

To guide officials charged with the

duty of drafting prospectuses, GSA issues

a handbook with instructions in preparing

the document. The basic purpose of the

prospectus is to "be completely

informative" so that the handbook sets

forth a description of information which

must be included. (RX-22) GSA also has

established a suggested schedule for

preparing a prospectus and urges the

regions to adhere to that target. (RX-=-21)

The desideratum is for the prospectus on a

particular property to be prepared,

approved and forwarded to Congress and

OMB, if necessary, for approval before any

B-14

formal action is consummated. There are,

however, instances when formal agency

action is undertaken prior. to

Congressional approval of a prospectus.

In such instances, GSA forwards the

completed prospectus to the Congress and

then seeks retroactive approval of the

action taken. What this means is that GSA

considers, in certain circumstances,

prospectus approval can be sought

after-the-fact and, late in 1980 CRO sent

a memorandum to Region 9 giving an opinion

that lease options may legally be

exercised in the absence of prior approval

from Congress. (I-48, 5i, 52)>

This very procedure seeking

retroactive approval is the likely track

to have been expected of the 1982

° It appears that it 1S common knowledge

in GSA that a lease option can be

exercised without prior prospectus

approval. (1-175; 178; 187)

B-15

prospectus dealing with Unit 1 or 211 Main

once it was returned for updating. That

is to say, Region 9 would have prepared a

prospectus in final form, and forwarded it

to CRO for review by its realty

specialist. CRO, in turn, would forward an

approved prospectus to either OMB or

Congress, even after the fact. But in

this instance, CRO became aware of the

missed option date and the version

prepared in Region 9 was stopped. An

official from CRO stated that the

prospectus prepared by Region 9 on Unit l

could mislead a reviewer in CRO into

believing that the lease option had been

exercised if the reviewer was not careful.

As ultimately submitted to Congress, the

prospectus for 211 Main Unit 1 was

substantially overhauled from that

Region 9 had prepared.

Within each’ region, primary

responsibility for prospectus preparation

B-16

is in the planning branch. (I-72) While

that section should check prospectuses for

accuracy, cross-checks with the

acquisition (leasing) branch are expected.

(I-56) It is the duty of the latter

branch, the organization headed by

appellant, to review prospectuses. before

their release. (I-76, 121) When the

planning branch prepares a lease it

normally releases it from the region in a

form suitable for transmittal to the

Congress. (I-77)

As mentioned, in June of 1982 it

became necessary to prepare a new

prospectus for 211 Main because the

administrator withdrew all pending

prospectuses. (I-127) While that

prospectus was being redrafted the

planning branch was notified that Kennedy

did not want the 360-day notice included

in the new 211 Main prospectus being

prepared because it would make it apparent

ee

B-17

a lease renewal option had been missed.

(I-82) On inquiry Yiakis agreed that he

desired that the notice be deleted.

(I-84) Although the planning branch

considered the deletion to be improper, it

complied, but placed the lease option

notice in the data sheet. That sheet

contained information which was not truly

part of the prospectus but which

accompanied the prospectus and would be

read by CRO. (I-82; 116) Later,

appellant told planning the notice should

be deleted from the data sheet as well.

(I-128; 135) When appellant advised the

chief of the planning. branch that the

360-day notice requirement should be

deleted from the prospectus, appellant

said that any discussions on this matter

should be directed to Yiakis. (1-120)

The chief of planning branch, in

reviewing data for prospectuses, relied

upon staff personnel for input, and

B-18

considered this a reasonable delegation of

authority. (I-98; 108) But the planning

branch expected its staff to look into the

lease files to ascertain the specific

terms of an existing lease. (1-103, 104)

GSA also prides itself on its

extensive program whereby it keeps

employees advised of the standards of

conduct expected of them and alerts them

to points of contact on counselling when

matters of questionable conduct arise.

(I-139-144)

To flesh out the background facts,

mention of an audit and management review

of Region 9 conducted in August of 1981 by

CRO is pertinent. (II-202; 204) Because

many of the lease files in Region 9 were

in very poor condition, this review became

a difficult task. (II-211; 212) In this

regard, during the management review,

discussions with appellant centered on the

fact that the reliability of the PBS/IS

B-19

program “was not very good." (II-210;

237) In fact, its reliability was set at

“about 20 percent" by most regions.

(II-211)

Included in that review was an

analysis of lease covering property at

550 Kearney [sic] in San Francisco, a

randomly selected site. When the review

team discovered that a lease option date

had not been fully exercised on that

property, it recommended that a manual

system be inaugurated to keep abreast of

these dates rather than rely solely on

PBS/IS. (11-207, 208) The team was

motivated by the realization that certain

other regions which had manual systems had |

not missed any option dates. (II-209)

Region 93 disagreed with the

recommendation to create a manual system,

believing that improving the PBS/IS

program was the best solution. (II-216,

220) The review team makes

B-20

recommendations, but it cannot compel

compliance (II-218). A draft report of

the audit review was submitted in February

of 1982 and it was pointed out that

Region 9 had missed a lease option.

Region 9 later acknowledged an awareness

that it failed to execute a renewal option

even though the region had only 13 or 14

leases which contained option renewal

dates. (II-213, 219, 232)

BRIEFS

Both appellant and the agency filed

post-hearing briefs, here summarized.

Respondent, argues that: (a) appellant's

conduct as a senior management official in

Region 9 was negligent, costly and

irresponsible; (b) her conduct clearly was

a breach of her duties and that she, not

subordinates, was responsible and

accountable for the oversight with respect

to 211 Main; (c) she actively

participated in the attempt to limit

B-21

disclosure of the missed option; and (d)

the decision to remove appellant is

reasonable and appropriate in light of the

seriousness and nature of her misconduct.

GSA points out that appellant held

the dual roles of Branch Chief and

warranted contracting office having

supervisory leasing responsibility for

211 Main. It claims that the very

importance of these assignments should

have motivated her to institute

verification procedures which would have

prevented the gross error which was

committed. It maintains, too, that

appellant and her supervisor embarked upon

a course of conduct designed to limit

disclosure of the missed option debacle by

omitting vital information from a

prospectus relating to the lease of

Vait i.

With respect to appellant's

insistence that she was prudent in her

B-22

reliance upon subordinates, GSA says such

reliance is wholly misplaced where, as

here, appellant never did her initial

homework in reviewing the leases. GSA

claims appellant did not delegate, she

abdicated. The agency concedes, as it

must, that reliance on subordinates is

necessary and proper in certain

circumstances, but counters that this is

not such a case because an important lease

is involved.

That the appellant attempted to limit

disclosure of the missed option is evident

to the agency because the resporsibility

for prospectus preparation was, at least

in part, that of the appellant. Moieover,

GSA says it 1s most likely that she has

violated 18 U.S.C. section 1001, "The

False Statements Act." Be that as it may,

GSA insists that appellant participated in

the deliberate omission of salient

information from an official document, as

charged.

B-23

GSA concludes that removal is plainly

within a zone of reasonableness for the

offenses committed because appellant,

holding a responsible position, is guilty

of misdeeds which strike at the very heart

of her duties and because the notoriety

generated in news media has adversely

impacted on the agency's reputation and

unquestionably damaged public trust in

GSA.

In her closing brief, appellant

maintains that neither of the charges made

against her were "supported by substantial

evidence"® and that even if the Board

finds either charge sustained, removal is

far out-of-line.

After reciting the procedural history

and offering a statement of facts,

appellant's brief argues specifically

6

The standard applicable is, however,

that of a preponderance of the evidence,

an even greater burden. See 3 C.F.R.

section 1201.56.

B-24

that: (1) there has been no showing

Kennedy has acted as other than a

reasonably prudent manager in the

performance of her duties; (2) delegation

by her of important assignments to trusted

subordinates was consistent with generally

accepted standards of care; (3) the

allegation she failed to develop a system

to backup the PBS/IS system overlooks the

attention appellant consistently gave to

reviewing all important lease information

whenever a new realty specialist was

assigned; (4) even an official holding a

contracting warrant must rely upon

subordinates; and (5) inasmuch as she was

merely the conduit for passing

instructions with respect to the omission

of information from the prospectus, she in

no way can be found to have engaged in a

cover-up.

In discussing the penalty of removal,

appellant insists it 1S inappropriate here

B=-25

because the agency unfairly relied on

consequences of the missed option instead

of taking into consideration specific

circumstances surrounding its happening.

Also, attention is drawn to Kennedy's

consistently outstanding work record

during her decade of service; her

continued exemplary performance even

during the negotiations over the missed

option; and the fact that others in

Region 9 received punishment somewhat less

severe than she did.

Finally, appellant alleges that the

agency should be precluded from

introducing evidence or raising issues not

included in its Notice of Proposed

Removal. In the latter connection, while

it would violate the basic procedural

rights of employees were the Board to

sustain agancy action taken on the basis

of charges that could have been levied,

but were not, the Board will consider all

B-26

relevant evidence adduced, including that

made at hearing which is in addition to

that considered at the agency level in

making a determination of whether changes

are Sustainable. See Johnston v.

Government Printing Office, 5 MSPB 376

(1981). In this appeal, no rights of

appellant have, in my opinion, been

violated.

As to the charge that appellant was

negligent in carrying out her duties as

Branch Chief of the leasing group,

appellant contends that the agency bore,

but failed to sustain, its burden of

establishing that she was somehow

negligent because she did not have

personal knowledge of all the terms of the

major leases for which she was contracting

officer. Appellant also disputes any

implication of negligence in her alleged

failure to implement a manual tracking

system, contending that she acted

B=-27

reasonably in concluding that such a

system was not feasible. Appellant also

argues that the Kearny Street and Tucson

options, mentioned in the notice of

proposed removal, could not have put her

on notice of problems with missed lease

options because failure to exercise those

options resulted when the leasing branch

did not receive certification to do so.

As to the 1977 missed option at

211 Main Street, appellant denies being

aware of that incident prior to 1982.

Appellant also contends that, with regard

to the Burlingame and Los Angeles leases,

while she was aware of problems with

multiple expiration date leases that she

took ali reasonable steps to prevent

recurrence and overall her conduct was in

accord with the accepted standard of care.

Appellant refutes the agency's

allegation of negligence in that she was

not personally familiar with the 211 Main

B-28

Street lease contract by stating that her

delegation of assignments to verify the

leases was reasonable, because the agency

encouraged such delegation, and that

appellant should not be held personally

responsible for errors by trusted

subordinates who act according to that

delegation.

Regarding the charge of omitting data

from a document intended for Congress,

appellant disputes any testimony that she

Girected the omission, saying that she had

no power to direct such an omission and

was only conveying instructions of Yiakis.

DISCUSSION AND CONCLUSIONS

GSA removed aprellant on the grounds

that she was negligent in the conduct of

her duties and participated in the

deliberate omission of information from an

official report. This misconduct was

considered to be of such severity to

warrant that penalty. If removal is to be

B-29

sustained on appeal, three separate and

distinct determinations must underscore

that action. It first must be shown that

the misconduct charged is sustainable by a

preponderance of the evidence. Next,

there must be demonstrated that a

sufficient nexus exists between whatever

misconduct is sustained and the efficiency

of the service. And finally, the penalty

imposed upon Kennedy must have been

appropriately chosen and within a zone of

reasonableness in light of the specific

facts and circumstances involved in the

appeal. See generally Phillips v.

Bergland, 586 F.2d 1007 (1978) and

Young v. Hampton, 568 F.2d 1253 (1977).

The Misconduct I find that the

charge of negligent administration of

leases by appellant has been sustained by

the preponderant evidence. Assigned the

duty of overseeing leases in her area of

responsibility, appellant failed to

B-30

establish procedures and controls

necessary to insure information concerning

leases was accurate. Her inattentiveness

to her primary professional duties has

resulted in needless and substantial loss

to the government. It also has destroyed

the confidence her superiors could place

in her.

Several factors reveal Kennedy's

carelessness in the performance of her

duties as glaring. First, the property at

211 Main was the second of the largest and

most important of all properties under

lease in her area. Nevertheless, it does

not appear to have been especially

complex, although the multi-unit feature

was somewhat unusual. Nor does the fact

the lease and its supplements covered a

number of volumes mean that 211 Main could

not easily have been reviewed for its

important features. (II-245) oe

entirely reasonable to expect that a

B-31

responsible official would exercise care

commensurate with the more important

matters within his or her province. But

the preponderant evidence of record

establishes that appellant failed to

exercise that degree of skill and

knowledge consistent with her position and

responsibilities with respect to 211 Main.

As mentioned, between 1977 and 1982

there had been several lease option dates

overlooked within Region 9 and it beggars

belief that respondent was unaware of this

general problem. ’ Nevertheless’ she

instituted no suitable procedures to

insure oversights would not occur in her

area. The PBS/IS system in use by GSA had

the pervasive reputation of being plagued

by information errors, suggesting that any

reliance upon the data in that bank was

‘ In the Spring of 1981 Kennedy was

specifically made aware of a missed lease

option in Los Angeles. (IV=-588, 589, 681,

682)

B-32

indeed risky. (II-209, 210; IV-685) Yet

Kennedy did put nearly exclusive reliance

on it in lease prospectus matters.

Although one of her contracting

officer duties with respect to the

exercise of options was to provide written

notice of renewals desired to be

exercised, Kennedy did not do so with

respect to Unit 1 on 21l1i Main. Without

question the reasons the option was missed

are several, but it is apparent that

appellant did not acquaint herself with

the terms of 211 Main when she became

contracting officer in 1979; nor for that

matter did she do so until the serious

problem of the missed option came to

light. (IV-695, 696) Indeed, it appears

that she had no systematic program of

review and only checked leases as problems

cropped up. (IV-695, 696 ) The

inescapable conclusion is that her efforts

to insure accuracy of lease data were

Superficial. More was required.

B-33

In addition, it is evident that the

appellant made no serious review of the

lease digest with respect to Unit l.

(IV-695, 696) And this, despite the fact

that Unit 1 was one of the very few in her

area which contained an option renewal;

despite the fact that multi-unit leases

were known to have inherent problems; and

notwithstanding that 211 Main was one of

the most important properties in Region 9.

A review of this lease, or at least

of its important terms, evidently could be

completed in a matter of hours. And a

review either of the lease, or the lease

digest, of the Region's second largest

lease would have put a careful reviewer on

notice that it contained an optional

renewal and, inherently, the potential for

problems. Appellant maintained no

methodology to cross-check data on renewal

option dates, choosing instead to rely on

the PBS/IS despite its reputation.

Borer ee "

B-34

Clothed in the complete wardrobe both of a

branch chief and a warranted contracting

officer, the performance of appellant was

seriously flawed. Her failure to carry

out her duties in a careful and dependable

manner has cost millions of dollars.

The second charge against appellant

is that she participated in the deliberate

omission of significant information from

an official report intended for the

Congress of the United States. What this

charge relates to is the 211 Main

prospectus prepared in the summer of 1982,

after appellant was fully aware that the

lease option date had, in fact, been

missed. I find that prospectus did not

contain the option renewal information it

should have. A lease option renewal date

is essential data which should be included

in a prospectus. Moreover, I also find

that the prospectus which left Region 9

was, indeed, an official document intended

for use by Congress. (I-77, 42-44)

B-35

The reason it lacked completeness

requires explanation. Once it became

obvious to Kennedy and Yiakis that the

lease option date covering Unit 1 of

211 Main had been missed, the immediate

problem confronting them was to determine

what steps could be undertaken to

ameliorate the problem. As seen, they

decided to try to persuade the landlord of

211 Main to waive the option date and to

proceed to conduct GSA business as if

adequate notice had been given. This

approach held some prospect of success for

the same provision on the same property

had been missed in 1977 but the landlord

had, through quiet negotiations, been

persuaded to waive the notice requirement.

During much of June and July of 1982,

the appellant and Yiakis waged their

unsuccessful attempt to persuade the

landlord to waive anew. The effort ended

in failure. By the time the GSA entered

B-36

into a new lease for the property, the

added costs are variously estimated to be

as much as $32 million.®

During the time the confidential

negotiations with the landlord wore on, it

became necessary to prepare and forward to

GSA headquarters in Washington a

prospectus for 211 Main. But when the

prospectus embracing Unit 1 was forwarded

in June of 1982 it did not contain any

mention of the required 360-day notice

period. The prospectus did include the

lease expiration date for Unit 1, but the

deletion from the prospectus of the

requirement that notice to exercise a

lease option was reguired 360 days in

advance of the expiration date

unquestionably resulted in the document

being incomplete.

6 Although the exact amount is in dispute,

there is no doubt the sum is enormous.

B-37

The entire episode concerning the

deletion of lease renewal information from

the 211 Main prospectus in the summer of

1982 is part and parcel of the combined

effort of appellant and Yiakis to try to

persuade the landlord to waive the notice

period as he had done previously. I find

beyond question that Kennedy was implicated

in this omission even if she is not con-

Sidered the principal architect of the

plan.

On the other hand, I do not consider

that Kennedy was engaged in an effort to

shield permanently from supervisory view

the overlooked option date. Instead, she

was seeking to buy time for the effort to

cure the serious problems attendant to the

oversight. Accordingly, while I conclude

the preponderant evidence sustains charge

2, the motive behind the deletion was not

shown nefarious or criminal in intent.

That such a tactic might cause supervisors

B-38

concern over her reliability is beyond

question.

Efficiency of the Service

Appellant's negligent administration of

her assigned duties and the omission of

essential data from an official document

are matters which directly and adversely

affect her work. Moreover, this

misconduct also impacts upon the

confidence her superiors can retain in

her. The efficiency of the service can

hardly be more seriously threatened than

where, as here, the failure of a

supervisor to perform her important duties

in a prudent manner has caused the loss of

millions of dollars. So, too, is the

intentional omission of essential

information from a government document a

matter directly impacting upon the

efficiency of the service.

Inasmuch as the basis of the removal

is a question of appellant's ability to

B=-39

accomplish her duties satisfactorily, not

only would removal promote the efficiency

of the service but the nexus between the

conduct and the efficiency of the service

is evident for the reason the cause for

the removal is a question of the

employee's ability to accomplish her

duties satisfactorily. Cf. Hatcher v.

Department of the Air Force, 705 F.2d 1315

(1983).

Appropriateness of the Removal. In

this proceeding this issue carries

particular importance because of the

nature of the offenses and the caliber of

the appellant. Besides, the parties seem

far apart in their views on the question.

At the outset, I conclude that the

suggestion of disparate treatment rings

hollow. While it is true that others

involved in this incident received lesser

penalties, these employees had roles and

responsibilities different from those of

B-40

the appellant and the circumstances of

their discipline were not. comparable to

those of appellant Kennedy who had a more

responsible position and for whom a higher

standard of care is appropriate. Even the

charges against her varied. What is more,

her supervisor was removed. (But see my

Initial Decision of September 20, 1983, in

Yiakis v. GSA, MSPB Docket No.

SFO07528310163 wherein I found demotion

more appropriate for her supervisor albeit

based on different charges. )

The seminal case for determining the

extent of the Board's review of an

agency's selection of penalty is

Douglas v. Veterans Administration, 5 MSPB

313 (1981). Under the guidelines there

established, the Board will afford due

deference to an agency's discretion in

Carrying out its obligation to maintain

employee discipline. See Gregg v.

United States Air Force, MSPB Docket

B-41

No. DA0O7528010134 at 4 (September 16,

1982). In other words, the Board

functions not to displace this managerial

role, but to assure that managerial

judgment has been exercised within

tolerable limits of reasonableness,

Douglas, 5 MSPB at 332-333. Thus, the

barometer for measuring appropriateness of

an agency-imposed penalty is whether it is

within the bounds of reasonableness in

light of the relevant factors. Young v.

27.8. Postal Service, MSPB Docket

No. ATO7528111161 at 2 (February 16,

1983); Davis v. Department of the

Treasury, MSPB Docket No. NY075209075 at 5

(October 2, 1981). The Board does not

write on a clean slate and will not freely

substitute its own view for that of GSA on

the question of what is the correct

penalty. Thus, whether I consider removal

best is not important; what is crucial is

whether such a penaltv is reasonable in

B-42

the circumstances. As will be explained,

I conclude that the agency acted wholly

within managerial bounds in removing the

appellant.

I am aware that Kennedy's past

disciplinary record is’ spotless. I

realize that she has been a very capable

employee during her ten years of federal

service. She has progressed to jobs of

increasing importance and, overall, has

earned an enviable reputation. It seems,

too, that the very nature of her duties

meant that her days were busily filled in

the performance of myriad duties.

But against these factors there must

be weighed the nature and seriousness of

the offenses sustained and their relation-

ship to her duties. Without question

appellant has failed to fulfill an

important part of her duties. Add to that

the fact that appellant participated in

the omission of essential information from

B-43

an official document. The facts under-

scoring her removal reveal characteristics

which are inappropriate for an employee in

a responsible and fiduciary position and

outweigh those favorabie factors in her

background.

Her rehabilitation potential is

slight for supervisors will have little

confidence in her ability to perform

assigned duties. Lesser sanctions are

hardly appropriate in that her performance

defects are grave. The missed option has

subjected GSA to adverse publicity and the

amount of money lost has caused GSA to be

ridiculed.

Removal is reasonable under the

Circumstances of this appeal because

Kennedy was negligent in the performance

of her duties and participated in the

omission of information from a prospectus.

B-44

FINDINGS

Upon consideration of the facts of

record, I find that: (1) to the extent

indicated, the charges made against

appellant Kathleen A. Kennedy have been

shown by the preponderant evidence; (2)

there is a clear nexus between the

misconduct found sustained and _ the

efficiency of the service; and (3) the

penalty imposed by the agency has been

appropriately chosen in light of the

specific facts and circumstances involved

in this case.

NOTICE

This is an initial decision. It will

become a final decision of the Merit

Systems Protection Board unless a petition

for review is filed within thirty-five

(35) calendar days after issuance of this

decision or the Board reopens the case on

its own motion. A petition for review

shall be filed with the Office of the >

B-45

Secretary of the Merit Systems Protection

Board, 1120 Vermont Avenue, N.W.,

Room 904, Washington, D.E., 20419.

Any party, the Director of the

Office of Personnel Management, and the

Special Counsel may file a petition for

review. The Director may request review

only if he is of the opinion that the

decision is erroneous and will have a

substantial impact on a civil service law,

rule, or regulation under the jurisdiction

of the Office of Personnel Management. The

Board may grant a petition for review,

after providing an opportunity for

response by other parties, when it is

established that:

(1) New and material evidence

1s available that, despite due

diligence, was not available

when the record was closed; or

(2) The decision of the

presiding official is based on

B-46

an erroneous interpretation of

statute or regulation.

Petitions for review shall set forth

objections to the initial decision,

supported by references to applicable laws

Or regulations, and the specific

references to the record.

Except for actions filed under the

anti-discrimination laws, a petition for

judicial review of a final Board decision

must be filed in the United States Court

Of Appeals for the Federal Circuit no

later than 30 days after appellant's

receipt of the Board's final decision.

DATED: November 30, 1983

Edward J. Reidy

Administrative

Law Judge

Appendix C

UNITED STATES OF AMERICA

MERIT SYSTEMS PROTECTION BOARD

KATHLEEN A. KENNEDY,

appellant,

DOCKET NUMBER

Vv. SFO07528310148

GENERAL SERVICES

ADMINISTRATION,

agency.

me ee ee eee ee eee ee ee”

OPINION AND ORDER

The appellant was removed from the

General Services Administration (the

agency) for negligent administration of

leases, and for participating in the

deliberate omission of significant

information from an official report

intended for the Congress of the United

States. She has petitioned for review of

the November 30, 1983, initial decision

sustaining her removal.*/

The appellant has objected to certain

a/ In accordance with his notice of

recusal dated April 11, 1984, the Chairman

of this Board has not participated in the

consideration of this case.

C=-2

findings and statements made by the

presiding official with respect to (1) her

alleged failure to inform management

officials (other than her immediate

supervisor) of the error at issue in the

case, (2) the general condition of her

leasing files, (3) her alleged knowledge

that a prospectus had been returned to the

regional office for correction, and (4)

her alleged knowledge of one of the

previous failures to exercise options

which were cited in the notice by which

the agency proposed her removal. We note,

however, that the agency's charges were

not based on either of the first two

matters listed above. With respect to the

third and fourth matters, we find that,

even if the appellant was unaware of these

matters, other circumstances cited in the

notice and elsewhere were sufficient to

place her on notice of the need to

implement effective methods for handling

lease-renewal options.

We find further, on considering the

other allegations raised in the petition

for review, that the presiding official's

findings regarding the legal issues which

have been raised are essentially

consistent with our views, and that any

——aEeEeEeEE

C=3

inconsistency would not affect the outcome

of this appeal. In addition, we find that

those other arguments which relate to the

presiding official's factual determinations

have not demonstrated any error by the

presiding official which would be suffi-

cient to warrant the Board's full review

of the record. See Weaver v. Department

of the Navy, 2 MSPB 297, 299 (1980).

The petition for review is hereby

DENIED. This is the final order of the

Merit Systems Protection Board in this

appeal. The initial decision shall become

final five (5) days from the date of this

organ. S&S €.F R. § 1201.133(D).

The appellant is hereby notified of

the right under 5 U.S.C. § 7703 to seek

judicial review of the Board's action by

filing a petition for review in the United

States Court of Appeals for the Federal

Circuit, 717 Madison Place, N.W.,

Washington, D.C. 20439. The petition for

judicial review must be received by the

court no later than thirty (30) days after

the appellant's receipt of this order.

FOR THE BOARD:

(Date )

Washington, D.C. Robert E. Taylor

Clerk of the Board

CERTIFICATE OF SERVICE

I hereby certify that a copy of the

foregoing OPINION and ORDER was sent by

certified mail this date to:

Ms. Kathleen A. Kennedy

116 Sylvia Way

San Rafael, California 94903

By regular mail service to:

Elizabeth G. Leavy, Esquire

Carroll, Burdick & McDonough

One Ecker Building, Suite 400

San Francisco, California 94105

Renn C. Fowler, Esquire

General Services Administration

525 Market Street, 28th Floor, 9L

San Francisco, California 94105

Office of Personnel Management

Attn: Appellate Policies Branch

Room 7P56B

1900 E Street, N.W.

Washington, D.C. 20415

By hand to:

Office of the Special Counsel

Merit Systems Protection Board

1120 Vermont Avenue, N.W.

Washington, D.C. 20419

(Date)

Washington, D.C. Robert E. Taylor

Clerk of the Board