Suspension, Reduction in Pay and Reassignment found to be Reasonable Penalty following Employee's Misconduct where Misconduct Created Appearance of Conflict of Interest, MSPB Recently Ruled

A 14-day suspension, a 5% reduction in pay, and a reassignment from a supervisor position in California to a former examiner position in Florida were reasonable penalties following a Department of Treasury employee's failure to recuse himself in a situation where the employee's actions could have potentially created a conflict of interest, the Merit Systems Protection Board (the Board) recently ruled.

Edward Vargas held a National Examiner, Large Banks Supervisor position with the Office of Comptroller of the Currency (OCC) in San Francisco, Calif. At some point during his employment with OCC, the agency gave Vargas a 14-day suspension, a 5% reduction in pay, and reassigned him to his former position as a National Bank Examiner in Miami, Fla., following a situation where Vargas examined the commercial credit of Wells Fargo & Company, despite being recused from Wells Fargo Bank, N.A. The administrative judge ultimately upheld the agency's penalty.

Vargas appealed, arguing that the administrative judge's analysis of the Douglas factors was flawed and that the unitary penalty was an unreasonable penalty for his failure to follow recusal requirements. 

Vargas requested that the Board mitigate his 14-day suspension to a letter of reprimand for his "inadvertent offense," and argued that he should not be punished for OCC's failure to notify him that his recusal from Wells Fargo Bank, N.A., prohibits him from examining the commercial credit of Wells Fargo & Company. Vargas specifically pointed to the table of penalties, which provided for penalties ranging from a letter of reprimand to removal for a first offense of improper conduct that adversely affects OCC's reputation, and to the collective bargaining agreement, which provides for progressive discipline.

The Board disagreed. First, the record showed that the administrative judge analyzed the relevant Douglas factors and ultimately found that the appellant's examination of the commercial credit of Wells Fargo Bank was a serious offense which significantly outweighed the mitigating factors of Vargas' years of service and good performance. In particular, the administrative judge noted that the proposing and deciding officials testified as to the seriousness of conflicts of interest and recusals, and as to the importance of OCC's impartiality and interest in avoiding the appearance of conflicting interests in supervising financial institutions. 

The Board also agreed that the serious of Vargas' misconduct outweighed the other factors, including his lack of intent to engage in misconduct and OCC's failure to inform him that Wells Fargo Bank, N.A., is the lead bank for Wells Fargo & Company. The Board also noted that the 14-day suspension was not the most serious punishment Vargas could have received for a first offense of improper conduct that negatively affects OCC's reputation.

Therefore, the Board found no reason to disturb the administrative judge's finding that Vargas' 14-day suspension was reasonable based on all the factors.

The case is Vargas v. Department of the Treasury, and is available here.

Posted in Case Law Update



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