How Did Bad Debts Lead to Removal?

An employee serving in a sensitive position subject to a background investigation ran into problems when adverse information was surfaced and sent to the agency.

In Terry v Department of Agriculture (CAFC No.2020-1604 (nonprecedential) 4/8/2021), Mr. Terry was hired by Agriculture as an Information Technology Specialist. Since this position required him to have access to sensitive information, he was subjected to a background investigation by the Office of Personnel Management (OPM). When OPM’s report was turned over to Agriculture for what is referred to as “adjudication,” there were a couple of problems that the agency addressed with Mr. Terry.

First up the report showed financial responsibility issues. It showed some 9 debts that had been referred for collection, three debts declared and written off as uncollectible, and an undisclosed bankruptcy action in Mr. Terry’s past. When as part of the adjudication process an agency personnel specialist notified Terry of these results, Mr. Terry simply did not respond to the request for explanation. At that point the agency decided it could not adjudicate this matter favorably to Mr. Terry and he was placed on administrative leave since he posed a security risk. (Opinion pp. 2-3)

In a parallel adjudication, another agency official wrote Mr. Terry about his apparent termination from a private sector job that he had failed to disclose on his personnel security questionnaire he filled out and submitted to the agency in conjunction with his job application. Mr. Terry responded to this concern. He claimed that he had not been terminated by the previous employer. However, the background investigation showed that when he left that job he applied for unemployment benefits. While at first he received the benefits, when the state agency learned from the private employer that it had terminated Terry for cause, it cancelled his entitlement to benefits and demanded repayment of the amounts he had received. In his response to Agriculture, Terry insisted he had repaid the benefits not because he had been terminated but because the state had overpaid. (P.3)

Agriculture adjudicated this matter as well as unsatisfactory since Terry was not truthful about this termination from a pervious job. Citing Terry’s “numerous delinquent financial liabilities that remain unresolved…,” and “his pattern of dishonesty and inability to provide truthful and accurate information,” the agency office charged with adjudicating Mr. Terry’s background investigation concluded it could not favorably do so. (P. 4)

At this point, the agency removed Mr. Terry for failing to meet a requirement of his position, namely successful completion of a background investigation. (p. 5)

On appeal before the Merit Systems Protection Board (MSPB) the administrative judge concluded from the evidence presented that the agency had made its case on both the financial irresponsibility and Terry’s failure to be forthcoming on his termination from a previous job. The judge simply did not believe Terry’s argument that he was “unaware” that he had been fired. (P. 5) She also did not find credible his testimony about some of his debts being the result of identity theft since he provided no evidence to support that claim. (P. 6)

Mr. Terry took his case to the federal appeals court. That court has now sustained the Board and the agency. On his failure to report he had been fired previously, the court pointed to evidence before the MSPB that included the company’s “Notice of Discharge,” the state agency’s notice demanding he refund the unemployment benefits since he was not eligible having been “discharged for gross misconduct,” and the fact that the AJ simply did not believe Mr. Terry’s testimony that he had no idea he had been fired. (P. 6)

Finally, as to the bad debt situation, the court upheld the MSPB’s findings and decision refusing to give credence to Mr. Terry’s identity theft argument. Yes, he had resolved a couple of debts, but he did so only when he realized this could be a job threatening situation with Agriculture. Other debts remained and several had been written off as uncollectible.  

In short, Mr. Terry could not persuade the appeals court to overturn his removal by the Agriculture Department.

About the Author

Susan McGuire Smith spent most of her federal legal career with NASA, serving as Chief Counsel at Marshall Space Flight Center for 14 years. Her expertise is in government contracts, ethics, and personnel law.