F.J. Capozzi, Sr. v. UCBR ( 2017 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Frank James Capozzi, Sr., :
Petitioner :
:
v. : Nos. 2283, 2284, 2285 C.D. 2015
: Submitted: December 9, 2016
Unemployment Compensation :
Board of Review, :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE DAN PELLEGRINI, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
SENIOR JUDGE PELLEGRINI FILED: January 19, 2017
In these consolidated petitions for review, Frank James Capozzi, Sr.
(Claimant) petitions pro se for review of the Unemployment Compensation Board
of Review’s (Board) orders1 affirming the Unemployment Compensation Referee’s
(Referee) decisions finding that because he was self-employed and intentionally
did not report earnings that: Claimant is ineligible for unemployment
compensation (UC)2 and emergency unemployment compensation (EUC)3 benefits;
1
By order dated March 1, 2015, this court granted Claimant’s motions to consolidate his
petitions for review of the Board’s three underlying orders dated August 26, 2015.
2
Section 402(h) of the Unemployment Compensation Law (Law), Act of December 5,
1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. § 802(h), provides that “[a]n
(Footnote continued on next page…)
imposing fault overpayments of UC benefits4 and state extended benefits;5 and
imposing fraud overpayments of emergency EUC benefits6 totaling $18,678.00.
We affirm.
(continued…)
employe shall be ineligible for compensation for any week . . . [i]n which he is engaged in self-
employment.”
3
Section 4001(b) of Title IV of the Supplemental Appropriations Act of 2008, Pub. Law
110–252, 122 Stat. 2323, § 4001(b), 26 U.S.C. § 3304 Note (EUC Act), states in relevant part
that “[t]he State will make payments of [EUC benefits] to individuals who—(1) have exhausted
all rights to regular compensation under the State law or under Federal law with respect to a
benefit year . . . [or] (2) have no rights to regular compensation or extended compensation with
respect to a week under such law or any other State unemployment compensation law or to
compensation under any other Federal law. . . .”
4
Section 4005 of the EUC Act provides, in pertinent part:
(a) In General.—If an individual knowingly has made, or caused to
be made by another, a false statement or representation of a
material fact, or knowingly has failed, or caused another to fail, to
disclose a material fact, and as a result of such a false statement or
representation or of such nondisclosure such individual has
received an amount of [EUC benefits] under this title to which
such individual is not entitled, such individual—
(1) shall be ineligible for further [EUC benefits] under this
title. . . .
(b) Repayment.—In the case of individuals who have received
amounts of [EUC benefits] under this title to which they were not
entitled, the State shall require such individuals to repay the
amounts of such [EUC benefits] to the State agency, except that
the State agency may waive such repayment if it determines that—
(1) the payment of such [EUC benefits] was without fault
on the part of any such individual; and
(Footnote continued on next page…)
2
I.
Following his separation from employment with Oxford Management
Services, Claimant applied for regular UC benefits receiving $5,538.00 in regular
UC benefits for claim weeks ending July 31, 2010, through January 22, 2011.
(continued…)
(2) such repayment would be contrary to equity and good
conscience.
(c) Recovery by State Agency.—
(1) In General.—The State agency may recover the amount
to be repaid, or any part thereof, by deductions from any [EUC
benefits] payable to such individual under this title or from any
unemployment compensation [(UC)] payable to such individual....
5
Section 804(a) of the Law, 43 P.S. § 874(a), states in relevant part that “[a]ny person
who by reason of his fault has received any sum as compensation under this act to which he was
not entitled shall be liable to repay … a sum equal to the amount received by him. . . .”
6
Section 801(b) of the Law states, in relevant part:
(b) Whoever makes a false statement knowing it to be false, or
knowingly fails to disclose a material fact to obtain or increase any
compensation or other payment under this act or under an
employment security law of any other state or of the Federal
Government or of a foreign government, may be disqualified in
addition to such week or weeks of improper payments for a penalty
period of two weeks and for not more than one additional week for
each such week of improper payment. . . . The penalty weeks
herein provided for shall be imposed against any weeks with
respect to which the claimant would otherwise be eligible for
compensation, under the provisions of this act, which begin within
the four year period following the end of the benefit year with
respect to which the improper payment or payments occurred.
43 P.S. § 871(b).
3
When his regular UC benefits were exhausted, he then applied for EUC benefits,
receiving $10,293.00 in those benefits for claim weeks ending January 29, 2011,
through December 17, 2011. After exhausting his EUC benefits, Claimant applied
for and received state extended benefits for the claim weeks ending December 24,
2011, through March 17, 2012, totaling $2,847.00.
During all claim weeks that he received UC, EUC and state extended
benefits, Claimant continuously, repeatedly and affirmatively indicated that he was
not self-employed or otherwise working and reported $0.00 in earnings. Claimant
also submitted 13 weekly state extended benefit forms indicating that he did not
receive earnings of any kind.
On June 12, 2014, more than two years after Claimant last received
benefit payments, the Department of Labor and Industry’s (Department’s) Office
of Integrity, Audits Division (Audits Division) issued a Complete UC Fraud
Investigation Report regarding the Department’s potential overpayment to
Claimant. The investigation was prompted by an Attorney General’s Office
investigation of Claimant for insurance fraud, theft by deception and criminal
conspiracy that revealed that Claimant may have been receiving benefits while
working and/or self-employed under the name Hindi Beginnings, Inc. Bonnie
Haas, the Audit and Investigation Specialist who issued the Fraud Investigation
Report, found that:
[T]he information received indicating [Claimant] may
have filed for and received UC benefits while working
and/or [self-employed] appeared accurate. Based on my
findings detailed in the body of this report, it appears
4
immediately following [Claimant’s] separation on July
22, 2010[,] from Oxford Management, [Claimant]
created Hindi Beginnings Inc. [Claimant] told me via
telephone that he essentially listed all areas he . . . had
experience in, with hopes of making money. . . . Review
of Hindi Beginnings and [Claimant’s] personal bank
records revealed [Claimant] played a significant role in
Hindi Beginnings. Based on same and follow-ups . . . it
appears [Claimant] entered into [self-employment],
removing himself from the labor market to pursue his
business activity. Moreover, the records obtained
verified [Claimant] made a substantial investment into
his business both in time and money. Accordingly, there
is a potential overpayment of $18,678 beginning
[compensable week ending] July 31, 2010 due to self-
employment.
(Record (R.) Item No. 4, UC Fraud Investigation Reports, dated 6/12/2014.)
On June 20, 2014, the Scranton UC Service Center (Service Center)
issued three separate notices of determination finding Claimant ineligible for UC,
EUC and state extended benefits and assessing fault overpayments for his UC and
state extended benefit claims and fraud overpayments for his EUC claim.
Claimant appealed and, before the Referee, although Claimant cross-examined the
Department’s witnesses,7 he did not present testimony of his own.8
7
In addition to the testimony of Bonnie Haas, the Department also presented the
testimony of Kimberly Richmond who authenticated several documents that were later entered
into the record.
8
We note though that when the Department initiates proceedings that result in a
suspension of benefits because of self-employment, it carries the burden. See McKean v.
Unemployment Compensation Board of Review, 94 A.3d 1110, 1112 (Pa. Cmwlth. 2014).
5
To satisfy its burden, the Department presented the testimony of
Bonnie Haas (Haas), the author of the Fraud Investigation Report, who testified
that after Claimant’s separation from employment with Oxford Management, on
July 27, 2010, he prepared and filed all paperwork with the Pennsylvania
Department of State to incorporate Hindi Beginnings Inc. (Hindi) and payed a
$195.00 fee from his personal account. Claimant also signed the majority of
Hindi’s PA Form UC-2, Employer’s Report for Unemployment Compensation,
which reported $0.00 in earnings for the business. Although Krisandra Strausser is
listed as sole owner of Hindi in these incorporation documents and Claimant is
listed as Hindi’s Vice President, Secretary and Chief Financial Officer, Hindi’s
bank account records at Wells Fargo list Claimant as an “owner” of Hindi and
Claimant is the only person named on Hindi’s bank account at Bank of America.
Notably, Claimant established both of Hindi’s bank accounts and signed checks on
behalf of Hindi. He created Hindi’s official website, submitted various
applications for establishing its credit and business investments, and signed Hindi’s
checks to pay labor costs. Checks were issued from Hindi’s bank account to cover
rent costs for Claimant’s joint residence with Krisandra Strausser.9
Haas further testified that the documentation and testimony she
obtained during her investigation demonstrated that Claimant made substantial
earnings while he was receiving UC, EUC and state extended benefits during the
claim weeks ending July 31, 2010, through March 17, 2012. Claimant admits that
he called the Department’s amnesty hotline on August 30, 2013, to report that he
9
According to Claimant’s brief, Krisandra Strausser was Claimant’s fiancée.
6
actually earned $600.00 per week from Hindi from January 1, 2011, through April
1, 2011. A 1099-form was also submitted to the Department indicating that he
earned $8,999.00 for the 2011 tax year. Claimant admitted to Haas that he
performed auto repairs and snow removal for Hindi. After conducting her
investigation, Haas verified that Claimant entered into a contract with the City of
Nanticoke in 2011/2012 for snow removal and that he earned $350.00 in this
capacity. Several phone calls to different individuals revealed that Claimant did
automotive repairs for cash payments. Claimant also made various purchases at
auto part stores that appeared to be related to automotive repair.
The Referee issued three orders affirming the Service Center’s
determination. As pertinent, the Referee determined that Claimant was ineligible
for benefits because he was self-employed, finding:
[1.] The claimant had an investment in the
business/corporation Hindi Beginnings Inc.
[2.] The claimant was at risk of sustaining a profit or loss.
[3.] The claimant was free from the direction and control
of others in performance of his corporate duties with
Hindi Beginnings Inc.
[4.] The claimant is customarily engaged in an
independently established trade, occupation, profession
or business.[10]
10
R. Item No. 12, Referee’s Decisions/Orders, dated 8/18/2014 (Ineligible w/ Fraud and
Fault Overpayments).
7
The Referee imposed fault and fraud overpayments because Claimant: falsified his
application for unemployment compensation benefits and/or deliberately withheld
material information in order to obtain regular UC benefits; deliberately omitted
material facts and/or provided false information to the Service Center for the
period of time in which he was receiving EUC benefits; and failed to inform the
Service Center that he was engaged in self-employment and received earnings for
work while receiving state extended benefits. Claimant appealed to the Board.
The Board issued three separate orders affirming the Referee’s
determinations relating to Claimant’s ineligibility for benefits and adopting and
incorporating all of the Referee’s findings and conclusions. However,
notwithstanding the adoption of the Referee’s findings and conclusions, and
without providing any further analysis or explanation, the Board modified the
Referee’s determination of fault and fraud overpayments to non-fault and non-
fraud overpayments.
The Department then filed a request for reconsideration, explaining in
pertinent part:
As detailed in the Referee’s decision, Claimant withheld
information from the Department regarding his self-
employment and earnings in order to obtain
unemployment compensation benefits. He organized and
played a substantial role in the operation of [Hindi], in
addition to providing auto repair and computer services
to the company, beginning just after he was separated
from employment. He was an officer of the company,
signed its checks, established credit with its suppliers,
and opened bank accounts in its name. He also failed to
report his work as a provider of snow plowing services to
8
the City of Nanticoke, and earnings he received from
Hindi and the City of Nanticoke. Claimant affirmatively
indicated he was not self-employed and was not
receiving payments at times when he was so working and
being paid. In addition, he even admitted to the
Department’s witness that he falsified information
regarding his work and receipt of payments in 2011.
***
The evidence submitted by the Department all points to
Claimant knowingly providing false information in order
to obtain benefits. In addition, his failure to testify to
defend himself should corroborate the Department’s
evidence and erase the equivocal nature of any evidence
regarding whether he knowingly provided false
information in order to obtain UC benefits as stated
above in Commonwealth v. $23,300.00 U.S. Currency[,
733 A.2d 693, 697-98 (Pa. Cmwlth. 1999)].
(R. Item No. 17 Department’s Request for Reconsideration, dated 10/23/2014).
The Board granted the Department’s request, vacating the orders and inviting the
parties to submit briefs.11
After briefs were submitted, the Board affirmed the Referee’s
decisions, including the Referee’s assessments of fault and fraud overpayments. In
doing so, the Board, once again, adopted the Referee’s findings and conclusions in
their entirety. Claimant then filed these petitions for review.12
11
Claimant retained an attorney at this point for the purpose of submitting a brief to the
Board on his behalf. However, Claimant now petitions pro se for review.
12
Our scope of review of the Board’s decision is limited to determining whether an error
of law was committed, whether constitutional rights were violated, or whether the necessary
(Footnote continued on next page…)
9
II.
A.
On appeal,13 Claimant initially contends that the Board abused its
discretion by granting the Department’s motion for reconsideration because it
lacked good cause to do so because the Department was not alleging new evidence
or changed circumstance but rather the sole purpose was for reconsidering
credibility issues pertaining to Claimant’s refusal to testify at the Referee’s
hearing.
Regarding reconsideration, the Board’s regulations provide:
(a) Within 15 days after the issuance of the decision of
the Board, as may be determined by the provisions of §
101.102 (relating to form and filing of application for
further appeal from decision of referee), any aggrieved
party may request the Board to reconsider its decision
and if allowed, to grant further the opportunity to do the
following:
(continued…)
findings of fact are supported by substantial evidence. Rock v. Unemployment Compensation
Board of Review, 6 A.3d 646, 648 n.5 (Pa. Cmwlth. 2010).
13
At the outset, Claimant contends that the Board violated his due process rights because
the Board failed to mail a copy of its August 26, 2015 orders to his then-attorney, which caused
him to file his petition for review late because he was incarcerated at the time. Although the
Board concedes that Claimant’s petitions for review were filed late as a result of this error, the
Board notes in its brief that it has not, and will not, file a motion to dismiss Claimant’s petitions
for review. Moreover, a nunc pro tunc appeal may be allowed where there has been a breakdown
in the administrative process, Cook v. Unemployment Compensation Board of Review, 671 A.2d
1130, 1131 (Pa. 1996), such as the Board’s admitted failure to timely mail copies of the orders to
Claimant’s then-attorney.
10
(1) Offer additional evidence at another hearing.
(2) Submit written or oral argument.
(3) Request the Board to reconsider the previously
established record of evidence.
(b) The requests will be granted only for good cause in
the interest of justice without prejudice to any party.
The parties will be notified of the ruling of the Board on
each such request. The request for reconsideration and
the ruling of the Board shall be made a part of the record
and subject to review in connection with any further
appeal to the Commonwealth Court.
34 Pa. Code § 101.111 (emphasis added). “In determining whether ‘good cause’
exists, the [Board] must consider whether the party requesting reconsideration has
presented new evidence or changed circumstances or whether [the Board] failed
to consider relevant law.” Laster v. Unemployment Compensation Board of
Review, 80 A.3d 831, 834 (Pa. Cmwlth. 2013) (quoting Ensle v. Unemployment
Compensation Board of Review, 740 A.2d 775, 779 (Pa. Cmwlth. 1999))
(emphasis added).
Contrary to Claimant’s contention, the Board had good cause to
reconsider whether, as a matter of law, it was required to affirm the Department’s
imposition of fault and fraud overpayments. While Claimant’s lack of testimony
was asserted in the Department’s motion for reconsideration, this was only set
forth for the purpose of establishing a negative inference when determining his
intent. See Commonwealth v. $23,300.00 U.S. Currency, 733 A.2d 693, 697-98
(Pa. Cmwlth. 1999). The Department’s motion specifically stated that it was not
seeking reconsideration of credibility determinations “[b]ecause the only testimony
11
presented was that of the Commonwealth, there was no credibility determination to
be made.” (R. at Item No. 17 Department’s Request for Reconsideration, dated
10/23/2014) (citing Petrone v. Unemployment Compensation Board of Review, 557
A.2d 1118 (Pa. Cmwlth. 1989)).
As the Board explained in its modified orders, the Department
“requested reconsideration, asserting that a fault overpayment was appropriate
considering the Referee’s findings that the claimant had knowingly provided false
information in order to obtain benefits. . . . [T]he Board granted reconsideration . .
. for the purpose of considering the Department’s arguments.” (R. Item No. 24,
Board’s Orders, dated 8/26/2015 (Ineligible w/ Fault and Fraud Overpayments).)
B.
Claimant next contends that the Board erred when determining that he
was ineligible for benefits because he was self-employed since the evidence does
not establish that he owned stock in or had control over Hindi or purchased
equipment for Hindi. Because the term “self-employment” is not defined in the
Law, we look to the definition of “employment” in Section 4(l)(2)(B) of the Law:
Services performed by an individual for wages shall be
deemed to be employment subject to this act, unless and
until it is shown to the satisfaction of the department
that—(a) such individual has been and will continue to be
free from control or direction over the performance of
such services both under his contract of service and in
fact; and (b) as to such services such individual is
customarily engaged in an independently established
trade, occupation, profession or business.
12
43 P.S. § 753(l)(2)(B). In order for an individual to be deemed “self-employed,”
both prongs of Section 4(l)(2)(B) of the Law must be satisfied. Silver v.
Unemployment Compensation Board of Review, 34 A.3d 893, 896 (Pa. Cmwlth.
2011).
Notably, Claimant does not dispute that the Board found Hindi was
incorporated by Claimant when he began receiving benefits; that he was Hindi’s
Vice-President, Secretary and CFO; that he signed checks on behalf of Hindi; that
he was listed as the corporation’s “owner” for one of its bank accounts; or that he
received unreported earnings from Hindi and other sources while he was receiving
benefits. All of this establishes that Claimant had an investment in Hindi, was at
risk of sustaining a profit or loss, was free from the direction and control of others
in performance of his corporate duties with Hindi and was customarily engaged in
an independently established trade, occupation, profession or business. This is
more than substantial evidence to support the Board’s determination that Claimant
was ineligible for UC, EUC and state extended benefits because he was self-
employed.
C.
Finally, Claimant contends that the Board erred when imposing fault
and fraud overpayments. Section 804(a) of the Law provides that “[a]ny person
who by reason of his fault has received any sum as compensation under this act to
which he was not entitled, shall be liable to repay . . . a sum equal to the amount so
received by him. . . .” 43 P.S. § 874(a). Section 4005 of the EUC Act provides that
an overpayment of EUC benefits shall be classified as fraud where an individual
13
“knowingly has failed . . . to disclose a material fact, and as a result of such . . .
nondisclosure such individual has received an amount of emergency
unemployment compensation under this title to which such individual was not
entitled.”
The word “fault” within the meaning of Section 804(a) connotes an
act to which blame, censure, impropriety, shortcoming or culpability attaches.
Fugh v. Unemployment Compensation Board of Review ___ A.3d ___ (filed
January 18, 2017); Summers v. Unemployment Compensation Board of Review,
430 A.2d 1046, 1048 (Pa. Cmwlth. 1981). To find fault, the Board must make
some findings with regard to claimant’s state of mind. Maiorana v. Unemployment
Compensation Board of Review, 453 A.2d 747, 749 (Pa. Cmwlth. 1982). Conduct
that is designed intentionally to mislead the UC authorities is sufficient to establish
a fault overpayment. Greenawalt v. Unemployment Compensation Board of
Review, 543 A.2d 209, 211 (Pa. Cmwlth. 1988). Where a claimant fails to provide
truthful information to the Service Center, Amspacher v. Unemployment
Compensation Board of Review, 479 A.2d 688, 692 (Pa. Cmwlth. 1984), or
provides an intentional misstatement on an application for benefits, the imposition
of a fault overpayment is appropriate. Matvey v. Unemployment Compensation
Board of Review, 531 A.2d 840, 844 (Pa. Cmwlth. 1987).
Claimant contends that the evidence and testimony presented failed to
establish that he knowingly and/or intentionally failed to disclose his earnings to
the Department because he attempted to correct his reported earnings to the
Department, undermining any finding that he held the requisite level of intent to
14
assign fault and fraud overpayments. What this argument ignores is that the Board
chose to discredit Claimant’s assertion that he attempted to correct his reported
earnings given his continued and repeated inaccuracies and omissions were
knowing or intentional and there is ample record evidence to support its
determination in this regard. On numerous occasions, Claimant indicated on his
UC, EUC and weekly state extended benefits forms that he was not working or
receiving earnings of any kind when he was, in fact, receiving such work and
earnings from Hindi. Moreover, he had been specifically advised on each occasion
that the failure to report all work and earnings could result in prosecution. Such an
extended course of conduct clearly supports the Board’s determinations regarding
Claimant’s state of mind.
Accordingly, the Board’s orders are affirmed.14
_________________________________
DAN PELLEGRINI, Senior Judge
14
Included in Claimant’s brief is a letter to Claimant dated November 11, 2015, from
Claimant’s former-counsel, a four-page excerpt from a transcript in criminal court, and two
pages taken out of an investigative report by the Office of Attorney General regarding Claimant.
On August 3, 2016, the Board filed an Application for Relief in the Form of a Motion to Strike
Extra-Record Evidence Attached to Claimant’s Brief. By Order dated August 16, 2016, this
Court directed that the motion be submitted with the merits. Because the three documents
attached to Claimant’s brief are not part of the record made before the Board, we strike those
portions of Claimant’s brief.
15
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Frank James Capozzi, Sr., :
Petitioner :
:
v. : Nos. 2283, 2284, 2285 C.D. 2015
:
Unemployment Compensation :
Board of Review, :
Respondent :
ORDER
AND NOW, this 19th day of January, 2017, it is hereby ordered that
the orders of the Unemployment Compensation Board of Review dated August 26,
2015, are affirmed, and the Unemployment Compensation Board of Review’s
Application for Relief in the Form of a Motion to Strike Extra-Record Evidence
Attached to Petitioner’s Brief is granted.
_________________________________
DAN PELLEGRINI, Senior Judge