State of North Carolina s59

STATE OF NORTH CAROLINA IN THE OFFICE OF ADMINISTRATIVE HEARINGS COUNTY OF HOKE 07 OSP 1866

ERIC DEWAYNE PENDER, ) ) Petitioner, ) ) v. ) DECISION ) N. C. HIGHWAY PATROL, ) ) Respondent. ) )

This contested state personnel case was heard before the undersigned Administrative Law Judge on 8 May 2008 in Raleigh, North Carolina. Petitioner contends that there was not just cause to terminate his employment with the North Carolina Highway Patrol for failing to file state or federal income tax returns every year from 2000 through 2006. APPEARANCES

PETITIONER: J. Michael McGuinness Attorney for Petitioner The McGuinness Law Firm PO Box 952 Elizabethtown, NC 28337

RESPONDENT: Tamara S. Zmuda Assistant Attorney General Ashby T. Ray Assistant Attorney General N.C. Department of Justice 9001 Mail Service Center Raleigh, NC 27609

Whether Respondent had just cause to dismiss Petitioner from the North Carolina State Highway Patrol. FINDINGS OF FACT

Before the termination of his employment that is at issue in this action, Petitioner had been employed as a Trooper with the North Carolina Highway Patrol since March 1987 and was assigned to Hoke County. As a Trooper, Petitioner was a sworn law enforcement officer who had taken an oath to uphold the laws of the State.

The Conduct At Issue

Petitioner was aware that he was required by law to timely file state and federal income tax returns for 2000 through 2007. Nevertheless, Petitioner failed to timely file income tax returns for 2000, 2001, 2002, 2003, 2004, 2005, and 2006. Petitioner did not file his income tax returns for 2000 until 2007 after Respondent began investigating Petitioner’s conduct and had recommended his dismissal. Nor did Petitioner file his income tax returns for 2001 through 2006 until 2007, after Respondent began investigating Petitioner’s conduct

The Investigation and Dismissal from Employment

In April 2007, Captain Ken Castelloe was the Unit Commander of the Internal Affairs Unit of the North Carolina Highway Patrol. Cpt. Castelloe learned from the Director of Administrative Services that Petitioner’s wages were being garnished for owed taxes in an amount that was believed to approximate $30,000. Consequently, Cpt. Castelloe filed a Personnel Complaint HP-307 concerning Petitioner’s owed taxes. With only the information that Petitioner owed taxes, Cpt. Castelloe classified the complaint as a Serious Personal Conduct violation of Directive H.1, Section XXX (Payment of Debts).

The Personnel Complaint HP-307 was served on Petitioner. Petitioner was interviewed by First Sergeant Blackmon and First Sergeant Lisenby on 27 April 2007. During this interview, Petitioner admitted that he had not filed state or federal income tax returns for seven (7) years and currently owed the State of North Carolina $39,005.86 in taxes and penalties for calendar years 2000 through 2002. Also at the 27 April 2007 interview, Petitioner told First Sergeants Blackmon and Lisenby that he had tried to file his tax returns with the help of Mr. Farmer with Jackson-Hewitt. Later investigation revealed, however, that, according to Mr. Farmer, Petitioner did not contact Mr. Farmer about the unpaid taxes until 30 April 2007, after the interview.

After reading the report of the completed investigation, Cpt. Castelloe determined that Petitioner not only owed taxes as previously discovered, but had not filed state and federal income tax returns for seven (7) years. Cpt. Castelloe recommended to Major C.J. Carden of the Office of Professional Standards that Petitioner be dismissed from the North Carolina State Highway Patrol for a Serious Personal Conduct in violation of Directive H.1, Section III (Conformance to Laws). Major Carden agreed that Petitioner should be dismissed from the North Carolina State Highway Patrol for a Serious Personal Conduct violation of Directive H.1, Section III (Conformance to Laws).

2 The recommendation was then sent to the Commander of the North Carolina State Highway Patrol, Col. Fletcher Clay. Col. Clay directed Cpt. Castelloe to interview Petitioner again to determine when the North Carolina Department of Revenue first notified Petitioner of his failure to file taxes and what, if any, efforts Petitioner made to file his state and federal income tax returns. On 26 June 2007, Sgt. Williams asked Petitioner to bring any tax documents or prior notices of garnishment to a second interview on 29 June 2007. On 29 June 2007, F. Sgt. Lisenby interviewed Petitioner for a second time. Petitioner did not bring any tax documents or prior notices of garnishment as had been requested. Petitioner also did not provide any proof that he had attempted to file his state and federal income tax returns since his first interview on 27 April 2007.

On 30 July 2007, F. Sgt. Lisenby contacted the North Carolina Department of Revenue and requested written documentation of Petitioner’s failure to file tax returns for the years 2000 through 2006. F. Sgt Lisenby learned that Petitioner was under criminal investigation and no further information could be released without Petitioner’s consent. This information was provided to Col. Clay. Col. Clay agreed that the Serious Personal Conduct violation of Conformance to Laws by Petitioner had been substantiated.

Col. Clay directed Cpt. Castelloe to conduct a Pre-Dismissal Conference with Petitioner. On 22 August 2007, Cpt. Castelloe conducted a Pre-Dismissal Conference with Petitioner. During this meeting, Petitioner was given the opportunity to provide any information he wanted Col. Clay to consider when making his decision. By this time, Petitioner had filed his tax returns for 2000 through 2006. Cpt. Castelloe reported by memorandum to Col. Clay on the Pre-Dismissal Conference, including attaching a statement by Petitioner, as well as completed state and income tax returns for Petitioner for the 2000 through 2006, dated 16-17 August 2007. In his 22 August 2007 statement, Petitioner explained that he had not previously filed tax returns for 2000, 2001, 2002, 2003, 2004, 2005, and 2005 because of his mother’s death, his divorce and lost documents. He stated that he had enrolled in financial counseling, planned to take a bookkeeping class, and had reduced his rental property inventory. Petitioner also apologized.

On 24 August 2007, Col. Clay dismissed Petitioner from the North Carolina State Highway Patrol.

Petitioner’s Internal Appeal

Petitioner was given notice of the grounds of his dismissal and the opportunity to appeal. Specifically, the Petitioner was notified that he was being dismissed for violation of State Highway Patrol Directive H.1, Section III (Conformance to Laws) in that he:

By his own admission, has failed to file a tax return with the Internal Revenue Service [and] the North Carolina Department of Revenue for calendar years 2000 – 2006.

3 On these occasions, Trooper Pender failed to obey the laws of the United States and the State of North Carolina.

Petitioner appealed his dismissal to the Secretary of Crime Control and Public Safety, Secretary Bryan Beatty, through Respondent’s internal grievance policy. Secretary Beatty upheld the decision to dismiss Petitioner from the North Carolina State Highway Patrol.

Petitioner’s Reasons for His Conduct

In support of his claim, Petitioner’s testimony reiterated the reasons he had offered in his Pre-Dismissal Conference, including that he did not timely file his tax returns because he was missing paperwork necessary for filing the returns and had experienced financial difficulties in connection with his mother’s death in 1997 and his divorce in 1998. Petitioner further added that he had offered financial assistance during the period to assist his niece who had been diagnosed with cancer. Whether Petitioner’s ability to timely file tax returns was adversely affected by his mother’s death and his divorce in the late 1990s, or even by lost documents, however, does not credibly address the sustained and repeated failure to file tax returns for seven (7) years. Additionally, while Petitioner may be lauded for assisting his niece, even if Petitioner’s financial resources were diminished by that effort, it does not credibly address or mitigate his failure to file seven (7) years of federal and state tax returns. Indeed, once Petitioner had filed his returns, his tax assessment was lower.

Petitioner’s Character Evidence

Petitioner offered testimony from Earl Jones. Mr. Jones met Petitioner approximately thirteen (13) years ago when he began working a job where Petitioner lives, after Mr. Jones retired from the military. Mr. Jones testified that he believes Petitioner to be honest and trustworthy.

CONCLUSIONS OF LAW

All parties are properly before this Administrative Law Judge, have been correctly designated, and jurisdiction and venue are proper. To the extent that the Findings of Fact contain Conclusions of Law, or that the Conclusions of Law are Findings of Fact, they should be so considered without regard to the given labels.

Petitioner is and has been continuously employed as a State Trooper in the Highway Patrol for approximately twenty (20) years. At the time of his dismissal, he was a Career State Employee entitled to the protections of the North Carolina State Personnel Act, N.C. Gen. Stat. § 126-1 et seq., and specifically the just cause provision of N.C. Gen. Stat. §126-35. Section 126-35(a) provides, in part, that “[n]o career State employee subject to the State Personnel Act shall be discharged, suspended, or demoted for disciplinary reasons, except for just cause.”

4 The North Carolina Supreme Court has held that “[d]etermining whether a public employer had just cause to discipline its employee requires two separate inquiries: First, whether the employee engaged in the conduct the employer alleges, and second, whether that conduct constitutes just cause for the disciplinary action taken.” North Carolina Dept. of Environment & Natural Resources v. Carroll, 358 N.C. 649, 665, 599 S.E.2d 888, 898 (2004). Respondent bears the burden of demonstrating “just cause” for terminating Petitioner’s employment. N.C. Gen. Stat. § 126-35(d).

A. Petitioner Engaged in The Alleged Conduct.

Petitioner knew that he was required to timely file tax returns for 2000, 2001, 2002, 2003, 2004, 2005, and 2006. For these seven (7) years, Petitioner failed to timely file tax returns. Nor did Petitioner seek any extensions of time to file his tax returns.

B. Respondent Proved Just Cause To Dismiss Petitioner.

Respondent had just cause to dismiss Petitioner for violating the Respondent’s policy on Conformance to Laws. North Carolina Highway Patrol Directive H.1, Section III, Conformance to Laws, states that:

Each member shall obey the laws of the United States, the State of North Carolina and of local jurisdictions. If facts revealed by a thorough investigation indicate there is substantial evidence that a member has committed acts which constitute a violation of a civil or criminal law, ordinance, or infraction other than a parking ordinance, then the member may be deemed to have violated this subsection, even if the member is not prosecuted or is found not guilty in court. Each member shall immediately report his/her supervisor any time the member is subject to an investigation by the patrol or any other law enforcement agency for any acts that could constitute a felony or misdemeanor. Each member shall report any conviction, finding of guilt or plea of no contest, or determination of responsibility involving the violation of any law or ordinance other than a parking ordinance.

Failure to file federal and state tax returns violates federal and state criminal law. With respect to the obligation to submit annual federal tax returns, 26 U.S.C.S. § 7203 states, in pertinent part:

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more

5 than $25,000 ($100,000 in the case or a corporation), or imprisoned not more than 1 year, or both, together with the cost of the prosecution.

Similarly, North Carolina criminalizes the failure to file a return and pay taxes. (See, e.g., N.C. Gen. Stat. § 105-236(9) (any person who required to make a return or pay tax “who willfully fails to pay the tax, make the return, keep the records, or supply the information, at the time or times required by law, or rules issued pursuant thereto, shall, in addition to other penalties provided by law, be guilty of a class 1 misdemeanor.”) Thus, Petitioner violated Respondent’s policy on Conformance to Laws.

Petitioner urges that consideration of the totality of the circumstances, North Carolina Dept. of Environment & Natural Resources v. Carroll, 358 N.C. 649, 599 S.E.2d 888 (2004), and whether there is a rational nexus between Petitioner’s off-duty conduct and the potential adverse impact on the employee’s ability to perform for the agency, Eury v. North Carolina Employment Security Comm’n, 115 N.C. App. 590, 446, S.E.2d 383 (1994), would lead to a conclusion in favor of Petitioner. This contention is without merit.

Petitioner’s failure to file state and federal income taxes spans a seven (7) year period. Each and every year for seven (7) years, Petitioner failed to file returns required by law, and did not seek any extension of time to file. Nor did Petitioner take any action to rectify his failure to file tax returns until after the Highway Patrol investigation and disciplinary process commenced. Petitioner’s position that events in the late 1990s prevented him from filing returns or seeking extensions explains or otherwise mitigates his failure simply does not credibly explain or mitigate Petitioner’s sustained and repeated conduct. Petitioner’s mother died in 1997 and he was divorced in 1998: years before his first failure to file. Further, under Eury, Respondent “need not show actual harm to its interest to demonstrate just cause for an employee’s dismissal,” just a rational nexus with the “potential adverse impact on the employee’s future ability to perform for the agency.” 115 N.C. App. at 611, 446 S.E.2d at 395-96 (emphasis added). Petitioner’s repeated and sustained knowing violation of the laws requiring him to file tax returns, and his failure to rectify those repeated violations until caught and involved in the disciplinary process, manifestly undermine his credibility and ability to perform his duties as a State Trooper: to uphold the laws of North Carolina. Moreover, unlike the off-duty conduct cases cited by Petitioner which involve isolated incidences, Petitioner maintained a pattern of violating federal and state laws known to him and did not voluntarily abate that criminal conduct until confronted with the disciplinary process that is at issue in this action. In this regard, there is no evidence that Petitioner has been the subject of selective enforcement: there is no evidence that conduct like Petitioner’s willful criminal violations spanning seven (7) years without credible explanation or mitigation has been found in other cases to warrant discipline less than dismissal.

Respondent met all procedural requirements for terminating Petitioner pursuant to the North Carolina General Statutes, North Carolina State Personnel Manual, and the

6 rules and policies of the North Carolina Department of Crime Control and Public Safety. Moreover, Respondent has satisfied its burden to demonstrate just cause for its disciplinary action in terminating Petitioner’s employment.

PROPOSED DECISION

Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby recommended that Respondent’s dismissal be upheld. It is recommended that Petitioner not recover reasonable attorneys’ fees and costs associated with the filing and prosecution of this contested case. ORDER

It is hereby ordered that the agency serve a copy of the Final Decision on the Office of Administrative Hearings, 6714 Mail Service Center, Raleigh, NC 27699-6714, in accordance with North Carolina General Statute § 150B-36(b).

NOTICE

Before the agency makes its FINAL DECISION, it is required by N.C.G.S. § 150B-36(a) to give each party an opportunity to file exceptions to this RECOMMENDED DECISION, and to present written arguments to those in the agency who will make the final decision. The agency that will make the final decision in this contested case is the State Personnel Commission. The agency is required by N.C.G.S. § 150B-36(b) to serve a copy of the Final Decision to all parties and to furnish a copy to the Parties’ attorney of record.

This the 4th day of August, 2008.

______Shannon Joseph, Administrative Law Judge