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Stone v. Federal Deposit Insurance Corp.

June 11, 1999


Before Lourie, Circuit Judge, Smith, Senior Circuit Judge, and Gajarsa, Circuit Judge.

The opinion of the court was delivered by: Gajarsa, Circuit Judge.

Appealed from: Merit Systems Protection Board


Milton R. Stone seeks review of the final decision of the Merit Systems Protection Board ("Board"), dated September 11, 1997, affirming the April 1, 1997 initial decision of the Administrative Judge ("AJ"), Docket No. DE-0752-97-0279-I-1. The Board sustained Mr. Stone's removal from his position as a bank examiner at the Federal Deposit Insurance Corporation ("FDIC"). For the reasons set forth below, we vacate the decision of the Board and remand for further proceedings consistent with this opinion.


Mr. Stone was employed as a GS-12 bank examiner in the FDIC's Division of Supervision, Englewood, Colorado. Mr. Stone submitted applications for approved leave using Standard Form 71s on four occasions. He admitted that he signed these forms with the names of doctors who were purportedly excusing the absences that he requested.

The FDIC decided to begin removal proceedings against Mr. Stone for the submission of false requests for leave. The FDIC provided Mr. Stone with notice of the charges of misconduct upon which his removal would be based by letter dated July 22, 1996. The letter stated that Mr. Stone was alleged to have forged four leave slips. The letter explained that Mr. Stone's prior 30-day suspension and a previous letter of reprimand would also be considered. The letter stated that Mr. Stone had "the right to review the material relied on to support this proposed [removal]" and would be "granted a reasonable amount of official time to review the material relied upon to support this [removal], to secure affidavits, and to prepare an answer." The letter also stated that "[f]ull and careful consideration will be given to any reply." Counsel for Mr. Stone requested that the FDIC send him all the materials upon which the FDIC intended to rely in its attempt to discipline Mr. Stone.

The official with the duty to decide whether Mr. Stone had committed such improper acts and to decide the level of the appropriate penalty (the "deciding official") was given instructions by the FDIC outlining his general responsibilities. These instructions included the following:

"Your decision should be based solely on the notice of charges and the supporting documentation that is contained in the file, and not on any additional information. . . ."

"The document file and your deliberations on the case are to be treated as confidential. You are not, however, expected to decide the matter in isolation. Nevertheless, to prevent due process complications in the case, you are encouraged to confine your Discussion about the case as much as possible. Insofar as technical advice is sought or there is a question regarding information contained in the document file, the matter can be discussed with the representative of Labor and Employee Relations Section. . . ."

"Prior to making your decision, you may wish to discuss this matter with someone on your senior staff other than the recommending official(s). That person must be given clear instructions about the confidentiality of the matter and the fact that no information other than that which is in the file is to be discussed or considered in connection with the case."

"The matter may be discussed with other individuals (including the recommending officials) on a limited basis. Before you do so, you may wish to coordinate with the Labor and Employee Relations Section representative or the Legal Division representative in order to avoid due process problems. In particular, those contacts must not involve the introduction of new information about the case." (No emphasis added.)

After considering Mr. Stone's case, the deciding official recommended removal and Mr. Stone's employment with the FDIC was thereafter terminated under Chapter 75 of Title 5 of the United States Code. After his removal and the filing of his appeal to the Board, Mr. Stone made a second request for relevant documents. In response to this request, Mr. Stone discovered that an ex parte memorandum from the official recommending his dismissal (the "proposing official") had been sent to the deciding official. Mr. Stone also discovered that the deciding official received a second ex parte memorandum from another FDIC official urging Mr. Stone's removal. In an affidavit, the deciding official stated that he would have concluded that Mr. Stone should be removed whether or not he had seen the ex parte memo from the proposing official. *fn1

Mr. Stone appealed the FDIC's decision to the Board, alleging, among other things, that harmful error occurred in the removal proceeding because the deciding official received ex parte ...

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