                      NOTE: This disposition is nonprecedential.


     United States Court of Appeals for the Federal Circuit

                                      2006-3206



                                     GARY WELCH,

                                                            Petitioner,

                                           v.


                      DEPARTMENT OF VETERANS AFFAIRS,

                                                            Respondent.



        Daniel Minahan, Minahan and Shapiro, P.C., of Lakewood, Colorado, for
petitioner.

       Gregory T. Jaeger, Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, of Washington, DC, for respondent. With him on the brief
were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, and
Steven J. Gillingham, Assistant Director.

Appealed from: Arbitrator Decision
                      NOTE: This disposition is nonprecedential.


    United States Court of Appeals for the Federal Circuit


                                       2006-3206


                                     GARY WELCH,

                                                       Petitioner,


                                            v.


                       DEPARTMENT OF VETERANS AFFAIRS,

                                                       Respondent.


                           __________________________

                           DECIDED: March 14, 2007
                           __________________________



Before SCHALL, GAJARSA, and PROST, Circuit Judges.

SCHALL, Circuit Judge.


                                       DECISION

      Gary Welch petitions for review of the decision of an arbitrator, which upheld Mr.

Welch’s permanent demotion by the Department of Veterans Affairs (“VA”). Dep’t of

Veterans Affairs v. Am. Fed’n of Gov’t Employees, FMCS No. 05-04679 (Watkins, Arb.)

(“Arbitration Decision”). We affirm-in-part, vacate-in-part, and remand.
                                       DISCUSSION

                                             I.

       On March 14, 2005, the VA proposed the removal of Mr. Welch, a police officer

for the VA, based on five charges. At the time of the events in question, Mr. Welch was

suspended from his VA police officer position based upon two incidents not at issue

here. Mr. Welch previously had been employed as a police officer by the Department of

Defense (“DOD”) at Fitzsimons Army Medical Center. Important to this appeal are two

of the charges against Mr. Welch, Charges #4 and #5. These charges arose out of a

traffic accident in which Mr. Welch was involved. The accident, which was a “fender

bender,” occurred in Aurora, Colorado, on December 3, 2004. Charges #4 and #5 were

as follows:

       Charge #4: Violation of VA Directive 0730, Paragraph 2c(6)(b), which
       states, "VA police officers will promptly inform the supervisor if arrested for
       any criminal offense except for traffic and parking citations .... "

       Specification: Correspondence from the Aurora Police Department
       advised that on December 3, 2004, you had been placed under arrest and
       charged with driving a vehicle while under the influence of alcohol,
       careless driving, and failing to give information in an accident (hit and run)
       by an officer of the Aurora Police Department. You failed to advise any
       Police Service supervisor of the arrest as required by the directive.

       Charge #5: Providing False Information to Aurora Police Department.

       Specification: On December 3, 2004, you were arrested by a Police
       Officer of the Aurora Police Department. Correspondence from the Aurora
       Police Department indicates that when you were stopped and asked for
       identification, you presented a United States Department of Defense
       (DOD) Police Badge and a DOD Police Identification Card. Those
       documents and your action in presenting them falsely identify your
       employment status.

The deciding official affirmed three of the charges (Charges #4 and #5 and Charge #1,

which is not relevant to this appeal), but reduced the punishment from removal to



2006-3206                                    2
permanent demotion to file clerk. Consequently, Mr. Welch, who had been employed

by the VA as a police officer, FS-083-7, step 7, was permanently demoted to file clerk,

GS-305-4, step 10. Mr. Welch appealed the deciding official’s determination, which the

parties agreed to present to an arbitrator for a decision on the merits.

       For Charges #1 and #4, the arbitrator found that the agency had either failed to

carry its burden or had shown only a de minimis violation. Arbitration Decision at 17.

The arbitrator sustained the remaining charge, Charge #5. Id. The arbitrator’s decision

on Charge #5 involved credibility determinations. The arbitrator decided to credit the

testimony of the police officer to whom Mr. Welch presented the DOD Police Badge and

Identification Card over that of Mr. Welch. Id. at 13-16.

       The arbitrator then reviewed the demotion penalty under the Douglas factors. Id.

at 19-20 (citing Douglas v. Veterans Admin., 5 M.S.P.R. 280 (1981)). The arbitrator

determined that the VA would have lost its trust in Mr. Welch and that the permanent

demotion to file clerk was appropriate. The arbitrator also explained:

               In his current position, [Mr. Welch’s] wage has been “red circled” so
       as to assure that he has no loss of pay; but his career has been in law
       enforcement, he wishes it to continue there, and he feels he has been
       unfairly deprived of it. Unfortunately, however, he has compromised that
       position. The Agency has a very small police force and has determined,
       without contravention, there is no position within it suitable for [Mr. Welch].

Arbitration Decision at 21-22.

       Mr. Welch timely appealed. We have jurisdiction pursuant to 5 U.S.C. § 7703.

                                             II.

       In a dispute between a federal employer and employee, an arbitrator applies the

same legal standards as apply in an appeal to the Merit Systems Protection Board

(“Board”). Martin v. Dep’t of Veterans Affairs, 412 F.3d 1258, 1263-64 (Fed. Cir. 2005).



2006-3206                                    3
Similarly, this court reviews an arbitrator’s decision under the same standard that it

would employ in its review of a decision by the Board. Morrison v. Nat’l Sci. Found.,

423 F.3d 1366, 1368 (Fed. Cir. 2005). Our scope of review is limited. Specifically, we

must affirm the arbitrator’s decision unless we find it to be arbitrary, capricious, an

abuse of discretion, or otherwise not in accordance with law; obtained without

procedures required law, rule, or regulation having been followed; or unsupported by

substantial evidence. Id. (citing 5 U.S.C. § 7703(c)); see Kewley v. Dep’t of Health &

Human Servs., 153 F.3d 1357, 1361 (Fed. Cir. 1998).

       On appeal, Mr. Welch makes essentially three main arguments. First, he argues

that substantial evidence does not support the arbitrator’s decision to sustain Charge

#5.   He argues that the DOD police credentials he presented were not false or

fraudulent, given that the top half of the DOD badge, which denotes active duty, is gone

and “retired” is inscribed on the back. He additionally contends that the fact he gave the

Aurora police officer his current work number at the VA Medical Center negates any

inference that he was trying to deceive the officer into thinking he currently was a police

officer for the DOD at Fitzsimons Army Medical Center. Second, Mr. Welch asserts that

the arbitrator’s decision is contrary to law because both the arbitrator and the deciding

official sustained his demotion based on allegations not contained in the notice of

proposed removal. Specifically, he argues that because the charge of providing false

information was not in the notice of proposed removal, his demotion may not be

sustained on that basis. Third, Mr. Welch asserts at several points in his brief that the

arbitrator misunderstood the penalty that was imposed on him.       Appellant’s Br. at 11-

12, 14, 19. Mr. Welch argues that the arbitrator was unaware that his demotion resulted




2006-3206                                   4
in a permanent loss of pay, given that the arbitrator explicitly stated that Mr. Welch’s

wage had been “‘red circled’ so as to assure that he has no loss of pay.” Appellant’s Br.

at 11 (citing Arbitration Decision at 21). Mr. Welch asserts that there is no evidence for

the arbitrator’s belief that his wage had been “red-circled.” Appellant’s Br. at 14.

       The government argues on appeal that the arbitrator’s decision should be

affirmed because it is supported by substantial evidence. The government contends

that the arbitrator’s conclusion that Mr. Welsh offered his DOD police credentials for an

improper purpose is reasonable and based on credibility determinations made by the

arbitrator based upon the testimony at the hearing. The government also asserts that

the arbitrator’s decision is not contrary to law because the notice of proposed removal,

namely the specifications for Charges #4 and 5, does implicate the charge of false

information.   The government does not address Mr. Welch’s contention that the

arbitrator misunderstood the nature of his penalty.

       We agree with the arbitrator’s decision to sustain the charge of presenting

misleading credentials. It appears, however, that there is an unresolved question as to

the nature of Mr. Welch’s penalty. We therefore vacate the portion of the Arbitration

Decision sustaining the penalty and remand the case to the arbitrator for a finding as to

whether Mr. Welch’s penalty entailed a reduction in his wage and a new determination

as to the reasonableness of the penalty based upon that finding.

                                            III.

       With regard to the arbitrator’s decision to sustain the charge of presenting

misleading credentials, we hold that substantial evidence supports both the finding that

the DOD police credentials constituted false information and that Mr. Welch intended to




2006-3206                                    5
deceive the Aurora police officer. At the time of his arrest, Mr. Welch was employed by

the VA as a file clerk, having been suspended from his VA police officer position.

Although Mr. Welch alleges that his DOD badge did not contain the top half denoting

active duty and was inscribed with “retired,” Mr. Welch presented his DOD badge and

identification card to the Aurora police officer when asked to prove he was a police

officer and did not state that the credentials were “former” or “old.” Arbitration Decision

at 15. Moreover, Mr. Welch, in response to the police officer’s question of where he

worked, stated that he worked on “Fitz” (Fitzsimons Army Medical Center), even though

he had not worked there for more than five years.            Id. at 15.   In reviewing the

misrepresentation charge, the arbitrator decided to credit the police officer’s testimony

during the hearing over that of Mr. Welch.         We decline to disturb this credibility

determination, which was within the arbitrator’s discretion.       See Raney v. Federal

Bureau of Prisons, 222 F.3d 927, 939 (Fed. Cir. 2000) (“Credibility determinations are

within the discretion of the arbitrator and are virtually unreviewable on appeal.”).

       Additionally, we hold that the arbitrator’s decision to sustain the charge of

presenting misleading credentials is not contrary to law, given that the notice of

proposed removal refers to Mr. Welch’s December 3, 2004 arrest and to the fact that

he presented a DOD Police Badge and a DOD Police Identification Card to the Aurora

police officer. The specificity of the notice of proposed removal therefore was sufficient

so as to provide Mr. Welch the opportunity to make an informed reply. See, e.g., Brook

v. Corrado, 999 F.2d 523, 526-27 (Fed. Cir. 1993) (“A notice of proposed removal is

sufficient . . . when it apprises the employee of the nature of the charges in sufficient

detail to allow the employee to make an informed reply.”) (internal citation omitted).




2006-3206                                    6
Because the arbitrator’s decision to sustain the charge of misleading credentials is

supported by substantial evidence and not contrary to law, we affirm this portion of the

decision.

                                            IV.

       As to the arbitrator’s understanding of Mr. Welch’s penalty, the arbitrator explicitly

noted in his decision that “[Mr. Welch’s] wage has been ‘red-circled’ so as to assure that

he has no loss of pay.” Arbitration Decision at 21. The record, however, contains no

indication that Mr. Welch’s wage was “red-circled,” and the government does not

dispute Mr. Welch’s assertion that, in actuality, his demotion resulted in an annual

salary decrease of $10,000, Appellant’s Br. at 14. The only indication in the record as

to what penalty Mr. Welch incurred is in the May 10, 2005 Decision on Proposed

Removal, stating that “a decision has been made to transfer you from your position as a

Police Officer, GS-083-7, step 7, in Police Service and assign you to the position of File

Clerk, GS-305-4, step 10, Patient Records File Section, Business Office.” In view of the

apparent discrepancy between the record and the arbitrator’s belief regarding Mr.

Welch’s wage, we conclude that the arbitrator’s finding that Mr. Welch’s wage was “red-

circled” is not supported by substantial evidence.

       A correct understanding of the nature of a penalty is a prerequisite to a

determination of the reasonableness of the penalty. We therefore vacate the arbitrator’s

decision that the penalty imposed upon Mr. Welch was reasonable and remand the

case for (i) a factual finding as to whether Mr. Welch’s demotion entailed a reduction in

his pay and (ii) a determination as to the reasonableness of the penalty based upon that

finding.




2006-3206                                    7
      For the foregoing reasons, the decision of the arbitrator is affirmed-in-part,

vacated-in-part, and remanded. ∗




      ∗
              No transcript of the hearing was made, and following his decision, the
arbitrator destroyed the notes he took during the hearing. Likewise, following his
decision, the arbitrator destroyed the hearing exhibits. Clearly, the better course is for
the hearing record to be maintained intact until the appellate process is completed. Had
that course been followed in this case, it is possible that a remand for further
proceedings would not have been necessary.

2006-3206                                   8
