[00:00:00] Speaker 02:
Our next case is Snyder versus Navy.

[00:00:13] Speaker 02:
This is 16-1942.

[00:01:01] Speaker 02:
Mr.. Graham you reserved five minutes your time for rebuttal correct Okay, you may begin May it please the court My name is Michael D. Graham.

[00:01:15] Speaker 04:
I represent the petitioner in this case Dr.. Victoria Snyder PhD is mechanical engineer and they will say surface warfare centered Baldwin She's also my spouse who've been married since 2009

[00:01:31] Speaker 02:
You're representing your wife today?

[00:01:33] Speaker 04:
Yes, sir.

[00:01:35] Speaker 01:
Best of luck.

[00:01:40] Speaker 04:
OK, sir.

[00:01:40] Speaker 04:
High stakes.

[00:01:43] Speaker 04:
So I'm told so.

[00:01:45] Speaker 04:
In any event, follow the money.

[00:01:50] Speaker 04:
Those were the words that were uttered by Deep Throat to Bob Woodward in the movie and also the book All Presidents Men.

[00:02:00] Speaker 04:
as an anonymous source that ultimately brought down the presidency of Richard Nixon.

[00:02:06] Speaker 04:
You might rephrase that saying, in this case, to follow the funding source, follow the money.

[00:02:15] Speaker 04:
Because in September of 2012, Naval Surface Warfare Center Dahlgren signed a cooperative research and development agreement, otherwise known as a CRADA, with Lockheed Martin,

[00:02:29] Speaker 04:
They signed that in September of 2012.

[00:02:32] Speaker 04:
It was for a term of three years.

[00:02:34] Speaker 04:
It was signed by the base commander.

[00:02:35] Speaker 04:
It was signed by Lockheed Martin.

[00:02:38] Speaker 04:
And it made very clear in that document that it was worth about $2.6 million that the funding source for the CRADA was Lockheed Martin Independent Research and Development Funds.

[00:02:54] Speaker 02:
The board held that CRADA funds were used to pay indirectly.

[00:02:58] Speaker 02:
with Snyder's salary, but that there was no difference between her situation and that of working capital funded employees.

[00:03:06] Speaker 02:
Can you focus on that?

[00:03:08] Speaker 02:
Why should we consider that the board erred on that, on finding that there's no difference?

[00:03:13] Speaker 04:
Well, first of all, I mean, the board below composed two members in a split vote.

[00:03:21] Speaker 04:
So one of them voted in our favor.

[00:03:24] Speaker 04:
We don't know why or how.

[00:03:26] Speaker 04:
They did not produce an opinion.

[00:03:29] Speaker 04:
And that's why the administrative logic of this decision below is the law of the case.

[00:03:35] Speaker 04:
We would submit that, first of all, he didn't consider any of the proof or detracting evidence that we presented in this case.

[00:03:45] Speaker 04:
We cited the Federal Technology Transfer Act that dates back to 1980, Title 15, United States Code 3710.

[00:03:57] Speaker 04:
We talked about the fact that there is a statement in that Act 3710 AD1 that expressly says, as a matter of law, that while the federal laboratory at Naval Warfare Surface Dahlgren could provide resources and personnel and expertise, they could not provide any money.

[00:04:23] Speaker 04:
And in contrast, the only money that could be provided would be by the non-Navy or non-governmental collaborator, which in this case is Lockheed Martin.

[00:04:32] Speaker 04:
And they, in fact, produced $2.6 million in advance of this particular project.

[00:04:41] Speaker 04:
Now, this is done in September of 2012.

[00:04:44] Speaker 04:
Six months later, the sequester is announced in light of the budget dispute between the Congress and the president.

[00:04:52] Speaker 04:
the Secretary of Defense letter.

[00:04:55] Speaker 02:
So, Ms.

[00:04:56] Speaker 02:
Snyder was working there at Dahlgren prior to these circumstances.

[00:05:01] Speaker 04:
That's correct.

[00:05:01] Speaker 04:
She dates back to 2002 as a mechanic.

[00:05:03] Speaker 02:
So, assuming that the circumstances had never come up, the sequestration and issues and all, she would have continued working there at Dahlgren, correct?

[00:05:13] Speaker 04:
Yes, sir.

[00:05:14] Speaker 02:
And I think, I don't know whether or not... So, the only difference here that we're looking at is that for a period of time, her salary was paid

[00:05:23] Speaker 02:
at least indirectly through the crater.

[00:05:26] Speaker 04:
That's correct, Your Honor.

[00:05:28] Speaker 04:
During a period of January to about September of 2013, almost all of her time, and we've produced her time cards in particular, that were coded for the crater project that she was working on.

[00:05:43] Speaker 04:
And we had her supervisor, her... So if her position was not dependent on the crater,

[00:05:54] Speaker 02:
And her salary was not dependent on the crater.

[00:06:00] Speaker 04:
She would have been furloughed like everybody else.

[00:06:05] Speaker 04:
But what we have contended is that she was entitled to this exception I because the Secretary of Defense memo from the 14th of May 2013, he said that most

[00:06:20] Speaker 04:
if not all of the Department of Defense employees would be furloughed to include the working capital funds, but then he came out with nine exceptions.

[00:06:30] Speaker 04:
The nine exceptions were based upon missions, but they were also based upon funding sources, because if the funding sources were such that there would be no savings that would come back to DOD, then what would be the point of furloughing that person, because there wouldn't be any savings in that particular case?

[00:06:49] Speaker 04:
And so in this particular case, when we had the video hearing before the administrative law judge, the agency came out with two witnesses.

[00:07:00] Speaker 04:
One witness had been the agency rep in a prior case there at Dauberin.

[00:07:09] Speaker 04:
She was the head of Labor and Employee Regulations.

[00:07:11] Speaker 04:
But significantly, she was not the deciding official.

[00:07:15] Speaker 04:
So she's kind of articulating

[00:07:19] Speaker 04:
what could have been decided by Mr. Cook, who was the technical director at Dauberin.

[00:07:26] Speaker 04:
And there were these emails that talked about work for private parties.

[00:07:31] Speaker 04:
They didn't say anything about creative.

[00:07:32] Speaker 04:
They said work for private parties.

[00:07:35] Speaker 04:
And from the very beginning of the furlough appeal, Dr. Snyder has been consistent throughout.

[00:07:43] Speaker 04:
I'm entitled to this exception.

[00:07:47] Speaker 04:
because I'm working on a project that is not funded by federal money.

[00:07:51] Speaker 04:
It's funded by Lockheed Martin money.

[00:07:54] Speaker 04:
And she also produced this letter from one of the subcontractors that stated the 30th of May, 2013, making it very clearly that they had been the ones that came forth, fully funded the project.

[00:08:09] Speaker 04:
It was Lockheed Martin money.

[00:08:11] Speaker 01:
Can I try to focus on something that is on my mind, as I understand it,

[00:08:17] Speaker 01:
it is your position that the CRETA project was funded by Lockheed, and so therefore these are non-federal funds that are the origins of Dr. Snyder's salary during this critical time period.

[00:08:37] Speaker 01:
That is fact one.

[00:08:38] Speaker 01:
Fact two, though, is that

[00:08:41] Speaker 01:
her salary during the relevant time period was being paid from Dahlgren's working capital fund.

[00:08:48] Speaker 01:
And so we have this earlier opinion called Einboden which says when an employee is being paid out of a working capital fund and there is some budgetary crisis like a sequestration, furloughing someone that is being paid out of the working capital fund saves

[00:09:09] Speaker 01:
that agency money in order to be able to use it for higher priorities in this emergency situation.

[00:09:18] Speaker 01:
So now that if we have to accept the fact that she was in fact paid out of the working capital fund and she wasn't being paid directly by Lockheed, what is wrong with the AJ's conclusion that just like an Einboden

[00:09:38] Speaker 01:
Dahlgren here was able to save money from that working capital fund that it could use for higher priorities during this critical time period.

[00:09:48] Speaker 04:
I think what the problem is is that in the A.J.

[00:09:51] Speaker 04:
was also the same A.J.

[00:09:54] Speaker 04:
in Einboden.

[00:09:55] Speaker 04:
And I just think that he wanted to revisit what he had written before.

[00:09:59] Speaker 04:
And he did not make the critical distinction that this case is not Einboden and this case is not

[00:10:05] Speaker 04:
NFV 1442 versus Department of Army.

[00:10:09] Speaker 04:
This case is a case based upon exception I, which says that if you have a funding source that is not federal money and you can't save money for the federal government back to DOD, then you should be accepted.

[00:10:27] Speaker 01:
It's interesting that... I guess what's the nature of the Working Capital Fund?

[00:10:32] Speaker 01:
Isn't that

[00:10:34] Speaker 04:
Essentially the budget for all these cases before have talked about governmental customers coming in with DoD or other federally appropriated money None of these cases have talked about a private contractor coming in with their own independent money and as a customer to the government and they're a customer to the government because what's going on between Lockheed Martin and the government is

[00:11:01] Speaker 04:
There is a transfer of this technology expertise with respect to, in this particular case, the advanced ship weapons control system, which is this computer system, a software system, that talks to a missile so that the missile is able to properly launch off the ship and then go into the air and ultimately hit its target.

[00:11:26] Speaker 04:
It's not a missile project, it's a software project for the

[00:11:30] Speaker 04:
surface warfare system on the ship.

[00:11:32] Speaker 04:
There's been some confusion about that.

[00:11:34] Speaker 04:
There's even been some allegations that, well, gee, really the money is coming from the United States government.

[00:11:41] Speaker 04:
No, it's not.

[00:11:42] Speaker 04:
It's coming from Lockheed Martin.

[00:11:46] Speaker 04:
I think the problem is that when you get into the testimony, and I know there's some concern about substantial evidence.

[00:11:54] Speaker 04:
But substantial evidence means that you don't just take into account that there might be some thread

[00:12:00] Speaker 04:
that they can hang their hat on that says, gee, it's working capital fund money, when there's a lot of detracting evidence elsewhere in the record, such as, as a matter of law, what the federal technology transfer acts about, the fact that it has to be non-federal money, the fact that we put the CRETA into evidence.

[00:12:18] Speaker 04:
The CRETA itself shows that the money came from Lockheed Martin.

[00:12:22] Speaker 04:
The CRETA itself shows that if there is excess money, it doesn't come back to the United States government.

[00:12:28] Speaker 04:
according to Article 5, it goes back to Lockheed Martin.

[00:12:32] Speaker 04:
There are no savings to the United States government, and there's certainly no savings to DOD in this case.

[00:12:37] Speaker 04:
And if there are no savings to DOD, then exception I is the exception that should apply.

[00:12:43] Speaker 03:
Mr. Graham, let me ask you a question quickly.

[00:12:45] Speaker 03:
As I understand it, Dr. Snyder has paid out of the working capital fund, and the working capital fund would get

[00:12:55] Speaker 03:
reimbursed from the CRADA funds that were provided by Lockheed.

[00:13:02] Speaker 03:
Is that correct?

[00:13:03] Speaker 04:
There is a attachment to the CRADA.

[00:13:06] Speaker 04:
I believe the attachment is Attachment 1 to Enclosure 2, and they show the split off of labor costs.

[00:13:17] Speaker 04:
But the interesting thing about that, not only does it show that the labor costs are paid for by Lockheed Martin, but they're also talking about

[00:13:23] Speaker 04:
paying computer costs, travel costs.

[00:13:26] Speaker 03:
And the interesting thing with respect to an employee like Dr. Snyder is... What I'm getting at is that Lockheed paid this money to the government and it went into the working capital fund, although there were separate accounts kept.

[00:13:43] Speaker 03:
Now, when Dr. Snyder was furloughed, can the government use that money, the money that

[00:13:52] Speaker 03:
it had from Lockheed for any other purpose?

[00:13:55] Speaker 03:
No sir.

[00:13:56] Speaker 03:
We don't believe so.

[00:13:57] Speaker 03:
So those funds were earmarked?

[00:13:59] Speaker 03:
That's correct.

[00:14:00] Speaker 03:
For that work and when that work is not performed then the funds remain there?

[00:14:05] Speaker 03:
That's correct sir.

[00:14:06] Speaker 03:
So Dalgren really doesn't save anything?

[00:14:09] Speaker 03:
That's correct sir.

[00:14:10] Speaker 03:
That's been our position throughout.

[00:14:13] Speaker 04:
And the interesting thing is further that when you get into the

[00:14:22] Speaker 04:
labor advisor, she says things like, well, I'm not familiar with what a credit is about.

[00:14:30] Speaker 04:
I did not discuss or advise Mr. Cook regarding the credit.

[00:14:33] Speaker 04:
I did not have anybody review the credit.

[00:14:35] Speaker 04:
I cannot speak to what Mr. Cook did or did not do as far as having reviewed the credit.

[00:14:42] Speaker 04:
He's the one who's got to decide whether the categorical exception, exception I, is going to apply or not.

[00:14:49] Speaker 04:
And of course, with respect to the MSPB case of Dye versus Department of Army, that whether or not the categorical exception applied or not goes to whether or not she was properly furloughed for cause and whether or not it does or does not promote the efficiency of the service.

[00:15:06] Speaker 04:
We would say that it did not because she qualified for the exception, but he did properly to decide that.

[00:15:13] Speaker 04:
She couldn't figure out what the creative was about, frankly, when we got to

[00:15:17] Speaker 04:
given the testimony of Ms.

[00:15:20] Speaker 04:
Clark, the comptroller, she didn't know anything about the credit or about the fact that whatever credit money wasn't used would end up going back to Lockheed Martin.

[00:15:32] Speaker 04:
And there's ever so slight of a concession by the agency in their brief at about page 23 that eventually somehow, if there was savings to Lockheed Martin,

[00:15:46] Speaker 04:
It wouldn't be, as you say, ever expendable to the government, but would come back to Lockheed Martin.

[00:15:52] Speaker 04:
Perhaps it would be at the end of the three-year term of the contract, but it would never come back to the government.

[00:16:00] Speaker 04:
It could only come back to Lockheed Martin.

[00:16:02] Speaker 02:
I'm going to stop you there.

[00:16:03] Speaker 02:
You've used up most of your time.

[00:16:06] Speaker 02:
Thank you.

[00:16:07] Speaker 02:
We'll give you back some rebuttal time.

[00:16:08] Speaker 02:
Yes, sir.

[00:16:09] Speaker 02:
All right.

[00:16:09] Speaker 02:
Thank you.

[00:16:14] Speaker 02:
Councillor Stern.

[00:16:16] Speaker 00:
Are you pleased to put it?

[00:16:19] Speaker 00:
This case really is in line with the court's decisions in Einboden and Nathy v. Department of the Army.

[00:16:26] Speaker 00:
And in those cases also, the employees basically made the argument that the working capital fund had enough money, more than enough money, to pay their salaries in some cases because there was carryover from private years and some other cases because they were already obligated funds.

[00:16:41] Speaker 00:
And the court's decision really didn't turn

[00:16:45] Speaker 00:
on whether there was funding in the working capital fund.

[00:16:48] Speaker 00:
In fact, in NAFTA, the court specifically said that the arbitrator was correct to focus on the budget shortfall in DOD as a whole.

[00:16:56] Speaker 00:
What the court focused on was the savings that the Department of Defense established could be realized from not paying working capital fund employees their salaries during the period of furlough.

[00:17:11] Speaker 00:
And when you look at a budget, the working capital fund

[00:17:15] Speaker 00:
has personnel costs that come off those employees.

[00:17:19] Speaker 00:
Federal employees are paid every two weeks.

[00:17:20] Speaker 00:
So when that date hits, the working capital fund has to pay salaries.

[00:17:25] Speaker 00:
In this case, there were something like $500 million in salaries that were saved from the period of furlough, in this case by furloughing working capital fund employees at the moment of that furlough.

[00:17:38] Speaker 00:
So at that moment,

[00:17:40] Speaker 00:
There was a savings on the budget.

[00:17:43] Speaker 00:
There was a budgetary savings of $500 million.

[00:17:45] Speaker 01:
This case is a little different from those cases, right?

[00:17:48] Speaker 01:
Because now we're dealing with a situation where the CRADA and the non-federal funds that are being contributed that are supporting Dr. Snyder's salary here for this particular time period.

[00:18:03] Speaker 01:
So now there's an argument being made that the sequestration is about

[00:18:10] Speaker 01:
federal funds and what we have here are non-federal funds.

[00:18:14] Speaker 00:
I understand the argument, Your Honor, and that is a difference, but it's not a material difference.

[00:18:18] Speaker 03:
Why is it not a material difference?

[00:18:21] Speaker 00:
It's not a material difference because the funds that are being saved and the funds that are affected by the sequestration are the working capital funds.

[00:18:28] Speaker 00:
Those are the funds that could be transferred to higher priority needs.

[00:18:32] Speaker 03:
But Dr. Snyder's salary, while it came out of the working capital fund,

[00:18:39] Speaker 03:
the working capital fund would get reimbursed from the CRETA funds.

[00:18:45] Speaker 00:
It would.

[00:18:45] Speaker 00:
And here's where timing becomes important, Your Honor.

[00:18:49] Speaker 03:
Is Mr. Graham's answer correct that the CRETA funds could not be used by the government for any other purpose?

[00:18:56] Speaker 00:
That is correct.

[00:18:57] Speaker 03:
So if we look at it... Then how does the government save money in this circumstance?

[00:19:02] Speaker 00:
Okay, let me see if I can explain it this way.

[00:19:04] Speaker 00:
If we think of the furlough as a pause,

[00:19:08] Speaker 00:
It's a pause in everything.

[00:19:08] Speaker 00:
It's a pause in the work.

[00:19:10] Speaker 00:
It's a pause, in effect, in also the work on the Lockheed Martin project.

[00:19:14] Speaker 00:
So a pause happens at that moment.

[00:19:17] Speaker 00:
Now, if Ms.

[00:19:20] Speaker 00:
Dr. Snyder works, the working capital fund has to pay her salary.

[00:19:24] Speaker 00:
That's money out of the working capital fund.

[00:19:26] Speaker 00:
If they pause it, the working capital fund doesn't pay that money.

[00:19:30] Speaker 00:
So it's got, at that moment, it's got that savings.

[00:19:32] Speaker 00:
Now, a week later, about a week later,

[00:19:34] Speaker 00:
The furlough is over, Dr. Snyder goes back to work, she works, the working capital fund pays her salary for that period, and the CRADA comes back to reimburse it for that period.

[00:19:47] Speaker 00:
That doesn't mean that there was no savings during that period of the furlough, because now the CRADA is going to pay her for now this work that followed the CRADA.

[00:19:56] Speaker 00:
But during the furlough itself,

[00:20:01] Speaker 00:
there was that savings.

[00:20:02] Speaker 00:
So things are being basically postponed down the line.

[00:20:05] Speaker 03:
But if she had not been furloughed, she would have been paid out of the working capital fund.

[00:20:12] Speaker 03:
And the working capital fund would have been able to immediately, I assume, get reimbursed from the credit funds that it already possessed.

[00:20:23] Speaker 00:
And I think the difference is that arguably you could make the argument that the working capital fund

[00:20:28] Speaker 00:
would not necessarily have lost money, because they would have been reimbursed, but they would not have realized the savings at the time they needed the savings.

[00:20:36] Speaker 00:
So at that moment, there was that pause for the furlough.

[00:20:38] Speaker 00:
The Working Capital Fund realized an actual savings by not paying Dr. Snyder.

[00:20:44] Speaker 00:
Now, later when work started up again, and that relationship began again with money going out from the Working Capital Fund and coming back from the crater, somewhere down the line, maybe five years from now when the project was over and there was a full accounting,

[00:20:58] Speaker 00:
There might or might not be some kind of money that would be returned to Lockheed Martin if there was some excess of funds.

[00:21:05] Speaker 00:
But at that moment, the working capital fund crisis or the bigger sequestration crisis that was affecting the Department of Defense would no longer be in existence.

[00:21:14] Speaker 00:
So the point is that ZLD needed the savings at the moment that it furloughed the employees.

[00:21:19] Speaker 00:
At that moment, on paper, that savings was realized because

[00:21:24] Speaker 00:
no money was going out of the working capital fund to pay Dr. Snyder as well as all of these other working capital fund employees.

[00:21:31] Speaker 00:
Whether or not the working capital fund itself had money to pay the salaries of these employees, they had carry-over funds, I mean, these were the same arguments that were made.

[00:21:40] Speaker 03:
What I'm having difficulty with is that it seems to me that the funds that the government possessed that were earmarked for the credit, the Lockheed funds, are not fungible with the other funds.

[00:21:51] Speaker 03:
Even though it's in one working capital fund,

[00:21:54] Speaker 03:
that the government couldn't use those locking funds for other purposes.

[00:21:58] Speaker 03:
So it seems to me that while she was furloughed, it was in effect the creator that saved the money, not the working capital funds available to the government generally.

[00:22:10] Speaker 00:
Well, I think what we have to look at is that there's a budget, a military budget, and the working capital fund is included under that military budget.

[00:22:19] Speaker 00:
And so when the Department of Defense looks at its budget and sees that working capital fund has

[00:22:24] Speaker 00:
you know, a hundred, I don't know, billions of dollars and whatever it has.

[00:22:28] Speaker 00:
Let's say, I'll say 800 million because I know the savings was 500 million, so I'm going to pick a number bigger.

[00:22:34] Speaker 00:
When the Department of Defense looks at that working capital fund and sees that it has 800 million, a billion dollars, and that by not paying six days worth of salary to all the working capital fund employees, including Dr. Snyder, is going to save 500 million dollars.

[00:22:50] Speaker 00:
That's, like I said, that operates at that moment in time.

[00:22:52] Speaker 00:
And that's the way the budget works.

[00:22:54] Speaker 00:
At that moment, if they don't cut those checks and pay that money, they are realizing a savings in that budget that can be transferred.

[00:23:01] Speaker 00:
When the work picks up again, yes, that money flows out to Dr. Snyder.

[00:23:05] Speaker 00:
And the working capital fund can turn around and basically bill Lockheed Martin, take the money out of the creative funds that are in the working capital and reimburse it.

[00:23:15] Speaker 00:
So the relationship picks up again.

[00:23:17] Speaker 00:
But it doesn't change the fact that during the period of the furlough, there was a savings in that budget.

[00:23:23] Speaker 02:
How can those savings be traced?

[00:23:25] Speaker 02:
There's no actual tracing of the funds.

[00:23:29] Speaker 02:
I mean, it's just a fungible bag of money, and money comes in, and bag gets bigger, money goes up, bag gets smaller.

[00:23:39] Speaker 02:
And it seems to be this argument that the administrative law judge found.

[00:23:43] Speaker 02:
He noted, said in reaching this finding,

[00:23:47] Speaker 02:
with reference to what I'm talking about.

[00:23:48] Speaker 02:
He says, I note that it is highly improbable that Lockheed Martin goes on and talks.

[00:23:54] Speaker 02:
And so it based this very important finding on what seems to me to be a personal assessment that it's highly improbable.

[00:24:07] Speaker 02:
I don't find that to be substantial evidence.

[00:24:09] Speaker 02:
And apart from that, I don't see any other evidence in the record with respect to tracing these funds from

[00:24:17] Speaker 02:
the funding source to Dr. Snyder's salary.

[00:24:22] Speaker 02:
So correct me if I'm wrong on that.

[00:24:25] Speaker 02:
Otherwise, I would tend to say that that decision is not supported by substantial evidence.

[00:24:30] Speaker 00:
Well, what I would say, Your Honor, is that the focus on the funding source is just the wrong focus.

[00:24:36] Speaker 00:
Because even if you look at the exemptions that are in the record, and I'm looking at appendix page 186, that's the exemption, including exemption I, in which Dr. Snyder

[00:24:46] Speaker 00:
is attempting to depend.

[00:24:49] Speaker 00:
The exemptions are not based on where funding comes.

[00:24:53] Speaker 00:
Funding is really not relevant to the issue in this case.

[00:24:57] Speaker 00:
And that's why I started off by saying in Einboden and Naffy, the court really did not focus on the funding of the projects in the Working Capital Fund or whether there were enough funds to pay employee salaries.

[00:25:10] Speaker 00:
What they focused on was the fact that the working capital fund budget itself saved money by not paying salaries.

[00:25:17] Speaker 00:
And if you look at the exemptions on page 186, exemption I, it doesn't talk about funding.

[00:25:24] Speaker 00:
It talks about the only people who will be exempted are employees who are not paid directly from accounts included in the Department of Defense military budget.

[00:25:34] Speaker 00:
But Dr. Snyder, according to Kathy Clark's testimony,

[00:25:38] Speaker 00:
And I would argue that that's the essential, substantial evidence in the record that supports this board's decision.

[00:25:44] Speaker 00:
Kathy Clark testified, undisputed testimony, that Dr. Snyder's salary was paid by the Working Capital Fund.

[00:25:53] Speaker 00:
That is a Department of the Fund's military budget item.

[00:25:57] Speaker 00:
And for that reason, Dr. Snyder doesn't fall with Exemption I, which is only employees who are not paid.

[00:26:04] Speaker 00:
by accounts in the Department of Contemporary Budget.

[00:26:07] Speaker 01:
The question is, for me, is what is the nature of the working capital fund?

[00:26:10] Speaker 01:
Are there lock boxes inside of the working capital fund?

[00:26:14] Speaker 01:
Like, okay, certain funds are here marked for certain things, or certain funds come from certain sources, and so therefore we treat them somehow a bit differently than other funds inside the working capital fund.

[00:26:29] Speaker 00:
There definitely are monies that are tracked within the working capital fund, definitely.

[00:26:34] Speaker 00:
But the working capital fund, the entire budget, including the monies coming in from Lockheed Martin, are part of the military budget that shows up as affected by sequestration.

[00:26:46] Speaker 00:
Now, those tracked funds, I would agree, cannot be.

[00:26:50] Speaker 00:
They are marked for that.

[00:26:52] Speaker 00:
But when you look at the budget, and Dr. Snyder's salary is paid out of that budget,

[00:26:56] Speaker 00:
That budget is part of the DOD military budget.

[00:27:00] Speaker 00:
And that's what the exemption applies to, where the salary of the employee is paid from, what budget it counts, and not where the funding for a particular project is coming in.

[00:27:11] Speaker 00:
Because if that argument was pertinent, then in Einboden and NAFI, the court would have looked.

[00:27:16] Speaker 00:
They would have said, OK, which project did these particular employees who were appealing work on?

[00:27:21] Speaker 00:
Was that project?

[00:27:23] Speaker 00:
funded, or the funds de-allegated.

[00:27:26] Speaker 00:
The court didn't care about that.

[00:27:27] Speaker 02:
How many individuals are affected by this case?

[00:27:30] Speaker 02:
Is this Dr. Snyder?

[00:27:31] Speaker 00:
This is Dr. Snyder, yes, Your Honor.

[00:27:33] Speaker 02:
Just Dr. Snyder?

[00:27:34] Speaker 00:
Single individual appealing in this appeal.

[00:27:37] Speaker 02:
Does it impact other cases that may be out there regarding sequestration?

[00:27:42] Speaker 00:
Well, clearly there were other working capital fund employees.

[00:27:46] Speaker 00:
I don't know if there are any others that are in the pipeline that are in exactly the same position as she is.

[00:27:51] Speaker 00:
I feel like there might be.

[00:27:52] Speaker 00:
But this case is a single-level appeal.

[00:27:54] Speaker 02:
Again, I would just say that... But we don't have a bunch of cases backed up somewhere waiting for this case to be decided.

[00:28:01] Speaker 02:
Not that I'm aware of.

[00:28:02] Speaker 02:
Okay.

[00:28:02] Speaker 01:
Not that I'm aware of.

[00:28:03] Speaker 01:
If hypothetically the CRETA agreement ended, say, August 31, 2013, okay, inside the fiscal year where this sequestration happened, then it wouldn't have

[00:28:22] Speaker 01:
been useful at all for DOD, for Dahlgren to furlough Dr. Snyder that summer?

[00:28:31] Speaker 01:
Is that right?

[00:28:34] Speaker 01:
Because if there was any monies paid by Lockheed and those weren't used to pay salaries, then all those monies would have needed to be paid back to Lockheed by the end of the

[00:28:51] Speaker 00:
Right?

[00:28:51] Speaker 00:
That is actually not necessarily the case.

[00:28:54] Speaker 00:
And Dr. Kathy Clark explained why that was true.

[00:28:59] Speaker 00:
And I tried to get at it a little bit when I was talking about sort of the pause.

[00:29:03] Speaker 00:
Because again, the work that didn't happen during that period of the furlough would be performed later.

[00:29:08] Speaker 01:
Listen, let me get back to the terms of the CRETA.

[00:29:10] Speaker 01:
The terms of the CRETA says at the end of the term of the agreement, any monies that Lockheed has paid in that haven't actually been

[00:29:21] Speaker 01:
used, right, for the Crata, they all get returned to Lockheed.

[00:29:27] Speaker 00:
Right, that's true, but the agreement provides for certain work to be performed.

[00:29:31] Speaker 00:
So presumably that work is still going to be performed just at the end of the furlough, it's going to pick up again.

[00:29:36] Speaker 00:
So the work, it's not that the work is not going to be done, it's going to be done.

[00:29:40] Speaker 01:
Right, but the Crata ends whenever the Crata ends, right?

[00:29:44] Speaker 00:
That's true, but the hours of work that will be required will be put in somehow.

[00:29:48] Speaker 01:
What I'm trying to do is create a difference

[00:29:50] Speaker 01:
For you, there could be a circumstance where maybe under a different set of facts, she would fall within exception I. But in this particular instance, maybe she doesn't fall within exception I. I'm thinking of the Rehill fact pattern, where in that particular instance, an employee in the summer was being paid by the University of Chicago.

[00:30:20] Speaker 01:
the term of that agreement ended within the fiscal year.

[00:30:24] Speaker 01:
So it wouldn't make any difference to, it wouldn't help Mr. Rehill in that particular instance.

[00:30:36] Speaker 01:
Or did?

[00:30:37] Speaker 00:
I guess I would answer the question two ways.

[00:30:39] Speaker 00:
One, I would say that perhaps there would be a stronger argument in that case, but I'm still not going to concede that it would actually fulfill that argument.

[00:30:47] Speaker 00:
And the other thing I would say is that the,

[00:30:50] Speaker 00:
The validity of the furlough has to be judged by the circumstances at the time that it's imposed.

[00:30:55] Speaker 00:
At the time that this was imposed, in fact, the Lockheed Martin Cradle was not at an end.

[00:31:00] Speaker 00:
It had some period of time to go with more work to be performed, whether that work would be performed, whether it would involve overtime work or whatever.

[00:31:08] Speaker 00:
But the hours that were.

[00:31:10] Speaker 02:
So what you're saying is at the end of the day, it's just guesswork whether there's going to be any savings as a result of the furlough.

[00:31:16] Speaker 02:
Not at all, Your Honor.

[00:31:17] Speaker 02:
Just with respect to Dr. Steiner.

[00:31:19] Speaker 00:
I'm not saying that at all, Your Honor.

[00:31:20] Speaker 00:
What I'm saying is that at the moment that that payroll did not have to be made, there was a savings realized.

[00:31:27] Speaker 00:
At that moment in the working capital funds budget, they didn't have to cut that check to that employee because she was an employee of the working capital fund.

[00:31:36] Speaker 00:
Clearly, she was not an employee of Lockheed Martin.

[00:31:38] Speaker 00:
And kind of using the analogy we used in our brief,

[00:31:41] Speaker 00:
with a law firm where, yes, one lawyer might be devoting all of their work to a particular client's work, and that client maybe is turned around and billed for that time.

[00:31:51] Speaker 00:
If that attorney doesn't work for a week, is furloughed for a week, and the law firm doesn't have to pay their salary for that week, the fact that when the week is over, the lawyer will resume working on that client's project, and the law firm will resume getting reimbursement,

[00:32:08] Speaker 00:
for the work performed.

[00:32:09] Speaker 00:
But for the week of that furlough, that lawyer and the working capital fund... Who keeps the end product here?

[00:32:15] Speaker 00:
Who keeps the end product?

[00:32:16] Speaker 02:
Right.

[00:32:17] Speaker 00:
I believe it was Lockheed Martin.

[00:32:19] Speaker 02:
It's Lockheed, right?

[00:32:20] Speaker 02:
So isn't Lockheed getting the savings here?

[00:32:23] Speaker 00:
They're not saving anything because the work is eventually going to be performed after the furlough, after the savings are realized, when the work relationship and the money relationship resumes.

[00:32:35] Speaker 00:
But during the period of the furlough,

[00:32:37] Speaker 00:
There's a savings realized by the working capital fund from not paying Dr. Snyder's salary.

[00:32:43] Speaker 02:
OK.

[00:32:43] Speaker 02:
We thank you very much.

[00:32:44] Speaker 00:
Thank you, Your Honor.

[00:32:47] Speaker 02:
Mr. Graham?

[00:32:53] Speaker 02:
We'll restore you to three minutes of your time, OK?

[00:32:56] Speaker 02:
Yes, sir.

[00:33:04] Speaker 04:
Well, it's interesting that the agency seems to think that by furloughing Dr. Snyder that there was actually money saved when there were other issues in this case.

[00:33:13] Speaker 04:
And that, you raise an issue with respect to how overtime was manipulated by the agency in this case because there was a compromise.

[00:33:22] Speaker 04:
And the compromise, as enunciated by Larry Pfatno, a witness, basically said that because of the credo, or I should say because of the furlough,

[00:33:34] Speaker 04:
that they were going to get overtime in order to make up for time that they were going to be furloughed.

[00:33:40] Speaker 04:
And the government's own documents show that, gee, this is non-DOD money, and we're not going around the cradle.

[00:33:49] Speaker 04:
I don't know how you're saving money if you're at one time furloughing people on one day, and then on the weekend you're having to work overtime on the rationale that we don't have to worry about DOD money because we got Lockheed Martin money in this cradle.

[00:34:03] Speaker 04:
I find that to be kind of contradictory.

[00:34:11] Speaker 04:
The agency also said that Cathy Clark, the comptroller, seemed to think that there were savings to the government.

[00:34:22] Speaker 04:
But in the last question that I asked her on cross-examination, I said, but there are no savings to the government.

[00:34:29] Speaker 04:
There are only savings of Lockheed Martin, right?

[00:34:33] Speaker 04:
I can't answer that one.

[00:34:34] Speaker 04:
I do not know."

[00:34:35] Speaker 04:
Because she was not familiar with how this unique document, the CRETA, actually, in fact, worked.

[00:34:43] Speaker 04:
And so consequently, I would say that there is no evidence that there were savings to the government, whether or not you have this pause that is talked about.

[00:34:58] Speaker 04:
In responding to your question, Your Honor, about the decision-making by the administrative judge, not only did he talk about the testimony of Ms.

[00:35:10] Speaker 04:
Snyder, who was not the deciding official and kind of didn't even understand the creative, and he talked about the comptroller who didn't understand the creative, he then goes off into

[00:35:23] Speaker 04:
an area that is, as we said, speculative, which is why we brought up substantial evidence in that particular quote from those series of Supreme Court cases.

[00:35:36] Speaker 04:
In reaching this finding, I note that it's highly improbable that Lockheed Martin, a publicly traded company, would expend its own capital to develop a missile for the Department of Navy.

[00:35:46] Speaker 04:
Instead, I find the money Lockheed Martin paid into the Working Capital Fund, pursuant to the

[00:35:52] Speaker 04:
must have been money, must have been money that can be traced to DOD appropriations.

[00:35:58] Speaker 04:
And, of course, this is where he confuses the projects.

[00:36:01] Speaker 04:
He confuses the weapons control system, the software system program on the ship versus a missile.

[00:36:10] Speaker 04:
That's a stretch.

[00:36:11] Speaker 04:
There's no evidence of that.

[00:36:12] Speaker 04:
If he had looked at the Federal Technology Transfer Act, he could have understood that a company such as Lockheed Martin would, in fact, expend its own

[00:36:21] Speaker 04:
independent research and development money in order to develop something, in order to get a leg up in future procurements down the line with the United States government as happened in this case.

[00:36:33] Speaker 03:
Mr. Graham, before you sit down, your time is expired, but before you sit down, what's your response to Ms.

[00:36:40] Speaker 03:
Stern's argument that exception I doesn't apply here because exception I only applies to employees who are not paid directly by accounts?

[00:36:51] Speaker 03:
And here, Dr. Snyder clearly is paid out of the working capital fund.

[00:36:56] Speaker 04:
Yes, Your Honor, but cases such as Rehill, the Naval Academy cases, the Dye versus Department of Army case, talks about where the money came from and whether or not the employee was entitled to the exception.

[00:37:14] Speaker 04:
In this case, we would say that

[00:37:15] Speaker 04:
the efficiency of the service wasn't promoted because she should have been granted the categorical exception because she was being funded to include a retirement out of the Lockheed Martin Freeland.

[00:37:34] Speaker 02:
Okay.

[00:37:34] Speaker 02:
We thank you very much.

[00:37:41] Speaker 02:
Our final case today is Rivera versus ITC.

[00:37:45] Speaker 02:
16-8