City of Gary, Indiana v. USDOL, No. 85-2473 (7th Cir. 1986)(79- CET-164)

Case No. 79-CET-164

                                  IN THE
                      UNITED STATES COURT OF APPEALS
                          FOR THE SEVENTH CIRCUIT

No. 85-2473

CITY OF GARY, INDIANA,
     Petitioner,

v.

UNITED STATES DEPARTMENT OF LABOR
     Respondent.

                 PETITION FOR REVIEW OF DECISION AND ORDER
                         OF THE SECRETARY OF LABOR

           ARGUED FEBRUARY 28, 1986-DECIDED JUNE 16, 1986

BEFORE:  POSNER and FLAUM, Circuit Judges, and ESCHBACH,
Senior Circuit Judge

FLAUM, Circuit Judge.  In 1974, the City of Gary, Indiana
received a $2,060,613 grant from the Department of Labor pursuant
to the Comprehensive Employment and Training Act (CETA).  The
Department in 1974 and 1975 audited the City's use of the funds
and reported that almost ,000,000 had been misspent and
therefore would be recoverable by the Department.  After
subsequent audits and various other proceedings, the matter was
placed before an administrative law judge, who in 1980 ordered
the City to repay the Department $313,592.36.  The ALJ further
ordered that the City make this repayment out of non-CETA funds. 
The Secretary of Labor affirmed the ALJ's decision on July 1,
1985.  The City now appeals only that portion of the decision
requiring repayment out of non-CETA funds.  We conclude that the
Secretary was authorized to order repayment in this manner, and
we thus deny the City's Petition for Review.
     The 1973 CETA statute, which governs the City's grant,[1] 
required that recipients remain accountable for their disposition
of CETA funds.  The Act provided that in order to carry out
provisions of the Act the Secretary has the discretion to make
"necessary adjustments in payments on account of overpayments or
underpayments," and that the Secretary "may also withhold
funds otherwise payable...in order to recover any amounts
expended in 
[PAGE 2]
the current or immediately prior fiscal year in violation of any
provision of this Act."  29 U.S.C. § 982(b) (1976
Ed.)(emphasis added).  The City argues that this language
authorized the Secretary to recoup misspent funds only by
withholding monies from future CETA grants.[2]   According to the
City's position, the Secretary was not empowered to order
direct repayment from CETA grant recipients, much less to
specify that the direct repayment be taken from non-CETA funds.
     We disagree, however, and join the six other circuits that
have considered the question in holding that this language
enables the Secretary to order direct repayment of misspent funds
from non-CETA sources.  See St. Regis Mohawk Tribe v.
Brock, 769 F.2d 37, 47-51 (2d Cir. 1985), cert.
pending, No. 85-949, 54 U.S.L.W. 3412 (Dec. 17, 1985);
Mobile Consortium of CETA v. United States Department of
Labor, 745 F.2d 1416, 1418 (11th Cir. 1984); California
Tribal Chairman's Association v. United States Department of
Labor, 730 F.2d 1289, 1291 (9th Cir. 1984); North Carolina
Commission of Indian Affairs v. United States Department of
Labor, 725 F.2d 238, 240-42 (4th Cir. 1984),  cert.
denied, 105 S.Ct. 112 (1984);  Texarkana Metropolitan Area
Manpower Consortium v. Donovan, 721 F.2d 1162, 1164 (8th Cir.
1983);  Atlantic County v. United States Department of
Labor, 715 F.2d 834, 835-37 (3rd Cir. 1983).  These cases
rely heavily on the Supreme Court's decision in Bell v. New
Jersey, 461 U.S. 773 (1983), which interpreted similar
language in the Elementary and Secondary Education Act (ESEA) as
empowering the Secretary of Education to recover misspent funds
from non-ESEA money.  Id. at 782-90.  We find persuasive
the conclusion of the other circuits that the reasoning of
Bell, as well as the historical background of the 1973
CETA Act, compel this reading of the CETA Act's grant of
authority.  Accordingly, we hold that the Secretary properly
ordered that the City repay the funds from non-CETA sources.
     The City finally argues that even if the Secretary had
statutory authority to order this repayment, we should refuse to
enforce the order either because of laches or because the
Secretary first should have sought recoupment from the City's
subcontractor on the grant, the "School City of Gary."  We find
little to support these claims.  Even leaving aside the question
of whether the government could be subject to the equitable
defense of laches in this context, the City can point to no
prejudice resulting form the gap in time between the ALJ's
decision in 1980 and the Secretary's 1985 order.  That delay,
while inexplicable, worked no detriment upon the City's ability
to present its case.  The issues at that point were merely legal
in nature, all factual questions about the amount of disallowed
funds having been settled.  With regard to the Secretary's
decision to proceed against the City rather than the 
[PAGE 3]
subcontractor, we have held that the grantee itself, here the
City, remains accountable for the actions of its subcontractor. 
Milwaukee County v. Peters, 682 F.2d 609, 612 (7th Cir.
1982).  Finally, we have noted that the Act was "intended to give
the Department of Labor broad powers to enforce the Act once it
has determined that a violation has occurred," and that the
Secretary therefore is not required to prefer one remedy over
another because the first appears to be more equitable. 
Illinois Migrant Council v. United States Department of
Labor, 773 F.2d 180, 813 (7th Cir. 1985).
     For these reasons, the City's Petition for Review of the
Secretary's Order is DENIED.




                               [ENDNOTES]

[1] The 1973 CETA Act was amended in 1978 to provide explicitly
that the Secretary of Labor have the authority to order repayment
of misused CETA monies from non-CETA sources, 29 U.S.C. §
816(d) (1976 Ed. Supp. V).  The Department has suggested that we
apply this amendment to the instant case.  Because we find that
the 1973 Act fully authorized the Secretary's order, we do not
reach the question of whether the 1978 amendment should apply to
the City's grant and the Secretary's remedial efforts.


[2] CETA was repealed, however, in 1982 and was replaced by the
Job Training Partnership Act.  29 U.S.C. § 1501 et
seq.