United States Marcus v. Hess

• Citation: 87 L.Ed. 443,63 S.Ct. 379,317 U.S. 537
• Decision Date: 18 January 1943
• Docket Number: No. 173,173
• Parties: UNITED STATES ex rel. MARCUS v. HESS et al
• Court: U.S. Supreme Court

317 U.S. 537

63 S.Ct. 379

87 L.Ed. 443

UNITED STATES ex rel. MARCUS

v HESS et al.

No. 173.

Argued Dec. 10, 1942.

Decided Jan. 18, 1943.

Rehearing Denied March 1, 1943.

See 318 U.S. 799, 63 S.Ct. 756, 87 L.Ed. —-.

Messrs. William Stanley, of Washington, D.C., and Charles J. Margiotti, of Pittsburgh, Pa., for petitioner.

[Argument of Counsel from page 538 intentionally omitted] Messrs. Wm. H. Eckert, Eugene B. Strassburger, and John B. Nicklas, Jr., all of Pittsburgh, Pa., for respondents.

Mr. Justice BLACK delivered the opinion of the Court.

Respondents, electrical contractors, were employed to work on P.W.A. projects in the Pittsburgh area. Their contracts were made with local governmental units rather than with the United States government, but a substantial portion of their pay came from the United States. Charging the respondents with defrauding the United States through the device of collusive bidding on these projects,¹ the petitioner in the name of the United States and on his own behalf brought this action under § 5438 (18 U.S.C.A. §§ 80, 82 86), and §§ 3490—3493 (31 U.S.C. §§ 231—234, 31 U.S.C.A. §§ 231 234), of the Revised Statutes.

These sections, now distributed through the statutes, are parts of what was originally the Act of March 2, 1863, 12 Stat. 696. Section 5438 contains that portion of the original Act which makes certain efforts to defraud the government a crime punishable by fine and imprison- ment.² Section 3490 separately provides that whoever commits 'any' of the prohibited acts shall 'forfeit and pay to the United States the sum of $2,000, and, in addition, double the amount of damages * * * sustained * * * together with the costs of suit; and such forfeiture and damages shall be sued for in the same suit.' Under §§ 3491, 3493, this latter action may be instituted by 'any' person in behalf of the government, and where such a qui tam action is brought, half the amount of the recovery is paid to the person instituting the suit while the other half goes to the government.

In the instant case verdict and judgment for $315,000 were rendered against the defendants, of which $203,000 was for double damages and $112,000 was an aggregate of $2,000 sums for 56 violations of § 5438. 41 F.Supp. 197. The Circuit Court of Appeals was of the opinion that the government had been defrauded—a conclusion not challenged here³—but held that the particular fraud was not reached by § 5438. It accordingly reversed. 127 F.2d 233.

First. The Court below, construing § 5438 with 'utmost strictness' on the premise that qui tam or informer actions 'have always been regarded with disfavor' by the courts, emphasized the absence of a direct contractual relationship between the respondents and the United States, and held that 'The claims of the defendants then were simply against the local municipalities. Since the defendants had no claim upon or against the United States, this action was not authorized by the informer statutes.'

We can not accept either the interpretive approach or the actual decision of the court below. Qui tam suits have been frequently permitted by legislative action,⁴ and have not been without defense by the courts.⁵ Moreover, this interpretation of 'utmost strictness' narrows not only the qui tam aspect of the Act, but also the criminal provisions. The decision below treats the language of § 5438 in such fashion that no criminal proceedings could be brought against the respondents, a result to which the policy on qui tam actions is immaterial even if it exists or could properly be applied. This 'qui tam policy' cannot be used to detract from the meaning of the language in the criminal section; and we cannot say that the same substantive language has one meaning if criminal prosecutions are brought by public officials and quite a different meaning where the same language is invoked by an informer.

Congress has power to choose this method to protect the government from burdens fraudulently imposed upon it; to nullify the criminal statute because of dislike of the independent informer sections would be to exercise a veto power which is not ours. Sound rules of statutory interpretation exist to discover and not to direct the Congressional will. True, § 5438 is criminal and for that reason in interpreting so much of its language as it shares in common with Sec. 3490 we must give it careful scrutiny lest those be brought within its reach who are not clearly included; but after such scrutiny we must give it the fair meaning of its intendment. Cf. United States v. Raynor, 302 U.S. 540, 552, 58 S.Ct. 353, 358, 82 L.Ed. 413.

We think the conduct of these respondents comes well within the prohibition of the statute which includes 'every person who * * * causes to be presented, for payment * * * any claim upon or against the Government of the United States * * * knowing such claim to be * * * fraudulent.' This can best be seen upon consideration of the exact nature of respondents' relation to the government. The contracts found to have been induced by the respondents' frauds were made between them and local municipalities and school districts of Alleghany County, Pennsylvania. A large portion of the money paid the respondents under these contracts was federal in origin, granted by the Federal Public Works Administrator, an official of the United States. 40 U.S.C. § 401(a), 40 U.S.C.A. § 401(a). The jury and both courts have found that the contracts were obtained by a successfully executed conspiracy to remove all possible competition from 'competitive bidding.' The bidding itself was a federal requirement; all bidders were fully advised that these were P.W.A. projects; and many if not most of the respondents certified that their bids were 'genuine and not sham or collusive.' While payment itself, in the sense of the direct transferring of checks, was done in the name of local authorities, monthly estimates for payment were submitted by the respondents to the local sponsors on P.W.A. forms which showed the government's participation in the work and called attention to other federal statutes prohibiting fraudulent claims. It was a prerequisite to respondents' payment by the local sponsors that these estimates be filed, transmitted to, and approved by, the P.W.A. authorities. Payment was then made from a joint construction bank account containing both federal and local funds. The work was done under constant federal supervision.

The government's money would never have been placed in the joint fund for payment to respondents had its agents known the bids were collusive. By their conduct, the respondents thus caused the government to pay claims of the local sponsors in order that they might in turn pay respondents under contracts found to have been executed as the result of the fraudulent bidding. This fraud did not spend itself with the execution of the contract. Its taint entered into every swollen estimate which was the basic cause for payment of every dollar paid by the P.W.A. into the joint fund for the benefit of respondents. The initial fraudulent action and every step thereafter taken, pressed ever to the ultimate goal payment of government money to persons who had caused it to be defrauded.

Government money is as truly expended whether by checks drawn directly against the Treasury to the ultimate recipient or by grants in aid to states. While at the time of the passage of the original 1863 Act, federal aid to states consisted primarily of land grants, in subsequent years the state aid program has grown so that in 1941 approximately 10% of all federal money was distributed in this form.⁶ These funds are as much in need of protection from fraudulent claims as any other federal money,⁷ and the statute does not make the extent of their safeguard dependent upon the bookkeeping devices used for their distribution. The Senatorial sponsor of this bill broadly asserted that its object was to provide protection against those who would 'cheat the United States.'⁸ The fraud here could not have been any more of an effort to cheat the United States if there had been no state intermediary.

The conclusion that the first clause of § 5438 includes this form of 'causing to be presented' a 'claim upon or against the Government' is strengthened by consideration of the other clauses of the statute. Clause 2 includes those who do the forbidden acts for the purpose of 'aiding to obtain' payment of fraudulent claims; Clause 3 covers 'any agreement, combination, or conspiracy' to defraud the government by 'obtaining or aiding to obtain the payment or allowance of any false or fraudulent claim.' These provisions, considered together, indicate a purpose to reach any person who knowingly assisted in causing the government to pay claims which were grounded in fraud without regard to whether that person had direct contractual relations with the government.

The situation here is in no sense like that discussed in United States v. Cohn, 270 U.S. 339, 342-347, 46 S.Ct. 251, 252, 253, 70 L.Ed. 616, where the government acted solely as bailee and no person had any claim against it for a payment. The Court in the Cohn case held that there had been no 'wrongful obtaining of money * * * of the Government', while there has been such a 'wrongful obtaining' here on claims which were presented either directly or indirectly to the government with full knowledge by the claimants of their fraudulent basis.

We conclude that these acts are covered by the statute under consideration.

Second. Previous to the filing of this action these respondents were indicted for defrauding the government and on a plea of nolo contendere were fined $54,000. They, and the government which has filed a brief amicus curiae at our request, assert that the petitioner received his information not by his own investigation, but from the previous indictment; and both argue that §§ 3490—93 should not under such circumstances be construed as permitting...