United States v. Bornstein

• Decision Date: 26 June 1973
• Docket Number: Civ. A. No. 1141-67.
• Citation: 361 F. Supp. 869
• Parties: UNITED STATES of America, Plaintiff, v. Philip L. BORNSTEIN et al., Defendants.
• Court: U.S. District Court — District of New Jersey

361 F. Supp. 869

UNITED STATES of America, Plaintiff, v. Philip L. BORNSTEIN et al., Defendants.

Civ. A. No. 1141-67.

United States District Court, D. New Jersey.

June 26, 1973.

COPYRIGHT MATERIAL OMITTED

Herbert J. Stern, U. S. Atty., by Carolyn E. Arch, William A. Carpenter, Jr., Asst. U. S. Attys., for plaintiff.

Jack Ballan, Fair Lawn, N. J., for defendant Philip L. Bornstein.

William Rossmoore, Newark, N. J., for defendant Gerald Page.

OPINION

KITCHEN, District Judge:

The United States brings this civil action pursuant to the provisions of the False Claims Act (Act), 31 U.S.C.A. § 231 et seq., to recover forfeitures and double damages provided for in section 231. Jurisdiction is founded in 31 U.S. C.A. § 232. The matter is before this Court on a stipulation of facts, trial memoranda of law, and oral argument of counsel. Findings of the Court are based on that stipulation.

Defendant United National Labs (United), a corporation of the State of New Jersey, was engaged in the business of purchase and sale of electron tubes. Defendant Bornstein was part owner and general manager of United; defendant Page was part owner, vice-president, and manager of sales of that corporation. At all times relevant to this proceeding United was operated and managed by Bornstein and Page.

In August 1962 the United States Signal Supply Agency entered into Supply Contract No. DA-36-039-AMC-01080(E) with Model Engineering and Manufacturing Corp., Inc. (Model), a corporation of the State of Indiana. Model was engaged in manufacturing and building electronic radio equipment and radio sets, and under the contract was to supply radio kit sets¹ to the Department of the Army. The component parts list of this contract specified that Sub-item #1-5-33, to be included in the radio accessory kits, called for:

2 ea. Tube, Electron JAN type 4X150G Per Specifications, MIL. E-1 and TSS MIL. E-1, 302E dated 4/17/57²

JAN 4X150G electron tubes are manufactured only for use in military equipment. Surplus or obsolete JAN 4X150G tubes may be used commercially even though they were originally manufactured for military use. During all times relevant to this proceeding the only authorized manufacturer of JAN 4X150G tubes was Eitel McCullough, Inc. (Eimac), a corporation of the State of California.³ Eimac's qualification code,⁴ which appeared on all tubes of its origin that had passed certain qualification tests, was CIM. In addition to the branding of JAN-CIM on tubes that passed all of the tests, Eimac imprinted an acceptance code date on each tube. This code date was a four digit number reflecting the year and week of manufacture.

Due to the requirements of the equipment specifications and "JAN" tests the use of a non-"JAN" branded commercial tube or a surplus or obsolete "JAN" branded tube required prior written approval from the Government contracting officer who administered the contract. Model had not obtained such approval and, in fact, certified that the material offered was new, recently manufactured, had never been used, and was not former surplus of any type.

In May, 1963 defendant Page wrote Model advising that United was able to supply JAN 4X150G electron tubes at a price of $32.00 per tube.⁵ In that same correspondence Page assured Model that United would test the tubes according to the applicable military specifications and would certify the tubes by Government inspection. Defendants knew that the tubes were for use in the Government contract, even though they had never seen a copy of that agreement.

Pursuant to the above arrangement in July 1963 defendants shipped ten 4X150G tubes to Model for sampling. Following a preliminary inspection of the sample tubes, Model sent a form to United advising of the following facts concerning the tubes:

no code date no JAN marking electrically OK physically OK Decision: accepted

In December 1963 Model issued to United a purchase order for 1008 JAN 4X150G electron tubes at a total cost of $32,256.00 and a unit price of $32.00 per tube. Shortly thereafter United shipped 120 of the subject tubes to Model. In early January 1964, however, Model returned the tubes as unacceptable because they had not been JAN branded or Government source inspected.

Model then became concerned that United might not be able to furnish tubes that met Government specifications and requested United confirm that the correct tubes could be furnished. By letter of January 24, 1964, signed by defendant Bornstein, Model was advised as follows:

This letter is to stand as affirmation by us that we are fully equipped and capable to delivery (sic) any and all electron tubes and semi-conductors on which we accept purchase orders from you to the applicable military specifications and government source inspection supplied as required.

The defendants then affixed or caused to be affixed to the tubes in their possession in January 1964⁶ the following markings:

(1) The JAN designation;

(2) The manufacturer's qualification code (CIM); and

(3) The acceptance date (6318).

The defendants knew these markings were false and inaccurate. Before shipping the falsely branded tubes to Model defendants sent the tubes to Saxon Laboratories, Inc. in New York for a MIL. E-1 electrical test. After the test was completed and the tubes were found operable, a facsimile of a Government inspector's "Eagle" stamp was affixed to each of the defendants' packing lists accompanying the shipments to Model.⁷ This stamping was accomplished at Saxon Laboratories by someone other than defendants Page and Bornstein.

There were twenty-one packing lists covering the tubes and containing their serial numbers.⁸ The packing lists comprised three separate shipments to Model. Accompanying each shipment was a "Certificate of Compliance" signed by defendant Page as vice-president of United. The certificate stated as follows:

It is hereby certified that all materials used in the manufacture of parts in the quantity called for on the subject purchase order received by Model . . . conform to the material and/or manufacturing specifications as called for on said purchase order.

Physical, Electrical, and/or Chemical test reports are on file with us or with our suppliers for examination and indicate conformance with applicable specification requirements.

United billed Model on three separate invoices and was paid $32.00 per tube by Model.

The United States received 684 4X150G tubes from Model under the contract. Of this total number of tubes 442 were found to contain:

(1) A false JAN designation;

(2) A false manufacturer's qualification code (CIM); and

(3) A false acceptance date (6318).

These falsely branded tubes were removed from the radio kits purchased from Model. Only 397 of these tubes can be identified by serial number as having been supplied by defendants. Serial numbers for the remaining forty-five improperly branded tubes are unknown and cannot be directly traced to defendants.

Model submitted to the United States thirty-five claims for payment under the contract. These claims were designated as invoices. Each invoice included claims for payment for tubes that had been "JAN" branded by the defendants although defendants did not prepare any of Model's invoices or have knowledge of the manner in which claims were presented to the Government. Model's thirty-five claims were paid with eight Government vouchers. The cost to the United States to replace the falsely branded tubes was $40.82 per tube.⁹

In May 1966 defendants Bornstein and Page pleaded guilty to Count II of an indictment which charged that from January 24, 1964, through June 3, 1964, they conspired to cause to be submitted to an agency of the United States false statements and representations to material facts and conspired to possess forged documents enabling Model to obtain money from the United States. Defendants were each given a suspended sentence and placed on probation for two years. Neither defendant was fined. In December 1966 Model paid the United States $18,000.00 in settlement of a claim brought against Model for the 442 falsely branded tubes.

The legal issues which confront the Court are as follows: did the defendants violate the False Claims Act; if the Court finds that the Act was violated, what actual damages, if any, were suffered and how are they to be computed; and, how is the number of forfeitures to be computed.

I STATUTORY VIOLATION

The applicable section of the False Claims Act, 31 U.S.C.A. § 231, provides, in pertinent part:

Any person . . . 1 who shall . . . cause to be made . . . or cause to be presented, for payment or approval, to . . . any person or officer in the civil, military, or naval service of the United States, any claim upon or against the Government of the United States, or any department . . . thereof, knowing such claim to be false, fictitious, or fraudulent, 2 or who, for the purpose of obtaining or aiding to obtain the payment or approval of such claim, makes, uses, or causes to be made or used, any . . . voucher . . . claim, certificate, affidavit . . . knowing the same to contain any fraudulent or fictitious statement . . . 3 or who enters into any agreement . . . or conspiracy to defraud . . . the United States, or any department . . . thereof, by obtaining or aiding to obtain the payment . . . of any false or fraudulent claim . . . shall forfeit and pay to the United States the sum of $2,000, and, in addition, double the amount of damages which the United States may have sustained by reason of the doing or committing such act . . . .

Applying the findings of this Court to the above quoted statutory language, it is an inescapable conclusion that defendants Bornstein and Page violated the provisions of section 231 of the Act. Defendants knew the materials they were furnishing Model were for use in a Government contract. They were also aware that their initial shipment of 120 tubes was unacceptable because the tubes lacked the required "JAN" ...