U.S. v. Maher, 77-2471

• Decision Date: 23 August 1978
• Docket Number: No. 77-2471,77-2471
• Citation: 582 F.2d 842
• Parties: 25 Cont.Cas.Fed. (CCH) 82,623 UNITED STATES of America, Appellee, v. Alvin Michael MAHER, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 842

582 F.2d 842

25 Cont.Cas.Fed. (CCH) 82,623

UNITED STATES of America, Appellee, v. Alvin Michael MAHER, Appellant.

No. 77-2471.

United States Court of Appeals, Fourth Circuit.

Argued May 5, 1978.

Decided Aug. 23, 1978.

Plato Cacheris, Washington, D. C. (Larry S. Gondelman, Hundley & Cacheris, P. C., Washington, D. C., on brief), for appellant.

Theodore S. Greenberg, Asst. U. S. Atty., Alexandria, Va. (Joseph A. Fisher, III, Asst. U. S. Atty., William B. Cummings, U. S. Atty., Alexandria, Va., on brief), for appellee.

Before BUTZNER and HALL, Circuit Judges, and NORTHROP, District Judge. ^*

K. K. HALL, Circuit Judge:

Defendant, Alvin Michael Maher, appeals his criminal conviction on eleven counts of filing false, fictitious, or fraudulent claims with the United States government in violation of the False Claims Act, 18 U.S.C. § 287. The primary issue presented in this appeal is whether the district court properly instructed the jury that under § 287 the criminal intent essential for conviction is not limited to a specific intent to defraud. At trial, the defendant conceded the basic facts of the government's case but maintained he was innocent because he acted without a specific intent to defraud the government. The district court refused to instruct the jury that proof of such a singular purpose was essential for conviction and, instead, instructed the jury that if the defendant caused false or fictitious or fraudulent claims to be submitted to the government, knowing them to be false or fictitious or fraudulent, with a specific intent to violate the law or with a consciousness that what he was doing was wrong, he should be found guilty. The defendant made timely objection to this instruction and to the court's refusal to give his proffered instructions which set forth his theory of defense. We hold that the district court properly instructed the jury and, therefore, affirm.

At trial, the government presented evidence showing that, during the year in which defendant was promoted from vice-president to president of his corporate employer, he caused false vouchers to be submitted to an agency of the federal government requesting payments totalling approximately $68,000 more than should have been paid to his employer under its contracts with that agency. The defendant contended that he did so with no intent to cheat the government or to gain unfair advantage for himself or his company.

During the time in question, defendant worked for General Environments Corporation ("GEC"), which tested equipment and conducted experiments for various commercial and government clients. GEC's contracts with these clients could be categorized as either "fixed-price" contracts or "time-and-materials" contracts, depending upon the manner in which GEC was to be paid for its work. Under its "fixed-price" contracts, GEC agreed to perform experiments for a certain amount and to bill periodically on the basis of percentage of completion. Under its "time-and-materials" contracts, GEC agreed to perform experiments for a price Not to exceed a certain amount and to bill periodically on the basis of the amount of labor and materials actually employed in the experiments up to the date of billing. According to the defendant's theory of defense, it was GEC's practice, at least for its contracts with government clients, to stop work on an experiment and seek additional funding from the client anytime GEC's costs met or exceeded its contract price. This practice was followed for such "cost overruns" under both "fixed-price" contracts and "time-and-materials" contracts.

During 1972, one of GEC's government clients was the Mobility Equipment Research and Development Center ("MERDC") of the Department of the Army of Fort Belvoir, Virginia. GEC and MERDC entered into various "time-and-materials" contracts most of which required GEC to conduct several experiments, or "tasks," with separate maximum prices allocated to each task. The hourly rate to be billed by GEC included its overhead and profit and varied according to the classification of labor utilized for each task. GEC billed MERDC monthly for work on these "time-and-materials" contracts. Its monthly billings were prepared by the company bookkeeper based upon time sheets which were filled out and signed by the GEC employees who worked on the MERDC contracts.

In 1972 the defendant became president of GEC. During that year, before and after his promotion, whenever the bookkeeper submitted MERDC billings to the defendant for his approval, he instructed her to change them to reflect more hours than were shown on the employees' time sheets. She made the billing changes that he specified, prepared new time sheets to conform to those billing changes, traced over the employees' signatures on the new time sheets and destroyed the original ones. The defendant told her these changes were necessary because the employees did not know to which contract they should charge their hours and that their signatures had to be traced because there was not time to have the employees sign the revised time sheets. Three GEC project managers, whose time sheets had been altered, testified that, in fact, they knew on which contracts they were working and that they recorded hours on their time sheets according to time spent working on those contracts. They said they were never told that they made errors on their time sheets. The defendant testified that no one in the government knew GEC was billing for the fictitious hours and that he did not discuss his practice of having hours changed on company time sheets with anyone at GEC. Approximately 5,300 fictitious hours, representing $68,000 in false claims, were billed on these MERDC contracts as a result of the defendant's instructions to the bookkeeper. The bookkeeper testified that the practice of changing time sheets ended when defendant left GEC in November, 1973.

Defendant admitted giving these instructions but maintained he was innocent because he acted for a legitimate business purpose and without a motive to defraud the government. He testified that he knew the MERDC contracts were to be paid at an hourly rate for work actually performed, but nevertheless thought they should be billed on the same basis as "fixed-price" contracts, that is, if he considered work on a MERDC task to be one half complete, he should have the bookkeeper bill one half of the maximum price allocated to that task regardless of the amount of labor actually employed. ¹

Defendant testified that this approach to billing for the MERDC tasks furthered a legitimate business purpose because these tasks were experiments which could not be performed efficiently if they were delayed pending receipt of additional funding each time a cost overrun occurred. When cost overruns did occur, GEC would not get additional contracts and the government would not get fair value for its money. ² Consistent with this defense, he claimed he knew employees were adjusting hours on their time sheets to prevent cost overruns and delays in their work. One GEC project manager testified that he charged hours on his own time sheets which were actually spent working on MERDC tasks to "fixed-price" contracts in order to prevent cost overruns and delays in completion of those "fixed-price" contracts pending GEC's request for additional funding. Defendant testified that he was aware that some hours were shifted away from MERDC contracts and he wanted to shift them back "to make it come out even." Therefore, in all, he contended that he would have the MERDC tasks billed on the basis of his personal estimations of the percentage each task was completed rather than on the amount of labor employed as shown on the employees' time sheets.

The primary issue presented in this appeal is whether the intent essential for conviction under § 287 is limited to an intent to defraud. This statute reads as follows:

Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be fined not more than $10,000 or imprisoned not more than five years, or both.

18 U.S.C. § 287. The court instructed the jury that, in addition to proving the defendant knowingly caused false claims to be made to the government, the government had to prove beyond a reasonable doubt that the defendant acted "willfully," that is, with either a consciousness that he was doing something wrong or with a specific intent to violate the law. In his closing argument, counsel for defendant argued to the jury that the government had to prove the defendant acted with a specific intent to defraud the government in order for the defendant to be found guilty. The court refused to define criminal intent in terms of intent to defraud and instructed the jury on intent, in pertinent part, as follows:

. . . It is sufficient if one . . . (claim in each count) . . . is false or fraudulent or fictitious, provided, of course, that in order to convict the defendant, it must be shown as to that item that he had knowledge of its falsity or fraudulent character or fictitious character, and that he acted willfully.

The defendant . . . asserts that he acted innocently and for a legitimate business purpose, with no specific intent to do what the law forbids.

If, of course, the government has not proven beyond a reasonable doubt that he acted with specific intent, that is, willfully, then he cannot be convicted.

In this regard, however, you are told that if the contract was a time and material contract, even with a ceiling, then the contractor . . . had no right to put on or cause to be put on a voucher, a claim for payment for work that he knew had not been done or put on such a voucher a claim for payment with reckless indifference as to whether...