Smith v. United States

Decision Date08 February 1961
Docket NumberNo. 18045.,18045.
Citation287 F.2d 299
PartiesW. Kelly SMITH, Appellant, v. UNITED STATES of America, Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Alto V. Watson, Beaumont, Tex., Watson & Selman, Beaumont, Tex., of counsel, for appellant.

Anthony Mondello, Samuel D. Slade, Seymour Farber, Morton Hollander, Attys. Dept. of Justice, Washington, D. C., Paul N. Brown, U. S. Atty., Tyler, Tex., George Cochran Doub, Asst. Atty. Gen., for appellee.

Before TUTTLE, Chief Judge, and JONES and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

After a trial without a jury the District Court held that Smith, Executive Director of a governmental housing project was liable under the False Claims Act, 31 U.S.C.A. § 231, to repay the Government double the amount of the payments wrongfully received plus the further statutory penalty of $2,000 for each of the two false claims. Three contentions are now pressed. First, the evidence was not sufficient to sustain the basic finding of false claims. Second, even if false, the certifications for payment were not claims within the Act. Third, the Government's claim was barred by the six-year statute of limitation, 31 U.S.C.A. § 235.

Smith, an accountant by business training, was the Executive Director of the Beaumont Housing Authority (BHA). As such, he was responsible for operating several housing projects in Beaumont. He had held the position for some time. BHA was the lessee of a project owned by the Federal Government through the Public Housing Administration. Under the lease BHA agreed to pay as rental the amount by which operating revenues exceeded approved expenses for the preceding quarter. Under other provisions the Government agreed to advance funds to cover operating deficits. Quarterly reports had to be filed by the lessee reflecting the amount due to, or due by, the Government depending on whether operations reflected a surplus or a deficit for that quarter.1

The two false claims involved here grew out of the quarterly reports dated June 30, 1951 and September 30, 1951. The challenged items related primarily to purchase, transportation and delivery of shell. Also challenged were smaller items for work performed by a project laborer on Smith's farm while on the project payroll time. Whatever Question there might be about whether the transactions were false or fraudulent, it is uncontradicted that the inclusion of the items had a direct and immediate effect on the Federal Treasury. In one quarter the amount of rental payable to the Government was reduced. In the other the amount of the advanced payable by the Government to make up the deficit was increased.

The attack on the Court's findings of fact is the not unnatural one that the Trial Judge ought not to have found as he did. But this misconceives our function. We do not retry the case. Williams v. National Surety Corp., 5 Cir., 1958, 257 F.2d 771, 773. We may determine only whether the findings pass muster under the clearly erroneous concept of F.R.Civ.P. 52(a), 28 U.S.C.A. The burden of upsetting these findings is indeed formidable here since the witnesses were all heard and seen by the Judge in open court and the crucial issues of motive and purpose involved credibility choices of the most elemental nature. United States v. Yellow Cab Co., 1949, 338 U.S. 338, 341-342, 70 S.Ct. 177, 94 L.Ed. 150. This required approach eliminates the necessity for any extended review of the evidence.

During April to September 1951 considerable rehabilitation was undertaken on one of the projects. This required the purchase and delivery of a substantial amount of shell. All of it came from the Jefferson Shell Company. The amounts here in dispute were covered in ten checks totaling $4170.75. Each of these checks of BHA was signed by Smith along with others. However, the checks were not payable to Jefferson Shell. Rather each was payable to Morris Celestine, a nearly illiterate laborer on the payroll of BHA. But Celestine did not get the money. For as each check was cashed, he turned all of the proceeds over to Smith. Smith did not undertake to deny this. On the contrary, he admitted that this arrangement had been set up by him. He had, indeed, taken Celestine to the bank to establish the system for cashing the checks.

It was Smith's story that there was an emergency to get this shell purchased and delivered within the two fiscal quarters for which Federal funds had been allocated. There was, he asserted, a shortage of trucks in Beaumont. Consequently, after informally clearing it with the Chairman of the Board of Commissioners of BHA, it was agreed that Smith would make use of his truck, owned personally by him, for this job. Celestine, already employed by BHA would drive the truck without extra pay. Smith, in the meantime, made an arrangement with Jefferson Shell to supply the shell. The shell was to be paid for by Smith when Smith received funds from BHA. As there was a fairly well locally established scale for transportation charges on a cubic yard basis, the price to be charged by Jefferson Shell was to include the transportation charge. Out of the proceeds of each Celestine check Smith would, therefore, retain the amount included for transportation as compensation for the use of his truck and as reimbursement to him for truck expenses. The balance would be paid to Jefferson Shell in payment for the shell physically delivered to Celestine.

Smith was emphatic that every load of shell thus paid for was delivered to the project, and that the money received by him from Celestine, less the transportation charges, was paid over to Jefferson Shell. At the time each of the checks was signed, it was supported by an invoice purchase order for each load which Celestine would surrender to the project office, and also a receiving order receipt signed by the project warehouseman attesting to the actual receipt of each load. There seems to be no doubt that Mrs. Webb, the BHA accounting clerk responsible for preparation of the checks, had the proper paper support for each check. But Smith personally prepared the vouchers showing the sale of the shell by Jefferson Shell to Celestine.

If Smith's story were credited, the case would then have turned on perhaps the more doubtful question whether handling the payment in this unorthodox fashion, but without profit to Smith, would have been false or fraudulent under the Act simply because the use of Smith's truck and the payment for it at the going rate violated the conflict of interest terms of the lease, see note 1, supra, and also a Texas statute making such insider transactions illegal.2 Under the statutory scheme of a civil judgment for the amount of the damage sustained by the Government through the fraudulent claim and a like amount as a civil penalty, it would have been impossible to have avoided decision on that point. But the Court did not credit this story. On the contrary, it expressly found that Smith "received personally the proceeds of each of said checks" and more important, that "none of said checks was issued for any * * * materials furnished to or for the" BHA.

It is not for us to say what we would have held were it our decision to make. We need only briefly summarize some circumstances that made this damaging conclusion permissible. A spectacular piece of evidence was the fact that Jefferson Shell's books reflected a specific account with BHA covering shell delivered during this same period of time. The total amounted to $2,412.85. Checks of BHA, likewise signed by Smith, payable to Jefferson Shell were identified for this precise amount.3 Smith never ventured an explanation as to why it was necessary to have both accounts — the official BHA and the Celestine accounts — at Jefferson Shell. If the "emergency" was a shortage of trucks, the Court was entitled to be skeptical since Smith's truck was used for the "official" movements and, according to him, for the Celestine shipments as well, see note 3, supra. As a matter of fact, no such emergency was ever really established.

Another circumstance related to the supporting delivery receipt which Smith testified was signed by the warehouse department for each load. Celestine was positive that no one signed any such receipt. Since this actual receipt was not produced, Mrs. Webb's assurance that all was in order was greatly imperiled. Next, while a plea of nolo contendere, as such, may not be received or used as an admission of civil or criminal liability, Piassick v. United States, 5 Cir., 1958, 253 F.2d 658; Mickler v. Fahs, 5 Cir., 1957, 243 F.2d 515, no objection was made to the evidence, so the conviction4 based on it was a relevant circumstance on the credibility of Smith as a witness. Kilpatrick v. Commissioner, 5 Cir., 1955, 227 F.2d 240, 243. Along these same lines and bearing directly on the credibility of Smith was the marked contrast between explanations made by him as a witness in Court and those expressed previously in statements given to Government investigators....

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