U.S. v. Hughes, 78-1294

• Decision Date: 11 October 1978
• Docket Number: No. 78-1294,78-1294
• Citation: 585 F.2d 284
• Parties: 25 Cont.Cas.Fed. (CCH) 82,752 UNITED STATES of America, Plaintiff-Appellee, v. Charles HUGHES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 284

585 F.2d 284

25 Cont.Cas.Fed. (CCH) 82,752

UNITED STATES of America, Plaintiff-Appellee, v. Charles HUGHES, Defendant-Appellant.

No. 78-1294.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 14, 1978.

Decided Oct. 11, 1978.

Hilbert L. Bradley, Gary, Ind., for defendant-appellant.

John S. Leonardo, Asst. U. S. Atty., South Bend, Ind., for plaintiff-appellee.

Before FAIRCHILD, Chief Judge, and CUMMINGS and WOOD, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

Appellant, Charles Hughes, appeals the civil judgment against him for violating the Federal False Claims Act, 31 U.S.C. § 231. The government's complaint alleged and the jury found that Hughes combined with Mallie J. Patterson and Verda Jean Patterson in a collusive bidding arrangement to assure the award of government contracts to particular bidders. Specifically, the appellant was found to have presented the Department of Housing and Urban Development with ten false claims while knowing the claims to be false.

Hughes was an Area Manager Broker (A.M.B.), a local real estate agent under contract with H.U.D. The A.M.B.'s duties included inspecting properties acquired by H.U.D. to determine the need for repairs. If the A.M.B. decided that repair was necessary and that the cost of repair was less than $2,000, H.U.D. regulations required that the A.M.B. obtain at least three competitive bids from contractors. The A.M.B. then was to submit those bids along with an accompanying purchase order-payment authorization to the local H.U.D. office for approval.

Evidence at trial established that the appellant told his co-defendants, the Pattersons, to submit bids in the names of fictitious contractors as well as that of the Pattersons' own firm, Service Painting Company. Mrs. Patterson (now Mrs. Forsythe) would use different ink and handwriting styles to make the bids look authentic. Often the bid by the fictitious company would be accepted by H.U.D. Regardless of which firm was finally awarded the contract, the Pattersons' firm would complete the work, and ultimately the government check for payment would be deposited in the Pattersons' checking account. Both of the Pattersons testified that they were invited to submit multiple and fictitious bids by the appellant. The Pattersons also testified that some other H.U.D. employees knew of and invited the fictitious bidding.

Appellant presents two issues on this appeal. First, is proof of the defendant's intent to defraud the government necessary to establish a violation of the first clause of the False Claims Act? Second, is the government guilty of discriminatory enforcement of the law by bringing this suit against the appellant because of his race? A preliminary question not raised by the parties concerns the jurisdiction of this court to hear the appeal.

The judgment entered by the district court merely states the judgment is for plaintiff and against defendants. The judgment does not indicate the amount of the defendants' liability. Thus, the question arises whether the judgment is final so as to permit this court to hear the appeal under 28 U.S.C. § 1291. The False Claims Act provides that whoever knowingly makes a false, fictitious, or fraudulent claim against the federal government "shall forfeit and pay to the United States the sum of two thousand dollars, and, in addition, double the amount of damages" that the government sustained. Prior to trial, the government withdrew its request for damages and relied solely on the forfeiture provision of the Act. ¹ This forfeiture provision is mandatory; it leaves the trial court without discretion to alter the statutory amount. Because the jury found against the defendants on ten separate counts, each based on ten distinct false claims, the amount of the defendants' liability must necessarily be $20,000. ² Since the amount of the appellant's liability is not left to future events and is readily determined, we believe that nothing save ministerial tasks relating to computation were left for the trial judge. Consequently, the judgment entered against Hughes is final for purposes of review under 28 U.S.C. § 1291.

Appellant's first argument is that the government failed to prove that he possessed the mental state necessary to incur liability under the Act. Appellant concedes that the bids submitted by him were false and that he knew them to be false. Appellant maintains, however, that employees of H.U.D. to whom he sent the bids for approval knew and approved of his conduct. Therefore, appellant argues, he lacked the intent to deceive which he maintains is a prerequisite to liability under the Act. The trial court, however, instructed the jury that they need only find that the claims were false and that the appellant knew them to be false to find for the government.

The circuit courts have disagreed about the mental state that must accompany the presentation of a false claim within the meaning of the False Claims Act. Some maintain that the Act requires that the defendant possess the specific intent to defraud the government; others have held that the defendant need only knowingly present a false claim to the government. See Annot., 26 A.L.R.Fed. 307 (1976). In United States v. Fox Lake State Bank, 366 F.2d 962 (7th Cir. 1966), this court apparently adopted the latter construction. In Fox Lake, The district court held that only knowledge of falsity was required by the first clause of the Act. 225 F.Supp. 723 (N.D.Ill.1963), Holding reaffirmed in 240 F.Supp. 720, 723 (N.D.Ill.1965). By stressing the disjunctive "or" in the first clause of the Act, See 366 F.2d at 965, this court indicated its approval of the lower court's construction. Nevertheless, we reversed the judgment, holding that the evidence was insufficient to establish that the defendants in that case knowingly presented false claims to the government. Because the court's examination of the issue was so cursory and because of the conflict between the decisions of the circuit courts, we reexamine the issue once again and reaffirm our previous holding.

Those circuits that have construed the first clause of the Act to require specific intent to defraud rely on several grounds. In United States v. Mead, 426 F.2d 118 (9th Cir. 1970), the court dismissed the government's argument that the three adjectives, "false, fictitious, or fraudulent," should be read in the disjunctive as "a shaky foundation of semantic distinctions." Id. at 123. Instead, the court, apparently construing "or" to mean "and," said the language probably was the result of "the draftsman's desire to encompass the varying ways in which fraud is defined." Id. The court's construction, however, renders the first two adjectives surplusage and disregards the ordinary rule of statutory construction that "or" is disjunctive. Moreover, the use of the words "false, fictitious, or fraudulent" is equally consistent with the intention to draft the Act to encompass every variety of false or misleading claim made against the government.

The court in Mead could perceive no reason why only two of the six types of conduct proscribed in the False Claims Act should require the element of specific intent to defraud and was unwilling to ascribe to Congress the intent to make such a distinction. This argument, however, ignores the fact that the language of the Act does indeed make such a distinction. Since Congress did require specific intent to defraud as a prerequisite to liability in two parts of the Act, Congress must be presumed to have intended to require a less stringent measure of proof in the remaining parts. See Fleming v. United States, 336 F.2d 475, 479 (10th Cir. 1964). Finally, the court in Mead refused to construe the False Claims Act as altering the common law any further than its language clearly demanded. This, of course,...