United States v. Decker

• Decision Date: 24 July 1943
• Docket Number: No. 19981.,19981.
• Citation: 51 F. Supp. 20
• Parties: UNITED STATES v. DECKER et al.
• Court: U.S. District Court — District of Maryland

51 F. Supp. 20

UNITED STATES v. DECKER et al.

No. 19981.

District Court, D. Maryland.

July 24, 1943.

William Curran and R. Palmer Ingram, both of Baltimore, Md., for defendant, Decker.

Simon E. Sobeloff, of Baltimore, Md., for defendant, Kann.

Bernard J. Flynn, U. S. Atty., of Baltimore, Md., Wm. A. Paisley, Sp. Asst. to Atty. Gen., and Ellis L. Arenson, Sp. Atty., Department of Justice, of Baltimore, Md., for plaintiff.

CHESNUT, District Judge.

The above criminal case was tried to a jury on May 31 to June 8, 1943. After several hours deliberation the jury returned a verdict of guilty on the second count of the indictment and not guilty on the first count (as instructed by the court as to the first count) against both defendants, with recommendation to the mercy of the court. Within due time thereafter both defendants have separately filed motions in arrest of judgment and for a new trial. The only proper ground for arrest of judgment is the overruling of the demurrer to the indictment. This question has not been reargued on the motion in arrest. The motion in arrest of judgment is, therefore, overruled as to both defendants.

The motion for a new trial presents numerous assigned grounds therefor. The principal ground now urged upon the court in support of the motion is that there was no evidence in the case legally sufficient to support the charge in the second count of the indictment that the defendants "furnished to the Secretary of the Navy of the United States, through the Price Adjustment Board of the Navy Department, pursuant to the provisions of section 403 of the `6th Supplemental National Defense Appropriation Act of 1942' statements of the actual cost of production of said Triumph Explosives, Inc., in the manufacture of ordnance materials under said contracts for the United States of America, which said statements, as the said defendants and each of them then and there well knew, contained false and misleading information in the following respects, to wit: said statements consisted of the totals of operating expense accounts of the corporation taken from the books of account of said corporation kept in the regular order of business."

The nature of the whole case and an outline of the evidence is contained in the court's charge to the jury which has been transcribed by the stenographer. Reference is made thereto in order to avoid repetition and unnecessary extension of this memorandum opinion.

While the point now urged was made in general terms in argument on the facts at the trial of the case, it is now presented and emphasized in a somewhat different way from its presentation at the trial. There the principal emphasis was on the insufficiency of the evidence to show that what the defendants did amounted to furnishing a statement. The point as now emphasized is that what was furnished did not constitute a statement within the meaning of section 403(e) of the Act of Congress approved April 28, 1942 cited as the "6th Supplemental National Defense Appropriation Act, 1942". Public Law 528, 77th Cong. c. 247, sec. sess. 41 U.S.C.A. note preceding section 1. Section 403(e) reads in part as follows: "In addition to the powers conferred by existing law, the Secretary of each Department shall have the right to demand of any contractor * * * statements of actual costs of production and such other financial statements, at such times and in such form and detail, as such Secretary may require. Any person who willfully fails or refuses to furnish any statement required of him under this subsection, or who knowingly furnishes any such statement containing information which is false or misleading in any material respect, shall, upon conviction thereof be punished" etc. (Italics supplied.)

The evidence as to the defendants' action on this issue was outlined in the charge and will not be here repeated. The main point that is now emphasized is that when the representative of the Bureau, one Zipf, presented his letter of authority dated June 18, 1942, on July 7, 1942, to the defendant Decker, the latter did not then or thereafter give to Zipf any written statement of cost figures, and did not give to Zipf then or thereafter any oral statement of specific figures. It will be remembered that the letter presented by Zipf to the defendant Decker said "Triumph Explosives, Inc., is hereby requested to furnish the Navy Department with statements of actual costs of production under contracts with the Navy Department", etc. This letter was presented in person by Zipf to Decker, the executive vice president of the corporation, in the absence of Kann, the president. Zipf testified that he talked the matter over with Decker for about half an hour and that the substance of the conversation was that the corporation did not keep accounts which segregated costs of production for Navy contracts from other business, although it appeared from other evidence that in 1942 the United States Government's business with the corporation comprised about 90% of all the business of the corporation and the great majority of the government business was for the Navy Department. In the absence of such segregated costs the best data that could be obtained as reflecting actual costs of production for the government contracts consisted in the total operating expense accounts of the corporation as contained in its books of account. Decker finally referred Zipf for a statement of these expenses to Criswell, another vice president particularly in charge of the accounting of the corporation. Criswell in turn introduced Zipf to Sabel, the accountant of the corporation, who, with assistants, was then engaged in auditing and preparing the second six months statement of operations of the corporation for the year ending July 31, 1942, only four months of which was then complete. Zipf spent several days in examining the corporation's books of account, conferring at certain times and from time to time with the corporation's accountants and as a result of his examination prepared a voluminous report which in due course was transmitted to the representatives of the Navy Department and which included (a) copies of balance sheets; (b) copies of summary of income and surplus; (c) copies of statement of cost of sales, selling and administration expenses, and other financial data. Zipf's report included the following comment: "3. Because of the absence of detailed cost records no information was obtained concerning profits on completed units or contracts as distinguished from the over-all results of the operations." Zipf's report was introduced in evidence as Plaintiffs' Ex. No. 31. Schedule C—Statement of cost of sales, included expense items for the completed fiscal years (ending July 31st) of 1937, 38, 39, 40, 41 and six months ended January 31, 1942. Among the items, with the amounts for the respective years were the following —Maintenance and repairs; professional fees, general factory expense; small tolls and supplies. And Schedule C—Selling and administrative expenses for 1937 to 1941 inclusive, and for the six months ended January 31, 1942, and estimated for the year ended July 31, 1942, included among other items, commissions, advertising expense, travelling expenses, entertainment, and miscellaneous.

The second count of the indictment under separate letters of the alphabet lists about 15 items varying in amount from a few hundred dollars to $84,000, which it was alleged constituted expenditures made from corporate funds for the personal benefit of the defendants (the great majority for Decker) and which had been improperly charged by Decker's authority, and to his knowledge, to various corporate expense accounts, including, to McCreight Landscape Service, $4301.90, to maintenance and repairs; $1688.50 to Sulka & Co., New York, haberdashers, charged to "Entertainment", "Miscellaneous administration expense"; Small tools Expense", and "Advertising Expense"; one rug $2500 to entertainment; $179.14 to Keyes & Miller Lumber Co. to repairs and maintenance; $7956.88 for liquor, to miscellaneous expenses and raw materials; $84,106 to commissions; $3216.16 to Decker's son (on the payroll while in school) to general factory expense; $32,092.10 for Decker's travelling expense; $160 for a suit of clothes (for a Navy Inspector) to general factory expense; $9,000 to Decker for professional fees; $2800 for liquor to entertainment expense account.

At the trial evidence offered by the government was to the effect that the amount of such improper charges to expense accounts aggregated $100,000 or more. It further appeared from the evidence that these improper charges were necessarily reflected in Zipf's report taken from the corporate books and appeared in Schedule C above referred to although, of course, without segregation from the total operating expenses charged to the several expense accounts.

The contention of the government is that section 403(e) is not limited to the furnishing of written statements by the defendants but is sufficient to include an oral statement if sufficiently clear and definite. More particularly stated, the position of the government is that when the Navy Department asked in writing for actual costs of production, Decker as the responsible and acting officer of the corporation referred Zipf to the books of the corporation for the information desired, he then knowing that the books contained false entries of total expense accounts as alleged in the indictment (to the extent found by the jury from the evidence) and that this was in substance and effect a statement that the books truly reflected the operating expenses, or at least the...