United States v. Grannis

• Court: U.S. Court of Appeals — Fourth Circuit
• Writing for the Court: PARKER, , and SOPER and DOBIE, Circuit
• Citation: United States v. Grannis, 172 F.2d 507 (4th Cir. 1949)
• Decision Date: 03 February 1949
• Docket Number: No. 5799.,5799.
• Parties: UNITED STATES v. GRANNIS et al.

172 F.2d 507 (1949)

UNITED STATES v. GRANNIS et al.

No. 5799.

United States Court of Appeals Fourth Circuit.

February 3, 1949.

J. Gregory Bruce, Atty., Dept. of Justice, of Washington, D. C. (H. G. Morison, Asst. Atty. Gen., John H. Manning, U. S. Atty., of Raleigh, N. C., Howard H. Hubbard, Asst. U. S. Atty., of Clinton, N. C., Joseph M. Friedman, Sp. Asst. to Atty. Gen. and William M. Lytle, Atty., Department of Justice, of Washington, D. C., on the brief), for appellant.

Horace E. Stacy, of Lumberton, N. C., and L. P. McLendon, of Greensboro, N. C. (J. R. Nance and R. H. Dye, both of Fayetteville, on the brief), for appellees.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

SOPER, Circuit Judge.

This suit was instituted by the United States against Edward Grannis, Karl Sloan and William R. Jones to recover forfeitures and damages specified by R.S. § 3490, 31 U.S.C.A. § 231, on account of certain acts committed by the defendants in violation of R.S. § 5438¹ during the construction of Camp Davis at Wilmington, North Carolina, in 1940 and 1941. The gist of these sections is that any person not in the military or naval forces of the United States, who shall make or cause to be made or presented for payment or approval to or by any person or officer in the civil, military or naval service of the United States, any claim against the United States, knowing the claim to be false, fictitious or fraudulent, or who, for the purpose of obtaining the payment or approval of such claim, makes or causes to be made or used any false bill, receipt, voucher or certificate, knowing the same to contain any fraudulent or fictitious statement, 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 of the act, together with the costs of suit.

Grannis, together with three other joint adventurers not party to this suit, entered into a contract with the United States for the construction of an antiaircraft firing center known as Camp Davis, on a cost plus a fixed fee basis.

Sloan was the office manager of Grannis and subject to his control.

Jones was a brother-in-law of Grannis, and became the lay figure over whom the fictitious transactions were draped in order to give them the appearance of reality.

The agreement provided that for the performance of the work the contractor should receive reimbursement for his expenditures, rental for his equipment, and a fixed fee of $270,942. The fixed fee was to constitute complete compensation for the contractor's services, including profit and overhead expenses.

The contractor was required to keep accurate records and books of account, to take all cash and trade discounts and rebates, and to account for and apply them in reduction of the cost of the work. In addition the contractor agreed at all times to use his best efforts in all acts under the contract to protect and subserve the interest of the government.

It was agreed that rental for equipment owned by the contractor should be based on actual cost for new equipment and replacement cost new for used equipment; that the contractor was to submit a fair valuation thereof at the time of its arrival at the site of the work, subject to the approval of the contracting officer of the United States; and that when the total rental paid should equal the fair valuation, plus 1 per cent. per month during the use of the equipment, no further rental should be paid and title thereto should vest in the government. The government's rental schedule for equipment owned by the contractor allowed the contractor reimbursement for depreciation, taxes, insurance, storage and interest on the investment, but excluded profit.

Rental actually paid by the contractor for equipment owned by third parties was allowed as an expenditure and was to be covered by contract between the contractor and the third parties in the form prescribed by the government, subject to the approval of the contracting officer, and was to contain provisions entitling the government to acquire title in the same manner as was provided with regard to equipment owned by the contractor; but the rental for equipment owned by third parties was to be fixed at a figure which included a profit to the owner, and third parties were not required to account to the United States for rebates received by them in the purchase of equipment. Hence the amount allowed the contractor for the rental of third party equipment exceeded the rental allowed him for his own equipment. These circumstances made it possible for the defendants to present the fictitious claims in this case.

The work under contract began December 10, 1940, and ended May 28, 1942. In December, 1940 and January, 1941, 130 automobile trucks and cars were entered on the rolls in Jones' name; on December 23, 1940 a rental agreement for this equipment was executed in the name of Jones and the joint adventurers; and on February 3, 1941, this agreement was approved by the constructing quartermaster of the government. A separate schedule for each of the cars, initialed by Jones and the government representative, was attached to the agreement. The first 80 items were on schedules which set out a description of the vehicle, the rental per day, and the value of the item. The remaining 50 items were on schedules which not only contained information in these respects, but also specified the cost new of the item. The figure for cost new and present value set out as to these 50 items were in each instance identical.

At the time of these transactions, Jones was a road superintendent for the T. A. Loving Company which had a government construction contract at Fort Bragg, North Carolina. He was not in the automobile business and did not own any automobile trucks or cars. He had neither the financial ability nor credit at the banks to enable him to purchase the equipment rented in his name to the contractor. Sloan arranged with two banks at Fayetteville, North Carolina, for loans to be made in the name of W. R. Jones and carried on the bank's books in the name of "W. R. Jones by K. Sloan". A total of $77,091.37 was borrowed in this way and Grannis guaranteed the payment of the loans. In addition he deposited $20,000 in one of the banks in the "W. R. Jones by K. Sloan" account. These sums were used in the purchase of the cars and trucks above described. Checks for the rental of the equipment were issued by the contractors and forwarded to Jones addressed to the post office box of Grannis, and came into the possession of Sloan who deposited them in the banks.

Jones had nothing to do with negotiating the loans, except that he signed the notes and chattel mortgages on the equipment which were given to the banks. Nor did he have authority to withdraw funds from the bank accounts. He signed only two checks, one for $3200 to the Collector of Internal Revenue in payment of his income tax, and one for $1,397.96 for insurance on the trucks. The records of the banks show that only Sloan was authorized to sign the checks. These records do not show that any funds from these accounts were paid to either Grannis or Sloan. The disbursements included payments to the automobile dealers for the purchased cars and payments to the banks in return for the money loaned. The disbursements also included the sum of approximately $30,000 made to an automobile dealer on account of an obligation due him for automobiles bought by a nephew of Grannis. This sum was ultimately repaid Jones by the nephew, and constitutes the greater part of the gains derived from the rental of the trucks to the contractors in the name of Jones.

The following circumstances attending the acquisition of the 130 vehicles disclose the identity of the parties actually concerned and the participation of the individual defendants. Grannis arranged for the purchase of 25 used Chevrolet trucks in December, 1940. A Chevrolet dealer at Fayetteville received an inquiry for new trucks from Grannis' office at Wilmington, and later offered him 25 used trucks. Grannis came from Wilmington to Fayetteville with two army officers, inspected the trucks, and ordered them delivered to Camp Davis. When they were delivered Sloan instructed the dealer to invoice them to Jones, and title was taken in Jones' name. Payment was made by checks signed "W. R. Jones by K. Sloan". Jones took no part whatever in the negotiations for the purchase of these trucks.

During January and February, 1941, 54 Ford trucks and automobiles were purchased by Grannis from another dealer and placed on the rental rolls at Camp Davis under the Jones rental agreement. The negotiations for the purchase were made by Grannis or Sloan. The invoices were made out in the name of Grannis and paid for out of the "W. R. Jones by K. Sloan" account. Titles for the vehicles were obtained in the name of Jones. Since Grannis was a fleet owner and purchaser of Ford automobiles, he was given a discount from the retail price. Three-quarter ton trucks were invoiced to Grannis at $575 each, but were placed on the Jones rental schedule at $792 each. Four door DeLuxe Sedans were invoiced to Grannis at $736.50 each and placed on the Jones rental schedule at $951. In addition Grannis obtained discounts on these cars from the dealer by certifying that he was the purchaser and owner of the cars, and agreeing not to resell the cars except after bona fide use and except to salaried employees. The total amount of the additional discounts thus obtained on these 54 cars and upon 17 cars purchased from another dealer, and 6 cars purchased from a third dealer, hereinbefore referred to, 77 cars in all, was $1,541.

In February, 1941, Grannis or Sloan bought over the telephone 5 Ford pick-up trucks and 1 station wagon. Grannis was given a discount from the regular retail list price. The invoices were issued in the names of Jones and showed a sales...