United States v. Greenberg

• Decision Date: 12 January 1965
• Citation: 237 F. Supp. 439
• Parties: UNITED STATES of America, Plaintiff, v. Joe GREENBERG, Defendant.
• Court: U.S. District Court — Southern District of New York

237 F. Supp. 439

UNITED STATES of America, Plaintiff, v. Joe GREENBERG, Defendant.

United States District Court S. D. New York.

January 12, 1965.

Robert M. Morgenthau, U. S. Atty. for Southern Dist. of New York, for plaintiff, James G. Greilsheimer, Sp. Asst. U. S. Atty., of counsel.

Harry Rosenblatt, New York City, for defendant.

FEINBERG, District Judge.

Plaintiff United States seeks to recover from defendant Joe Greenberg penalties provided by the False Claims Act, 31 U.S.C. §§ 231-235. This suit arises out of three construction contracts which Greenberg, as general contractor, entered into with the United States Navy, calling for construction of certain facilities on Navy property.¹ The government alleges that Greenberg, to obtain approval and payment by the United States of moneys due under these contracts, caused to be made and presented to the government thirty-four payroll reports which falsely certified that the wages set forth in them were correct and which contained on the reverse side an affidavit to the same effect. There is no serious dispute that the wages certified to in these reports were higher than the wages actually paid² and that the Navy made payments to Greenberg under all three contracts.³

The government urges that the submission of these payroll reports constituted false claims against the United States, subjecting defendant Greenberg to statutory liability under 31 U.S.C. § 231. That section provides, in part, as follows:

"Any person * * * who shall make or cause to be made, or present or cause to be 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 upon or against the Government of the United States, or any department or officer thereof, knowing such claim to be false, fictitious, or fraudulent or who, for the purpose of obtaining or aiding to obtain the payment or approval of such claim, makes, uses, or causes to be made or used, any false * * * affidavit * * * knowing the same to contain any fraudulent or fictitious statement or entry * * 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 or committing such act * *."

The government contends that defendant Greenberg violated both clauses of section 231.

As part of its direct case, the government introduced the 1958 criminal conviction of Greenberg in this court for violating 18 U.S.C. §§ 2, 1001. Defendant was convicted after a jury trial on thirty-four counts of aiding and abetting two subcontractors in making false statements to the government to the effect that they paid their workers the wage rates required by the contracts and the Davis-Bacon Act. The conviction was affirmed in United States v. Greenberg, 268 F.2d 120 (2d Cir. 1959). The false statements in question were contained in the identical payroll reports upon which this action is based: twelve payrolls certified by subcontractor Robert D'Agostino under contract NOy-85012, eighteen payrolls certified by D'Agostino under contract NOy-86279, one payroll certified by D'Agostino under contract NOy-86274, and three payrolls certified by subcontractor Arthur L. Peterson under contract NOy-86274.

In this civil action, defendant challenges the right of the government to employ the criminal conviction in any manner. In Local 167, International Brotherhood of Teamsters, etc. v. United States, 291 U.S. 293, 54 S.Ct. 396, 78 L.Ed. 804 (1934), the Supreme Court found that "the judgment after trial in the criminal conspiracy case conclusively established in favor of the United States and against those who were found guilty that within the period covered by the indictment the latter were parties to the conspiracy charged." Id. at 298, 54 S.Ct. at 399. The complaint in the civil action in that case, as here, included the allegations on which the criminal prosecution was based. The Court held that "the defendants in this suit for an injunction who had been there convicted could not require proof of what had been duly adjudged between the parties." Ibid. This principle was reaffirmed by the Supreme Court in Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 568-569, 71 S.Ct. 408, 95 L.Ed. 534 (1951), where the Court said:

"It is well established that a prior criminal conviction may work an estoppel in favor of the Government in a subsequent civil proceeding. * * * In the case of a criminal conviction based on a jury verdict of guilty, issues which were essential to the verdict must be regarded as having been determined by the judgment."

Thus, plaintiff here may rely upon the prior judgment of conviction of defendant after trial to establish the issues relevant to this case which were necessarily determined by the conviction. The conviction necessarily decided that Greenberg aided and abetted in the preparation of the thirty-four payroll reports referred to above, which falsely represented that certain wages were being paid to employees when, in fact, actual wages paid were lower. Therefore, I find these facts to be established. Even if the conviction could not be so used, there is sufficient evidence in the record to find as I do that Greenberg helped in the preparation and made or caused to be made these thirty-four reports⁴ and that the reports were false in the respects stated above.

In addition to contesting use of the prior conviction in this proceeding, defendant claims that it is entitled to judgment nonetheless, principally because the government has not proved that each payroll report was "a claim upon or against the Government" and that Greenberg caused such reports to be presented to the government. Defendant has other claims, as well, which will be dealt with later.

Greenberg, as general contractor, was not paid for any work until he submitted a voucher for payment. It was stipulated that progress payments are not made on vouchers presented by the general contractor relating to the amount of work completed until payroll reports are received.⁵ Defendant argues that since the voucher, and not the payroll reports, contains the request for payment, then, assuming arguendo the falsity and submission of the payroll reports, the reports do not constitute claims against the government. In short, defendant urges that unless the false statement is contained in the voucher request for payment, there is no false claim within the meaning of the Act.

Not all false statements made to the federal government are claims within the meaning of the False Claims Act. E.g., United States v. Howell, 318 F.2d 162 (9th Cir. 1963). In United States v. McNinch, 356 U.S. 595, 78 S.Ct. 950, 2 L.Ed.2d 1001 (1958), the Supreme Court held that the mere submission of a false application to a credit institution which, in turn, procured F.H.A. insurance of the loan did not constitute a false claim against the government. The Court stated: "The conception of a claim against the government normally connotes a demand for money or for some transfer of public property." Id. at 599, 78 S.Ct. at 952.⁶ The Court expressly left open the question whether the result would be different if there were a default on the loan and a demand upon the government as guarantor. Id. at 599, n. 6, 78 S.Ct. 950. Shortly thereafter, this question came before the Court of Appeals for the Third Circuit in United States v. Veneziale, 268 F.2d 504 (3d Cir. 1959), where the government had been required to pay under its guaranty induced by a fraudulent application for a bank loan. The application was fraudulent because it contained the false statement that the loan applicants wanted the money for home improvements when in fact they intended to use it to buy real property from defendant Veneziale. The court held that there was a false claim within the meaning of the False Claims Act and that defendant Veneziale was liable thereunder. See also Fleming v. United States, 336 F.2d 475 (10th Cir. 1964), petition for cert. filed, 33 U.S.L.WEEK 3209 (U.S. Dec. 8, 1964) (No. 728); United States v. Cherokee Implement Co., 216 F.Supp. 374 (N.D.Iowa 1963).

The important facts in this case are similar to those in United States v. Veneziale, supra. In Veneziale, there was a false statement (a loan application to a bank) which by itself would not constitute a false claim against the government. This fraudulent application became one of the essential documents which induced the Federal Housing Administration to guaranty payment of the bank loan eventually causing the government to pay money out of the Treasury. In Veneziale, the court said:

"Here it is clear that the fraudulent statement in the loan application * * * was an essential inducement to the Federal Housing Administration guaranty upon which the government has now had to pay. Thus the wrong of the defendant was an important, even an essential factor in subjecting the government to an enforceable demand for money."

United States v. Veneziale, supra, 268 F.2d at 505; cf. United States ex rel. Marcus v. Hess, 317 U.S. 537, 542-544, 63 S.Ct. 379, 87 L.Ed. 443 (1943). In this case, the facts leading to a determination that the false payroll reports are claims are even stronger. Defendant knew that the payroll reports were an essential element in subjecting the government to a demand for money and defendant himself filed the vouchers upon which the payments were made to him.⁷ For other holdings that the submission of false payrolls is within the purview of the False Claims Act, see United States v. Annicciarico, 238 F.Supp. 339 (D.N.J.1963); United States v. Hochstein, Civil No. 1273 (S.D.Fla.1963); United States v. Hochstein, Civil No. 1236 (S.D.Fla.1962); United States v. Sanders, 194 F.Supp. 955 (E.D.Ark. 1961). Cf. United States v. Ueber, 299 F.2d 310 (6th Cir. 1962).

That there was submission to the Navy of false payroll reports is not seriously contested, but...