United States v. Hess

• Decision Date: 12 August 1941
• Docket Number: No. 748 Civil.,748 Civil.
• Citation: 41 F. Supp. 197
• Parties: UNITED STATES ex rel. MARCUS et al. v. HESS et al.
• Court: U.S. District Court — Western District of Pennsylvania

41 F. Supp. 197

UNITED STATES ex rel. MARCUS et al. v. HESS et al.

No. 748 Civil.

District Court, W. D. Pennsylvania.

August 12, 1941.

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Charles Margiotti, Joseph Rossi, and Joseph Reich, all of Pittsburgh, Pa., for plaintiff.

Eugene Strassburger, Wm. Eckert, John Nicklas, Jr., and J. V. Burke, Jr., all of Pittsburgh, Pa., for defendants.

SCHOONMAKER, District Judge.

This is an informer's action based on Section 5438 and Sections 3490 to 3494, inclusive, of Revised Statutes, 18 U.S.C.A. § 80, 31 U.S.C.A. §§ 231-235, in relation to false claims against the United States. The case, on trial from December 2, 1940, to March 22, 1941, resulted in a verdict in favor of plaintiff and against all the defendants — except the defendant Carmack — in the sum of $315,100.91. All the defendants, except Carmack, have moved for judgment in their favor, non obstante veredicto, or, in lieu thereof, for a new trial.

The suit charges the Electrical Contractors Association of Pittsburgh, Inc., its officers, general manager, and members, with a conspiracy to defraud the United States, a department or officer thereof, in the matter of electrical works on PWA projects, by obtaining or aiding to obtain the payment or allowance of false or fraudulent claims for such electrical work against the United States. That is made an offense by Section 5438, R.S. Section 3490, R.S., provides that any person who shall do or commit any of the acts prohibited by the provisions of Section 5438, 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 doing or committing such acts, together with the costs of suit. This section further provides that such forfeiture and damages shall be sued for in the same suit.

Section 3491 of Revised Statutes gives jurisdiction to United States District Courts to hear and determine such suits; and provides that they may be brought and carried on by any person, as well for himself as for the United States.

An informer's action under Sections 3490-3494 of the Revised Statutes must rest on violations of Section 5438 as that section read at the time of the enactment of Section 3490. That seems to be conceded by both parties to this suit; and it has been so ruled by this court, and others. See Olson v. Mellon, D.C., 4 F. Supp. 947, affirmed, United States ex rel. Knight v. Mellon, 3 Cir., 71 F.2d 1021; United States ex rel. Kessler v. Mercur Corporation, D.C., 13 F.Supp. 742, affirmed, 2 Cir., 83 F.2d 178; United States ex rel. v. Salant & Salant, Inc., D.C., 41 F.Supp. 196, decision by District Judge Patterson, July 1, 1938.

Section 5438 of the Revised Statutes, as it stood when it was incorporated in Section 3490, R.S., reads as follows: "Every person who makes or causes to be made, or presents, or causes 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 bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or fictitious statement or entry, or who enters into any agreement, combination, or conspiracy to defraud the Government of the United States, or any department or officer thereof, by obtaining or aiding to obtain the payment or allowance of any false or fraudulent claim, or who, having charge, possession, custody, or control of any money or other public property used or to be used in the military or naval service, who, with intent to defraud the United States, or wilfully to conceal such money or other property, delivers, or causes to be delivered, to any other person having authority to receive the same, any amount of such money or other property less than that for which he received a certificate or took a receipt, and every person authorized to make or deliver any certificate, voucher, receipt, or other paper certifying the receipt of arms, ammunition, provisions, clothing, or other property so used or to be used, who makes or delivers the same to any other person without a full knowledge of the truth of the facts stated therein, and with intent to defraud the United States, and every person who knowingly purchases or receives in pledge for any obligation or indebtedness from any soldier, officer, sailor, or other person called into or employed in the military or naval service, any arms, equipments, ammunition, clothes, military stores, or other public property, such soldier, sailor, officer, or other person not having the lawful right to pledge or sell the same, every person so offending in any of the matters set forth in this section shall be imprisoned at hard labor for not less than one nor more than five years, or fined not less than one thousand nor more than five thousand dollars."

The plaintiff contends the facts of this case bring it within the purview of these statutes. The defendants contend it does not.

The complaint charges, and the evidence in this case establishes, that the United States, in pursuance of the Emergency-Relief-and-Construction Acts of Congress, made certain grants of Federal funds to be expended in public-work projects undertaken by local municipalities and school districts in Allegheny County, Pennsylvania, under the supervision of the Federal Public Works Administrator, who is an official of the United States Government. See 40 U.S.C.A. Section 401(a). An application was made in each case to the Federal Government for a grant of Federal money to be used in the construction of these projects. Plans and specifications for each project were prepared by the local municipality or school district, submitted to the Public Works Administrator of the Federal Government for approval, and were approved by him. Bids were asked for, and received, for doing the electrical work thereon. Such bids were submitted to the Administrator for approval, and were approved by him. The money the Government agreed to contribute to these projects was paid out in the course of the carrying out of these projects only on sworn estimates submitted by the contractor to the Administrator, and approved by him on Federal Form (I 23). The Federal funds allotted to each project were placed in a bank approved by the Administrator, which bank account contained also the funds of the local authority. This special fund was from time to time checked by a representative of the Administrator; and no payments could be made therefrom to the contractor doing the work, except with the approval of the Administrator, which approval was noted on Form I 23 above mentioned.

There was a conspiracy among the defendants, whereby they would agree among themselves as to which defendant was to submit the low bid for a particular project, and which of the other defendants would submit other and higher bids for the same project, thereby intending to control, and actually controlling the low bid to be submitted, and preventing any competitors bidding on any of the projects involved in this suit; thus compelling the Government to contribute and pay for doing the electrical work on the projects more than the Government would have been required to pay, had there been open and free competition in the open market for doing the electrical work.

In this connection it will be noted that the defendant-contractors, in submitting their bids which were approved by the PWA Administrator, submitted signed statements substantially as follows: "The undersigned hereby certifies that this Proposal is genuine and not sham or collusive, or made in the interest or in behalf of any person, firm or corporation not herein named, and that the undersigned has not, directly or indirectly, induced or solicited any other bidder to submit a sham bid, or any other person, firm or corporation to refrain from bidding, and that the undersigned has not in any manner sought by collusion to secure for himself an advantage over any other bidder." And further it will be noted that payments were made out of the joint construction account in banks approved by the Administrator and containing funds furnished by the United States and the local municipality or district on Forms I 23, of estimates furnished by contractor-defendants and approved by the Administrator. Therefore, in each transaction there was not an absolute gift of money to the local municipality or district, but a grant of money by the Government for payment to the contractor for a portion of the work, which was disbursed only on vouchers submitted by the contractor to the Administrator, and approved by him.

In our opinion, the facts of the case bring it squarely within the provisions of Section 5438, Revised Statutes, which is applicable to "Every person who makes or causes to be made, or presents, or causes to be presented, for payment or approval, to or by any person 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, * * *." It requires no strained or forced construction of this Act to bring the facts of this case within the purview of Section 5438, Revised Statutes. A fair construction of this statute makes it apply to the facts of this case, because the claim on which the Government money was paid to defendant contractors was made directly to an officer of the Government; and, upon the allowance of this claim, the Government contribution...