United States v. Strange Bros. Hide Co.

• Decision Date: 05 August 1954
• Docket Number: Civ. No. 778.
• Parties: UNITED STATES v. STRANGE BROS. HIDE CO.
• Court: U.S. District Court — Northern District of Iowa

123 F. Supp. 177

UNITED STATES v. STRANGE BROS. HIDE CO.

Civ. No. 778.

United States District Court, N. D. Iowa, W. D.

August 5, 1954.

Francis E. Van Alstine, U. S. Dist. Atty., Sioux City, Iowa, Richard W. Beebe, Asst. U. S. Dist. Atty., Sioux City, Iowa, and Philip C. Lovrien, Asst. U. S. Dist. Atty., Sioux City, Iowa, for plaintiff.

Robert B. Pike, Sioux City, Iowa, for defendant.

GRAVEN, District Judge.

This is an action brought by the United States under that portion of the so-called False Claims Act contained in Sections 231, 232, 233 and 235 of 31 U.S. C.A. The pertinent portion of Section 231 provides 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 * * 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, together with the costs of suit; and such forfeiture and damages shall be sued for in the same suit."

The United States seeks to recover double damages and the statutory sum of $2,000 on each of 40 alleged false claims made by the defendant, an Iowa corporation, against the Commodity Credit Corporation. The alleged false claims are alleged to have been made by the defendant between 1945 and 1949 as "requests for payment" of sums in excess of amounts actually due defendant by virtue of its services under "Wool Handler's Agreements" entered into by the defendant and the Commodity Credit Corporation. These agreements were entered into on March 6, 1945, December 27, 1945, April 12, 1946, August 22, 1947, and January 8, 1949. The United States alleges that the defendant made and presented the false claims knowing them to be "false, fictitious, or fraudulent".

The defendant, by a motion to strike, has raised the defense of the statute of limitations as to 22 of the claims. Those 22 claims are as follows:

                                                          Date Presented for Payment
                                                                   1945
                           1945 Program Request No.  1     (Day and month unknown)
                             "     "       "     "   2     July 10, 1945
                             "     "       "     "   2a    December 14, 1945
                             "     "       "     "   3     September 1, 1945
                             "     "       "     "   4     July 4, 1945
                             "     "       "     "   5     September 5, 1945
                             "     "       "     "   6     November 13, 1945
                             "     "       "     "   7     December 1, 1945
                             "     "       "     "   9     December 7, 1945
                             "     "       "     "  10     January 25, 1946
                           1946 Program Request No.  1     (Date not known)
                             "     "       "     "   2     August 9, 1946
                             "     "       "     "   3     September 13, 1946
                             "     "       "     "   4     (Date not known)
                             "     "       "     "   5     October 25, 1946
                             "     "       "     "   6     October 29, 1946
                             "     "       "     "   7     November 1, 1946
                             "     "       "     "   8     November 12, 1946
                             "     "       "     "   9     December 4, 1946
                             "     "       "     "  10     March 16, 1947
                             "     "       "     "  12     September 4, 1947
                             "     "       "     "  13     November 27, 1946
                

The complaint in this action was filed on October 5, 1953. It is the claim of the defendant that recovery on the 22 claims is barred by Section 235 of 31 U. S.C.A. which provides as follows:

"Every such suit shall be commenced within six years from the commission of the act, and not afterward."

The United States claims that the running of that limitation statute was suspended by the Wartime Suspension of Limitations Act, 18 U.S.C.A. § 3287. That Section provides as follows:

"When the United States is at war the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or (2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or (3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress."

For the purposes of the motion, the truth of the allegations of the complaint that the claims in question were false claims and that the defendant made and presented them for payment knowing them to be "false, fictitious, or fraudulent" has to be assumed.

The question presented by the defendant's motion is whether the Wartime Suspension of Limitations Act is applicable to the six-year limitation contained in Section 235 of the so-called False Claims Act. The so-called False Claims Act was first enacted in 1863. 12 Stat. 696. It made certain acts to defraud the government punishable by fine and imprisonment. It provided that any person who committed any of the prohibited acts should forfeit and pay to the United States the sum of $2,000 and, in addition, double the amount of the damages. It also provided a qui tam action by an informer in which half of the recovery would go to the informer. The prohibited acts included the making of a claim against the United States knowing such claim "to be false, fictitious, or fraudulent". The different portions of the Act were in later statutory revisions distributed through the statutes. See United States ex rel. Marcus v. Hess, 1942, 317 U.S. 537, 539, 540, 63 S.Ct. 379, 87 L.Ed. 443. The portion imposing criminal penalties for knowingly making a "false, fictitious, or fraudulent" claim is now Section 287 of 18 U.S.C.A. The portion providing for the statutory recovery sum of $2,000 and double damages is now Section 231 of 31 U.S.C.A. Because of their common origin and background, both Sections are referred to in the decisions as the False Claims Act. Prosecutions under Section 287 come within the scope of the general federal three-year limitations statute contained in Section 3282 of 18 U.S. C.A. The six-year limitation statute contained in Section 235 of 31 U.S.C.A., which the defendant asserts bars this action as to the claims in question, has heretofore been set out.

The opportunities for abuse of the provisions in the False Claims Act permitting qui tam suits which are referred to in United States ex rel. Marcus v. Hess, supra, led to revision of the Act in 1943, drastically limiting the field for informers' suits. In United States v. Borin, 5 Cir., 1954, 209 F.2d 145, in an action by the Government under the False Claims Act growing out of alleged overpayments on illegal claims under the wartime meat subsidy program, it was held that the six-year limitation contained in Section 235 applied to suits by the Government as well as to those brought by an informer. That Court also held that the six years commenced to run at the time the false claim was made, not at the later time when the fraud was discovered. See also United States ex rel. Nitkey v. Dawes, 7 Cir., 1945, 151 F.2d 639, certiorari denied 327 U.S. 788, 66 S.Ct. 808, 90 L.Ed. 1015. The holding of the Borin case was that the Government was barred by Section 235 from its remedies under Section 231 of the False Claims Act but not precluded from common law remedies for fraud. The alleged false claims in that case were all made between 1943 and 1946 during wartime, but no question seems to have been raised concerning the possible applicability of the Wartime Suspension of Limitations Act, 18 U.S.C.A. § 3287.

The Wartime Suspension of Limitations Act, 18 U.S.C.A. § 3287, was originally enacted as temporary legislation on August 24, 1942, to suspend the running of statutes of limitation on certain wartime frauds until June 30, 1945, or such earlier date as the Congress or the President might designate. The measure was similar to the 1921-1927 extension to six years of the general three-year statute of limitations as to any "offenses involving the defrauding or attempts to defraud the United States", 42 Stat. 220, prompted by belated discovery of frauds committed during World War I. See Bridges v. United States, 1952, 346 U.S. 209, 217, 218, 73 S.Ct. 1055, 97 L.Ed. 1557. The World War I extension of the statute of limitations reached only "* * * offenses * * * now indictable under any existing statutes * * *." 42 Stat. 220. (Emphasis supplied.) Bridges v. United States, supra, note 16, at page 217 of 346 U.S., at page 1060 of 73 S.Ct.

The World War II Act was amended in 1944, 58 Stat. 667, to provide for its expiration three years after the termination of hostilities of World War II as determined by the President or the Congress. See United States v. Grainger, 1953, 346 U.S. 235, at page 245, 73 S.Ct. 1069, at page 1075, 97 L. Ed. 1575. In October, 1944, 58 Stat. 781, a clause was added more specifically covering the handling of property under the Surplus Property Act of 1944, 50 U. S.C.A.Appendix, § 1611 et seq. (see United States v. Grainger, supra, 346 U. S. at page 246, 73 S.Ct. at page 1075) and in 1948 the Act took its present form as permanent legislation applicable "When the United States is at war * * *." By Proclamation of the...