Wagner Iron Works v. United States

• Decision Date: 13 July 1959
• Docket Number: No. 48-53.,48-53.
• Citation: 174 F. Supp. 956,146 Ct. Cl. 334
• Parties: WAGNER IRON WORKS v. UNITED STATES.
• Court: U.S. Claims Court

174 F. Supp. 956

146 Ct. Cl. 334

WAGNER IRON WORKS v. UNITED STATES.

No. 48-53.

United States Court of Claims.

July 13, 1959.

John Lipscomb, Washington, D. C., for plaintiff. Floyd F. Toomey, Thomas E. Jenks, and Alfred M. Osgood, Washington, D. C., were on the briefs.

John F. Wolf, Washington, D. C., with whom was Asst. Atty. Gen. George Cochran Doub, for defendant. Francis J. Steiner, Jr., Washington, D. C., was on the brief.

WHITAKER, Judge.

Plaintiff sues to recover its costs and damage which resulted by reason of the termination, for the convenience of the Government, of two contracts, one an experimental and the other a production contract, for the manufacture of compulsion systems for the Terrier Missile. The Government defends on the ground, among others, that the plaintiff's termination claim was fraudulent, and, therefore, that it is forfeited to the United States under section 2514 of Title 28 U.S.C.¹ In addition, the Government counterclaims to recover double damages and a $2,000 penalty under the False Claims Act, 31 U.S.C.A. § 231. We consider this question first, since, if it is answered in the affirmative, it will be unnecessary to consider the other questions propounded.

From the record, it appears that during the period when the two contracts here involved were being performed the plaintiff's president and majority stockholder, Mr. A. A. Wagner, and the vice president and owner of substantially all of the remaining stock, Mr. A. J. Werner, caused the corporation to pay certain of their personal expenses, which affected the termination claims. Mr. Wagner employed the Black-Top Specialty Company to construct a tennis court and paved driveway at his house in the country. He not only caused the plaintiff company to pay for this work, but prepared a false invoice, so that, upon an examination of the company books, it would appear that the work had been done for the company. Mr. Wagner also had the company pay for a number of other personal expenses. These included such items as the funeral expenses of his father-in-law, fuel oil and gas delivered to his home, etc.

Werner also caused the company to pay for services and material for his own personal benefit. In one instance, he had a plumbing company perform some work on his mother's home, which was paid for by the plaintiff company. He, too, had the plaintiff provide and pay for fuel oil and gas at his home for his personal use. Also, on another occasion the company paid for a heating plant to provide heat for his swimming pool.

The total of the personal expenses of Wagner and Werner paid for out of corporate funds aggregates between seventy-five and one hundred thousand dollars, the majority of which were for Wagner's personal expenses.

All of the above expenses were charged to various company operating accounts, and were included in the company's total indirect operating and administrative expenses. These expenses were allocated in part to the Government contracts, and in part to other contracts, and were reflected in the termination claims. Plaintiff prepared statements using seven percent of its total indirect expenses as the amount allocable to the Navy contracts. Thus, $5,535.53, or seven percent of $79,009.72, of personal expenditures were included in these cost schedules filed in support of the termination claims. These were submitted to the Navy Department in April 1954 for payment, and when that was denied, they were filed in this court on June 29, 1954, pursuant to Rule 28(b) (2), 28 U.S.C., as the basis for plaintiff's claim against the United States.

Shortly after they had been filed in this court, the plaintiff was notified that the Federal Bureau of Investigation would audit plaintiff's books pursuant to Rule 28(b)(3) of this court. On learning of this, Wagner, in early October 1954, presented a list of invoices to Werner, and confessed that they had been paid for by the company, although they were for his own personal use. In consequence, at a meeting of the Board of Directors on November 22, 1954 Wagner was forced to resign as president, and Werner was elected to that position. Immediately thereafter, Werner repaid the company some or all of the amounts paid for his personal expenses, and he informed the Federal Bureau of Investigation that the schedules filed were incorrect and that revised cost schedules would be filed, and they have since been filed in this court, from which all ascertainable personal items have been deleted.

That Wagner defrauded...