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United States v. Hess

March 23, 1942; As Amended March 26, 1942.


Appeal from the District Court of the United States for the Western District of Pennsylvania; Frederic P. Schoonmaker, Judge.

Author: Clark

Before CLARK, JONES, and GOODRICH, Circuit Judges.

CLARK, Circuit Judge.

We share appellees' righteous indignation at the conduct of the appellants. In fact their own counsel made no attempt in his argument to us to justify that conduct. We cannot, however, share appellees' views of the applicable statute. The facts are not in dispute and may be simply stated. Federal funds were granted under the Public Works Administration to local municipalities and school districts in Allegheny County, Pennsylvania to be expended in publicworks projects. The appellants, the officers and members of the Electrical Contractors Association of Pittsburgh, conspired to rig the bidding on these projects. The pattern of the collusion was the informal and private averaging of the prospective bid which might have been submitted by each appellant. An appellant chosen by the others would then submit a bid for the averaged amount and the others all submitted higher estimates. The government was thereby defrauded in that it was compelled to contribute more for the electric work on the projects than it would have been required to pay had there been free competition in the open market. A verdict against the appellants was had in the sum of $315,100.91, which consisted of $203,100.91 damages (being double the actual damages found by the jury) and $112,000 penalties ($2,000 penalty for each violation of the statute). The defendants' motions for a new trial and judgment non obstante veredicto were refused. These motions were on various grounds. The learned District Judge discussed principally two: the scope of the pertinent statute and the question of double jeopardy. As we think he erred as to the first, it is unnecessary to pass on the others. We may say that we have already given some consideration to the question of civil sanctions and double jeopardy.*fn1

The plaintiff-appellee is an informer. In other words he is the "any person" referred to in the statute.*fn2 The fact that he is manifestly any person does not completely solve his difficulty. He must also establish the relevancy of the statute. In terms it reads: "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 ." Revised Statutes, ยง 5438.

In the companion section of the Revised Statutes already alluded to,*fn3 some of the present functions of the Department of Justice were delegated to the people at large. Private persons were empowered to prosecute frauds against the United States through informer actions.*fn4 Thus any person may sue another who commits "any of the acts prohibited by any of the provisions of section fifty-four hundred and thirty-eight."*fn5 Section 5438 was repealed in 1909.*fn6 Since the amendments to its successor*fn7 were not incorporated into the provision creating liability in informer actions, these amendments may not be invoked in qui tam suits.*fn8

Qui tam actions have always been regarded with disfavor:

"It is wrong for a free country to allow an informer to seek redress for his own pecuniary advantage in respect of a public wrong in which he has no direct personal interest or concern.A wrong to the State should surely be atoned for by a penalty payable to the State alone. * * * The origin of the practice whereby private persons can exploit the wrongs of others goes back into English history. Penal actions of this sort arose generally because men doubted whether the eyes of the primitive State were sufficiently watchful and its arm sufficiently long to discover and punish offenders. In a few cases of later date the legislature may have distrusted the zeal of the executive. * * *

"The golden age of the informer was the Tudor period. In Sir William Holdsworth's History of English Law*fn9 reference is made to the long line of sixteenth-century statutes in which the common informer was given the penalties recovered by his energy, and collusive proceedings by friends of culprits were treated as 'covinous' and therefore no bar against a genuine informer's suit. The system gradually provoked resentment among the many who were 'unjustlie vexed and disquieted by common informers' and this class found a powerful champion in the great Sir Edward Coke. In his Third Institute of the Laws of England he describes informers as 'turbidum hominum genus', and as ranking among the 'viperous vermin who endeavored to have eaten out the sides of the church and common-wealth'. By their diligence in setting penal actions on foot they impoverish 'chiefly the poorer sort for malice and private ends'. Coke's influence caused a marked decline in the statutory recognition and encouragement of common informers. Probably the Crown recognized that it paid better to take the penalty for itself.Coke expressed this view in more dignified words: 'The King cannot commit the sword of his justice or the oil of his mercy concerning any penal statute to any subject.'" Hurst, The Common Informer, 147 Contemporary Review 189, 190.

That dislike has been implemented in court decisions for informer statutes have been construed with utmost strictness. Informers wishing to recover under them must adhere to the exact language of the statute.*fn10

The statutory language here important authorizes recovery only where the defendants presented a "claim upon or against the Government of the United States, or any department or officer thereof."*fn11 Plaintiff would have us believe that the statutory words "presents * * * any claim upon or against" are synonymous with "commits a fraud upon". This argument is refuted both by legislative history and by grammar. The Senator in charge of the bill said in introducing it: "This bill has been prepared at the urgent solicitation of the officers who are connected with the administration of the War Department and the Treasury Department. The country, as we know has been full of complaints respecting the frauds and corruptions practiced in obtaining pay from the Government during the present war; and it is said, and earnestly urged upon our attention, that further legislation is pressingly necessary to prevent this great evil. * * * " The Congressional Globe, 37th Cong., 3d Sess., Dec. 1, 1862 - March 9, 1863, at p. 952.

That the Honorable Senator from Michigan was guilty of no overstatement is apparent from the histories of the times: "The government was cheated without conscience in its purchases of military supplies. A committee of the War Department in 1862 exposed frauds of $17,000,000 in contracts amounting to $50,000,000.*fn12 The Michigan legislature formally charged that 'traitors in the disguise of patriots have plundered our treasury', and James Russell Lowell, agreeing, asserted, 'Men have striven to make the blood of our martyrs the seed of wealth.' The term, 'shoddy aristocracy', came to signify those who reaped fortunes out of government contracts, particularly from supplying the soldiers with inferior clothing." Hockett, Political and Social Growth of the American People 1492-1865, 759.*fn13

"Necessity, haste and carelessness can explain the acceptance of a great many of these contracts and a very great deal of inferior goods. But a large amount of blame must go to a horde of government-paid officials who, either through criminal negligence or criminal collusion, permitted or encouraged this robbing of the government treasury and cruelty to the American soldier * * * . Accused inspectors passed the blame on to those letting the contracts, the latter blamed the contractors, and the contractors in turn contended that they furnished goods according to specification. * * * Such wide publicity was gained by this complicity of public officials in the early contracting business that one of the very first acts of the extra session of Congress in 1861 was to institute an investigation of the existing practices and conditions. * * * The committee discovered an astounding amount of illegal and fraudulent activities, in some instances calling into question the honor or good judgment of men high in political and military councils of the country." 1 Shannon, Organization and Administration of the Union Army, 56-58.*fn14

To the word "claim" has been attributed several legal meanings. It is used as an equivalent for "cause of action",*fn15 "debt",*fn16 "demand",*fn17 "existing right"*fn18 and "unadjudicated obligation".*fn19 Through them all however runs the sense of something owing from one party to another. The statement of the facts upon which that obligation is asserted to depend may of course be false, but if true would spell out something like an action of assumpsit or debt. It is something quite different to rely on facts which never could give rise to a promise, express or implied, to pay however amply they demonstrate a cheat. The authorities cited by the ...

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