Petition — Maher v. United States

IN THE

Supreme Court of the United States

OcToBER TERM, 1978

—_—

No 78-675

a

AtvIn MicHakeL MaAner, Petitioner,

Vv.

Unirep States or America, Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Pxiato CACHERIS

LarrY S. GONDELMAN

Hunpuey & Cacuerts, P.C.

1709 New York Avenue, N.W.

Suite 205

Washington, D.C. 20006

Attorneys for Petitioner

Alvin Michael Maher

Press or Byron S. ADAMs PRINTING, INC., WASHINGTON, D. C.

en

TABLE OF CONTENTS

Page

I I to To a eno Oy i

NII gs me oe ik 1

a 2

QueEsTIONS PRESENTED ..... 2.0... cece cece ccc cccccee 2

CONSTITUTIONAL AND Statutory Provisions INVOLVED . ’ 2

ROSES Ee ee er 2

REASONS FOR GRANTING THE WRIT ................... 3

SR La a 10

Apprenpix A—-Opinion and Judgment of the United

States Court of Appeals for the Fourth Circuit .. 1a

Aprenpix B—Order of United States Court of Appeals

for the Fourth Cireuit Denying Petition for Re-

I eee ee ad oo os4 oes da euch de kee ons lia

Appenpix C—Constitutional and Statutory Provisions

a Ei t's OAs G G-ks 44 ab's 6 44.640 6k bi w l6a

AUTHORITIES CITED

Casks:

Arlington Trust Company v. Hawkeye Security Insur-

ance Company, 301 F.Supp. 854 (F.D.Va. 1969) .. 8

Honeywell, Ine. v. Metz Apparatewerke, 509 F.2d 1137

NE he 6

Morissette v. United States, 342 U.S. 246 1. | ee 7,8

United States v. Aerodex, 469 F.2d 1003 (5th Cir.

I 4

United States v. Bornstein, 423 U.S. 303 (1976) ...4,6,8,9

i 6

United States v. Ekelman & Associates. 532 F.9d 545

ETRE ee a 4,9

United States v. Goldberg, 158 F.Supp. 544 (E.D. Pa.

eet Levu k's 46x bbe bs 0adss ckbedk +

ii Authorities Cited—Continued

Page

United States v. Hangar One, Inc., 406 F.Supp. 60

(05 Sl .: 5 rere rs reer ee

United States v. Lazy F.C. Ranch, 324 F.Supp. 698

ii "O'S. :: t errr rer cere eee

United States v. Mead, 426 F.2d 118 (9th Cir. 1970) .. 4,8

United States v. National Wholesalers, 236 F.2d 944

2) a) Pe reer ye erer rere ere 4

United States v. Park Motors, 107 F.Supp. 168 (1.D.

:, | i eee Pee eee TTT Te cree ee ee 4,8

United States v. Priola, 272 F.2d 589 (Sth Cir. 1959) .. 4

United States v. Sawin, 243 F.Supp. 744 (S.D. Towa

ere eye Es Tr errr ere +

United States v. Schmidt, 204 F.Supp. 540 (E.D. Wis.

UN Oe aes es aa aes ee 4

United States v. Snider, 502 F.2d 645 (4th Cir. 1974). 9

United States v. Ueber, 299 F.2d 310 (6th Cir. 1962) .. 4

United States v. Winchester, 407 F.Supp. 261 (D.Del. :

ee Ie, Samet ey Pee pre ay Toes eee ee 7

Woodbury v. United States, 232 F.Supp. 49 (D.Ore.

SOG) nn acagevkeusessieiescerecdessahesenawae 4

S'rATUTES!

PEC, ME cas wan 005-00659 050005000505 Ee RED passim

et oe | er rrr rer re ores 4,9

TS TUBE, SITE) onc cvcncececsnstavrancdseseises 2

, Bit 1k Perper are rye rr errs 3

Bok oe. rrr ere rT ree ctr ee Te passim

MISCELLANEOUS!

Cong. Globe, 37th Cong., 3d Sess., 952 (remarks of

Memeter FIGWORE) 6 icccccesssccccccavecseesssen 8

IN THE

Supreme Court of the Rnited States

OcToBER TERM, 1978

No.

Arvin MicHaEL Mauer, Petitioner,

v.

Unirep States or AMERICA, Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Petitioner, Alvin Michael Maher, petitions this Court

for a writ of certiorari to review the Judgment and

Decision of the United States Court of Appeals for the

Fourth Circuit affirming the judgment of conviction

against petitioner.

OPINIONS BELOW

The Opinion of the Court of Appeals (Appendix A,

infra, p. la) is reported at —— F.2d —— (1978).

There was no Opinion of the District Court.

2

JURISDICTION

The Judgment of the Court of Appeals was entered

on August 23, 1978. (Appendix A, infra, p. la.) Peti-

tioner’s petition for a rehearing was denied on Septem-

ber 22, 1978. (Appendix B, infra, p. 15a). On October

4. 1978. the Court of Appeals stayed the issuance of

the mandate pending application to the Supreme

Court for a writ of certiorari. The jurisdiction of

the Court is invoked pursuant to 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED

1. Whether a specific intent to defraud is an essential

element of a criminal prosecution under the Criminal

False Claims Act (18 U.S.C. § 287) where under the

Civil False Claims Act (31 U.S.C. § 231) specifie in-

tent to defraud is a required element and where both

statutes have a common statutory genealogy and pro-

seribe false. fictitious and fraudulent claims in identi-

eal terms.

9 Whether the Criminal False Claims Act (13 U.S.C.

§ 287) requires that the claim submitted be material

and. if so, whether materiality incorporates the elc-

ment of an intent to defraud into 18 U.S.C. § 287.

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The provisions of the Fifth Amendment to the

United States Constitution, 18 U.S.C. § 287, 31 U.S.C.

§ 231, and the Revised Statutes §§ 3490, 5438 are set

forth in Appendix C, infra, p. 16a.

3

STATEMENT

This case presents for review the decision of the

Court of Appeals for the Fourth Circuit that a specific

intent to defraud is not an element of the crime defined

in 18 U.S.C. § 287. This is an issue of first impression,

previously undecided by any court.

Petitioner Alvin Michael Maher was charged with

violating the Criminal False Claims Act, 18 U.S.C.

§ 287 by an indictment which alleged that he willfully

eansed the presentation of false and fictitious claims to

the Department of the Army. The defense asserivd an

absence of any intent to defraud in the submission of

these claims to the government. Petitioner requested

the trial court to instruct the jury that, in order to find

the defendant guilty, it must find that he had an intent

to defraud. A proffered instruction was refused.

After two hours of deliberation, the jury sent a mes-

sage to the Court inquiring whether ‘‘criminal intent

to defraud was a primary consideration for guilt or

innocence.’’ The Court responded, over the objection of

petitioner’s counsel, that ‘‘[¢]riminal intent to defraud

may or may not be a primary consideration for guilt or

innocence ... Fraud is only one of the three things he

may have had a consciousness of what he was doing

and what was going on. It could be false, as that term

is defined for you, and fraudulent, as that term was

defined for you, or fictitious.’’ The jury then returned

with a verdict convicting the petitioner on the eleven

counts which were submitted to it.

On appeal pursuant to 28 U.S.C. § 1291, the Court

of Appeals for the Fourth Circuit held that an intent

to defraud is not an essential element for conviction

under 18 U.S.C. § 287.

4

REASONS FOR GRANTING THE WRIT

1. The import of the decision by the Court of Ap-

peals for the Fourth Circuit is that it is easier for the

government to deprive a man of his liberty than it is to

deprive him of his money. This assessment is man-

dated by the Fourth Circuit’s refusal to recognize that

the standard required for a civil monetary recovery for

false claims under 31 U.S.C. § 231 is a sine qua non

for prosecution under 18 U.S.C. § 287. The majority

rule is that an intent to defraud is a requisite element

in a civil suit by the government under 31 U.S.C. § 231."

Cases construing the Civil False Claims Act are rele-

vant to the interpretation of the Criminal False Claims

Act for two reasons. First, the statutes utilize, in rele-

vant part, identical language, i.e. ‘‘make ... or present

-any claim... knowing such claim to be false, fic-

titious, or fraudulent ...’’. Secondly, these two statutes

1 United States v. Ekelman & Associates, 532 F.2d 545 (6th Cir.

1976); United States v. Aerodex, Inc., 469 F.2d 1003, 207 (5th

Cir. 1972): United States v. Mead, 426 F.2d 118, 122 (9th Cir.

1970): United States v. Ueber, 299 F.2d 310, 314-315 (6th Cir.

1962) ; United States v. Priola, 272 F.2d 589, 594 (5th Cir, 1959) ;

United States v. National Wholesalers, 236 F.2d 944, 950 (9th Cir.

1956): United States v. Hangar One, Inc., 406 F.Supp. 60, 70

(N.D. Ala. 1975); United States v. Lazy F.C. Ranch, 324 F.Supp.

698, 700 (DD. Idaho 1971); United States Vv. Sawin, 243 F.Supp.

744, 745 (S.D. Iowa 1965) ; Woodbury v. United States, 232 F.

Supp. 49, 54-55 (D. Ore. 1964) ; United States v. Schmidt, 204 F.

Supp. 540, 543 (E.D. Wis. 1962) ; United States v. Goldberg, 158

I Supp. 544, 548 (B.D. Pa. 1998) ; United States v. Park Motors,

107 F.Supp. 168, 176 (E.D, Tenn. 1952).

5

have evolved from the same statute, Act of March 21,

1863, 12 Stat. 696, C. 67.’

Yet, despite the inherent and obvious relationship

between the civil and criminal statutes, the Fourth

Circuit rejected petitioner’s analogy to the civil statute,

stating:

Unlike » 231, § 287 requires proof of a criminal

act, rather than proof of a civil wrong ... Under

§ 287, the government must prove beyond a reason-

able doubt that the defendant performed forbidden

acts with a criminal intent. The prohibition of the

statute is absolute in that the defendant’s liberty

is at stake. Under § 231, the government is em-

powered to enforee the underlying civil duty to

submit to the government only valid claims for

payment by bringing an action for imposition of

civil penalties. The nature of the proceedings, the

standards of proof, and the defendant’s interests

at stake are wholly different under these two stat-

utes, and in construing § 287 we do not find either

authority or persuasion in defendant's analogy to

§ 231." Appendix A, p. 18a.

The Fourth Cirenit Court thus acknowledged the

significance of the different degrees of interests in-

volved in these statutes. The criminal statute, as the

three-year sentence demonstrates, affeets the hberty of

the defendant while the civil statute merely impacts on

his wallet. Nevertheless, the Court failed to apply the

2A detailed statutory history was set forth by this Court in

United States v. Bornstein, 423 U.S. 303 (1976). The original

statute was subsequently re-enacted, the eriminal provisions be-

coming § 5438, the civil section becoming §§ 3490-3494. The eivil

section merely provided that anyone who committed any of the

acts prohibited by § 5438, the criminal statute, would be civilly

liable to the United States. The criminal provisions of § 5438 were

eventually altered and codified in 18 U.S.C. §§ 287 and 1001,

6

majority rule which requires an intent to defraud for

civil recovery in its interpretation of the companion

criminal statute. The irony of this holding is that the

Court makes the government’s burden for incarcera-

tion easier than for a suit for the recovery of money.

Such a holding violates every principle of justice and

fairness basic to the American concept of liberty and

due process of law as guaranteed by the Fifth Amend-

ment to the Constitution.

“The due process clause of the Fifth Amendment is

essentially a recognition of the principles of justice and

fundamental fairness in a given set of circumstances.”’

Honeywell, Inc. v. Metz Apparatewerke, 509 F.2d

1137, 1143 (7th Cir. 1975). The conviction of the peti-

tioner cannot be allowed to stand under these cireum-

stances.

2. Due process also requires that criminal statutes

be strictly construed. United States v. Chappell, 292

F.Supp. 494 (C.D.Cal. 1968). However, the Fourth Cir-

euit, by construing the Criminal False Claims Act to

require less than other courts have required under the

Civil False Claims Act, has not only ignored this time-

honored principle, but has actually contravened it by

reading the statute broadly.

Indeed, the interpretation of this statute by the

Fourth Circuit violates the admonition of the Court in

United States v. Bornstein, 423 U.S, at 313 n.8:

“This Court has noted that in construing § 5438

[the predecessor statute of § 287] we are actually

construing the provisions of a criminal statute.

Such provisions must be carefully restricted, not

only to their literal terms but to the evident pur-

pose of Congress in using those ‘terms, particularly

where they are broad and susceptible to numerous

definitions.’ ”’

7

The purpose of Congress in enacting § 5438 and its

progeny was to combat fraud against the government.

See Petitioner’s argument, infra, 15, pp. 7-9. There-

fore, conviction under 18 U.S.C. 9) 287 must require

proof of an intent to defraud.

3. The dezision of the Court of Appeals also con-

flicts with both the district court’s opinion and the

government’s position in the case of United States v.

Winchester, 407 F.Supp. 261 (D.Del. 1975). In Win-

chester, the defendant disputed the government’s in-

terpretation of the type of claim falling within the

purview of 18 U.S.C, § 287. The government attempted

to support its contention by referring to cases brought

under the civil sections of the False Claims Act as an

aid to the interpretation of the criminal statute. The

district court accepted the government’s reasoning,

stating that the similar

‘statutory genealogy lends support to the Gov-

ernment’s contention that cases brought under the

civil branch of the False Claims Act are relevant

to the interpretation of the criminal branches

insofar as the civil cases rely upon incorporated

criminal provisions.’’ United States v. Winchester,

407 F.Supp. 261, 272 (D.Del. 1975) (Emphasis

added).

Thus, whereas in this case the Fourth Circuit ex-

plicitly rejected any analogy to the Civil False Claims

Act as an aid to the interpretation of the Criminal

False Claims Act, both the government and the dis-

trict court took the position in Winchester that cases

interpreting the civil aspects of the False Claims Act

were relevant to the interpretation of the Criminal

False Claims Statute.

8

4. The issue in this case, whether an intent to de-

fraud is an element of 18 U.S.C. § 287, has yet to be

addressed by any Court outside of this case. Section

987 has not previously been a widely utilized statute.

However, we suggest that since this statute will see

inereasing use by prosecutors in the future, it is im-

portant that this issue be settled by this Court.

5. The decision in this ease by the Court of Appeals

for the Fourth Cireuit ignores the rule enunciated by

this Court in Morissette v. United States, 342 U.S. 246

(1952). Indeed, the Fourth Cireuit’s opinion does not

even address the principles enunciated by that case al-

though they were raised in petitioner’s brief before

that Court.

This Court, in the Morissette case, established that

the omission of the element of intent from a statutory

crime does not eliminate it as a requirement for con-

viction absent evidence of Congressional intent to do

so, Therefore, if an act merely ‘‘adopt{s] into federal

statutory law a concept of crime already so well de-

fined in common law” all the common law elements are

incorporated into the statute. Therefore, absent evi-

dence of congressional intent to dispense with the com-

mon law, section 287 of Title 18, United States Code,

must be read in conjuction with the common law.

It is well established that common law fraud, in

both its eriminal and eivil aspects, required an intent

to defraud as one of its essential elements. I'nited

States v. Mead, 426 F.2d 118, 123 n. 4 & 5 (9th Cir.

1970) : United States v. Park Motors, 107 F.Supp. 168,

175-176 (E.D.Tenn. 1952). See also A rlinaton Trust

Co. v. Hawkeye Security Insurance Company, 301 F.

Supp. 854, 858 (E.D.Va. 1969).

9

It is also evident that Congress did not intend to dis-

pense with the common law element of intent to de-

fraud. To the contrary, according to the sponsors of the

original False Claims Act, the Act was adopted ‘‘for

the purpose of punishing and preventing . . . frauds.”

Cong. Globe, 37th Cong., 3d Sess, 952 (remarks of

Senator Howard), quoted in United States v. Born-

stein, 423 U.S. 303, 309 n.5 (1976). (emphasis added. )

The Supreme Court repeated this legislative purpose

in United States v. Bornstein, observing that ‘‘[t]he

Act was originally aimed principally at stopping the

massive frauds perpetrated by large contractors dur-

ing the Civil War... ‘We think the chief purpose of

the [Act’s civil penalties] was to provide for restitu-

tion to the government of money taken from it by

fraud’... .”’. 423 U.S. at 309, 314. (emphasis added).

Accordingly, the Sixth Cirenit has held that the grava-

men of an action under the False Claims Act (31

U.S.C. § 231) is “intentional fraud.’ United States v.

Ekelman & Associates, 532 F.2d 545, 548 (6th Cir.

1976). Given this history, it is quite clear that the

False Claims Act, in both its criminal and civil as-

pects, sought to protect the government from fraudu-

lent claims. As Congress has not expressed any intent

to the contrary, these statutes incorporate the elements

required for fraud at common law, including an intent

to defraud.

6. The decision of the Fourth Cireuit also conflicts

with another case decided by that same Court, United

States V. Snider, 502 F.2d 645 (4th Cir. 1974). In

Snider, the Court held that materiality is an element

of 18 U.S.C. § 287 and that ‘‘[i]mplicit within the utili-

zation of the materiality standard under 287 and 1001

is the notion that the criminal intent necessary under

10

the statute includes not only an intention to make the

statement but also an intention to deceive or mislead

the person or agency to whom it ts proffered.”’ United

States v. Snider, supra, at 652 n. 12 (emphasis added).

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

PLato C\cHEnis

Danay S. GONVELMAN

Hunp.ey & Cacuerts, P.C.

1709 New York Avenue, N.W.

Suite 205 A EK |

Washington, D.C. 20006

Attorneys for Petitioner

Alvin Michael Maher

la

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Published

No. 77-2471

Unirep States or America, Appellee,

v.

Auvin Micuaret Mauer, Appellant.

Appeal from the United States District Court for the Kast-

ern District of Virginia, at Alexandria. Albert V. Bryan,

Jr., District Judge.

Argued May 5, 1978 Decided August 23, 1978

Before Burzner and Haut, Cireuit Judges, and NorTHROP,

District Judge.*

Plato Cacheris (Larry S. Gondelman, Hundley & Cacheris

on brief) for Appellant; Theodore S. Greenberg (Joseph

A. Fisher, III, Assistant United States Attorneys, William

B. Cummings, United States Attorney on brief) for Ap-

pellee.

* Chief Judge of the United States District Court for the District

of Maryland, sitting by designation.

hi

Hai, Cireuit Judge:

Defendant, Alvin Michael Maher, appeals his criminal

conviction on eleven counts of filing false, fictitious, or

fraudulent claims with the United States government in

violation of the False Claims Act, 18 U.S.C. § 287. The pri-

mary issue presented in this appeal is whether the district

court properly instructed the jury that under § 287 the

eriminal intent essential for conviction is not limited to a

specific intent to defraud. At trial, the defendant conceded

the basie facts of the government’s case but maintained he

was innocent because he acted without a specific intent to

defraud the government. The district court refused to in-

struct the jury that proof of such a singular purpose was

essential for conviction and, instead, instructed the jury

that if the defendant caused false or fictitious or fraudu-

lent claims to be submitted to the government, knowing

them to be false or fictitious or fraudulent, with a specific

intent to violate the law or with a consciousness that what

he was doing was wrong, he should be found guilty. The

defendant made timely objection to this instruction and to

the court’s refusal to give his proffered instructions which

set forth his theory of defense. We hold that the district

court properly instructed the jury and, therefore, affirm.

At trial, the government presented evidence showing that,

during the year in which defendant was promoted from

vice-president to president of his corporate employer, he

caused false vouchers to be submitted to an agency of the

federal government requesting payments totalling approxi-

mately $68,000 more than should have been paid to his em-

plover under its contracts with that agency. The defendant

contended that he did so with no intent to cheat the gov-

ernment or to gain unfair advantage for himself or his

company.

During the time in question, defendant worked for Gen-

eral Environments Corporation (“GEC”), which tested

3a

equipment and conducted experiments for various commer-

cial and government clients. GEC’s contracts with these

clients could be categorized as either “fixed-price” con-

tracts or “time-and-materials” contracts, depending upon

the manner in which GEC was to be paid for its work.

Under its “fixed-price” contracts, GEC agreed to perform

experiments for a certain amount and to bill periodically

on the basis of percentage of completion. Under its “time-

and-materials” contracts, GEC agreed to perform experi-

ments for a price not to exceed a certain amount and to bill

periodically on the basis of the amount of labor and ma-

terials actually employed in the experiments up to the date

of billing. According to the defendant's theory of defense,

it was GEC’s practice, at least for its contracts with gov-

ernment clients, to stop work on an experiment and seek

additional funding from the client anytime GEC’s costs met

or exceeded its contract price. This practice was followed

for such “eost overruns” under both “fixed-price” contracts

and “time-and-materials” contracts. .

During 1972, one of GEC’s government clients was the

Mohility Equipment Research and Development Center

(*“MERDC”) of the Department of the Army of Fort Bel-

voir, Virginia. GEC and MERDC entered into various

“time-and-materials” contracts most of which required

(EC to conduct several experiments, or “tasks,” with sep-

arate maximum prices allocated to each task. The hourly

rate to be billed by GEC included its overhead and profit

and varied according to the classification of labor utilized

for each task. GEC billed MERDC monthly for work on

these “time-and-materials” contracts. Its monthly billings

were prepared by the company bookkeeper based upon time

sheets which were filled out and signed by the GEC em-

ployees who worked on the MERDC contracts.

In 1972 the defendant became president of GC. During

that year, before and after his promotion, whenever the

hi

da

bookkeeper submitted MERDC billings to the defendant for

his approval, he instructed her to change them to reflect

more hours than were shown on the employees’ time sheets.

She made the billing changes that he specified, prepared

new time sheets to conform to those billing changes, traced

over the employees’ signatures on the new time sheets and

destroyed the original ones. The defendant told her these

changes were necessary because the employees did not know

to which contract they should charge their hours and that

their signatures had to be traced because there was not

time to have the employees sign the revised time sheets.

Three GEC project managers, whose time sheets had been

altered, testified that, in fact, they knew on which contracts

they were working and that they recorded hours on their

time sheets according to time spent working on those con-

tracts. They said they were never told that they made

errors on their time sheets. The defendant testified that

no one in the government knew GEC was billing for the

fictitious hours and that he did not discuss his practice of

having hours changed on company time sheets with any-

one at GEC, Approximately 5,300 fictitious hours, repre-

senting $68,000 in false claims, were billed on these MERDC

contracts as a result of the defendant's instructions to the

bookkeeper. The bookkeeper testified that the practice of

changing time sheets ended when defendant left GEC in

November, 1973.

Defendant admitted giving these instructions but main-

tained he was innocent because he acted for a legitimate

business purpose and without a motive to defraud the gov-

ernment. He testified that he knew the MERDC contracts

were to be paid at an hourly rate for work actually per-

formed, but nevertheless thought they should be billed on

the same basis as “fixed-price” contracts, that is, if he con-

sidered work on a MERDC task to be one half complete, he

should have the bookkeeper bill one half of the maximum

da

price allocated to that task regardless of the amount of

labor actually employed.*

1The court examined the defendant before the jury as follows:

Tue Court: Mr. Maher, suppose that vou had a ceiling on

a task of $80,000. It turned out that you could do it for time

and materials for $5,000, That’s an extreme example.

Tre Witness: Yes, sir.

THe Court: You ascertained that it was 50 percent com-

plete. Therefore, you would submit vouchers totalling $40,000,

wouldn’t you, even though it had only cost you say, $5,000?

Tue Witness: In that extreme example, yes, that’s what

would have happened, but it never occurred, because that is

very extreme,

Tue Court: But that was your theory?

Tue Witness: That's right.

Tue Court: That if your ceiling was $80,000, and you could

do it for five when it was 50 pereent completed, you were

entitled to $40,000?

Tur Wrrness: Yes. Conversely, if it were $80,000, but it

took us $186,000 to do it, and we had already expended $80,000

of effort into it, we only charged $40,000,

Tre Court: If 40 was vour ceiling?

Tue Witness: No. no---50 percent complete, remember, that

is just the other side of the coin. The coin always had another

side. We had hundreds of tasks and some of them had as many

as 20 and 30 subtasks and we were dealing with literally thou-

sands of fixed-price items over a ten-year period.

Tue Court: Even if you had to transfer fictitious hours,

you would do it to get your 50 percent up to $40,000, wouldn't

you?

Tue Witness: Or down to $40,000, ves, sir.

Tue Court: Still again, using my example, if your ceiling

was 80, and your maximum cost was five, for the time and

material, when you were 50 percent through and say, had only

expended $2,500 in time and material, you would add enough

hours to that to add up to $40,000?

6a

Defendant testified that this approach to billing for the

MERDC tasks furthered a legitimate business purpose be-

cause these tasks were experiments which could not be per-

formed efficiently if they were delayed pending receipt of

additional funding each time a cost overrun occurred. When

THe Witness: That’s right, but that would never occur,

hbeeause the engineer-

Tue Court: (Interposing) But that’s the theory on which

you operate?

Tus Witness: That’s right. And conversely, if I could say

it again, if it were $80,000, and we were half finished but we

had expended the full $80,000, it would not show up. It would

only show as $40,000.

Now, we just weren't that grossly erroneous, You know, the

guys had years of experience. Our people knew what they were

duing. And the government engineers knew what they were

doing. So we oscillate maybe 10, 15, 20 percent around the

number.

Tur Court: Do vou say the government knew that you

were putting in fictitious hours—?

Tue Witness: No sir.

THe Court: —to up that, in my hypothetieal, from $2,000

to $40,000?

Tue Witness: No. I would say the government knew we

were fixed pricing every task. There is two ways to do it. If

you're really smart and you're well organized, and you're not

growing like we were, perhaps what you could do is go out,

get your weekly IBM run, that’s why we had the machine,

but were trying to get ahead of the thing and see if we could

tell a person what to charge to, so as to refleet the amount

of work done and that’s what's done in a lot of time and

material contracts now, when you have the information.

We just didn’t have the information that ready. We had too

many tasks, too few people. And we were always behind the

power curve. That was the time the Vietnam War was really

heating up and all of that work was dumping down on us.

* * * * o

7a

cost overruns did oceur, GEC would not get additional con-

tracts and the government would not get fair value for its

money.’ Consistent with this defense, he claimed he knew

employees were adjusting hours on their time sheets to pre-

vent cost overruns and delays in their work. One GEC proj}-

ect manager testified that he charged hours on his own

time sheets which were actually spent working on MERDC

tasks to “fixed-price” contracts in order to prevent cost

overruns and delays in completion of those “fixed-price”

contracts pending GEC’s request for additional funding.

Defendant testified that he was aware that some hours were

shifted away from MERDC contracts and he wanted to

shift them back “to make it come out even.” Therefore, in

all, he contended that he would have the MERDC tasks

billed on the basis of his personal estimations of the per-

centage each task was completed rather than on the amount

of labor employed as shown on the employees’ time sheets.

The primary issue presented in this appeal is whether

the intent essential for eonviction under § 287 is limited to

an intent to defrand. This statute reads as follows:

Whoever makes or presents to any person or officer

in the civil, military, or naval service of the United

States, or to any department or agency thereof, any

? In his words, if one billed on an hourly basis,

in the testing business, you wouldn't get any testing

done and you certainly wouldn't get it done very efficiently.

You can't run a test program and go bang up against the

task, run out of money and stop. Everybody .. . goes to other

work and then wait a month, two months . . . sometimes three

months—then go find your equipment again, hook it back up

again and start over again.

You can do that, but you’re not going to do it very effi-

ciently. Remember, if we didn’t do a good service, if we didn’t

do good work, we didn’t get any work the next time, so we

were really interested in giving the government good value

for the dollar, That’s why we did it.’”’

8a

claim upon or against the United States, or any de-

partment or agency thereof, knowing such claim to be

false, fictitious, or fraudulent, shall be fined not more

than $10,000 or imprisoned not more than five years,

or both.

18 U.S.C. § 287. The court instructed the jury that, in addi-

tion to proving the defendant knowingly caused false claims

to be made to the government, the government had to prove

beyond a reasonable doubt that the defendant acted “will-

fully,” that is, with either a consciousness that he was do-

ing something wrong or with a specific intent to violate the

law. In his closing argument, counsel for defendant argued

to the jury that the government had to prove the defendant

acted with a specific intent to defraud the government in

order for the defendant to be found guilty. The court re-

fused to define criminal intent in terms of intent to defraud

and instructed the jury on intent, in pertinent part, as

follows:

Tt is sufficient if one... [claim in each count |

‘s false or fraudulent or fictitious, provided, of

course, that in order to convict the defendant, it niust

be shown as to that item that he had knowledge of its

falsity or fraudulent character or fictitious character,

and that he acted willfully.

The defendant . .. asserts that he acted innocently

and for a legitimate business purpose, with no specific

intent to do what the law forbids.

[f, of course, the government has not proven beyond

a reasonable doubt that he acted with specific intent,

that is, willfully, then he cannot be convicted.

in this regard, however, you are told that if the con-

tract was a time and material contract, even with a

ceiling, then the contractor ... had no right to put on

or cause to be put on a voucher, a claim for payment

9a

for work that he knew had not been done or put on such

a voucher a claim for payment with reckless indiffer-

ence as to whether the work had been done or not, that

is, or whether the claim was true or false.

Ilowever, even if this is shown, the defendant of

course cannot be convicted unless it is shown that he

acted with a specific intent, as that term... will be

defined for you....

You heard reference during the closing argument to

whether the government got its money's worth. Whether

the government got its money’s worth or not on these

contracts is not the issue in this case. And that is no

defense to any count if the elaim referred to in that

count, as submitted, was false or fraudulent or fieti-

tious, and acted willfully.

As indicated before, the crime charged in this case

requires proof of specific intent before the defendant

‘an be convicted. Specific intent, as that term implies,

means more than the general intent to commit the act.

To establish specific intent, the government must

prove the defendant knowingly did an act which the

law forbids, purposely intending to violate the law.

Such intent may be determined from all the facts and

circumstances surrounding the case. And intent ordi-

narily may not be proved directly, because there is no

way of fathoming or serutinizing the operations of the

human mind, but you may infer the defendant’s intent

from the surrounding circumstances.

Two hours after it began deliberations, the jury re-

quested further instruction on whether “criminal intent to

defraud was a primary consideration for guilt or inno-

cence.’ Then the court instructed the jury, in pertinent part,

as follows:

Criminal intent to defraud may or may not be a pri-

mary consideration for guilt or innocence. You will

10a

recall that the act that the defendant is charged with

violating is the submitting of a claim, knowing the

claim to have been false or fraudulent or fictitious.

Now, as an overall proposition, whether any one or

all of those you find to be the ease here, whether the

claim was false or fraudulent or fictitious, the defend-

ant, to be convieted, must be found to have had the

specific intent to violate the law.

That is, he must have had a consciousness that what

he was doing was wrong. Whether it is specific intent to

defraud is not necessarily the only consideration, but

he must have had the specifie intent to do something

he knew the law forbade.

That is, he must have had a consciousness that what

he did was wrong, or he must have acted—well—yes,

the specific intent is the specific intent to do something

the law forbids.

Now, that may or may not be fraud. Fraud is only

one of the three things he may have had a conscious-

ness of what he was doing and what was going on. It

could be false, as the term is defined for you, and

fraudulent, as that term was defined for you, or fie-

titious.

Then the court read § 287 in its entirety to the jury.

Therefore, on the issue of criminal intent, we hold the

court properly instructed the jury that § 287 may be vio-

lated by the submission of a false claim, a fictitious claim

or a fraudulent claim, if, in each instanee, the defendant

acted with knowledge that the claim was false or fictitious

or traudulent and with a consciousness that he was either

doing something which was wrong, see United States v.

Bishop, 412 U.S. 346, 93 S.Ct. 2008, 36 L.d.2d 941 (1973)

or which violated the law, see United States v. Moylan, 417

I.2d 1002 (4th Cir. 1969), cert. denied, 397 US. 910, 90

S.Ct. 908, 25 L.Ed.2d 91 (1970).

lla

The defendant contends that the court committed error

in refusing to instruct the jury that the intent essential for

conviction under § 287 is limited to a specific intent to de-

fraud the government. The instructions proffered by de-

fendant on his theory of defense, which the court refused

to give, implied that unless the jury found that in submit-

ting the false claims the defendant acted with a purpose

to either cheat the government or to unjustly benefit him-

self or his company, he should be found innocent. We dis-

agree for three reasons.

First, we do not find that the statute specifies an intent

to defraud as an element to be proved under § 287. The

language of the statute states the terms, “false, fictitious or

fraudulent,” in the disjunctive, and we interpret this to

mean that three kinds of claims may be submitted in vio-

lation of § 287 and not merely claims which are fraudulent.

Compare United States v. Srider, 502 F.2d 645 (4th Cir.

1974) with United States v. Cooperative Grain and Supply

Co., 476 F.2d 47 (Sth Cir. 1973). The statute is silent on

motive and criminal intent and only specifies that the

claims be submitted with a knowledge that they are false,

fictitious or fraudulent.

Second, in applying general principles of criminal law,

the court added the element of ‘‘willfulness’’ or criminal

intent to the requirements of the government’s case, and

we think correctly refused to define criminal intent under

§ 287 solely in terms of purpose or motive. Criminal intent

may be proved either by a showing that the defendant

acted for a specifie purpose to violate the law or that he

acted with an awareness that what he was doing was mor-

ally wrong, whether or not he had actual knowledge that he

was doing, something that the law forbids. Proof of motive

is relevant on the issue of criminal intent but is not deter-

minative of it. The defendant could have formed the requi-

site criminal intent by acting with a consciousness that he

was doing something wrong while pursuing a legitimate

business goal, or he could have been aware of the prohibi-

la

tions of the False Claims Act and could have chosen to

pursue his business goals in spite of those prohibitions

hoping that his illegal acts would not be discovered. Wheth-

er or not the defendant formed such a criminal intent is a

question for the trier of fact. At defendant’s trial, the Jury

was instructed that criminal intent essential for conviction

under § 287 could be proved by either a showing that the

defendant was aware that he was doing something wrong

or that he aeted with a specific intent to violate the law.

After hearing the defendant's evidence, his counsel’s argu-

ments and the court’s reference to his theory of defense

in its initial instruction on criminal intent, the jury re-

turned a verdict of guilty. Based upon the evidence of rec-

ord, we think the jury was justified in finding the defendant

acted with a criminal intent. He admitted having the boox-

keeper alter company records which substantiated the false

claims at issue, and he admitted causing her to trace em-

ployees’ signatures on those altered records without their

consent or knowledge. Whether or not the jury chose to

credit defendant’s claims of good or justifiable motive, we

think such attempts to substantiate the false claims consti-

tute good evidence of the requisite criminal intent to be

proved under § 287.

Third, we think that § 287 does not require proof of a

specific intent to defraud, as defendant defines that term,

because the purpose of § 287 will not be furthered by limit-

ing criminal prosecutions to instances where the defendant

is motivated solely by an intent to cheat the government or

to gain an unjust benefit. The plain purpose of § 287 is to

assure the integrity of claims and vouchers submitted to

the government. Federal criminal statutes written in lan-

guage similar to § 287 which have specified intent to de-

fraud as an element to be proved have been interpreted to

require only proof that the defendant acted ‘‘for the pur-

pose of impairing, obstructing, or defeating’’ a lawful

function of the government. Pina v. United States, 165 F.2d

890, 893 (9th Cir. 1948). In Pina, it was held as well-settled,

l3a

that ‘‘the contemplated infliction of a monetary loss upon

the Government is not a necessary ingredient of an intent

to defraud the United States.’? 165 F.2d at 893. Such an

interpretation is consistent with common law, in that, a

common law prosecution for forging or for uttering a false

writing could not be defended by a showing that the de-

fendant’s purpose was only to use the false writing as a

device to collect a bona fide debt. R. Perkins, Criminal Law

303-307 (1st Ed. 1957).

The defendant supports his contention that intent to de-

fraud is essential for conviction under § 287 by arguing

that in some jurisdictions specifie intent to defraud is es-

sential to give rise to civil penalties under 31 U.S.C. § 231,

a civil penalty statute stated in part in language similar to

§ 287, and by asserting that the element of material falsity

imports a requirement of an intent to defraud under our

holding in United States v. Snider, supra. We find no merit

in either of these arguments. Unlike § 231, §287 requires

proof of a criminal act, rather than proof of a civil wrong.

See generally, United States v. Miller, 545 F.2d 1204, 12138

(9th Cir. 1976). Under § 287, the government must prove

heyond a reasonable doubt that the defendant performed

forbidden acts with a criminal intent. The prohibition of

the statute is absolute in that the defendant's liberty is at

stake. Under § 231, the government is empowered to en-

force the underlying civil duty to submit to the govern-

ment only valid claims for payment by bringing an action

for imposition of civil penalties. The nature of the pro-

ceedings, the standards of proof, and the defendant's inter-

ests at stake are wholly different under these two statutes,

and in construing § 287 we do not find either authority or

persuasion in defendant’s analogy to $231." Also, we do

3 Likewise, we note that under § 231 there is a split of authority

on the issue of whether a specific intent to defraud must be proved

by the government in order to maintain its actions under that civil

statute, and we expressly disclaim any implication in our holding

today that such an intent is or is not required as an clement of

proof under § 231.

l4a

not think that our holding in United States v. Snider, supra,

supperts defendant’s contention. In that case we were Ccon-

struing a criminal tax fraud statute and held that in order

for a taxpayer to be convicted of supplying ‘‘false or

fraudulent’? information, the information must either be

supplied with an intent to deceive or be of such a nature

that it could reasonably affect withholding to the detri-

ment of the government. 502 F.2d at 695.

Finally, defendant has raised as an issue in this appeal,

the court’s refusal to give the defendant’s proffered in-

structions which summarized the evidence of his theory of

defense. We think the court properly refused to give these

‘nstructions because they were contrary to law as previ-

ously stated. Furthermore, because the court included the

defendant’s claims of good or justifiable motive in its initial

instructions on the issue of criminal intent and because the

jury apparently gave considerable weight to this defense

in its deliberation on that issue as indieated by its inquiry

to the court regarding ‘Seriminal intent to defraud’’, we

ean find no merit, in fact, to defendant’s objection on this

ground.

Therefore, judgment of conviction is

AFFIRMED.

loa

APPENDIX B

[Caption deleted in printing]

Filed September 22, 1978

Upon consideration of the appellant’s petition for rehear-

ing and suggestion for rehearing en bane, and no judge

having requested a poll on the suggestion for rehearing en

banc, |

It is Anyupcep and Orperep that the petition for rehear-

ing is denied.

Entered at the direction of Judge Hall for a pane? con-

sisting of Judge Butzner, Judge Hall, and Judge Northrop.

For the Court,

‘s/ Wiuram K. Snare, Il

Clerk

l6a 17a

APPENDIX C son or officer in the civil, military, or naval service of

tlhe United States, any claim upon or against the Gov-

ernment of the United States, or any department or

oflicer thereof, knowing such claim to be false, fictitious,

or fraudulent, or who, for the purpose of obtaining or

The Fifth Amendment to the United States Constitution aiding to obtain the payment or approval of such claim,

reads as follows: makes, uses, or causes to be made or used, any false

hill, receipt, voucher, roll, account, claim, certificate,

aflidavit, or deposition, knowing the same to contain

anv 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 publie prop-

erty used or to be used in the military or naval service,

who, with intent to defraud the United States or will-

fully to conceal such money or other property, delivers

Constituiional and Statutory Provisions Involved

CONSTITUTION : Firtu AMENDMENT

‘‘No person shall be held to answer for a capital, or

otherwise infamous crime, unless on a presentment or

indictment of a Grand Jury, except in cases arising in

the land or naval forces, or in the Militia, when in ac-

tual service in time of War or public danger; nor shall

any person be subject for the same offence to be twice

put in jeopardy of life or limb; nor shall be compelled

in any criminal case to be a witness against himself,

nor be deprived of life, liberty, or properly, without

due process of law; nor shall private property be taken

for public use, without just compensation.”

Statute: 18 U.S.C. § 287 or causes to he delivered, to any other person having

authority to receive the same, any amount of such

‘Whoever makes or presents to any person or officer money or other property less than that for which he

in the civil, military, or naval service of the United received a certifieate or took a receipt, and every per-

States, or to any department or agency thereof, any son authorized to make or deliver any certificate,

claim upon or against the United States, or any de- voucher, receipt, or other paper certifying the receipt

partment or agency thereof, knowing such claim to be of arms, ammunition, provisions, clothing, or other

false, fictitious, or fraudulent, shall be fined not more property so used or to be used, who makes or delivers

than $10,000 or imprisoned not more than five years, the same to any other person without a full knowledge

or both.’’ of the truth of the facts stated therein, and with intent

June 25, 1948, ec. 645, 62 Stat. 698. to defraud the United States, and every person who

knowingly purchases or receives in pledge for any obli-

Sratrute: 31 U.S.C. § 231 gation or indebtedness from any soldier, officer, sailor,

so or other person called into or employed in the military

Any person not in the military or naval forces of the

United States, or in the militia called into or actually

employed in the service of the United States, who shall

make or cause to be made, or present or cause to be

presented, for payment or approval, to or by any per-

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, shall forfeit and

pay to the United States the sum of $2,000, and, in

18a

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.

R.S. § 3490, 5438.

However, since Title 31 has not been enacted into positive

the official text of the statute is that which appears in

the Revised Statutes, §§ 3490-3494, 5438. The relevant por-

tions of these statutes are as follows:

§ 3490:

. 3490. “Any person not in the military or naval

forees of the United States or in the militia called into

or actually employed in the service of the United States,

who shall do or commit any of the acts prohibited by

any of the provisions of section fifty-four hundred and

thirty-eight, Title ‘Crim rs,’ shall forfeit and pay to the

United States the sum of two thousand dollars, 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 sueh forfeiture and damages shall be sued

for in the same suit.”

§ 5438:

<438. “Every person who makes or causes to be

made, or presents or causes to be presented, for pay-

ment 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, OT

‘auses to be made or used, any false bill, receipt,

19a

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

oflicer 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 willfully to conceal

such money or other property, delivers or causes to be

delivered, to any other person having authority to re-

ceive the same, any amount of such money or other

property less than that for which he received a certifi-

cate 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 pledg:

or sell the same, every person so offending in any 01

the matters set forth in this section shall be imprisoned

at hard labor for not less than one nor more than five

vears, or fined not less than one thousand nor more

than five thousand dollars.”