Opposition — Maher v. United States

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No. 78-675 . SEC 18 1978

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WOWAR PROAK, JR., CLERN

In the Supreme Court of the United States

OCTOBER TERM, 1978

ALVIN MICHAEL MAHER, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

WADE H. MCCREE, JR.

Solicitor General

PHILIP B. HEYMANN

Assisiant Attorney General

ROBERT J. ERICKSON

ALAN J. SOBOL

Attorneys

Department of Justice

Washington, D.C. 205380

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Statement

Argument

Conclusion

CITATIONS

Cases:

Morissette v. United States, 342 U.S. 246..

United States v. Aerodex, Inc., 469 F.2d

TU ese Sc iguieabaeneescatenestes nies

United States v. Ekelman & Associates,

Be Ee Giccinncckn Gore

a etk At were ESSN Ge RPA ARN Reh laa

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

I i

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

ERR or TO RoE TON

United States v. Mazurie, 419 U.S. 544...

United States v. Mead, 426 F.2d 118........

United States v. National Wholesalers,

I adc hitco sas ctistivaidatianzorapeaes

United States v. Park Motors, 107 F.

PI BE Siecle aieaei eee ammanicaseeecnn

United States v. Powell, 423 U.S. 87

United States v. Priola, 272 F.2d 589........

United States v. Sawn, 243 F. Supp. 744..

United States v. Schmidt, 204 F. Supp.

540 ..

Statutes:

II

False Claims Act, 18 U.S.C. 287 ...0.0000000....

Se RE PIU Zachescntvashocamuncomamaaumeccunce

31 U.S.C. 231

Iu the Supreme Court of the United States

OCTOBER TERM, 1978

No. 78-675

ALVIN MICHAEL MAHER, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals (Pet. App. la-

14a) is reported at 582 F.2d 842.

JURISDICTION

The judgment of the court of appeals was entered

on August 23, 1978. A petition for rehearing was

denied on September 22, 1978 (Pet. App. 15a). The

petition for a writ of certiorari was filed on October

(1)

2

20, 1978. The jurisdiction of this Court is invoked

under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether, in a prosecution under the False Claims

Act (18 U.S.C. 287) of a federal contractor who knew

his claims for payment were overstated and who knew

his presentation of such claims was prohibited, the

government must prove that the contractor lacked any

legitimate business or other reason for the misrepre-

sentation.

STATEMENT

After a jury trial in the United States District

Court for the Eastern District of Virginia, petitioner

was convicted on 11 counts of filing false, fictitious,

or fraudulent claims with the United States govern-

ment, in violation of 18 U.S.C. 287. He was sentenced

to concurrent terms of three years’ imprisonment on

each count. The court of appeals affirmed (Pet. App.

la-14a).

The evidence showed that in 1972 General Environ-

ments Corporation (“GEC”), which tested equipment

and conducted experiments for various commercial

and government clients, entered into various “time

and materials” contracts with the Mobility Equipment

Research and Development Center (“MERDC”) of

the Department of the Army at Fort Belvoir, Vir-

ginia. Under these contracts, GEC agreed to perform

experiments for a price not to exceed a certain

amount and to bill periodically on the basis of the

amount of labor and materials actually employed in

3

the experiments up to the date of billing. GEC billed

MERDC monthly for its work, with the hourly rate

varying according to the classification of labor utilized

for each experiment; the hourly rate also included

GEC’s overhead and profit. The monthly billings

were prepared by the company bookkeeper based on

time sheets that were filled out and signed by the

GEC employees who worked on the MERDC contracts

(Tr. 32-36, 39-41, 58-60).

In 1972, petitioner was promoted from vice-presi-

dent to president of GEC. In both of these capacities,

petitioner had primary and final responsibility for

billing on the MERDC contracts (Tr. 59-60, 92).

Accordingly, the bookkeeper submitted all MERDC

billings to petitioner for his approval prior te their

submission to MERDC. Whenever the bookkeeper did

so, petitioner 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. Peti-

tioner 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 insufficient time

to have the employees sign the revised time sheets

(Tr. 86-110, 120-125). 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

ee ee

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according to time spent working on those contracts.

They said they were never told that they made errors

on their time sheets (Tr. 180-137, 138-145, 150-154).

Approximately 5,300 fictitious hours, representing

$68,000 in false claims, were billed on the MERDC

contracts as a result of petitioner’s instructions to the

bookkeeper (Tr. 187, 192).

At trial, petitioner admitted instructing the book-

keeper to alter the time sheets but maintained that he

was innocent because he acted for a legitimate busi-

ness purpose and without a motive to defraud the

government. Essentially his theory of defense was

that while he knew the MERDC contracts were to be

paid at an hourly rate for work actually performed,

he nevertheless thought they should be billed as

“fixed-price” contracts, since the contracts provided

for a dollar ceiling. Thus, by his own admission,

using the ceiling as his basis, he measured what the

government should be charged according to what he,

himself, estimated the percentage of completion on a

job to be regardless of the amount of labor actually

employed (Tr. 257-258, 263, 270-272, 274-275).

‘In other words, if petitioner considered work on a MERDC

task to be one-half complete, he would have the bookkeeper

bill one half of the maximum price allocated to that task re-

gardless of the amount of labor actually employed. Thus, if

he had a task with a ceiling of $80,000 and found it to be

50% complete, he would charge $40,000 even if the labor

actually employed amounted to only $5,000 (Tr. 277-280).

5

ARGUMENT

1. Petitioner does not deny that he knew the claims

were false when he submitted them for payment to

the government. Nor does he deny that he knew such

claims were prohibited. As to these elements of the

offense, there is no question that the judge correctly

instructed the jury.’

Petitioner contends that the court should also have

instructed that the offense requires a finding that

petitioner intended to defraud the government. 18

U.S.C. 287, however, contains no express scienter

requirement beyond knowledge of the inaccuracy of

the claim and consciousness that its submission is

prohibited:

Whoever makes or presents to any person or

officer * * * of the United States * * * any claim

* * *, 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.

Petitioner offers no persuasive reason for disregard-

ing the statutory language and engrafting a fur-

ther scienter requirement onto the statute. Peti-

tioner’s contention that Morissette v. United States,

342 U.S. 246 (1952), requires a specific intent to

deceive serves only to confirm the decision below. In

Morissette a deer hunter found and took spent bomb

casings on a practice bombing range also used for

hunting deer. He was convicted for converting gov-

2 See Pet. App. 8a-10a.

6

ernment property. This Court reversed the conviction

because Morissette believed that the property had

been abandoned and that it was lawful to take the

casings. This Court reasoned that mens rea was a

necessary element of all federal crimes that derived

from the infamous common law crimes. In sharp

contrast, petitioner was convicted precisely because

he did know that the claims were inaccurate and he

was aware that it was wrong to submit such claims.

Morissette offers petitioner no further protection than

he has already received.

Nor is there any merit in petitioner’s argument

that due process requires that criminal statutes be

strictly construed. Petitioner can hardly claim that

he was given inadequate notice that his actions were

unlawful, since the jury found that petitioner was

conscious that his actions were prohibited. Petitioner

may not challenge the statute, which in any event is

plain enough on its face, on the ground that someone

else might receive inadequate notice. United States

v. Powell, 423 U.S. 87, 92 (1975); United States v.

Mazurie, 419 U.S. 544, 550 (1975).

Petitioner’s contention that at common law fraud

required an intent to cheat is premised on the errone-

ous assumption that the statute comprehends only

common law fraud. As the court of appeals noted,

the statute prohibits claims that are either “false,

fictitious or fraudulent” (Pet. App. lla). Even if

“fraudulent” claims would be measured by common

law criteria, the court correctly held that the statute

is violated when the claim is either fictitious or false

7

(ibid.). The purpose of the statute is to assure the

integrity and veracity of claims submitted to the gov-

ernment. As the court below held (Pet. App. 12a),

that purpose would be substantially frustrated by

preventing its application to persons such as peti-

tioner who knowingly submit inaccurate claims with

an awareness that it is wrong to do so.

2. Petitioner does not contend that the decision

below is in conflict with the decision of any other

circuit under 18 U.S.C. 287. Petitioner does, how-

ever, contend that the decision below conflicts with

several lower court decisions stating that intent to

deceive is an element of a violation of 31 U.S.C. 231.

Section 231 in part authori. .s the government to seek

civil recovery and penalties from persons who submit

false, fictitious or fraudulent claims to the govern-

ment. None of the civil cases cited by petitioner,

however, absolved any claimant who was aware that

its claim was false—with the arguable exception of

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

Tenn. 1952).° In that case, a statute authorized fed-

’ While it is true that dicta in some of the other cases

cited by petitioner state that an element of the civil offense is

an intent to deceive, their actual holdings are fully consistent

with the opinion below. Most of the cited decisions held that

the claimant lacked any knowledge at all that the claim was

false, fictitious, or fraudulent and therefore there was no liabil-

ity. United States v. Ekelman & Associates, 582 F.2d 545,

548-549 (6th Cir. 1976) ; United States v. Mead, 426 F.2d 118,

122-124 (9th Cir. 1970); United States v. Priola, 272 F.2d

589, 593-594 (5th Cir. 1959); United States v. Lazy F C

Ranch, 324 F. Supp. 698, 700 (D. Idaho 1971) ; United States

v. Sawn, 243 F. Supp. 744 (S.D. [owa 1965); United States

8

eral financial assistance for certain disabled veterans

in purchasing automobiles priced less than $1600.

Certain veterans desired automobiles at about $1700.

The government paid approximately $1600 and the

veterans paid the difference. A government employee

advised the dealer that the law permitted such sepa-

rate billings. In the course of obtaining the federal

payment, therefore, the dealer in question submitted

a certificate to the government stating that the sales

price was less than $1600, when in fact it knew that

the total sales price was about $1700. The verifica-

tion was not used to obtain something from the gov-

v. Hangar One, Inc., 406 F. Supp. 60, 64, 139-145 (N.D. Ala.

1975). In two other cases claimants had not misstated any

facts but had stated exaggerated conclusions based on the

facts. In both cases, however, the claimants supplied the

underlying factual information, or it was otherwise known to

the agency, so the agency could draw its own conclusion; the

submission, therefore, was not misleading factually. United

States v. Schmidt, 204 F. Supp. 540, 542 (E.D. Wis. 1962) ;

United States vy. Goldberg, 158 F. Supp. 544, 548 (E.D. Pa.

1958). Finally, two of the cases equated an intent to deceive

with awareness of and concealment of the discrepancy be-

tween the claim and the truth. In United States v. Aerodez,

Inc., 469 F.2d 1003 (5th Cir. 1972), for example, a govern-

ment contract or substituted another type of ball bearing for

the type it had agreed to supply. The court dismissed the con-

tention that the contractor in good faith believed the substi-

tutes to be just as good as the specified ones. Since the con-

tractor deliberately mislabelled the bearings to conceal the

discrepancy, the court held that the only possible conclusion

was that the claimant had intended to deceive the government.

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

950 (9th Cir. 1956). In sum, none of these cases absolved any

claimant from liability where the claimant knew its claim was

inaccurate and knew that it was wrong to submit it.

9

ernment to which the dealer was not entitled. In

sharp contrast, petitioner was conscious that he was

asking for more compensation than his company was

entitled to receive.

Nor is United States v. Snider, 502 F.2d 645 (4th

Cir. 1974), in conflict with the decision below. That

case considered the scienter requirements for convic-

tion under 26 U.S.C. 7205, which prohibits employees

from supplying false or fraudulent tax information

to their employers. The court of appeals held that the

scienter requirements of Section 7205 are satisfied

if the inaccurate information supplied is either sup-

plied with an intent to deceive ov is of “such a nature

that it could reasonably affect withholding to the

detriment of the government” (502 F.2d at 655). By

analogy, petitioner’s misrepresentations were of such

a nature that they could reasonably be expected to

lead to government payments greater than those re-

quired. Petitioner does not contend that he could have

escaped liability under this definition of false or

fraudulent adopted for purposes of Section 7205.

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CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

WADE H. McCREE, JR.

Solicitor General

PHILIP B. HEYMANN

Assistant Attorney General

ROBERT J. ERICKSON

ALAN J. SOBOL

Attorneys

DECEMBER 1978

YoU. S. GOVERNMENT PRINTING OFFICE; 1978 279893 236