Brief for the United States — United States v. Kapp

Supreme Court brief1937

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SY CI i click ddan eee eek amen esetnoukien 1

Es cr has en deh dn kin ceansnnh Kwak enema aan 1 -

ND sneaked bana an nme meetin Aw ameke 2

Statutes involved -_--.-....------- AE Aakdneenate”

Statement- - - - - eeweh nen Naigalamcam La ne Aen 6 Keeani re 3

Specification of errors to be urged. --...-.....-.-...--.----- 7

Summary of sini samc ae ea dhcm ear laa er i

. Argument:

I. Notwithstanding the cnindenniiiielbinndlian of the Agri-

cultural Adjustment Act, appellees may be guilty of

conspiracy to violate Section 35 of the Criminal Code,

by fraudulently obtaining benefit payments under -

CE ha bb ce nacd eadchebennsahes ie aa Manian bain 9

II. Appellees are estopped to attack the constitutionality

ofthe Agricultural Adjustment Act__....___.-._-- .

I ie ak as aaa es aia et a ea aT a 30

SI is hans ok das co ach th mes aoc aida Sala aaah wh i ak esd i chaeovn clin 31

: CITATIONS

Cases: -

' American Bond & Mortgage .Co. v.- United States, 52 FF. -

Ge Stack cat rin Kank ghee Redan nena 29

Anniston Mfg. Co. v. Davis, 301 U. S. 387__._.....-.-- >

pe =. ema, GD Tis 8. Fa FIR oenencincracassscqan 30

Booth Fisheries v. Industrial Comm., 271 U.S. 208_.__--_-- 26

Buck v. Kuykendall, 267 U.S. BO as hie mantempicn i

' Burtoh v. United States, 196 U. S. 283___....----------.+ 11

Cagle v. United States, 3 F. (2d) 746....-.------.------- 17

Capone v. United States, 51 F. (2d) 609__----.---------- 11

| City of Topeka v. Dwyer, 70 Kan. 244.___.-..-...-.---1-- 18

| . Columbus & Greenville Ry. v. Miller, 283 U. 8S. 96-....----~ 12 .

ce Curtin v. Barton, 189 N. Y. 505.......-........-1------ 18

. Danide v. Toarney, 102 U. &. 416. ........,.-.......... 25, 29

| Great Falls Mfg. Co. v. Attorney General, 124 U. 8. 581_ 26,28, 29

Hall v. Johnson, 41 Mich. 286. .....:-....-..-.----:--- 24

= Harding v. United States, 81 F. (2d) 563_.._..._-------- 16, 17

| _ Hirsh v. Block, 267 Fed. 614, 256 U. 8. 135-..__- ane

-. ¢ Humbird v. Avery, 195 U. 8S. Pain panen tien tinsannsin . 2

pe a eee ee ee aaa eee

‘Hurley v. Commission of Fisheries, 257 U. 8. aa 26

' Ingles v. People, 90 Colo. 51-2. --.-------+----------+-- 29,

Jannett v. Windham, 109 Fla. 129____._-_..------------ 29

fe eg RS ee een eae 19

Kluezek v. State, 115 N. J. L. 105__----- imi enaibaciaidan 29

24481-8371 . ~~ (i),

Cases—Continued: : ' Page

Langer v. United States, 76 F. (2d) 817__..-.------------ 16, 17

Madden v. United States, 80 F. (2d) /672___.____._._____-- 14 -

Norton v, Shelby County, 118 U. 8S. nt hen 21

Pierce Oil Co. v. Phoenix Refining Co., 259 U. 8. 125_____- 28

_ St. Louis Co. v. Prendergast Co., 26 aa... £

Smith v: Indiana, 191 U. 8S. 138__--_....-...-.-.-.------ 12, 13

ls es I Bn needa necacscececaces 1s

Bai v. Ghoskey, 13 Walk. 06...........2............. 18

State v. Board of Police Commissioners, 56 .N. J. L. _ ee 30

eee I en ncncccenccncncnseesa 30

State v. Gardner, 54 Oh. St. 24.___._____-_- laa ahbane deed 19

+ ee We se Ee Bs BEE wadiccccnccscccceses Meieostcebiehieh - 30

Strang, Bz parte, 21 Oh. &. 610............22..2.22-22. 18

United Gas Co. v. Railroad Comm., 278 U. 8. 300:___-- 26, 27, 28

United States v. Bowman, 260 U. S. Di tadedct natn madion 11

United States v. Butler, 297 U. S. 1._-_..-.-------------- 11, 29

United States v. Cohn, 270 U. 8S. 339----- anseis LILES 11

United States v. Harding, 81 F. (2d) 563___-..-.-_------ 16

, United States v. MacDonald, 10 F. << eee 11,14

United States v. Realty Co.; 163 U. 8S. 427___,------------ 22

United States v. Schor, 13 F. Supp. 399___.._...-_------- 17

United. States v. Seelig and Mesch Construction and Equip-

ment Corp. (8S. D. N. Y,, Dec. 8, 1936)_......-...----- 15

United Staies v. Soeder, 10 F. Supp. 944_-_..._..-.------ . 11,17

Walt v. Parrot Silver & Copper Co., 244 U. 8. 407_-_--.-- 26, 28

Statutes:

_ Agricultural Adjustment Act of May 12, 1933, c. 25, 4X

hie G eh A iat eddighniianasbneenness 3, 4

Criminal Appeals Act of March 2, 1907, c. anes, 34 Stat.

1246 (U.8. C., Title 18, Sec. 682) _----.---- i canminaiens = 1

Sec. 28 (U. 8. C., Title 18, See. 72)_..-.---- aecdenns 14

Sec. 35, 35 Stat. 1095, as amended by the Act of

October 23, 1918, ch. 194, 40 Stat. 1015 (U. S. C.,

ees en adibeubbeaguecsoans 2

Sec. 37 (U. 8. C., Title 18, Sec. 88)_......-..--:---- 2

Miscellaneous: '

Bigelow, Fraud (1888) p. 497_...------:.------------ ss 24

Bower, Spencer, Actionable ‘idienseenntatine (1911) See.

Cae ueeesiebecedetinn 25 .

Field, The Effect of an Unconstitutional Sidete. 3... 18, 19

Opinions of the Attorney General P

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ei ccaccatipedabbdctenacnstinns 12

th a cbekinnaddnophnensead keen 12

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cndidvcedtandananasbencgen eakenee 12

s tt the Supreme Court ath the United Stats

OcTOBER TERM, 1937

| No: 97

THE UNirep STaTEs OF AMERICA, APPELLANT

Bren Kapp, Bert Cox, Tom Woops, Erc., Er Au.

APPEAL FROM THE DISTRICT COURT OF THE UNITED

STATES FOR THE WESTERN DISTRICT OF OKLAHOMA

BRIEF FOR THE UNITED STATES

OPINION BELOW

The opinion of the District Court appears at R. .

19-20. : ee:

JURISDICTION

The judgment of-the District Court was entered

April 6, 1937 (R. 20). The appeal to this Court was

- prayed for and allowed on May 5, 1937 (R. 21, 22).

_ Probable jurisdiction was noted on October 11,

1937. The jurisdiction of this Court to review, on

direct appeal, is conferred by the Criminal Ap-

peals Act of March 2, 1907, c. 2564, 34 Stat. 1246

(U.8.C,, 7 18, Section 682).

QUESTION PRESENTED

Whether the District Court erred in sustaining -

the demurrer of the appellees to the second count

of the indictment which charged them with con-

spiring to falsify material facts, in securing bene-

fits under the provisions of the Agricultural

Adjustment Act, for the purpose of se the

United States.

STATUTES INVOLVED

Section 37 of the Criminal Code, 35 Stat. 1096

(U.S. C., Title 18, Section 88) follows: ..

_. If-two or more persons conspire either to

commit any offense against the United -

States, or to defraud the United States in ©

any manner or for any purpose, and one or

more of such parties do any act to effect the

object of the conspiracy, each of the parties

to such conspiracy shall be fined not more

than ten thousand dollars, or imprisoned

not more than two years, % both.

Section 35 of the Criminal Code, 35 Stat. 1095,

- as amended by the Act of October 23, 1918, e Pate %

40 Stat. 1015, provides:

Whoever shall make or cause to be made

or present or cause 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, or any: department

thereof, or any corporation in which the —

United States of America is a stockholder,

any claim upon or against the Government

of the United States, or any department or

officer thereof, or any corporation i in which

the United States of America is a. stock-

_ holder, knowing such claim to be false, ficti-

tious, or fraudulent; or whoever, for the

purpose of obtaining or, aiding to obtain -

the payment or approval of such claim, or

for the purpose and with the intent of cheat-

ing and swindling or defrauding the Gov-

ernment of the United States, or any depart-

ment: thereof, or any corporation in which

the United States of America is a stock-

holder, shall knowingly and willfully falsify

or conceal or cover up by any triek, scheme, .

or device a material fact, or make or cause

to be made any false or fraudulent state-

ments or representations, or make or use or

cause to be made or used any false bill, re-

ceipt, voucher, : ‘roll, account, claim, certifi-

cate, affidavit, or deposition, knowing. the

same to contain any fraudulent or fictitious

statement or entry, * *-* ghall be fined

not more than $10,000 or imprisoned - not

more than ten | years, or both, * * *

STATEMENT

On N ovember 29, 1935, the appellees were in-

dicted on two: counts in the United States District

Court

| 1-15).

for the Western District of Oklahoma (R.

‘The first count, as interpreted. by the Dis-

trict. Court in its opinion (R, 19), charged a con-

spiracy to violate the provisions of the Agricultural

Adjustment Act. ‘The first count is not here in-

+ =

volved, as no error is assigned to the sa sustain-

ing the demurrer as to it. ' }

The second count, which is here in issue, alleges

a conspiracy to violate Section 35-of the Criminal

Code as amended, by making false claims, state-

ments and representations, with intent to defraud

the United States, whereby the defendants would

obtain from the United States moneys in payment

of benefits, allowed under the provisions of the

Agricultural Adjustment Act,.to which they were

- not entitled.

The second count first describes the Siietentin

program of the Government. It is averred (R. 8)

that the United States was at all times alleged in ©

the indictment engaged in. purchasing pigs from

producers under the provisions of the Agricultural

Adjustment Act of May 12; 1933, and under the -

ules and regulations made and promulgated by

the Secretary of Agriculture to carry out the pow-

ers invested in him by that Act; and that, for the

purpose of assuring that benefit payments: pro-

vided for in the Actywould reach the producers, the

Secretary of hart promulgated rules and

regulations to the €ffect that hogs owned or con-

signed by.traders.and speculators were not eligible

te benefit payments, and that the name -and ad-

dress of the owners of hogs declared eligible to

benefit payments must be furnished to the proces- -

sors receiving the hogs at the market. Further

regulations are set out in the indictment, which

provided that pigs could be handled for individual

farms by country buyers providing the farmer sup-

plied with the pigs a letter or telegram authorizing.

the shipment. ; as

These allegations are then made (R. 9):

* * * “it was the purpose and object of

Said conspiracy * * * that they [the .

defendants] should then and there falsely

and fraudulently make eertain false state-

- ments and misrepresentations, with intent to

defraud the United States * * *

whereby there would be shipped and trans-

ported to [a Chicago Commission Company]

for sale to the Secretary of Agriculture and

the United States of America * * *

certain pigs which the defendants * * *—

had purchased and would purchase from

farmers and producers of SS.

and said defendants would indicate and dis-

close, represent and state that the pigs so .

« shipped would be the property of various

producers other than the defendants, and

which said pigs * * * would be sold by.

[the Commission Companies] to the United

States of America at the premium price to be

paid for said pigs under the rules and regu-

lations promulgated by the Secretary of Ag--

riculture hereinabove set forth, and which

said pigs would, in truth and fact, be owned

yy * * ee defendants].

The indictment alleges that it was part of the ,

conspiracy directed toward a sale of the pigs to the

Secretary of Agriculture that certain defendants

—_?*

influential with Chicago commission firms would

secure permits for the. shipment of the pigs; that

other ‘defendants,’ pretending to be the original

producers, would cause the Chicago commission

merchants, acting as their, agents in the sale, to

lead representatives of the ‘Secretary of eAgricul-

ture to bélieve that they wee buying from the

original producers (R. 10); and would cause to be

presented to certain processing firms invoices for

the pigs, as being the property of the original pro-

- ducers and sold by the commission merchants for

the account of the Secretary of Agriculture; and

would thereby cause the processors to present fic-

titious claims to the Field Auditor of the Agricul-

tural Adjustment Administration (who was

authorized by the Secretary of Agriculture to

approve for payment such claims and vouchers),

‘*knowing said vouchers and claims were and would |

be false, fictitious, and fraudulent” (R. 11).

‘Phe indictment fur ther alleges eleven overt acts’

' in pursuance of the conspiracy, setting out in de-

tail that during September 1933 permits for ship-

ment of the Government pigs were secured, and the

defendants caused the agents of the commission

merchants to present to processing firms invoices

covering the pigs shipped, thereby causing the

processors to’ present specified vouchers, contain-

ing items covering these invoices, to the Field

Auditor of Agricultural Adjustment” Administra-

tion (R. 11-15).

ae a. 5 . “Wass

_, A demurrer, raising various objections, was in-

-terposed by defendants (R. 15, 17-18). On April

6, 1937, the demurrer was sustained as to each

count, the court assigning as its reason the in-

* validity of the Agricultural Adjustment Act. As —

_ to the second count, it concluded that the misrep-

resentations as to who owned the hogs shipped

‘‘éease to be misrepresentations of material facts

when the act itself falls”. (R. 19-20.)

SPECIFICATION OF ERRORS TO BE URGED

1. The District Court erred in holding that the

second count ef the indictment stated no offense

on the ground that the misrepresentations of facts

alleged were not misrepresentations of facts within

the meaning of Section 35 of the Criminal Code as _

amended, in as much as the Agricultural Adjust- —

ment Act is void. |

2. The District Court erred in holding that Sec- - ,

tion 35 of the Criminal Code does not extend to and

punish the offenses and acts of the defendants al-

leged in Count two of the indictment herein.

3. The District Court erred ‘i In sustaining the de-

_murrer to the second count of the indictment.

SUMMARY OF ARGUMENT

Notwithstanding the unconstitutionality of the

Agricultural Adjustment Act, appellees may be

guilty of conspiracy to violate Section 35 of the

"24481872. | |

8 i

Criminal Code by obtaining benefit payments under

that Act. Section 35 punishes anyone wha. shall

wilfully falsify or conceal a material fact or make

any false or fraydulent representations for the pur-

- pose and with the intent of cheating the United

States. It was intended to protect the Government |

against all frauds, including frauds’ ‘directed to -

activities of the | Government undertaken pursuant

to an unconstitutional statute. Because money |

should not be paid out of the,Treasury to some

favored class it does not follow that others may

with: impunity: falsely represent that they are of .

that class, and so enrich themselves at public ex-._

pense. Appellees conspired to cheat the Govern-

ment by selling hogs at premium prices through

misrepresentation as to the identity of the hogs °

sold. Although the Agricultural Adjustment Act

is void, this Court will consid cas included in the

facts of this case, the fact’that this statute was

. passed, and that the Secrétary of Agriculture pro-

mulgated regulations providing for purchase of

hogs at premium prices only from the original pro-

ducers. In view of these facts the representation

made by appellees, that they were the producers. oF :

certain hogs to be sold to the Secretary of A |

culture, was clearly ‘‘material’’ within the n6Gitn- ‘

ing of Section 35 of thé Criminal Code.

a :

In any event appellees are estopped to attack

the constitutionality of the Agricultural Adjust- -

.- we

Be ul 9

ment Act. They caused vouchers to be presented

for payment to the agent appointed by the Secre-

tary of Agriculture. Having invoked the Act, by

action. désigned to secure benefits under the Act,

they are estopped to assail its ‘validity.

ARGUMENT

NOTWITHSTANDING THE UNCONSTITUTION ALITY OF

THE AGRICULTURAL ADJ USTMENT ACT, _ APPELLEES

MAY BE GUILTY OF CONSPIRACY TO VIOLATE SECTION

‘35 OF THE CRIMINAL CODE, BY FRAUDULENTLY OB-

TAINING BENEFIT PAYMENTS UNDER THAT ACT

The second count of the’ indictment charges a

conspiracy (Section 37, Criminal Code, supra, p.

2). to_violate Section 35 of the-Criminal Code,

supre, pp. 2-3. The latter section punishes one who

“shall knowingly and willfully falsify or conceal

or cover up by any.trick, scheme, or device a ma-

terial fact, or make or cause to be made any false or

fraudulent statements or representations’’ ‘‘for

‘the purpose and with the intent of cheating and

swindling or defrauding the Government of the

‘United States.” *

In this case the appellees sibiinaiiea to cheat the |

United States by selling hogs to the Government at

premium prices through misrepresentation as to

the identity of the producers of the hogs sold. . In

. SA

— LO

sustaining the demurrer interposed by appelices,

the District Judge reasoned as follows (R. 20):

The overt acts charged, whieh would be |

— material in this count, are that hogs were

shipped under the representation by the de-

fondants that they were the hogs of various

producers when in fact the hogs helonged to-

one or more of the defendants. hy 00 iat

— There is no contention that the hogs were

not shipped and that the bills, which were

made to Armour and -Company aud other

processors, Were not vorrect bills, w ith the

> exception that, the hogs did not originate

from. the sources represented by the de-

fendants,

This ctases to De a material fact, if the

provisions of the Agricultural Adjustment

Act are void. Ly other words, the represen- ~

tations, which are alleged to have been made,

cease to be misrepresentations of material

facts when the act itself falls.

1. The court’s opinion disregards the legal sig-

nificance ofthe fact that appellees were indicted on

the second count, not for a conspiracy to violate the *

Agricultural Adjustment Act, but rather for a con-

spiracy to violate Section 35 of the Criminal Code,

protecting the United States Government against

frauds. The broad reach intended for Section 35 °

is apparent from a consideration of the astiendment

by the Act of October 23, 1918, c. 194, 40 Stat. 1015.

The statute, originally confined to the punishment

of those presenting fraudulent claims based upon

ye ae 11 | cy

the Government's own liability, United States ve

Cohn, 270. U. 8. 339, 345-: 146, was extended to “i

elude ‘others *. * °* who cause pecuniary or

property loss to the government by wikfully con-

eealing\by some trick, ete., a material fact.’’

Capone ly. United States, 51 ¥.. (2d) -609, 615

(CO. C. A, 7th). In view of the piling of United.

States v. Bowman, 260 U. S. 94, 102, that Section

4 must net be given an artificially strict construc-

tion but must be ‘fairly construed according to _

the legislative intent,” it is clear that the section

‘was intended to cover all situations in which the

Government might be cheated. |

In reaching a.result contrary ‘to other rulings -

announced on an identical fact situation, United

States v. MacDonald, 10 F. Supp. 948 (W. D. Mo.) ;

4 United States v. Soeder, 10 F. Supp. 944 (W. D.

Mo.), the court below apparently proceeded on the

assumption that the Government ‘could not be de-

frauded when operating under an invalid. law.’

1 The amiga errors, through a parenthetical citation,

imply that the-hog purchases i undertaken under Section

8 of the Agricultural Adjustment Act, c. 25, 48 Stat. 31

(R, 22). This-section was declared invalid in United States -

v. Butler, 297 U.S. 1. We are informed that in fact the

purchases were with funds made available for activities |

under Section 12 (b) of the original Act, the. validity of

which was not considered in the Butler case. In confarthity

to the séttled policy of this Court not unnecessaril¥to decide

constitutional questions, Burton v. United States, 196 U. S.

283, 295; Anniston Mfg. Co. v. Davis, 301 U.S. 337, 355, we

asssygne for the purpose of this argument that Section 12 ‘(b)

* was inseparably linked to Section 8, and that the payments -

were accordingly made under an unconstitutional statute. ”

aa 12 oe

But the money which the respondents aw to ob-

tain was money of. the United States. Whether

or not the statute and regulations under which,the

respondents made claim fdr payment were consti-

tutional, their misrepkesentatipns were made ‘‘with

_ the intent of cheating’ * */* the Government.”

_-» As such théy-are condemned by Section 35, irre-

. gpective of the constjtutionality of the Act under

which payments were made. _* {

2.,The court below apparently -proceeded upon

the hypothesis that the Goyernment officials should

have known that the statute was unconstitutional

and that respondents’ misrepresentations thus

‘could not be taken to be material since payment

should not be made in‘any-event. Such ‘a hypoth-

esis is unrealistic. It ignores a vital principle of-

practical constitutional gdvernment, that a law

is presumed to be constitutional until it is jugi- é

cially declared invalid, and, that it is the duty-of ~~

Government officials to enforce a statute duly en-

acted by Congress until it is held to be invalid.’

231 Op. A. G: 475, 476 ( Attorney General Palmer) ; 35 Op.

A; G. 110, 114-115 (Attorney General Stone, referring to a

letter written by a predecessor) ; 38 Op. A. G. + (Opinion

- of August 16, 1935; Attorney General Cummings) ; 39 Op.

_A. G. —— (Opinion. of March 26, 1937; Atforney General

Cummings) ; see also 36 Op. A. G. 21, 25 (Attorney General

Mitchell; cf. 10 Op. A. G. 56, 61 (Attorney General Bates) ;

31 Op. A. G. 218, 215 (Acting Attorney General Davis). It -

is settled doctrine in this Court that a public official has no

ing, under the due process clause, to attack the con-

itutionality of a statute which he is under a duty to en-_

force. See e. g. Smith v. Indiana, 191 U.S. 138, 148; Colum- -

woe.

; _ a3

Certainly the respondents knew. that the Govern-

ment officials were acting on the assumption that

- sthe statute was constitutional, else they would not

have presented the false claims.: And since the

Government Officials.were in fact making the pay-

ments, the misrepresantations were necessarily ma-

_terial and served to defraud the Government, what-

ever the ultimate decision as to the constitutionab

authority to make the payments.

Any other doctrine would have most dangerous

consequences in the encouragement of. fraud and.

chicanery in dealing with the Government. Fur-

ther; the logic would seem to carry over to out-

right theft of Government property used in a pro-

‘gram later. declared unconstitutional, since the

‘ United States might be said to be without authority

to purchase or hold the property for such a pur-

pose, and thus to rednce thescentral government to

a status at least reminiscent of that of the felon

declared outlaw at ancient common law.

_ 3. The uniform course of decisions in other

courts makes it plain that there is nothing in the

logie of constitutional government which requires

_ that. payments made pursuant to an unconstitu-

Bus & Greenville Ry. v. Miller; 283 U. &. 96, 99.. In Smith

v. Indiana, supra, 148, the Court said in dictum:

ie ot there are many authorities to the effect that a

ministerial officer, chargéd by law with the duty of enfore-

ing, a certain statute, cannot refuse to perform his plain

duty thereunder upon the ground that in his opinion it is

_ Tepugnant to the Corstitution.”

os,

“SD

)

iP . = 14°

tional program be declared fair game for knaves

and cheats.

Trenchant reference to the realities of the situ-

ation may be found in United States v. MacDoyld,

' “supra (10 F. Supp. 948) :

. Let it be assumed arguendo that in the

Agricultural Adjustment Act there was an

unconstitutional delegation of legislative

power. Let it he assumed arguendo that

the regulations made by the Secretary of

Agriculture and referred to in the indiect- .

. ment were not authorized. Still the gov-

ernment did devise a pig buying program.

Certainly any who conspired together to sell

-pigs to the government under that program,

falsely representing that they were entitled

to the benefit of its Provisions and so to ob-

tain money from t#e public treasury, hav

committed a crime. Because money shoul

not be paid of the treasury ta some

favored class it does not follow that others

who falsely tate. pt they are of. that

class, and so enrich themselves at public

expense, should go unpunished. [Italies

added. ]

Contraty to the snhanade of and the result

reached by the court below is the case of Madden

v. United States, 80 F. (2d) 672 (C. C. A. Ist).

_An indictment drawn under Section 28 of the Crim-

inal Code, U. 8S. C., Title 18, See. 72, Which pro-

hibits forgeri de ‘‘for the purpose of defraud-_

ing the Uni tates’, charged the forgery of a |

name to an assignments and jdentification card

weed by the- Civil Works Adininistration i in the se-

lection of individvals empldyed on lag project to

which Federal funds were advanced. The defense

was interposed that the National Industrial Re-

covery Act, under which the money. wes appropri-

ated, was ‘unconstitufi onal. The court said (Pe

674):

. There seems to be some diversity of opin-

. ion as to = constitutionality of - this

law * * *; but this is not a question

which we must decide, for if we were to as-

sume that the act appropriating the money

is unconstitutional, such assumption does

not furnish justification for embezzlement

of the funds in question, neither would it

furnish justification to thé defendant for di-

verting by means of forged instruments such

funds from the channels to whach they bad

been allocated.

In the recent opinion of United States v. Seelig

and Mesch Construction and Equipment Corp.

(S. D. N. ¥,, December 8, 1936), set out in the Ap-

* pendix, tafvn, p. 31, the indictment, char¥ing a

violation of Section 35 of the Criminal Code, al- -

eged that the defendants had stibmitted, in

nection with work done under the pedals

Relief Appropriation Act of 1935, youchers falsely

stating the rates at which certain employeés were

‘paid. - In refusing to countenance, as a possible

defense, the invalidity of the Emergency Relief -

. Appropriation Act, the court stated:

the court in Madden v. United States. The

o6tt—6F——-8

I am in accord with-the view expressed by _ |

16 Ws

result urged by the defendants would lead —

. inevitably to gross frauds upon the Gdovern-

-. ment. Pressed to its logical conclusion, the

defendants’ thesis is that whenever a specific

eens = eae has been made .—

under an unconstitutienal statute, the fund. .

appropriated becomes fair game for con-

tractors dealing with the government, and

is not within the protection of federal stat-

utes designed for its protection. Even if the

° fund here involved w ere improperly appro-

priated, the money, so long as it is within”

the control of the Treasury Department,

remains the property‘of the United States ~

and its expenditure, even for an illegal pur-

pose, must necessarily be-in accordance with

pertinent rules and regulations, and the

matter of their application to a govern-

« mental function under the jurisdiction of

the department: authorize¢ * execute the

legislation. : ae

‘Thesé cases exemplify the uniform ‘course of de-

cision on the problem. Other criminal _ in-

volving conspiracy or fraud, and rejectingidefenses

grounded on the alleged invalidity. ‘of the Goverh-

ment’ ’s activities, include Langer v. United States,

6 F. (2d) 817, 824-82H(C. C. A. 8th) (conspiracy

corruptly to ad minister Rederal Emergency Relief

Act and Act set ting up the Reconstruction Fifiance

_ 7 Qorporation) ; United States v. H. arding,. 81 F.

pS 563.(App. D. G.) (conspiracy to deprive Gov-

ernmentéof: money appropriated to.Public Works

‘ Snaky smaciaiaeiee under the National Industrial Re-

“ ‘covery Act) ; ; United States v. Soeder, 10 F. Supp.

944, 947 (W. D. Mo.) (conspiracy to defraud Gov-

ernment by violating provisions, of Agricultural 7

- Adjustment Act); United States v. Schor, 13 F.

Supp. 399, 401 (E. D..N. Y.) (presenting false

: claims in connection with project built in part with

funds appropriated under National Recovery

_ Act); ef. Cagle v. United States, 3 F. %2d) 746

(C. C. A. 6th) ( conspHacy to defraud Government

of title and possession to an automobile ; held imma-

" terjal whether automobile had been obtained by

legal or illegal seizure) .

4. The Langer and Harding cases, supra, utilize

a slightly different. approach to the’ problem. As

stated in ‘Harding v. - United States, 81 F.. (2d)

at 568:

We answer this polit as did the Circuit

Court of Appeals in the Eighth Circuit, Lan-

ger v. Unte@States, 76 F. (2d) 817, 824, that

the gist of the offense charged is conspiracy,

and the indictment: being properly. drawn

under the conspifacy statute, the on

the National Industrial Recovery Act is in

the nautre of a collateral attack ; and the in-

dictment is good as a conspiracy{ indictment

even though the National Recovery Act may

be unconstitutional. . .

- Itis submitted that, in the present gontext, this

doctrine of ‘‘collateral attack’’ constitutes merely a.

formulistic expression of the thesis that the sub-

‘stantive crime, the fraud upon the Government or .

the conspiracy to defraud, is punishable whether

or not.the Government’s activities were undertaken .

_ pursuant to a valid law.. The concept is doubtless

borrowéd from the substantial body of authority

_ to the effect that private.corporations and munici-

pal corporations created under, and public officers

appointed under, an unconstitutional statute, are

not wholly to be ignored, but constitute de facto cor-

porations or de facto officers, whose title or lawful

authority may not be attacked collaterally,* but dh

* See, e. g., Smith v. Sheeley, 12 Wall. 358 (de facto aon

organized under act of territorial legislature which was

without any force or effect: because not approved or con-

firmed by Congress). Many cases are collected in Field,

- The Effect of: an Unconstitutional Statute, Introduction,

chapters IT, III, IV. It is not suggested that the cases are

all uniform, and it is not denied that several cases attribute no

: legal effect whatever to an invalid enactment. See, e. g., Field,

passim, and seé pp. 43, 102. - As typical of the cases giving

some effect to a statute already declared unconstitutional, or

' without determination of its validity vel non, see, e. g.; City

_ of Topeka v. Dwyer, 70 Kan. 244 (perscn indicted for vio-

lation of ordinance may not attack statute authorizing addi-

tion of territory around his home to the municipal] limits) ; -

Smith ¥. Lynch, 29 Oh. St. 261 (taxpayer may not enjoin

‘ collection of tax because board collecting the tax was estab-

lished by an invalid ordinance) ; Cawtin v. Barton, 139 N. Y.

505 (party to civil suit nt appeal on the ground that—

the trial judge was a to office under an invalid

statute); Ly parte Strang, 21 Oh. St. 610 (same result in

criminal case).—I+s not intended to suggest that “de facto”

action may always be taken under an invalid law. Thus a

defendant in a criminal case may not attack the validity of

the statute governing the selection of the trial judge, but he

may attack the statute creating the court or the office of the

judge. Field, pp. 101 et seq. Such refinements do not

obscure the fact that, at least in some situations, some legal

cognizance will be. taken of an unconstitutional statute.

be brought mrte question directly by appropriate

officials, e. g., through a quo warranto action by the

attorney general of-the State. ‘‘Collateral attack”’

does not have precisely the same connotations as

applied to an attack on a statute which does not — |

also involve an attack on an official or corporate

authority (which might more appropriately be at-

tacked in an authoritative and direct proceeding).

Yet it is apparent that similar considerations of

policy may be pertinent to both types of cases.

Thus, analogous to the case at bar is State v.

Gardner, 54 Oh. St. 24. The defendant was in-

dicted for offering a bribe to a ¢ity commissioner.

The defense was that.the statute creating the city

_ of which the commissioner was alleged to be an of-

ficer. was unconstitutional, and there being no legal

organization of. the city or its government there

could be no officer of the city to whom a bribe

could be offered. The court held that the existence

of the city or its government could not be attacked

in such acase.* See 54 Oh. St. at 31:

We think that principle of public policy,

declared by the English courts threé cen-

turies ago, which gave validity to the official

acts of persons who intruded themselves

into an office to which they had not been

‘ But cf. Kirby v. State, 57 N. J. L. 320 (incumbent of

office created by unconstitutional statute cannot be guilty of

extortion), whose precedent value in its own jurisdiction is

discussed and doubted, see Field, The Effect of an Un-

constitutional Statute, p. 107.

legally appointed, is as applicable to the

conditions now presented as they were to

the conditions that then confronted the Eng- ,

lish judiciary” We are not required to find

a name by which officers are to be known,

who have acted under a statute that has

subsequently been declared ynconstitutional,

though we think such officers might aptly be

~ ealled ‘‘de facto officers.”” * * * -Courts,

in the practical administration of. justice _

should regard the substance of things and |

deal with conditions as they actually exist.

Here are grave and important official acts

actually performed by virtue of an office,

“created ‘ander the a a eater

been preter ty the pine enero there.

is a clearly established legal, presumption of

its validity. The public in its organized

capacity as well as private citizens has ac- _

quiesced in and submitted to their author-

ity. Such circumstances, the majority of

the court are of opinion, are sufficient to

give such color to their title as to make them

de facto officers;. but whether they fall

‘within the previously exfsting*definition of

such officers or not, thar official acts thus

~performed fall within the protection of that

principle of public policy which defends

them against collateral attack, and that,

therefore, the question of the constitutionai-

ity of the statute in ‘question was not before

* the court of common pleas.

% s

_5. The fundamental error of the formalistic

opinion below lies in the breadth of its major .

premise, that the Agricultural Adjustment Act

was ‘void ab initio’? (R. 19).° Presumably the

trial judge was invoking the well-known expression

frequently excerpted from Norton v. Shelby

. County, 118 U. S. 425, 442:

¢ An unconstitutional act i is not a law; ae con-.

fers no rights; it imposes no duties ; it af-

fords no protection; it creates no office ; ot

is, in legal contemplation, as inoperative as:

of it had never been passed. [Italics added. ]

If the premise be accepted, the syllogism acquires

_a_superficial persuasiveness.’ If no Agricultural

* Adjustment Act had ever been passed, perhaps it

would not be ‘‘material’’ to any Government official

_ Whether the hogs he ee were. ‘produced by

- the vendor or not. )

But the statement that an iii ia stat- —

ute must be viewed as if it-+had never been passed

is not true in all contexts and for all purposes.

It is not necessary here to inquire into the legal

rights and duties which may arise by virtue of the

enforcement and application of a statute later de-

- clared unconstitutional. It is certainly true that

this Court will not shut its eyes entirely to the fact

that a statute was passed and: enforced, and that

_ individuals and officials took action and made plans

® Although this expression.was used only in thé discussion

of the-first count of the indictment, it is apparent that this

. theory underlies the entire opinion. :

with reference to the law on the books. In cther

words, the statute will be regarded, in an appro-__

priate instance, as one of the facts in the case. “ >

_ Authority for this view is to be found in United

States v. Realty Company, 163 U. S. 427. That

_ ease involved two actions brought to obtain moneys

by reason of Congressional legislation in regard

to sugar bounties. The Tariff Act of 1890 provided

for a bounty to be paid to producers of sugar pro- |

duced in this country. This statute was repealed

in 1894, and in 1895 Congress -provided that a

bounty should be paid to those producers and man-

ufacturers who had complied with the 1890 law and

had not yet been paid. The disbursing official de-

clined to pay the bounty on the. ground that the

1890 Act was unconstitutional, and that therefore»

there was no debt for which Congress could validly .

make an appropriation (by means of the 1895 stat-

ute) under its power to lay and collect taxes ‘‘to

pay the debts” of the United States, This Court :

refused to decide whether or not the 1890 Act was

void, and held that in any case the producers had

claims of an equitable or moral nature which could

validly be recognized by Congress. See\pp. 438,

439: . .

Being unconstitutional, there never was a

moment, it is,stated, when there was any

, Valid act, and, therefore, no equities can

arise in their favor.because of any acts done

by them upon the faith of the act, which ~—

_ they, were bound to know was wholly void. -

This reasoning does not exactly fit the case.”

It is not a question whether any strictly

~ legal rights can arise out of an unconstitu-

tional act. It is a question whether equita-

ble considerations can attach to a claim

which, among other grounds, is based upon

an act that was supposed by all the officers

of the government to be valid and which

was repealed only when the whole taxing

act of 1890 was subjected to a careful and

_comp@ghensive révision. There are occa- -

’ sions when the presumption that every man

knows the law must be enforced for the

safety of society itself. * * * But in

such a case as this, knowledge of the inva-

lidity of the law in advance of any authori-

tative declaration to that effect will not be

imputed to those who are acting under its

provisions, and receiving the benefits pro-

vided by its terms. These parties cannot

be held bound, upon the question of equitable

or moral consideration, to know what no one

else actually knew, and what no one could

know prior to-the determination, by some

judicial tribunal, that the. law was uncon-

stitutional. Although it should finally turn

out that the law is invalid, and is so pro- ~

nounced, yet during all the time of its oper-—

ation, as has been:stated, all the officers of

the government united in treating it as a

_ valid act. No court had determined ‘to the

contrary. It was a question at least admit-

ting of argument. * * *_— |

We are of the opinion that the parties,

situated as were the plaintiffs in these ac-

or 7

Oo Eee, i

tions, acquired claims upon the government

of an equitable, normal or honorary nature.

* * * They are asserting that by rea-

son of the occurrences which took place be- — °

fore the appropriation, among which wds

the passage of the_act of 1890, they were go

placed before Copy, as to authorize that

body to recognize the equities of the situa-°

tion, and to pay their claims which, while .

: they wege not of a legal character, were

nevertheless of so meritorious and equitable

a nature as to authorize the nation through

its Congress to appropriate money to pay

them. . [Italics added. ] _

Unconstitutional though the 1890 law may have ©

been, it was real enough to be considered as an

‘‘occurrence,’’ ora fact in the case, supporting the

conclusion that the sugar producers who had taken

action in reliance on the statute, had an ‘‘equita-.

ble’’ or ‘‘moral’’ claim against the Government.

Similarly here, when the Agricultural Adjust-

ment Act is viewed as one of the facts in the case, _

lending meaning to the actions and plans of the

appellees, then their criminal responsibility, based |

upon the materiality of. their representations, be-

comes obvious:

- Within the meaning of the doctrines governing

actions in fraud and deceit, a representation is

‘‘material’’ if ik offers a motive sufficient to influ-

ence the conduct of asperson of average intelligence,

_—

_ Bigelow, Fraud (1888) p. 497; Hall v. Johnson, —

41 Mich. 286, 289, or if the representor is aware

that’ this stat@ment, “though it would be. utterly

inoperative on the mind of any other person, will

thake all tht difference in the world to the particu-

_ lar.representee to whom he addresses it,’’ Spencer

. Bower, Actionable Misrepresentation (1911) See.

128. Here the Agricultural Adjustment Act was

in existénce and had not yet been declared invalid.

Appellees had knowledge of the regulations they

desired to ¢ vent, which made it clear that the

_ Field Auditor, whose duty it was to enforce the

Act and approve the vouchers for payment, regard-

less of his opinion as to. its constitutionality, would

be influenced by the representation that appellees

were the producers of the hc gs sold. It seems obvi-

~~. ous that their misrepresentation was a “material”

one. | ps

| , =f . ‘

_ APPELLEES ARE ESTOPPED TO ATTACK THE CONSTITU- .

TIONALITY OF THE AGRICULTURAL “ADJUSTMENT

ACT ;

Even if it be assumed that the success of a prose-

cution for a conspiracy to violate Section 35 of the

Criminal Code is dependent upon, the constitution-

ality of the Agricultural Adjustment Act, the ap-

pellees are estopped to assail the constitutionality

_ of that Act.

It is well settled that one who has availed himself

. of the benefits of a statute is estopped to question

. its constitutionality. Daniels v. Tearney, 102 U.S.

— 415, 421; St. Louis Co. v. Prendergast Co., 260 U. 8.

"26

| * yey

469, 472-473. -For purposes of this argument on

demurrer it dges, not appear that the appellees re-

ceived payments under the Agricultural Adjust-

ment Act,**but the doctrine of estoppel applies as

-well to one who has not actually. received benefits

under a statane, but has taken action under the

statute in quest of such benefits. Thus,apart from .

the rwe that one may not both rely upon and assail

. an enactment in the same proceeding, Hurley. v.

Commission of Fisheries, 257'U. S. 223, 225, the

constitutionality of a statute may not be attacked - -

by one who has previously invoked the statute by

taking steps or’ instituting proceedings in. accord-

ance with its provisions. Great Falls Mfg. Co. v.

| Attorney General, 124 U. S. 581, 598-600; Wall’v:

Parrot Silver & Copper Co., 244 U, S. 407, 411- .

412; United Gas Co. v. Railroad Contm., 278 U.S.

300, 307-308; cf. Booth Fisheries y. Industrial

Comm., 271 U. S. 208. =

In both the Great Falls Mfg. Co. and Wall cases

a party who had instituted a proceeding prescribed

by~statute for the determination of damages suf-

_ feyed from the loss of property rights-was held

unable to maintain a separate suit attacking the

~ constitutional sufficiency of the statutory proce- —

LE) adh ay

“The second count of the indichneit isclose

that “appellees ever received a payment ef no under the

Agricultural Adjustment Act, $i apept sare theged dtr -

we onlt ite yrmahtedthn ot yosshers er it (ER

WW). The first count, which avers that pigs were sold to the —

agents of the Secretaty of Agriculture at premium prices

(R. 5), is not before the Court on this appeal.

_flure to provide adequate remuneration, though

the proceedings hati not yet effminated in an

award, and no benefits had been received. ‘In the

United Gas Co. case, because a gas company had —

petitioned a state commission to establish higher

_ Fates or permit withdrawal from service, it was °

held unable, in a ‘suit to set aside the commission’s_

order denying it relief, to assail the statute creat--

‘ing the commission, or the statute prohibiting any

- public service company which. had continyed its

service after the expiration of its franchise par-

tially to withdra® from such service without per-

missipn of the conimission.

It is. true that in Buck v. Kuykeydall~267

U. S. 307, the Court directed that the enforcement.”

of a Washington statute, making a certificate of

convenience. and necessity a prerequisite to the use +

of the “highways by a common carrier operating

instance of one who had applied, in vain, fer sucha _

certificate. The Court stated (pp. 616-317) that |

the doctrine of estoppel was not applicable, though

the carrier had invoked ‘the exercise of the power

now assailed, because the carrier had neither re--

ceived any benefit, nor was it relying on the statute

and attacking it in the same proceeding. The case

_ Inay be open to the'distinction that the statute, de-

limiting the freedom to engage in the transportation .

business, was wholly burdensome as to carriers,

aN could not possibly confer any benefits. But ,

—

—-

the approsch of the case seems to be at variance |

with the cases just discussed. ;

On principle as well as authority it seems ‘that

a party should not be able f#-assume inconsistent

positions,® first to rely on a statute and later to.

assail it, even though he has. failed to secure the

benefité which: he sought under the statute. It is,

. believé@ that the correct doctrine ‘is that stated in

the more recent decision of United Gas Co. v. Rail--

. road Commission, 278 U.S. 300, 307-308:

It is the rule of this Court, consistently ap-

plied, that one who -has ‘wench’ action by

state courts or authorities under state stat-

the result, assail their action on the theory

- taken offend against the Constitution of the

United States. * * *

7In Great Falls M te Co. v. pre General, 24 U.S.

581, the Court emphasized the inconsistency of the corpora-

tion’s position: it had previously acquiesced -in ‘the taking

of the property, and the procedure before the Court of

Claims; it éuld not. now bring a suit proceeding on the.

ground that there had been no lawful taking (pp. 598, 600).

The. Cqurt stated that the corporation should have. stood

. upon its constitutional rights in the first place, if it desired

to urge them (p. 600). See infra, footnote 6. In Wall-v.

Parrot Silver & Copper Co., 244 U. S. 497, the Court stated

(p. 412): “They cannot claim the benefit of statutes and

afterwards successfully assert their invalidity.” *[Italics

added. | ares | | ? :

® The power to claim a constitutional right may be barred

“by pt sl election. or by conduct inconsistent with the

assertion of such a right.” Pierce Oil Co. v. Phoenia feefin-

ing Co., 259 U. S. 125, 128-129.

Y; | .

—.

The indictment sets out that appellees conspired

to obtain benefits under the Agricultural Adjust-

> ment Act, and that they caused to be presented to

the Field Auditor appointed by the Secretary of

Agriculture vouchers for approval and payment

by the United States. -Having thus invoked the

Act, by action designed to secure benefits under

the Act, they are estopped to attack its validity.

Noné of the factors i in the instant case precludes .

the appli#@ation of the doctrine of estoppel. It ap-

plies to Federal as well as State statutes. Great

Falls Mfg. Co. v. Attorney General, 124 U.S. 581;

|. American Bond & Mortgage Co. v. United States,

— 52 F. (2d) 318, 321 (C. C. A. 7th); see Hirsh v.

Block, 267 Fed. 614, 618 (App. D. C.), reversed

on another ground, 256°U. S. 135; ef. Humbird v.

Avery, 195 U. S. 480. It applies nolwithetanding

the fact that the. Agricultural Adjustment Act is

concededly unconstitutional in several aspects, -

_ United States v. Butler, 297 U. 8:1. -In-Daniels v...

Tearney, 102 U.S. 415, the Court declared a statute

invalid (pp. 418-419) and yet held that there was

an estoppel to. aver. its unconstitutionality (pp.

- 421-422). It applies notwithstanding the fact that

a criminal prosecution is involved, where the deé-

fendant has accepted the benefits of or invoked the

; statute.” Kluceek v. State,-115 N. J. L. 105, 111;

°In addition may be ‘ea hioesns criminal cases preclud- .

ing a defendant from relying on and assailing the statute

in the same proceeding. Hunt v. State, 186 Ind. 644; State -

v. Collins, 225 Mo. 633; Ayers v. Newark, 49 N. J. L. 170;

State v. Board of Police Com’?rs;58.N. J. ‘ 258,

| 30

Ingles v. People, 90 Colo. 51, 56-57; Janneti v.

Windham, 109 Fa. 129, 130; :° State v. Sténe, 46 La.

_ Ann. 147, 150.”

CONCLUSION

For the ‘reasons stated it’ is respectfully sub-

mitted that the judgment of the District Court

‘' should be reversed and the cause remanded with |

instructions to overrule the demurrer.

{ Svan.ey REED, be

| Solicitor Géneral.

Brien McManon,

Assistant Attorney General.

4 -W. W. Barron,

Special Assistant to the Attorney General.

JOHN M. SULLIVAN,

Attorney.

ss HAROLD LEVENTHAL,

_ Special Attorney.

N OVEMBER 1937.

1° On rehearing, as an alternative ground of decision, the

state court examined the statute and held it consonant with - ~

the Federal Constitution, and on this ground the judgment

was affirmed, 290 U.S. 602.

11The court held that a defendant wi a furnished -

samples of milk without objection could not-attack the pro-

vision of a milk ordinance requiring dairymen to. furnish

free samples or attack the regularity of the execution of the

ordinance, but it did permit him to attack the separate

- provision punishing the sale of adulterated milk.

IN THE DISTRICT COURT OF THE UNITED STATES FOR

THE SOUTHERN DISTRICT OF NEW YORK

No. C 99-6

UniTep States OF AMERICA, PLAINTIFF

: v. :

M. C. SEELIG AND Mescu ConstTRUCTION AND Equr-

_ MENT CorP., DEFENDANTS

_ OPINION

Knox,D.J.: |

This is a demurrer to an indictment in nine

counts, each charging violation of Criminal Code, :

Section 35, 18 U. S. C. A., Section 80. The defend-

ants have been indicted for submitting to the Treas-

‘ury Department, Procurement Division, false

equipment and furnishing pessonnel to the Treas-

ury Department, Procurement Division, for work

under the Emergency Relief Appropriation Act of.

_ 1935.. The Treasury Department’s invitations to

paid personnel. These specifications were part of

the contract. In submitting their bids, the defend-

ant proposed to pay their engineers $1. 50 per hour

and their drill runners $1.10 per hour, plus com-.

pensation- insurance: The-Treasury ‘Department

accepted defendants’ bids for services in connec-

tion with the-construction of the foundation of a |

(31)

library at City College, and on the rerio of sureet

car,tracks on Madison Avenue and on Central Park

West, New York City. Thereafter, defendants

submitted bills, receipts, vouchers, etc., to the Treas- |

ury Department in which certification was made

that defendants had paid the two classes of person-

nel at the rates agreed upon in the contracts. These —

claims presented have been partially paid by the

Treasury Department. The government charges

that the papers mentioned in the indictments and

submitted to the Department, as charged therein,

were false, and known to pe false in that defend- —

ants had “paid their personnel substantially less

than was represented to the Treasury Department.

The statute under which this prosecution is

brought reads as follows: |

Whoever shall make or cause to be made

or present or cause to be presented, for pay-

ment or approval, to or by any perso. or

officer in the civil, military, or naval service

of the United States, or any department

thereof, or any corporation in Which the

United States.of America is a stockholder,

any claim upon or against the Government

of the United States, or any department or

officer thereof, or any corporation in which

the United States of America is a stock- -

holder, knowing such claim to be false, fic-

titious, or fraudulent; or whoever. shall

‘knowingly and wilfully falsify or conceal or

cover up by any trick, ‘scheme, or device a

material fact; or make or cause to be made

any false ‘or fraudulent statéments or rep-

resentations, or make or use or cause to be

made or used any false bill, receipt, voucher,

roll, account, claim, certificate, affidavit, or

deposition, knowing the same to contain any

< - 33

fraudulent or fictitious statement or entry, _

in any matéer within the jurisdiction of any |

department or agency of the United States

or of any corporation in which the United

States of America is a stockholder shall be

fined not more than $10,000., or imprisoned

not more than ten years, or both. (As

amended June 18, 1934, c. 587, 48 Stat. 996.)

The principal ground of the defendants’ de-_

murrer is that Criminal Code, Section 35, 18 U. 8.

C. A., Section 80, as construed with sections 1 and

7 of The Emergency Relief Appropriation Act of

1935, is inapplicable to defendants’ transactions -

with the Treasury Department; if, however, the

acts are applicable, they are unconstitutional be-

cause they are beyond the powers delegated to Con-

gress by the Constitution or because they purport

to delegate législative power to the President of

the United States. The defendants-also-¢eqntend

that the indictment fails to state facts sufficient to

constitute a crime. The defendants stress the

phrase ‘‘matter within the jurisdiction’’, contend-

ing that the statute under which the contracts were:

made, viz., The Emergency Relief Appropriation

Act of 1935, is invalid, and therefore the matter

cannot be ‘‘within the jurisdiction’’ of the Treas-

ury Department.

In Madden v. United States, 80 Fed. (2d) 672,

_ the defendant, appealing from a conviction for

forging certain assignment cards used by the Civil

Works Administration, contended that Title II of

The National Industrial Recovery Act was uncon-

stitutional. The court, in affirming the conviction,

Said: — % .

Counsel for the appellant stresses the

point in argument that the provisions of the

National Industrial Recovery Act are uncon-

stitutional and that Congress has no consti-

tutional authority under the public welfare

clause to set up a bureau or agency for the

expenditure of federal funds for purely

state or municipal projects such as to pay

employees for — books i in the Bos-

ton Public Library.

There seems to be some diversity of opin-

ion as to the tonstitutionality .of this law

(citing casés); but this is not a question

which we must decide, for if we were to as-

sume that the act appropriating the money

is unconstitutional, such assumption does

not furnish jurisdiction [sic] for embezzle-

ment of the funds in question, neither would

it furnish justification to the defendant for

--~diverting by means of forged instruments

such funds from the channels to which they .

had been allocated.

The Supreme Court denied certiorari, 56 Su- .

preme Court 502. _

I am in accord with the view expressed by the

court in Madden v. United States. The result

urged by the defendants would lead inevitably to

gross frauds upon the Government. Pressed to

its logical conclusion, the defendants’ thesis is that

whenever a'specific appropriation by Congress has

been made under an unconstitutional statute, the

fund appropriated becomes fair game for contrac-

tors dealing with the government, and is not within

the protection of federal statutes designed for its

protection. Even if the fund here involved were

improperly appropriated; the money, so long as it

is within the control of the Treasury Department,

remains the property of the United States and its

expenditure, even for an illegal purpose, must nec-

~~"

_essarily be in accordance with pertinent, rules and

- regulations, and the matter of their application to

a governmental function under the jurisdiction of

the department authorized to execute the —

Jation. © *

_ In United States v. Schor, 13 Fed. supp. 399, -

case very similar to the instant prosecution, the

court said:

_ * * * the exercise of an administrative

function, i. e., jurisdiction, on the part of

an agency of the United States’ was recog- -

nized as a necessary consequence of entering

into and carrying out the contract, into

which these defendants entered.

- If the foregoing reflects a correct under-

standing of the necessary incidents of the -

contract which ‘gave rise to the defendants’

claims for payments, it follows that they in-

tended to and did submit themselves re the

- exercise of jurisdiction by an agency of the

United States, when they filed the certifi-

cates, vouchers and bill which they: knew to

be false, and that this court had a

of the offense charged.

It thus becomes unnecessary to pass upon the

constitutional issues proposed by the defendant.

The demurrer is overruled.

. DECEMBER 8, 1936. .

GU. S$. GOVERNMENT PRINTING OFFICE: 1937

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.