A-28182, AUGUST 31, 1929, 9 COMP. GEN. 97

A-28182: Aug 31, 1929

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VETERAN'S BUREAU - INSURANCE - FRAUDULENT ENLISTMENT WAR-RISK INSURANCE IS VALID WHERE ISSUED IN ACCORDANCE WITH THE TERMS OF THE CONTROLLING STATUTE DURING AN ENLISTMENT PERIOD FRAUDULENT IN ITS INCEPTION BECAUSE OF CONCEALMENT OF DISABILITY AND PRIOR SERVICE BUT WHICH WAS VALIDATED BY AN HONORABLE DISCHARGE PRIOR TO THE DISCOVERY OF FRAUD. 3 COMP. ARE NOT RETROACTIVELY EFFECTIVE REQUIRING REFUND OF AMOUNTS ACTUALLY RECEIVED PRIOR TO THE DATE OF THE ACT. ANY AMOUNT OF DISABILITY COMPENSATION ACTUALLY RECEIVED SUBSEQUENT TO THE DATE OF THE ACT ALTHOUGH FOR A PERIOD RETROACTIVELY EFFECTIVE PRIOR TO THE DATE OF THE ACT IS FORFEITED AND MAY BE CHARGED AGAINST THE AMOUNT OF WAR-RISK INSURANCE DUE THE VETERAN.

A-28182, AUGUST 31, 1929, 9 COMP. GEN. 97

VETERAN'S BUREAU - INSURANCE - FRAUDULENT ENLISTMENT WAR-RISK INSURANCE IS VALID WHERE ISSUED IN ACCORDANCE WITH THE TERMS OF THE CONTROLLING STATUTE DURING AN ENLISTMENT PERIOD FRAUDULENT IN ITS INCEPTION BECAUSE OF CONCEALMENT OF DISABILITY AND PRIOR SERVICE BUT WHICH WAS VALIDATED BY AN HONORABLE DISCHARGE PRIOR TO THE DISCOVERY OF FRAUD. 3 COMP. GEN. 431; ID. 691, DISTINGUISHED. WHILE THE PENAL PROVISION CONTAINED IN THE WAR RISK INSURANCE ACT, AS AMENDED BY THE ACT OF AUGUST 9, 1921, 42 STAT. 152, IMPOSING A FORFEITURE OF ALL RIGHTS TO DISABILITY COMPENSATION FOR FRAUD PERPETRATED BY THE CLAIMANT, ARE NOT RETROACTIVELY EFFECTIVE REQUIRING REFUND OF AMOUNTS ACTUALLY RECEIVED PRIOR TO THE DATE OF THE ACT, ANY AMOUNT OF DISABILITY COMPENSATION ACTUALLY RECEIVED SUBSEQUENT TO THE DATE OF THE ACT ALTHOUGH FOR A PERIOD RETROACTIVELY EFFECTIVE PRIOR TO THE DATE OF THE ACT IS FORFEITED AND MAY BE CHARGED AGAINST THE AMOUNT OF WAR-RISK INSURANCE DUE THE VETERAN.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, AUGUST 31, 1929:

THERE HAS BEEN RECEIVED YOUR LETTER OF JULY 30, 1929, SUBMITTING FOR CONSIDERATION THE WAR-RISK INSURANCE AND DISABILITY COMPENSATION CASE OF WILLIAM N. EDWARDS, ALIAS JOE D. EDWARDS, C-413078, INVOLVING (1) THE VALIDITY OF THE WAR-RISK INSURANCE ISSUED DURING AN ENLISTMENT IN THE ARMY UNDER THE ASSUMED NAME, WHICH ENLISTMENT WAS FRAUDULENT IN ITS INCEPTION BECAUSE OF CONCEALMENT OF DISABILITY AND PRIOR SERVICE IN THE MARINE CORPS, BUT FROM WHICH THE INSURED WAS GRANTED AN HONORABLE DISCHARGE WITHOUT KNOWLEDGE OF THE FRAUD BY THE MILITARY AUTHORITIES, AND (2) THE PROPER BASIS FOR CHARGING AGAINST THE REMAINDER OF THE INSURANCE, IF DETERMINED TO HAVE BEEN VALID, THE AMOUNT OF DISABILITY COMPENSATION FORFEITED FOR FRAUD IN APPLYING FOR COMPENSATION UNDER TWO DIFFERENT NAMES FOR THE SAME DISABILITY.

THE VETERAN ENLISTED IN THE UNITED STATES MARINE CORPS ON FEBRUARY 1, 1918, UNDER THE NAME OF WILLIAM N. EDWARDS, AND WAS DISCHARGED ON AUGUST 21, 1919, AS A TUBERCULOSIS SUSPECT. ON SEPTEMBER 28, 1919, HE ENLISTED IN THE ARMY UNDER THE ASSUMED NAME OF JOE D. EDWARDS. HE APPLIED FOR $10,000 WAR-RISK TERM INSURANCE ON JANUARY 26, 1920, AND WAS DISCHARGED ON MAY 21, 1920, ON ACCOUNT OF A DISEASE OF THE LUNGS (TUBERCULOSIS), AND GIVEN AN HONORABLE DISCHARGE. HE WAS SUBSEQUENTLY RATED AS PERMANENTLY AND TOTALLY DISABLED FROM OCTOBER 14, 1919, AND MONTHLY PAYMENTS OF INSURANCE WERE MADE TO HIM UNTIL DECEMBER 25, 1925, WHEN IT WAS DISCOVERED THAT HE WAS FRAUDULENTLY RECEIVING COMPENSATION UNDER TWO DIFFERENT NAMES, IN VIEW OF WHICH DISCLOSURE ALL PAYMENTS TO HIM WERE SUSPENDED. THEREAFTER THE BUREAU DETERMINED THAT ALTHOUGH THE VETERAN HAD FRAUDULENTLY RECEIVED COMPENSATION, HIS INSURANCE WAS VALID, AND AN AMENDED AWARD WAS SUBMITTED TO THIS OFFICE FOR PREAUDIT PROPOSING TO REOPEN THE AWARD OF INSURANCE AND WITHHOLD PAYMENTS THEREUNDER UNTIL COMPENSATION FRAUDULENTLY RECEIVED SHALL HAVE BEEN RECOVERED. THE DATE FOR RESUMPTION OF INSURANCE PAYMENTS, IF VALID, HAS BEEN TENTATIVELY FIXED BY THE BUREAU AS JANUARY 1933, WHEN IT IS BELIEVED THE INDEBTEDNESS CAUSED BY THE RECEIPT OF COMPENSATION FRAUDULENTLY WILL HAVE BEEN LIQUIDATED. THERE WAS QUESTIONED IN THE AUDIT THE VALIDITY OF THE INSURANCE BECAUSE OF THE CONCEALMENT OF THE DISABILITY AT THE TIME OF THE SECOND ENLISTMENT DURING WHICH THE INSURANCE WAS ISSUED.

UNDER DATE OF OCTOBER 12, 1928, THE ADJUTANT GENERAL OF THE ARMY REPORTED AS FOLLOWS:

1. FROM INFORMAL COMPARISON OF THE FINGERPRINTS ON FILE IN THIS OFFICE WITH THOSE ON FILE AT HEADQUARTERS, U.S. MARINE CORPS, IT APPEARS THAT JOE D. EDWARDS, 6502987, WHO ENLISTED SEPTEMBER 29, 1919, AT PRESIDIO OF SAN FRANCISCO, CALIFORNIA, IS IDENTICAL WITH WILLIAM NATHANIEL EDWARDS, WHO ENLISTED IN THE U.S. MARINE CORPS FEBRUARY 1, 1919, AT MARE ISLAND, CALIFORNIA, AND WAS DISCHARGED BY REASON OF MEDICAL SURVEY, AUGUST 21, 1919, PRIVATE, BARRACKS DETACHMENT, MARE ISLAND, CALIFORNIA.

2. THIS MAN AT ENLISTMENT OF SEPTEMBER 29, 1919, DECLARED THAT HE HAD NEVER BEEN DISCHARGED FROM THE SERVICE (ARMY OR NAVY) OF THE UNITED STATES OR ANY OTHER SERVICE ON ACCOUNT OF DISABILITY.

UNDER DATE OF NOVEMBER 6, 1928, HE REPORTED FURTHER AS FOLLOWS:

THE ENLISTMENT OF JOE D. EDWARDS, 6502987, ON SEPTEMBER 29, 1919, WAS FRAUDULENT IN ITS INCEPTION, BUT HAS BEEN VALIDATED BY HIS HONORABLE DISCHARGE ON MAY 21, 1920.

SECTION 400 OF THE WAR RISK INSURANCE ACT OF OCTOBER 6, 1917, 40 STAT. 409, AUTHORIZED INSURANCE FOR ENLISTED MEN "WHEN EMPLOYED IN ACTIVE SERVICE UNDER THE WAR DEPARTMENT * * * WITHOUT MEDICAL EXAMINATION.' SECTION 401 REQUIRED APPLICATION TO BE FILED WITHIN 120 DAYS AFTER ENLISTMENT OR ENTRANCE INTO OR EMPLOYMENT IN THE "ACTIVE SERVICE" AND BEFORE DISCHARGE OR RESIGNATION. SUBSEQUENT STATUES ARE TO THE SAME EFFECT. THE SERVICE CONTEMPLATED IS LAWFUL SERVICE. 3 COMP. GEN. 691. IF THE SERVICE IN THIS CASE WAS LAWFUL AND THE CONDITIONS OF THE STATUTE TO AUTHORIZE ISSUANCE OF THE INSURANCE WERE MET, THE INSURANCE MUST BE CONSIDERED AS VALID.

IN DECISION OF JULY 30, 1923, 3 COMP. GEN. 61, IT WAS HELD:

A FRAUDULENT ENLISTMENT RESULTS IN A VOIDABLE CONTRACT, AS WAS SAID IN THE EARLIER DECISIONS ON THE SUBJECT. WHERE THE FRAUD IS NOT DISCOVERED WHILE THE CONTRACT IS BEING PERFORMED, AND ALL THE SERVICES REQUIRED ARE PERFORMED IN A MANNER ENTITLING THE MAN TO AN HONORABLE DISCHARGE, HE IS ENTITLED TO RETAIN THE PAY AND ALLOWANCES PROPERLY PAID HIM DURING THE ENLISTMENT. 8 COMP. DEC. 684; 12 ID 446; 14 ID. 369.

SEE ALSO DECISION OF JULY 25, 1929, 9 COMP. GEN. 26, WHEREIN IT WAS HELD (QUOTING FROM THE SYLLABUS):

A FRAUDULENT ENLISTMENT IS VOIDABLE AT THE OPTION OF THE GOVERNMENT. WHERE THE FRAUDULENT CHARACTER OF AN ENLISTMENT DID NOT BECOME KNOWN AND THE DECEASED WAS ACTUALLY CARRIED ON THE ROLLS AS AN ENLISTED MAN OF THE ARMY AT DATE OF DEATH, HE WAS AN ENLISTED MAN "ON THE ACTIVE LIST OF THE REGULAR ARMY" WITHIN THE MEANING OF THE ACT OF DECEMBER 17, 1919, 41 STAT. 367, AND HIS WIDOW IS ENTITLED TO BENEFITS THEREUNDER. SEE ALSO 15 COMP. DEC. 614.

THEREFORE, IT MUST BE CONCLUDED IN THIS CASE THAT AS THE INSURED WAS GIVEN AN HONORABLE DISCHARGE WITHOUT KNOWLEDGE OF THE FRAUD, THE PERIOD OF SERVICE OF THE INSURED, ALTHOUGH FRAUDULENT IN ITS INCEPTION WAS NEVERTHELESS VALID SERVICE, AND THE ENLISTED MAN IS ENTITLED TO ALL RIGHTS UNDER ANY INSURANCE ISSUED TO HIM DURING THAT PERIOD, PROVIDED THAT THE OTHER CONDITIONS OF THE STATUTE WERE PROPERLY MET. AS ALL THE CONDITIONS OF THE STATUTE APPARENTLY WERE COMPLIED WITH, THE INSURANCE IN THIS CASE WAS VALID.

IT HAS BEEN SUGGESTED THAT THE INSURANCE SHOULD BE CONSIDERED AS VOID UNDER THE RULE ANNOUNCED IN THE CASE OF ZED PENNINGTON, 3 COMP. GEN. 431 ID. 691, FOR THE REASON THAT THE FACT CONCEALED UPON ENLISTMENT WAS THE HEALTH CONDITION OF THE INSURED GOING TO THE VERY ESSENCE OF THE INSURANCE CONTRACT. SEE 3 COMP. GEN. 398. IN THAT CASE THE ENLISTMENT WAS TERMINATED BY A DISCHARGE FOR FRAUDULENT CONCEALMENT OF DISABILITY WHICH VOIDED THE CONTRACT OF ENLISTMENT AND DEFEATED ANY RIGHTS ARISING THEREUNDER. IN THE INSTANT CASE THERE WAS NO SUCH DISCHARGE. WHILE IT WAS GENERALLY IN THE PRIOR DECISIONS THAT THE FACTS CONCEALED UPON ENLISTMENT WENT TO THE ESSENCE OF THE CONTRACT OF INSURANCE, THE DECIDING FACTOR WAS THE INVALIDITY OF THE ENLISTMENT CONTRACT. IF THE INSURANCE IS APPLIED FOR IN ACCORDANCE WITH THE TERMS OF THE CONTROLLING STATUTE DURING A PERIOD OF VALID SERVICE, AS IN THE INSTANT CASE, THE PHYSICAL CONDITION OF THE INSURED AT THE DATE OF APPLICATION FOR INSURANCE WAS IMMATERIAL. COMP. GEN. 526.

WHILE YOUR SUBMISSION REQUESTS CONSIDERATION ONLY OF THE INSURANCE FEATURE OF THIS CASE, THERE HAS, ALSO, BEEN QUESTIONED IN THE AUDIT THE BASIS ON WHICH THE BUREAU PROPOSES TO CHARGE AGAINST THE REMAINING INSURANCE THE COMPENSATION FRAUDULENTLY RECEIVED. IT IS UNDERSTOOD THE BUREAU PROPOSES RAISING A CHARGE OF ALL DISABILITY COMPENSATION RECEIVED UNDER THE REAL NAME OF THE VETERAN AS WAS PAID FOR PERIODS SUBSEQUENT TO AUGUST 9, 1921, DATE OF THE ACT (42 STAT. 152), REQUIRING A FORFEITURE OF ALL RIGHT TO COMPENSATION FOR FRAUD, ON THE PRINCIPLE THAT A PENAL STATUTE MAY NOT BE APPLIED RETROACTIVELY EFFECTIVE.

THIS OFFICE IS IN AGREEMENT WITH THE PROPOSED CHARGE OF THE ENTIRE AMOUNT RECEIVED UNDER AN ASSUMED NAME AND ALSO WITH THE LEGAL PRINCIPLE RELATIVE TO THE PENAL STATUTE. HOWEVER, THIS OFFICE IS NOT IN AGREEMENT WITH THE PROPOSED CHARGE OF ONLY THE AMOUNT OF COMPENSATION RECEIVED UNDER THE REAL NAME OF THE VETERAN FOR PERIODS SUBSEQUENT TO AUGUST 9, 1921. ON THAT DATE IT IS UNDERSTOOD BOTH CLAIMS FOR DISABILITY COMPENSATION WERE IN THE BUREAU AND PAYMENT PREVIOUSLY HAD BEEN MADE ONLY UNDER THE ASSUMED NAME--- THE FIRST PAYMENT HAVING BEEN MADE ON OR ABOUT MAY 31, 1920, CONVERING PERIOD FROM MAY 22, 1920; BUT THAT NO COMPENSATION WAS AWARDED OR PAID UNDER THE REAL NAME OF THE VETERAN UNTIL DECEMBER 4, 1922, SUBSEQUENT TO AUGUST 9, 1921, FOR A PERIOD OF TWO YEARS RETROACTIVELY EFFECTIVE FROM DATE OF FILING CLAIM, OR FROM NOVEMBER 5, 1919. THEREFORE, AS THE FRAUD WAS BEING PERPETRATED WITHIN THE MEANING OF THE PENAL STATUTE ON THE DATE OF ITS PASSAGE, ALL PAYMENTS OF COMPENSATION NOT THEN ACTUALLY RECEIVED UNDER THE REAL NAME OF THE VETERAN AND PURSUANT TO HIS VALID APPLICATION WERE FORFEITED. AS NO PAYMENT HAD BEEN RECEIVED ON THAT DATE, UNDER THE VALID APPLICATION, THE ENTIRE AMOUNT SUBSEQUENTLY PAID WAS FORFEITED. ALL PAYMENTS UNDER THE ASSUMED NAME, WHETHER RECEIVED BEFORE OR AFTER THE STATUTE, WERE FORFEITED INDEPENDENTLY OF THE PENAL STATUTE FOR THE REASON THAT THE APPLICATION WAS ABSOLUTELY VOID AND OF NO EFFECT. THEREFORE, THE ENTIRE AMOUNT OF DISABILITY COMPENSATION RECEIVED BY THIS VETERAN UNDER BOTH AWARDS SHOULD BE CHARGED AGAINST THE REMAINING INSURANCE, AND MONTHLY PAYMENTS SHOULD NOT BE RESUMED UNTIL THAT AMOUNT HAS BEEN COLLECTED OR THE DEBT OTHERWISE LIQUIDATED.

ALTHOUGH IT IS NOT NOW MATERIAL, IN VIEW OF THE ABOVE DISPOSITION OF THE ENTIRE AMOUNT OF DISABILITY COMPENSATION RECEIVED BY THE VETERAN, IT IS NOTED THAT COMPENSATION WAS AWARDED BY THE BUREAU RETROACTIVELY AS FOR THE PERIOD FROM NOVEMBER 5, 1919, TO MAY 21, 1920, DURING WHICH PERIOD THE VETERAN WAS IN THE ACTIVE SERVICE AND RECEIVING ACTIVE SERVICE PAY. PAYMENT FOR THIS PERIOD WOULD HAVE BEEN UNLAWFUL UNDER SECTIONS 312 AND 212 OF THE WAR RISK INSURANCE AND WORLD WAR VETERANS' ACTS, RESPECTIVELY. WITH RESPECT TO PAYMENT OF INSURANCE INSTALLMENTS PRIOR TO DISCHARGE, TO WIT, FROM OCTOBER 14, 1919, TO MAY 21, 1920, SEE 7 COMP. GEN. 526.

YOU REFER TO THE DELAY BY THIS OFFICE IN GIVING CONSIDERATION TO THE CASE IN THE PREAUDIT. WHILE AN UNREASONABLE DELAY IN THIS OFFICE IN THE CONSIDERATION OF ANY CASE, PARTICULARLY IN THE PREAUDIT, IS NOT COUNTENANCED, IN THIS CASE IT SEEMED THAT MORE TIME THAN USUAL WAS NECESSARY TO GIVE THE CONSIDERATION IT DESERVED IN VIEW OF THE INVOLVED FACTS AND ISSUES. ALSO, IT SEEMED THAT MORE TIME THAN USUAL MIGHT REASONABLY BE TAKEN FOR THE PROPER CONSIDERATION OF THE CASE, IN VIEW OF THE FACT THAT, UNDER THE SHOWING BY THE BUREAU, NO FURTHER INSTALLMENTS OF INSURANCE WERE PAYABLE BEFORE JANUARY, 1933. THAT IS TO SAY, ON THE RECORD AS SUBMITTED, NO REASON APPEARED FOR EXPEDITING ACTION.