B-13958, MARCH 6, 1941, 20 COMP. GEN. 507

B-13958: Mar 6, 1941

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1941: I HAVE YOUR LETTER OF DECEMBER 11. AS FOLLOWS: WILL P. ALLEN WAS AWARDED THE CONTRACT ON ROUTE 76468. WHEN THESE FACTS BECAME KNOWN THE CONTRACT WAS ANNULLED. ALLEN WAS INDICTED. IS NOW SERVING A JAIL SENTENCE. THERE WAS FOUND TO BE A BALANCE DUE ALLEN OF $406.71. IN A CASE INVOLVING THE CANCELLATION OF AN AIR-MAIL CONTRACT IT WAS HELD IN 7 C. THE ONLY PENALTY PRESCRIBED FOR THE VIOLATION OF THE STATUTE WAS THE ANNULMENT OF THE CONTRACT AND THE DISQUALIFICATION OF THE OFFENDER AS A FUTURE CONTRACTOR. THAT THE AMOUNT EARNED FOR SERVICES PERFORMED PRIOR TO THE CANCELLATION WAS NOT FORFEITED. YOUR EARLY DECISION IS REQUESTED AS TO WHETHER THIS AMOUNT MAY BE PAID TO ALLEN FOR SERVICES ACTUALLY PERFORMED.

B-13958, MARCH 6, 1941, 20 COMP. GEN. 507

FRAUD - CONTRACT IRREGULARITIES - PAYMENT LIABILITY THE GOVERNMENT'S ACCEPTANCE OF A PROPOSAL FOR CARRYING THE MAIL UPON WHICH THE BIDDER HAD FORGED THE SIGNATURES OF THE SURETIES AND OF THE POSTMASTER, IN CONNECTION WITH THE BOND REQUIRED BY LAW TO ACCOMPANY THE PROPOSAL, DID NOT RESULT IN A VALID CONTRACT, AND THE BIDDER HAS NO RIGHT TO PAYMENT, EITHER UNDER THE TERMS OF THE SO-CALLED CONTRACT, OR FOR THE REASONABLE VALUE OF THE WORK PERFORMED.

COMPTROLLER GENERAL WARREN TO THE POSTMASTER GENERAL, MARCH 6, 1941:

I HAVE YOUR LETTER OF DECEMBER 11, 1940, AS FOLLOWS:

WILL P. ALLEN WAS AWARDED THE CONTRACT ON ROUTE 76468, PARTS A AND B, LOS ANGELES, CALIFORNIA, TO CANOGA PARK, CALIFORNIA. THE DEPARTMENT LATER ASCERTAINED THAT ALLEN ON APRIL 22, 1938, HAD FORGED OR CAUSED TO BE FORGED NAMES OF PERSONAL SURETIES, LIKEWISE THE NAME OF THE POSTMASTER, ON A CERTIFICATE WHICH FORMED A PART OF THE PROPOSAL BOND AND CONTRACT. WHEN THESE FACTS BECAME KNOWN THE CONTRACT WAS ANNULLED, EFFECTIVE OCTOBER 31, 1940. ALLEN WAS INDICTED, PLEADED GUILTY, AND IS NOW SERVING A JAIL SENTENCE. PRIOR TO THE ANNULMENT OF HIS CONTRACT ALLEN HAD RENDERED SERVICE ON THE ROUTE AND AFTER MAKING THE NECESSARY ADJUSTMENTS INCIDENT TO THE RENDITION OF SERVICE BY A SUBSTITUTE CONTRACTOR, THERE WAS FOUND TO BE A BALANCE DUE ALLEN OF $406.71.

IN A CASE INVOLVING THE CANCELLATION OF AN AIR-MAIL CONTRACT IT WAS HELD IN 7 C. G. 322 THAT SINCE THE CONTRACT HAD BEEN CANCELED AS VIOLATIVE OF SECTION 3950 OF THE REVISED STATUTES (PROHIBITING COLLUSION AMONG BIDDERS), THE ONLY PENALTY PRESCRIBED FOR THE VIOLATION OF THE STATUTE WAS THE ANNULMENT OF THE CONTRACT AND THE DISQUALIFICATION OF THE OFFENDER AS A FUTURE CONTRACTOR, AND THAT THE AMOUNT EARNED FOR SERVICES PERFORMED PRIOR TO THE CANCELLATION WAS NOT FORFEITED.

YOUR EARLY DECISION IS REQUESTED AS TO WHETHER THIS AMOUNT MAY BE PAID TO ALLEN FOR SERVICES ACTUALLY PERFORMED.

WITH RESPECT TO THE BALANCE SAID TO BE DUE WILL P. ALLEN FOR SERVICES RENDERED, THE ACCOUNT, AS SHOWN BY THE RECORDS OF THIS OFFICE FOR THE PERIOD FROM SEPTEMBER 1, 1939, TO OCTOBER 31, 1940, IS AS FOLLOWS:

CHART

SERVICES PERFORMED UNDER CONTRACT AND CHANGE ORDERS SEPT. 1 TO SEPT. 17, 1939, AT $4,692.00 PER ANNUM-- $221.56 SEPT. 18, 1939, TO FEB. 28, 1940, AT $4,733.79

PER ANNUM----------------------------------------2,143.36 MAR. 1 TO MAR. 14, 1940, AT $5,378.03 PER ANNUM---- 202.39 MAR. 15 TO MAY 26, 1940, AT $5,392.55 PER ANNUM----1,072.70 EXTRA PAY (THIRD PARAGRAPH OF FIFTH SECTION OF

CONTRACT, P. 2/---------------------------------- 13.09 MAY 27 TO OCT. 31, 1940, AT $5,235.41 PER ANNUM----2,251.79

--------- $5,904.89

COMPENSATION AND EXPENSES PAID COMPENSATION SEPT. 1, 1939, TO OCT 31, 1940------$4,263.26AMOUNT TRANSFERRED TO APPROPRIATION " VEHICLE

SERVICE," FOR SERVICE PERFORMED BY

GOVERNMENT-OWNED VEHICLES AND GOVERNMENT

PERSONNEL FROM FEB. 1 TO OCT. 31, 1940---------1,204.21 DIFFERENCE BETWEEN CONTRACT RATE AND AMOUNT

TRANSFERRED TO APPROPRIATION " VEHICLE

SERVICE"-------------------------------------- 279.76

---------- 5,747.23

157.66

FROM THE ABOVE STATEMENT THERE APPEARS TO HAVE BEEN EARNED AND UNPAID UNDER THE CONTRACT THE SUM OF $157.66, INSTEAD OF $406.71, AS REPORTED IN YOUR LETTER, SUPRA.

IT APPEARS THAT IT IS A REQUIREMENT OF LAW THAT EVERY PROPOSAL FOR CARRYING THE MAIL SHALL BE ACCOMPANIED BY THE BOND OF THE BIDDER, WITH SURETIES APPROVED BY A POSTMASTER, AND THAT NO PROPOSAL SHALL BE CONSIDERED UNLESS IT BE ACCOMPANIED BY SUCH BOND. SEE 39 U.S.C. 426. THE ACT OF THE BIDDER IN SUBMITTING A PROPOSAL UPON WHICH WERE FORGED THE SIGNATURES OF THE SURETIES AND OF THE POSTMASTER CONSTITUTES A FRAUD IN THE PROCUREMENT AND EXECUTION OF THE CONTRACT. BECAUSE OF SUCH FORGERY AND FRAUD, A VALID CONTRACT DID NOT RESULT FROM THE GOVERNMENT'S ACCEPTANCE OF THE PROPOSAL, AND IT IS PLAIN THAT THE FRAUD VITIATES ANY RIGHT OF RECOVERY EITHER UNDER THE TERMS OF THE SO-CALLED CONTRACT OR FOR THE REASONABLE VALUE OF THE WORK PERFORMED. ATLANTIC CONTRACTING COMPANY V. UNITED STATES, 57 CT.1CLS, 185; MICHIGAN STEEL BOX CO. V. UNITED STATES 49 ID. 421; MCMULLEN V. HOFFMAN, 174 U.S. 639. SEE ALSO 28 U.S.C. 279; 31 U.S.C. 231. ALSO, A CONTRACT PROCURED BY MEANS OF AN ILLEGAL ACT, TO WIT, FORGERY, SO OFFENDS PUBLIC POLICY AS TO DESERVE NO RECOGNITION BY THE COURTS. SEE OSCANYAN V. ARMS COMPANY, 103 U.S. 261; MCMULLEN V. HOFFMAN, SUPRA.

THE DISPOSITION MADE OF THE MATTER INVOLVED IN 7 COMP. GEN. 322, CITED BY YOU, WAS IN ACCORDANCE WITH SPECIFIC STATUTES COVERING SUCH CASES, AND IS NOT CONTROLLING UNDER CIRCUMSTANCES SUCH AS HERE INVOLVED.

WHILE IT DOES NOT APPEAR FROM THE PRESENT RECORD THAT THERE HAS BEEN SUCH DAMAGE TO THE UNITED STATES AS WOULD REQUIRE ACTION TO RECOVER AMOUNTS PREVIOUSLY PAID FOR SERVICES ACTUALLY RENDERED, YOU ARE ADVISED THAT NO FURTHER PAYMENT SHOULD BE MADE TO WILL P. ALLEN BY REASON OF SERVICES RENDERED UNDER THE FRAUDULENTLY PROCURED CONTRACT.