B-143302, JAN. 26, 1961

B-143302, JAN. 26, 1961

TO THE SECRETARY OF LABOR:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 7, 1960, CONCERNING REPORTED VIOLATIONS OF THE COPELAND ANTI-KICKBACK ACT, 18 U.S.C. 874 AND 40 U.S.C. 276C, BY HERBERT BENNER, DOING BUSINESS AS HERBERT BENNER TRUCKING COMPANY. YOU STATED AS FOLLOWS:

"BY LETTER OF MAY 31, 1960, MR. HAROLD C. NYSTROM, ACTING SOLICITOR OF LABOR, SUBMITTED THE NAMES OF MR. BENNER AND HIS FIRM FOR DEBARMENT ON THE BASIS OF THE EVIDENCE IN THE RECORD FORWARDED WITH THAT LETTER. FOR YOUR FURTHER INFORMATION, BY LETTER OF JULY 25, 1960, MR. BLANCHARD OF THE OFFICE OF YOUR GENERAL COUNSEL WAS FURNISHED A COPY OF A FEDERAL BUREAU OF INVESTIGATION REPORT CONCERNING THE CRIMINAL ASPECTS OF THE VIOLATIONS ALLEGED UNDER 18 U.S.C. 874 AND A COPY OF A LETTER FROM MR. K. KEY HOFFMAN, JR., ASSISTANT UNITED STATES ATTORNEY, INDICATING THAT ONE OF THE REASONS FOR DROPPING CRIMINAL PROSECUTION IN THIS CASE WAS MR. HOFFMAN'S BELIEF THAT ADMINISTRATIVE DEBARMENT WOULD BE MORE APPROPRIATE. BY LETTER OF AUGUST 19, 1960, THE CLAIMS DIVISION, DEBT BRANCH OF THE UNITED STATES GENERAL ACCOUNTING OFFICE, ADVISED ON YOUR BEHALF THAT IN VIEW OF A FINDING THAT THE EVIDENCE PRESENTED APPEARED " ... INSUFFICIENT TO ESTABLISH ACTIVITIES PROHIBITED BY THE COPELAND ANTI-KICKBACK ACT (AS DISTINGUISHED FROM THE MAKING OF FACTUAL STATEMENTS FOR THE PURPOSE OF OBTAINING EMPLOYEE ASSISTANCE IN OVERCOMING FINANCIAL DIFFICULTIES)," YOU WERE UNABLE TO COMPLY WITH THIS DEPARTMENT'S REQUEST FOR PUBLICATION OF AN ADMINISTRATIVE DEBARMENT.

"THE RECORD IN THIS MATTER ESTABLISHES THAT SEVEN TRUCK DRIVERS EMPLOYED BY MR. BENNER WERE FOUND BY THE STATE HIGHWAY DEPARTMENT OF THE STATE OF TEXAS AND THE UNITED STATES BUREAU OF PUBLIC ROADS TO BE DUE $1,093.76 IN WAGE RESTITUTION. MR. W. O. PELPHREY OF PELPHREY FARQUHAR, THE PRIME CONTRACTOR ON THE PROJECTS, PROVIDED MR. BENNER WITH ADDITIONAL FUNDS EXPRESSLY FOR THE PURPOSE OF COMPENSATING THE UNDERPAID EMPLOYEES.

MR. BENNER MADE OUT CHECKS AND SUBMITTED CORRECTED CERTIFIED PAYROLLS SHOWING PAYMENT OF RESTITUTION TO THOSE UNDERPAID EMPLOYEES. HOWEVER, BY CLAIMING THAT SUCH PAYMENTS WOULD PUT HIM OUT OF BUSINESS AND THE EMPLOYEES WOULD NO LONGER HAVE A JOB, MR. BENNER INDUCED THEM TO RETURN THE UNCASHED CHECKS TO HIM. WHEN MR. BENNER'S FAILURE TO PAY THE UNDERPAID EMPLOYEES WAS BROUGHT TO THE ATTENTION OF MR. PELPHREY, HE, RATHER THAN MR. BENNER, FINALLY MADE RESTITUTION TO THE WORKERS INVOLVED. THESE FACTS ARE CLEARLY ESTABLISHED BY THE RECORD WHICH WAS SUBMITTED TO YOU, AND HAVE BEEN TACITLY ADMITTED BY THE CONTRACTOR WHO FAILED TO RESPOND TO A CHARGING LETTER IN WHICH THEY WERE SET FORTH IN DETAIL.

"AS YOU KNOW, THE COPELAND ANTI-KICKBACK ACT PROVIDES IN PART AS FOLLOWS: "WHOEVER, BY FORCE, INTIMIDATION, OR THREAT OF PROCURING DISMISSAL FROM EMPLOYMENT, OR BY ANY OTHER MANNER WHATSOEVER INDUCES ANY PERSON ... TO GIVE UP ANY PART OF THE COMPENSATION TO WHICH HE IS ENTITLED ...' SHALL BE HELD IN VIOLATION OF THE LAW. FROM THE LANGUAGE OF THE STATUTE, IT WOULD APPEAR THAT THE EMPLOYER'S MOTIVATION IN OBTAINING A REBATE OF WAGES IS COMPLETELY IRRELEVANT, EXCEPT POSSIBLY AS IT MIGHT APPEAL TO THE SYMPATHY OF A JURY.

"AS I SEE IT, THERE IS NO DOUBT THAT THE LAW WAS VIOLATED AND TO THAT EXTENT I MUST TAKE ISSUE WITH MR. WEINER'S LETTER OF AUGUST 19, 1960, IN WHICH HE DECLINED TO PLACE THE CONTRACTOR'S NAME ON THE DEBARRED LIST. VIEW OF THE FACT THAT THE FUNDS WHICH MR. BENNER RECEIVED BACK FROM THE EMPLOYEES WERE NOT EVEN HIS OWN IN THE FIRST PLACE, THEY HAVING BEEN FURNISHED BY MR. PELPHREY, I CAN SEE NO EXCUSE WHATSOEVER FOR MR. BENNER'S ACTIONS. I DEEM HIS ACTIONS BOTH AGGRAVATED AND WILLFUL WITHIN THE MEANING OF REGULATIONS, PART 5, SECTION 5.6 (29 CFR 5), AND AGAIN REQUEST THAT HIS NAME AND THE NAME OF HERBERT BENNER TRUCKING COMPANY BE INCLUDED IN THE PUBLISHED LIST OF INELIGIBLE CONTRACTORS.'

THE ADVICE FURNISHED TO THE ACTING SOLICITOR BY OUR CLAIMS DIVISION, UNDER DATE OF AUGUST 19, 1960, THAT THE "EVIDENCE APPEARS INSUFFICIENT TO ESTABLISH ACTIVITIES PROHIBITED BY THE COPELAND ANTI-KICKBACK ACT" AND TO JUSTIFY DEBARMENT LISTING, SHOULD NOT IN ANY SENSE BE CONSTRUED AS FAILING TO RECOGNIZE OR EXCUSING THE REPREHENSIVENESS OF MR. BENNER'S CONDUCT OR THE LIKELIHOOD THAT HIS ACTIONS MIGHT BE ESTABLISHED TO BE OFFENSES UNDER THE CRIMINAL PROVISIONS OF 18 U.S.C. 874, QUOTED IN YOUR LETTER. IT WAS, ON THE OTHER HAND, PREDICATED UPON CONSIDERATION OF THE CIVIL PROVISIONS SET OUT IN 40 U.S.C. 276C, AUTHORIZING YOU TO MAKE REASONABLE REGULATIONS GOVERNING ,CONTRACTORS AND SUBCONTRACTORS," INCLUDING A REQUIREMENT THAT THEY FURNISH WEEKLY A PAYROLL STATEMENT. PART 3 AND THE VARIOUS PROVISIONS OF PART 5 OF THE REGULATIONS APPEAR TO RELY UPON THAT AUTHORITY AND TO APPLY ONLY TO CONTRACTORS AND SUBCONTRACTORS. IF THIS IS SO, MR. BENNER'S STATUS AS A SUBCONTRACTOR FURNISHING WEEKLY PAYROLL STATEMENTS IS MATERIAL TO ANY DETERMINATION OF RESPONSIBILITY FOR VIOLATING ESTABLISHED REQUIREMENTS NOT OF A CRIMINAL NATURE.

WHILE MR. BENNER APPEARS TO HAVE ENTERED INTO A SUBCONTRACT ACCEPTING RESPONSIBILITY FOR PAYING EMPLOYEES, IT IS CLEAR THAT HIS STATUS AS A SUBCONTRACTOR WAS NOT RECOGNIZED BY THE STATE AGENCY IN CHARGE OF THE CONTRACT. ALSO, NOTWITHSTANDING THE TERMS OF THE SUBCONTRACT, UNCERTAINTY EXISTS AS TO THE DEGREE HE ACTED INDEPENDENTLY, PARTICULARLY WITH RESPECT TO WHETHER OR NOT HE ACTUALLY PAID EMPLOYEES OUT OF HIS OWN FUNDS. IN ANY EVENT, THE FEDERAL BUREAU OF INVESTIGATION REPORTED (REPORT ON HERBERT BENNER, DATED OCTOBER 31, 1958, PAGE 7) THAT THE PROGRAM ENGINEER OF THE BUREAU OF PUBLIC ROADS ADVISED THAT EMPLOYEES INVOLVED WERE LISTED ON THE PRIME CONTRACTOR'S PAYROLLS. IN THE CIRCUMSTANCES, WE APPEAR TO HAVE NO CHOICE BUT TO REGARD MR. BENNER AS SOMETHING LESS THAN A SUBCONTRACTOR COVERED BY THE REGULATIONS AND TO TREAT HIS PARTICIPATION IN THE WAGE PAYMENTS AS THE ACTIVITIES OF AN AGENT OF THE PRIME CONTRACTOR.

IT IS NOTED THAT YOU HAVE QUOTED PROVISIONS OF 18 U.S.C. 874, RATHER THAN OF 40 U.S.C. 276C, AND HAVE EMPHASIZED THE UNITED STATES ATTORNEY'S OPINION "INDICATING THAT ONE OF THE REASONS FOR DROPPING CRIMINAL PROSECUTION IN THIS CASE WAS MR. HOFFMAN'S BELIEF THAT ADMINISTRATIVE DEBARMENT WOULD BE MORE APPROPRIATE.' THE PERTINENT STATEMENT IN HIS LETTER OF JULY 12, 1960, TO THE REGIONAL ATTORNEY OF THE DEPARTMENT OF LABOR AT DALLAS, TEXAS, READS:

"* * * IT IS THEREFORE MY OPINION THAT IN SPITE OF THE FACT THIS CASE APPEARS TO SHOW TECHNICAL VIOLATION OF THE ANTI-KICKBACK ACT A PRACTICAL EVALUATION OF THE SAME WOULD NOT ILLUSTRATE ANY WORTHWHILE PROSECUTABLE CRIMINAL CASE. IT WAS ALSO MY OPINION AT THAT TIME THAT EFFECTIVE ADMINISTRATIVE SANCTIONS COULD BE TAKEN AND JUSTICE EFFECTED IN SUCH A MANNER. I AM STILL OF THIS SAME OPINION.'

IT SEEMS PROBABLE THAT, CONTRARY TO ACTUALITY, A WAGE REPORTING STATUS AS A SUBCONTRACTOR AGAINST WHICH THE REGULATIONS MIGHT OPERATE WAS MERELY ASSUMED. IN THE ALTERNATIVE, WE KNOW OF NO AUTHORITY BY WHICH AN ADMINISTRATIVELY SELECTED PENALTY MAY BE ADDED TO OR SUBSTITUTED FOR THE STATUTORY FINE AND IMPRISONMENT PROVIDED. SEE COMMISSIONER V. ACKER, 361 U.S. 87; PETERS V. HOBBY, 349 U.S. 331; PRIEBE AND SONS V. UNITED STATES, 332 U.S. 407.

WE ARE ANXIOUS TO COOPERATE AS FULLY AS POSSIBLE TO MAKE THE MINIMUM WAGE ENFORCEMENT PROGRAM EFFECTIVE. IN THE EVENT ANY OF THE FACTS ARE NOT AS RELIED UPON, EVIDENCE ESTABLISHING THEIR NATURE OTHERWISE WHEN BROUGHT TO ATTENTION WILL RECEIVE CAREFUL CONSIDERATION. HOWEVER, SHOULD THE FACTS BE RE-ESTABLISHED AND IT THEN APPEAR THAT SOME ACTION TO LIST MR. BENNER AND HIS FORM A INELIGIBLE TO RECEIVE AWARDS OF FEDERAL CONTRACTS MIGHT BE PROPER, ATTENTION IS INVITED TO THE CRITERIA FOR DOING SO DISCUSSED IN OUR LETTER OF JANUARY 6, 1960, B-139720, TO YOU, A COPY OF WHICH IS ATTACHED FOR CONVENIENT REFERENCE.