B-154766, AUGUST 28, 1964, 44 COMP. GEN. 110

B-154766: Aug 28, 1964

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ACCOUNTING AND AUDITING OFFICERS HAVE A DUTY TO REFUSE AND PREVENT PAYMENT OF PUBLIC MONEYS UNDER ANY AGREEMENT AS TO WHICH THERE IS A REASONABLE SUSPICION OF IRREGULARITY. 1964: REFERENCE IS MADE TO LETTER DATED JULY 17. THE FIRST OF TWO SPECIFIC QUESTIONS PRESENTED IN THE LETTER IS AS FOLLOWS: A. IS PAYMENT OF AN ASBCA AWARD PROPER UNDER CIRCUMSTANCES WHERE THE BOARD HAS REFUSED TO CONSIDER AND DECIDE AS AN INCIDENT OF THE APPEAL PROCEEDINGS THE QUESTION OF FRAUD ALLEGEDLY COMMITTED BY THE APPELLANT. A PRICE REDETERMINABLE SUPPLY CONTRACT DA 30 069-ORD-666 WAS EXECUTED FOR 500. THE CONTRACT PRICE OF WHICH WAS NOT PREDICATED ON THE USE OF GOVERNMENT-OWNED EQUIPMENT. GOVERNMENT FACILITIES WERE SHIPPED TO THE CONTRACTOR FOR USE IN THE PERFORMANCE OF CONTRACT ORD 666.

B-154766, AUGUST 28, 1964, 44 COMP. GEN. 110

FRAUD - FALSE CLAIMS - EFFECT OF CONTRACTING OFFICER AND CONTRACT APPEALS BOARD DECISIONS A DECISION BY A CONTRACT BOARD OF APPEALS TO ALLOW A CONTRACTOR A CLAIM THAT MAY BE PARTIALLY TAINTED WITH POSSIBLE FRAUD DOES NOT CREATE ANY RIGHT OR OBLIGATION ON THE GOVERNMENT AND UNDER THE LONGSTANDING, JUDICIALLY RECOGNIZED RULE, THAT ADMINISTRATIVE, ACCOUNTING AND AUDITING OFFICERS HAVE A DUTY TO REFUSE AND PREVENT PAYMENT OF PUBLIC MONEYS UNDER ANY AGREEMENT AS TO WHICH THERE IS A REASONABLE SUSPICION OF IRREGULARITY, COLLUSION, OR FRAUD, PAYMENT FROM APPROPRIATED FUNDS OF ANY AMOUNT ON ACCOUNT OF THE DECISION OF THE BOARD MAY NOT BE AUTHORIZED.

TO THE SECRETARY OF THE ARMY, AUGUST 28, 1964:

REFERENCE IS MADE TO LETTER DATED JULY 17, 1964, FROM THE ACTING DIRECTOR OF PROCUREMENT, OFFICE OF THE ASSISTANT SECRETARY, OF YOUR DEPARTMENT, REQUESTING A DECISION AS TO THE PROPRIETY OF PAYMENT, IN VIEW OF THE EVIDENCE INDICATING FRAUD AND THE PROVISIONS OF THE FORFEITURE STATUTE, 28 U.S.C. 2514, OF AN AWARD OF $54,023.24 MADE BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS TO THE AYWON WIRE AND METAL CORPORATION, BROOKLYN, NEW YORK, ON ACCOUNT OF A CLAIM DATED NOVEMBER 15, 1956, IN THE TOTAL SUM OF $144,014.22 ALLEGED TO BE DUE UNDER FACILITIES CONTRACT NO. DA 30-069-ORD- 1011, ENTERED INTO APRIL 23, 1953.

THE FIRST OF TWO SPECIFIC QUESTIONS PRESENTED IN THE LETTER IS AS FOLLOWS:

A. RECOGNIZING THAT 28 U.S.C. 2514 REQUIRES FORFEITURE OF A FALSE CLAIM, IS PAYMENT OF AN ASBCA AWARD PROPER UNDER CIRCUMSTANCES WHERE THE BOARD HAS REFUSED TO CONSIDER AND DECIDE AS AN INCIDENT OF THE APPEAL PROCEEDINGS THE QUESTION OF FRAUD ALLEGEDLY COMMITTED BY THE APPELLANT, BECAUSE OF LACK OF JURISDICTION?

SUMMARIZING THE PERTINENT FACTS AND CIRCUMSTANCES STATED IN THE LETTER, ON MAY 16, 1952, A PRICE REDETERMINABLE SUPPLY CONTRACT DA 30 069-ORD-666 WAS EXECUTED FOR 500,000 METAL PARTS FOR THE 3.5 ROCKETS, THE CONTRACT PRICE OF WHICH WAS NOT PREDICATED ON THE USE OF GOVERNMENT-OWNED EQUIPMENT. SUBSEQUENTLY, GOVERNMENT FACILITIES WERE SHIPPED TO THE CONTRACTOR FOR USE IN THE PERFORMANCE OF CONTRACT ORD 666, SUBJECT TO THE GOVERNMENT'S RIGHT OF CONSIDERATION THEREOF IN LATER NEGOTIATIONS. FACILITIES CONTRACT DA 30-069-ORD-1011 WAS ENTERED INTO WITH THE CONTRACTOR ON APRIL 23, 1953, WHICH WAS MODIFIED BY SUPPLEMENT NO. 1 DATED JUNE 17, 1953, TO ADD THE GOVERNMENT-OWNED EQUIPMENT SHIPPED TO THE CONTRACTOR AS SCHEDULE "B"OF THE CONTRACT. THE UNDERSTANDING OF THE ARMY'S NEGOTIATORS OF THEIR AGREEMENT REGARDING THE SUPPLY AND FACILITY CONTRACTS WAS THAT THE CONTRACTOR WOULD ABSORB THE COSTS OF TRANSPORTING AND INSTALLING THE GOVERNMENT OWNED EQUIPMENT AS AN EXPENSE OF PERFORMING CONTRACT ORD-666.

ON NOVEMBER 15, 1956, AYWON SUBMITTED A CLAIM FOR PAYMENT IN THE AMOUNT OF $144,014.22 UNDER THE FACILITIES CONTRACT, CONSISTING OF THE FOLLOWING ITEMS:

TABLE

TRUCKING AND RIGGING PAID TO TRUCKER BY NAME OF N. ARNOLD $52,000.00

INSTALLATION LABOR 39,321.37

OVERHEAD 39,321.37

MATERIALS 13,371.48

TOTAL 144,014.22

FROM A DECISION BY THE CONTRACTING OFFICER, APRIL 9, 1958, DENYING THE CLAIM, THE CONTRACTOR PROSECUTED AN APPEAL UNDER THE CONTRACT'S "DISPUTES" CLAUSE BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS. THE BOARD SUSTAINED THE CLAIM IN THE SUM OF $54,023.24 BY DECISION OF SEPTEMBER 27, 1963, ASBCA NO. 4966, AS MODIFIED BY DECISION DATED DECEMBER 20, 1963, ON A MOTION BY THE GOVERNMENT THAT THE BOARD RECONSIDER AND DISMISS THE APPEAL FOR LACK OF JURISDICTION OR REOPEN THE CASE ON THE MERITS.

THE HEARING ON THE APPEAL WAS HELD ON JULY 6 THROUGH 22, 1959. CONFERENCES WITH THE CONTRACTOR PRIOR TO THE HEARING AND TESTIMONY AND EVIDENCE GENERATED AT THE HEARING DISCLOSED FACTS AND CIRCUMSTANCES INDICATING THE POSSIBILITY OF MISREPRESENTATION AND DELIBERATE FALSIFICATION AND DUPLICATION OF CLAIMS BY THE CONTRACTOR. AS A RESULT OF AN INVESTIGATION THE CONSIDERATION OF THE APPEAL BY THE BOARD WAS SUSPENDED AND THE MATTER WAS SUBMITTED TO THE DEPARTMENT OF JUSTICE FOR APPROPRIATE ACTION.

BY LETTER DATED JUNE 14, 1962, ADVICE WAS RECEIVED FROM THE CHIEF OF THE CIVIL FRAUDS SECTION OF THAT DEPARTMENT TO THE EFFECT THAT A DETERMINATION HAD BEEN MADE THAT A CIVIL ACTION UNDER THE FALSE CLAIMS ACT, 31 U.S.C. 231, WAS NOT WARRANTED AT THAT TIME AND, CONSEQUENTLY, THAT OFFICE HAD NO OBJECTION TO THE RENDITION OF A DECISION BY THE BOARD ON THE APPEAL. WAS STATED THAT THE DEPARTMENT'S DECISION WAS "PROMPTED PRIMARILY BY PRACTICAL CONSIDERATIONS AND IT WAS REACHED NOTWITHSTANDING OUR BELIEF THAT THERE IS SUBSTANTIAL EVIDENCE OF FRAUD.'

THE BOARD THEREAFTER RENDERED ITS DECISION SEPTEMBER 27, 1963, STATING IN PART AS FOLLOWS:

AFTER HEARING THIS APPEAL THE BOARD WAS DIRECTED (SEE PART 6, SECTION 1, ARMY PROCUREMENT PROCEDURE) TO SUSPEND ACTION AND THE MATTER WAS INVESTIGATED BY THE DEPARTMENT OF JUSTICE. THEREAFTER, AND CONTRARY TO THE PROCEDURE FOLLOWED IN HARRY LEV. ASBCA NO. 2869, 25 JULY 1961, 61-2 BCA PAR. 3118, (WHERE THE GOVERNMENT AND THE DEPARTMENT OF JUSTICE JOINED IN A MOTION TO DISMISS (WHICH WAS GRANTED) UPON THE BASIS THAT DETERMINATIONS WITH RESPECT TO FRAUD AND FALSE CLAIMS WERE TO BE MADE BY THE COURTS) THE SUSPENSION WAS LIFTED AND THE BOARD WAS AUTHORIZED TO PROCEED ON THE APPEAL. CF. DALLAS SCRAP BALING CORP., ASBCA NO. 5778, 14 DECEMBER 1961, 61-2 BCA PAR. 3251 ON PAGE 16,842, AND DAWSON ENGINEERING COMPANY, ASBCA NO. 7762, 14 MAY 1963, 1963 BCA PAR. 3759.

BECAUSE OF THE NATURE OF THE STATUTES CONCERNED; FOR THE REASONS SET FORTH IN HARRY LEV, ASBCA NO. 2869 SUPRA; AND BECAUSE OF THE ASSIGNMENTS WITHIN THE DEPARTMENT OF THE ARMY WITH RESPECT TO RESPONSIBILITY FOR FALSE CLAIMS, FRAUD, AND OTHER CRIMINAL CONDUCT, (PART 6, SECTION 1, APP): THE BOARD CONCLUDES THAT IT IS NOT WITHIN ITS JURISDICTION TO FIND THAT ALL OR A PORTION OF APPELLANT'S CLAIM OR OF THE TESTIMONY OR DOCUMENTARY EVIDENCE PRESENTED IN SUPPORT THEREOF IS, IN THIS CASE, FALSE OR FRAUDULENT AND TO DENY OR FORFEIT THE CLAIM, IN WHOLE OR IN PART, UPON THE BASIS OF SUCH A FINDING. CF. ATLAS CAN CORP., ASBCA NO. 3381, 6 JUNE 1960, 60-1 BCA PAR. 2651, PAGES 13,165 AND 13,177-8.

THE BOARD ACCORDINGLY DOES NOT DECIDE WHETHER APPELLANT'S CLAIM IS FALSE OR FRAUDULENT; DOES NOT DECIDE WHETHER ANY TESTIMONY IS, OR ANY DOCUMENT PREPARED OR USED BY APPELLANT ARE, FICTITIOUS AND FALSE; AND MAKES NO FACTUAL FINDINGS WITH RESPECT TO SUCH MATTERS. IN WEIGHING THE EVIDENCE PRESENTED IN SUPPORT OF THE CLAIM THE BOARD HAS, OF COURSE, CONSIDERED THE GOVERNMENT'S OBJECTIONS THERETO JUST AS IT HAS CONSIDERED APPELLANT'S OBJECTIONS TO EVIDENCE RELIED ON BY THE GOVERNMENT. THE BOARD OBSERVES THAT IN WEIGHING EVIDENCE IT MAY DECIDE THAT CERTAIN EVIDENCE IS NOT PERSUASIVE OR IS IN ERROR WITHOUT DECIDING--- OR HAVING ANY NEED TO DECIDE --- THAT SUCH EVIDENCE IS FALSE, FICTITIOUS, OR FRAUDULENT.

THE GOVERNMENT FILED A TIMELY MOTION "THAT THE BOARD RECONSIDER ITS DECISION IN SUBJECT APPEAL AND AS A RESULT THEREOF DISMISS THE APPEAL FOR LACK OF JURISDICTION OR REOPEN THE CASE ON THE MERIT.' IN DENYING THIS MOTION THE BOARD STATED AS FOLLOWS:

THE REQUEST THAT THE APPEAR BE DISMISSED FOR LACK OF JURISDICTION IS MADE FOR THE FIRST TIME IN THE MOTION AND IS BASED ON A LETTER BY THE DEPARTMENT OF JUSTICE TO THE GOVERNMENT IN WHICH THE BELIEF WAS EXPRESSED THAT "THERE IS SUBSTANTIAL EVIDENCE OF FRAUD.' PECULIARLY ENOUGH THIS WAS THE LETTER LIFTING A DEPARTMENT OF JUSTICE SUSPENSION AND AUTHORIZING THE BOARD TO PROCEED WITH A DECISION ON THE MERITS. THE LIFTING OF THE SUSPENSION AND THE AUTHORIZATION TO PROCEED WERE KNOWN TO THE BOARD. THE REFERENCES IN THE LETTER TO FRAUD AND TO POSSIBLE LATER RELIANCE ON THE FRAUD SANCTION OF 28 U.S.C. 2514 IN COURT PROCEEDINGS WERE NOT BEFORE THE BOARD AS THEY WERE IN AN EX PARTE COMMUNICATION BETWEEN THE DEPARTMENT OF JUSTICE AND THE GOVERNMENT WHICH WAS NOT A PART OF THE BOARD'S RECORD ON THE APPEAL.

THE BOARD HAD JURISDICTION TO DECIDE IN ITS ORIGINAL DECISION THAT WHICH IT DID DECIDE. IN THAT DECISION IT CORRECTLY DISCLAIMED JURISDICTION TO FIND FRAUD. THIS IS NOT TO SAY THAT THE ISSUE OF FRAUD IS FORECLOSED BECAUSE WE ARE NOT UNMINDFUL OF THE FACT THAT ADMINISTRATIVE, ACCOUNTING, AND AUDITING OFFICERS SOMETIMES REFUSE PAYMENT OF PUBLIC MONIES WHEN THEY HAVE A REASONABLE SUSPICION OF FRAUD, THUS RESERVING THE MATTER FOR SCRUTINY IN THE COURTS. IN THIS CASE THE COURT WOULD BE IN A POSITION TO TRY AND DECIDE THE FRAUD ISSUE OVER WHICH THIS BOARD HAS NO JURISDICTION IF THE GOVERNMENT BELIEVES THAT THE COURT WOULD DECIDE THAT MONIES OTHERWISE DUE ARE TO BE DECLARED FORFEITED BECAUSE OF FRAUD.

IT IS ALSO POINTED OUT IN THE LETTER OF JULY 17, 1964, THAT AN IMPORTANT WITNESS FOR THE GOVERNMENT HAD REFUSED TO APPEAR AND TESTIFY IN THE PROCEEDINGS ON THE APPEAL DESPITE REPEATED REQUESTS TO DO SO, AND THAT NO STATEMENT OR DEPOSITION BY HIM WAS INTRODUCED IN EVIDENCE AT THAT TIME. HOWEVER, AS A RESULT OF AN INVESTIGATION SUBSEQUENTLY MADE BY THE FEDERAL BUREAU OF INVESTIGATION, HIS AFFIDAVIT WAS TAKEN WHICH WAS SUBMITTED BY MOTION TO THE BOARD AND MADE A PART OF THE BOARD'S RECORD. THIS AFFIDAVIT DISCLOSED THAT A DISCREPANCY EXISTS BETWEEN THIS INDIVIDUAL'S STATEMENT OF THE AMOUNTS OF MONEY RECEIVED FROM THE CONTRACTOR AND THE CONTRACTOR'S CLAIM AS TO HOW MUCH HE WAS PAID, WHICH IS RELEVANT TO THE TRUCKING AND RIGGING COSTS CLAIMED BY THE CONTRACTOR IN THE AMOUNT OF $52,000.

THE PROVISIONS OF 28 U.S.C. 2514, POPULARLY REFERRED TO AS THE FORFEITURE STATUTE, ARE AS FOLLOWS:

A CLAIM AGAINST THE UNITED STATES SHALL BE FORFEITED TO THE UNITED STATES BY ANY PERSON WHO CORRUPTLY PRACTICES OR ATTEMPTS TO PRACTICE ANY FRAUD AGAINST THE UNITED STATES IN THE PROOF, STATEMENT, ESTABLISHMENT, OR ALLOWANCE THEREOF.

IN SUCH CASES THE COURT OF CLAIMS SHALL SPECIFICALLY FIND SUCH FRAUD OR ATTEMPT AND RENDER JUDGMENT OF FORFEITURE. (JUNE 25, 1948, CH. 646, 62 STAT. 978.)

IN CONSTRUING THE FORMER SECTION 279 OF THIS TITLE, 28 U.S.C. 279 (1946 ED.), THE COURT OF CLAIMS HAS EMPHASIZED THAT THESE PROVISIONS SHOULD BE ENFORCED RIGIDLY TO PROTECT THE GOVERNMENT AGAINST THE PAYMENT OF FALSE AND FRAUDULENT CLAIMS. FURAY V. UNITED STATES (1899), 34 CT.CL. 171; TERRILL V. UNITED STATES (1900), 35 CT.CL. 218. IN THE CASE OF JERMAN V. UNITED STATES (1942), 96 CT.CL. 540, AT PAGE 552, THE COURT OF CLAIMS STATED:

* * * WE DO NOT THINK THAT CONGRESS WOULD HAVE HAD ANY REASON FOR DISTINGUISHING BETWEEN, OR SHOWED ANY INTENTION TO DISTINGUISH BETWEEN, THE PRESENTATION OF A FALSE INVOICE TO A PURCHASING AGENT OF THE GOVERNMENT HAVING AUTHORITY TO ISSUE A VOUCHER FOR ITS PAYMENT, AND A SIMILAR PRESENTATION TO THE COMPTROLLER GENERAL OR TO THE COURT. IN ANY CASE ITS PURPOSE IS TO FRAUDULENTLY OBTAIN MONEY FROM THE UNITED STATED. THE STATUTE SEEMS TO US TO MEAN THAT SUCH AN ATTEMPT RESULTS IN THE FORFEITURE OF WHATEVER RIGHT MIGHT HAVE OTHERWISE RESULTED FROM THE TRANSACTION. SEE FURAY V. UNITED STATES, 34 C.CLS. 171; NEW YORK MARKET GARDENERS' ASSOCIATION V. UNITED STATES, 43 C.CLS. 114.

CF. ARLINGTON TRUST CO. V. UNITED STATES (1951), 121 CT.CL. 32; ALSO UNITED STATES V. NATIONAL WHOLESALERS (9TH C.A. 1956), 236 F.2D 944, HOLDING THAT THE TEST OF WHETHER A CLAIM IS FALSE MUST BE AS OF THE DATE WHEN THE CLAIM IS MADE. WHAT MAY BE REGARDED AS "SUBSTANTIAL EVIDENCE" OF FRAUD UNDER THE FALSE CLAIMS ACT IS CAREFULLY CONSIDERED IN UNITED STATES V. ST. LOUIS CLAY PRODUCTS CO. (D.C.MO. 1946), 65 F.SUPP. 645.

AS RECOGNIZED IN THE BOARD'S DECISION IN THIS CASE, IT SEEMS ABUNDANTLY CLEAR THAT THE DETERMINATION OF FRAUD IS A QUESTION OF LAW THAT IS BEYOND THE POWER OF ADMINISTRATIVE OFFICIALS TO DETERMINE WHICH NECESSARILY INCLUDES CONTRACTING OFFICERS AND BOARDS OF APPEAL WHO ARE THEIR REPRESENTATIVES. IN UNITED STATES V. WUNDERLICH (1951), 342 U.S. 98, THE OPINION BY MR. JUSTICE MINTON FOR THE SUPREME COURT EMPHASIZED "THIS COURT HAS CONSISTENTLY UPHELD THE FINALITY OF THE DEPARTMENT HEAD'S DECISION UNLESS IT WAS FOUNDED ON FRAUD, ALLEGED AND PROVED.' "SO FRAUD IS IN ESSENCE THE EXCEPTION," IT WAS STATED, BUT THE OPINION WENT ON TO SAY,"BY FRAUD WE MEAN CONSCIOUS WRONG-DOING, AN INTENTION TO CHEAT OR BE DISHONEST.' BECAUSE OF THE APPARENT INTENTION TO NARROW THE EXCEPTION TO ACTIONABLE FRAUD OF GOVERNMENT REPRESENTATIVES, THE RULING RECEIVED CONSIDERABLE, UNFAVORABLE CRITICISM. CONGRESS THEREUPON PASSED LEGISLATION APPROVED MAY 11, 1954, 68 STAT. 81, 41 U.S.C. 321, POPULARLY CALLED THE WUNDERLICH ACT, WHICH EXPRESSLY (1) PROHIBITS THE PLEADING OF THE PROVISION OF ANY CONTRACT WITH THE UNITED STATES RELATING TO FINALITY OR CONCLUSIVENESS OF ANY DECISION OF THE HEAD OF ANY DEPARTMENT OR AGENCY OR HIS DULY AUTHORIZED REPRESENTATIVE OR BOARD ON DISPUTED QUESTIONS OF FACT THEREUNDER AS LIMITING JUDICIAL REVIEW OF ANY SUCH DECISION TO CASES WHERE FRAUD BY SUCH OFFICIAL OR HIS REPRESENTATIVE OR BOARD IS ALLEGED; (2) MAKES SUCH ADMINISTRATIVE DECISIONS FINAL AND CONCLUSIVE UNLESS THE SAME ARE FRAUDULENT OR CAPRICIOUS OR ARBITRARY OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE; AND (3) PROHIBITS THE INCLUSION IN GOVERNMENT CONTRACTS OF PROVISIONS MAKING THE DECISION OF ANY ADMINISTRATIVE OFFICIAL, REPRESENTATIVE OR BOARD FINAL ON A QUESTION OF LAW. IN REPORTING ON THIS LEGISLATION, THE HOUSE COMMITTEE ON THE JUDICIARY STATED ITS PURPOSE WAS TO OVERCOME THE EFFECT OF THE WUNDERLICH CASE, AND TO PRESCRIBE FAIR AND UNIFORM STANDARDS FOR THE JUDICIAL REVIEW OF ADMINISTRATIVE DECISIONS UNDER CONTRACTS "IN THE LIGHT OF THE REASONABLE REQUIREMENTS OF THE VARIOUS GOVERNMENT DEPARTMENTS AND AGENCIES, OF THE GENERAL ACCOUNTING OFFICE AND OF GOVERNMENT CONTRACTORS.' SEE H.REPT. NO. 1380, 83D CONGRESS, 2D SESSION. SINCE BY OPERATION OF THE FORFEITURE STATUTE A PERSON, SUCH AS A CONTRACTOR, WHO CORRUPTLY PRACTICES OR ATTEMPTS TO PRACTICE ANY FRAUD AGAINST THE UNITED STATES IN THE PROOF, STATEMENT, ESTABLISHMENT OR ALLOWANCE OF A CLAIM AGAINST THE UNITED STATES FORFEITS WHATEVER RIGHT MIGHT HAVE OTHERWISE RESULTED FROM THE TRANSACTION, AND THE COURT OF CLAIMS MUST BY STATUTORY MANDATE RENDER JUDGMENT OF FORFEITURE, IT SEEMS MANIFEST THAT NO ENFORCEABLE RIGHT IN THE CONTRACTOR OR OBLIGATION ON THE UNITED STATES CAN STEM FROM A CLAIM TAINTED WITH FRAUD NOR CAN A RIGHT OR OBLIGATION BE CREATED OR REVIVED BY A DECISION RENDERED BY A CONTRACTING OFFICER ON SUCH CLAIM OR BY A BOARD'S DECISION UPON APPEAL. THUS, IN UNITED STATES V. UNITED STATES CARTRIDGE CO. (D.C.MO. 1948), 78 F.SUPP. 81, AT 83-84, IT WAS STATED THAT THE CONTRACTING OFFICER UNDER THE CONTRACT CONSIDERED HAD POWER TO ADMINISTRATIVELY SETTLE DISPUTES OF FACT ARISING IN THE EXECUTION OF A CONTRACT, NOT CRIMES IN THE NATURE OF FRAUDS OF FACT RESULTING FROM ITS EXECUTION; THAT SETTLEMENT OF CIVIL RESPONSIBILITY FOR FRAUD AS WELL AS CRIMINAL RESPONSIBILITY WAS BEYOND THE AUTHORITY OF THE CONTRACTING OFFICER IN MAKING SETTLEMENTS UNDER THE PROVISIONS OF THE CONTRACT SETTLEMENT ACT OF 1944, 41 U.S.C. 101, ET SEQ. (1958 ED.). SEE, ALSO, INTERNATIONAL POTATO CORP. V. UNITED STATES (1958), 142 CT.CL. 604, WHEREIN THE COURT OF CLAIMS HELD THAT UNDER THE STANDARD CONTRACT "DISPUTES" CLAUSE, THE CONTRACTING OFFICER HAD NEITHER THE AUTHORITY NOR DUTY TO RENDER A DECISION WITH RESPECT TO THE ALLEGED FRAUD. CF. UNITED STATES V. MISSISSIPPI VALLEY CO. (1961), 364 U.S. 520, WHERE THE FINDINGS BY THE COURT OF CLAIMS WHICH THE PARTIES HAD AGREED TO RELY UPON WERE ACCEPTED BY THE SUPREME COURT AS SUFFICIENT TO DISPOSE OF THE ISSUES PRESENTED, BUT IT WAS POINTED OUT, AT PAGE 526,"OUR RELIANCE UPON THE FINDINGS OF FACT DOES NOT PRECLUDE US FROM MAKING AN INDEPENDENT DETERMINATION AS TO THE LEGAL CONCLUSIONS AND INFERENCES WHICH SHOULD BE DRAWN FROM THEM.'

AS TO THE REDUCTION OF THE AMOUNT AND PARTIAL PAYMENT OF A FALSE CLAIM, IT SEEMS WELL ESTABLISHED THAT EVEN THE COURT OF CLAIMS DOES NOT HAVE THE RIGHT TO DIVIDE A CLAIM WHICH IS TAINTED WITH FRAUD AND ALLOW RECOVERY ON PART OF IT. SEE THE CASES CITED IN OUR DECISION 23 COMP. GEN. 907; ALSO MERVIN CONTRACTING CORPORATION V. UNITED STATES (1941), 94 CT.CL. 81; LITTLE V. UNITED STATES (1957), 138 CT.CL. 773; KAMEN SOAP PRODUCTS COMPANY, INC. V. UNITED STATES (1957), 140 CT.CL. 566, CERTIORARI DENIED (1958), 357 U.S. 939; AND WAGNER IRON WORKS V. UNITED STATES (1959), 146 CT.CL. 334. PARTIAL SETTLEMENTS ADMINISTRATIVELY WOULD DEFEAT THE INTENT AND PURPOSE OF THE FORFEITURE STATUTE WHICH IS BASED ON THE SOUND PRINCIPLE THAT FRAUD DESTROYS THE VALIDITY OF EVERYTHING INTO WHICH IT ENTERS AND VITIATES THE MOST SOLEMN CONTRACTS AND DOCUMENTS, EVEN JUDGMENTS. CF. 23 AM.JUR., FRAUD AND DECEIT, SECTION 19, AND THE AUTHORITIES CITED.

FURTHERMORE, UNDER THE RULE WHICH HAS BEEN JUDICIALLY RECOGNIZED FOR SO LONG AND SO OFTEN DECLARED IN DECISIONS OF OUR OFFICE THAT IT HAS BECOME A LANDMARK IN THE DISPOSITION OF CLAIMS INVOLVING IRREGULARITIES AND POSSIBLY FRAUDULENT PRACTICES AGAINST THE UNITED STATES, IT IS THE PLAIN DUTY OF ADMINISTRATIVE, ACCOUNTING AND AUDITING OFFICERS OF THE GOVERNMENT TO REFUSE APPROVAL AND TO PREVENT PAYMENT OF PUBLIC MONEYS UNDER ANY AGREEMENT ON BEHALF OF THE UNITED STATES AS TO WHICH THERE IS A REASONABLE SUSPICION OF IRREGULARITY, COLLUSION, OR FRAUD, THUS RESERVING THE MATTER FOR SCRUTINY IN THE COURTS WHEN THE FACTS MAY BE JUDICIALLY DETERMINED UPON SWORN TESTIMONY AND COMPETENT EVIDENCE AND A FORFEITURE DECLARED OR OTHER APPROPRIATE ACTION TAKEN. LONGWILL V. UNITED STATES, 17 CT.CL. 288, 291; CHARLES V. UNITED STATES, 19 ID. 316, 319; HUME V. UNITED STATES, 21 ID. 328, AFFIRMED, 132 U.S. 406; UNITED STATES V. ADAMS, 7 WALL. 463; BEARD V. UNITED STATES, 3 CT.CL. 122; MCKINNEY V. UNITED STATES, 4 CT.CL. 537; N.P.R.R. CO. V. UNITED STATES, 15 CT.CL. 428; ALSO, UNITED STATES V. ST. LOUIS CLAY PRODUCTS CO. (D.C.MO. 1946), 68 F.SUPP. 902, AND THE OTHER CASES CITED ABOVE. CF. 14 COMP. GEN. 150; 15 ID. 466; 17 ID. 61; ID. 240; 20 ID. 507; 23 ID. 907; 33 ID. 394; 41 ID. 206; ID. 285.

FROM A CAREFUL REVIEW OF THE ENTIRE MATTER IN THE LIGHT OF THE APPLICABLE STATUTORY PROVISIONS AND THE AUTHORITIES INDICATED ABOVE, WE ARE OF THE OPINION THAT THE DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS REASONABLY MAY NOT BE REGARDED AS IMPOSING ANY OBLIGATION ON THE UNITED STATES UNDER THE CIRCUMSTANCES OF THIS CASE. YOU ARE ACCORDINGLY ADVISED THAT CERTIFICATION BY OUR OFFICE OF THE PAYMENT FROM APPROPRIATED FUNDS OF ANY AMOUNT ON ACCOUNT OF THE CLAIM IN QUESTION IS NOT JUSTIFIED, AND IN ANSWER TO THE FIRST QUESTION SUBMITTED, PAYMENT ADMINISTRATIVELY IN THIS AND SIMILAR CASES IS NOT AUTHORIZED.

WE FEEL YOU WILL AGREE THAT IN VIEW OF THE ANSWER TO THE FIRST QUESTION SUBMITTED, AN ANSWER TO THE SECOND IS NOT REQUIRED.