B-158000, JAN. 14, 1966, 45 COMP. GEN. 406

B-158000: Jan 14, 1966

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CONTRACTS - FRAUD - MEDICAL CERTIFICATES THE CLAIMS UNDER GUARD SERVICE CONTRACTS TERMINATED DUE TO SUBMISSION BY THE CONTRACTOR OF FALSE OR FICTITIOUS MEDICAL CERTIFICATES FOR PROSPECTIVE EMPLOYEES ARE NOT SUBJECT TO THE FORFEITURE ACT. A RELEASE SHOULD BE SECURED FROM THE CONTRACTOR BEFORE PAYMENT IS MADE. 1966: REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 5. THE QUESTION PRESENTED FOR OUR CONSIDERATION IS WHETHER THE GENERAL SERVICES ADMINISTRATION (GSA) MAY APPROVE PAYMENT FOR THE SERVICES RENDERED UNDER THESE CONTRACTS UNDER THE FOLLOWING CIRCUMSTANCES. A PHYSICAL EXAMINATION WITHOUT COST TO THE GOVERNMENT WAS REQUIRED OF EACH EMPLOYEE AND A CERTIFICATE GIVING NOTICE AS TO THE RESULTS WAS TO BE FURNISHED THE CONTRACTING OFFICER BEFORE THE EMPLOYEE WAS ASSIGNED TO DUTY.

B-158000, JAN. 14, 1966, 45 COMP. GEN. 406

CONTRACTS - FRAUD - MEDICAL CERTIFICATES THE CLAIMS UNDER GUARD SERVICE CONTRACTS TERMINATED DUE TO SUBMISSION BY THE CONTRACTOR OF FALSE OR FICTITIOUS MEDICAL CERTIFICATES FOR PROSPECTIVE EMPLOYEES ARE NOT SUBJECT TO THE FORFEITURE ACT, 28 U.S.C. 2514, THE GUARD SERVICE HAVING BEEN SATISFACTORILY PERFORMED BY PHYSICALLY CAPABLE EMPLOYEES, THE GOVERNMENT RECEIVED A DIRECT BENEFIT AND SUSTAINED NO MONETARY LOSS, AND ABSENT A SHOWING OF FRAUD TO OBTAIN PAYMENT, THE CONTRACTOR MAY BE PAID FOR THE SERVICES RENDERED; HOWEVER, IN VIEW OF THE PENDING APPEAL FROM THE LEGALITY OF THE CONTRACT TERMINATION BECAUSE OF THE IMPROPER CERTIFICATES, A RELEASE SHOULD BE SECURED FROM THE CONTRACTOR BEFORE PAYMENT IS MADE.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, JANUARY 14, 1966:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 5, 1965, REQUESTING A DECISION AS TO THE PROPRIETY OF PAYMENT IN THE AMOUNT OF $5,188.32 TO THE NATIONAL SECURITY SYSTEM, INC., NEW ORLEANS, LOUISIANA, UNDER CONTRACTS NOS. GS-07B-235/BM) AND GS-07B-248/BM), ENTERED INTO MAY 14, 1964, AND JUNE 15, 1964, RESPECTIVELY, COVERING GUARD SERVICES AT FEDERAL INSTALLATIONS LOCATED IN HOUSTON AND DALLAS, TEXAS.

THE QUESTION PRESENTED FOR OUR CONSIDERATION IS WHETHER THE GENERAL SERVICES ADMINISTRATION (GSA) MAY APPROVE PAYMENT FOR THE SERVICES RENDERED UNDER THESE CONTRACTS UNDER THE FOLLOWING CIRCUMSTANCES.

PARAGRAPH 3 (A) OF THE SPECIFICATIONS INCLUDED IN BOTH CONTRACTS REQUIRED THAT ALL EMPLOYEES ASSIGNED BY THE CONTRACTOR TO WORK UNDER THE CONTRACT BE PHYSICALLY ABLE TO DO THEIR ASSIGNED WORK AND FREE FROM ANY COMMUNICABLE DISEASE. A PHYSICAL EXAMINATION WITHOUT COST TO THE GOVERNMENT WAS REQUIRED OF EACH EMPLOYEE AND A CERTIFICATE GIVING NOTICE AS TO THE RESULTS WAS TO BE FURNISHED THE CONTRACTING OFFICER BEFORE THE EMPLOYEE WAS ASSIGNED TO DUTY. IN ADDITION, MEMBERS OF THE PROTECTION FORCE WERE REQUIRED TO BE MALES IN GOOD GENERAL HEALTH WITHOUT PHYSICAL DEFECTS OR ABNORMALITIES WHICH WOULD INTERFERE WITH THE PERFORMANCE OF THEIR DUTIES.

ON NOVEMBER 6, 1964, THE DALLAS REGIONAL OFFICE OF THE PUBLIC BUILDINGS SERVICE, GSA, CANCELED BOTH CONTRACTS ON THE BASIS OF INFORMATION THAT NATIONAL SECURITY KNOWINGLY SUBMITTED FALSE OR FICTITIOUS MEDICAL CERTIFICATES TO THE GOVERNMENT COVERING PERSONS PROPOSED TO BE EMPLOYED BY THE COMPANY UNDER THE CONTRACTS AND WHO WERE SUBSEQUENTLY APPROVED FOR EMPLOYMENT BY THE CONTRACTING OFFICER. THE MEDICAL CERTIFICATES WERE REQUIRED UNDER THE CONTRACTS AS EVIDENCE THAT PROSPECTIVE EMPLOYEES WOULD BE PHYSICALLY CAPABLE OF PERFORMING THEIR ASSIGNED DUTIES.

INVESTIGATIONS CONDUCTED BY YOUR COMPLIANCE DIVISION AND THE FEDERAL BUREAU OF INVESTIGATION INDICATED THAT A TOTAL OF 11 CERTIFICATES WERE SUBMITTED TO THE GOVERNMENT WHICH CONTAINED FORGED SIGNATURES OF DOCTORS OR THE NAMES OF FICTITIOUS DOCTORS. FURTHERMORE, AFFIDAVITS OF EMPLOYEES INVOLVED REVEAL THAT LARRY E. KONRAD, PRESIDENT OF NATIONAL SECURITY SYSTEM, INC., ADVISED PROSPECTIVE EMPLOYEES THAT A PHYSICAL EXAMINATION WOULD NOT BE NECESSARY AND THAT A PHYSICIAN'S NAME COULD BE AFFIXED TO THE CERTIFICATES BY THE PROSPECTIVE EMPLOYEE. IN SOME INSTANCES THE CERTIFICATES WERE RETURNED BY THE APPLICANTS TO MR. KONRAD WITHOUT A PHYSICIAN'S SIGNATURE AND LATER SUBMITTED TO THE GOVERNMENT WITH THE SIGNATURE OF A FICTITIOUS PHYSICIAN APPEARING THEREON.

IN ADDITION TO CANCELING THE CONTRACTS AS A RESULT OF NATIONAL SECURITY SYSTEM'S SUBMISSION OF FALSE OR FICTITIOUS MEDICAL CERTIFICATES, THE CONTRACTING OFFICER ADVISED THAT FOR THIS REASON ALL CLAIMS ARISING UNDER THE CONTRACTS WERE SUBJECT TO FORFEITURE PURSUANT TO THE FORFEITURE ACT, 28 U.S.C. 2514. THAT ACT REQUIRES THAT A CLAIM AGAINST THE UNITED STATES BE FORFEITED 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.'

IN CONSTRUING THE FORMER SECTION 279 OF THIS TITLE, 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. WILLIAM F. FURAY V. THE UNITED STATES, 34 CT.CL. 171 (1899); DAVID P. TERRILL V. THE UNITED STATES, ET AL., 35 CT.CL. 218 (1900). HOWEVER, STATUTES IMPOSING FORFEITURES, BEING PENAL IN NATURE, MUST BE STRICTLY CONSTRUED. UNITED STATES V. ONE 1946 MERCURY SEDAN AUTOMOBILE, 100 F.SUPP. 957 (1951), AFFIRMED 199 F.2D 499 (1952).

AT THE TIME THE CONTRACTS WERE TERMINATED YOUR AGENCY REPORTS THAT NATIONAL SECURITY SYSTEM, INC., HAD SATISFACTORILY PERFORMED GUARD SERVICES UNDER BOTH CONTRACTS FOR WHICH NO PAYMENT HAD BEEN MADE. ALTHOUGH THE RECORD SHOWS THAT THE MEDICAL CERTIFICATES REQUIRED AS EVIDENCE THAT PROSPECTIVE EMPLOYEES WOULD BE PHYSICALLY CAPABLE OF PERFORMING THEIR ASSIGNED DUTIES WERE FALSE OR FICTITIOUS, THERE IS NO EVIDENCE THAT THE EMPLOYEES WERE PHYSICALLY INCAPABLE OF PERFORMING THEIR ASSIGNED DUTIES.

IN VIEW OF THE FACT THAT THE GOVERNMENT HAS RECEIVED A DIRECT BENEFIT FROM THE SERVICES PERFORMED WHICH YOUR AGENCY HAS REPORTED AS BEING SATISFACTORY AND THE GOVERNMENT HAS SUSTAINED NO MONETARY LOSS AS A RESULT OF THE CONTRACTOR'S ACTIONS, IT DOES NOT APPEAR THAT UNDER THE FACTS IN THIS CASE THE LANGUAGE OR SPIRIT OF 28 U.S.C. 2514 WOULD REQUIRE FORFEITURE OF THIS CLAIM.

IN THE CASE OF ANDREW T. LITTLE, DOING BUSINESS AS SOUTHERN SCHOOL OF INSURANCE V. THE UNITED STATES, 138 CT.CL. 773 (1957), THE COURT HELD THAT THE CONTRACTOR PRACTICED FRAUD AGAINST THE UNITED STATES IN THE PROOF OR ESTABLISHMENT OF CLAIMS UNDER THE CONTRACT AND IN VIEW THEREOF THE PLAINTIFF'S CLAIMS UNDER THAT CONTRACT WERE FORFEITED PURSUANT TO 28 U.S.C. 2514. IN THAT CASE THE CONTRACT REQUIRED THAT THE SCHOOL MAINTAIN RECORDS OF ATTENDANCE, DEPORTMENT AND PROGRESS OF VETERANS IN TRAINING UNDER THE CONTRACT AND THE PLAINTIFF FALSIFIED THESE RECORDS FOR THE PURPOSE OF SECURING A GREATER AMOUNT OF MONEY FROM THE GOVERNMENT THAN HE WOULD BE ENTITLED TO HAD THE SCHOOL RECORDS BEEN ACCURATE. WE THINK THE LITTLE CASE CAN BE DISTINGUISHED FROM THE PRESENT CLAIM WHICH DOES NOT INVOLVE THE PRACTICE OF FRAUD FOR THE PURPOSE OF SECURING PAYMENT FOR THE SERVICES. IT IS ALSO DISTINGUISHABLE FROM THE CASE IN 44 COMP. GEN. 110, FOR THE SAME REASONS.

IN THE CASE OF F. B. CROVO, JR. AND CO. V. THE UNITED STATES, 100 CT.CL. 368 (1943), THE COURT STATED THAT THE FORMER SECTION OF 28 U.S.C. 2514 IS OBVIOUSLY AIMED AT FRAUD COMMITTED FOR THE PURPOSE OF SECURING THE PAYMENT OF A CLAIM. THE EVIDENCE IN THE PRESENT CASE FAILS TO SHOW THAT THE FRAUD WAS COMMITTED FOR THIS PURPOSE AND IN VIEW OF THIS FACT, AS WELL AS FOR THE OTHER REASONS INDICATED ABOVE, PAYMENT FOR THE SERVICES RENDERED BY NATIONAL SECURITY SYSTEM, INC., IS AUTHORIZED.

HOWEVER, IN VIEW OF THE CONTRACTOR'S PENDING APPEAL FROM THE LEGALITY OF THE CONTRACT TERMINATION BECAUSE OF THE IMPROPER CERTIFICATES, WE BELIEVE IT WOULD BE APPROPRIATE FOR YOU TO SECURE A RELEASE FROM THE CONTRACTOR BEFORE PAYMENT IS MADE.