B-171759, JUN 10, 1971

B-171759: Jun 10, 1971

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WAS COMMITTED BY TRUCK DRIVERS WHO WERE INDEPENDENT CONTRACTORS AND AS EVIDENCE INDICATES NO COLLUSION BETWEEN CLAIMANT AND TRUCK DRIVERS PAYMENT MAY BE MADE AT CONTRACT RATE FOR ACCEPTED MATERIAL THAT MET CONTRACT SPECIFICATIONS. TO DEPUTY DIRECTOR ACCOUNTING AND FINANCE: REFERENCE IS MADE TO YOUR REQUEST FOR AN ADVANCE DECISION DATED DECEMBER 26. IT WAS DISCOVERED THAT SOME OF THE TRUCKS HAD FALSE BOTTOMS AND CONSEQUENTLY THE GOVERNMENT WAS NOT OBTAINING THE AMOUNT OF GRAVEL AND SAND FOR WHICH IT HAD CONTRACTED. THERE IS ALSO EVIDENCE TO INDICATE THAT CERTAIN OF THE MATERIAL DELIVERED UNDER THE CONTRACT DID NOT MEET SPECIFICATIONS. THE CONTRACT WAS TERMINATED FOR DEFAULT FOR FAILURE TO DELIVER THE MATERIALS AT THE RATE CALLED FOR UNDER THE CONTRACT.

B-171759, JUN 10, 1971

CONTRACTS - FRAUD CONCERNING CLAIM OF CONG THANH ENTERPRISES OF SAIGON, RVN, FOR 3 MILLION PIASTERS, UNDER CONTRACT WITH U.S. AIR FORCE, SAIGON AREA PROCUREMENT OFFICE, FOR DELIVERIES OF SAND AND GRAVEL. AS EVIDENCE INDICATES FRAUD PERPETRATED AGAINST THE U.S. WAS COMMITTED BY TRUCK DRIVERS WHO WERE INDEPENDENT CONTRACTORS AND AS EVIDENCE INDICATES NO COLLUSION BETWEEN CLAIMANT AND TRUCK DRIVERS PAYMENT MAY BE MADE AT CONTRACT RATE FOR ACCEPTED MATERIAL THAT MET CONTRACT SPECIFICATIONS.

TO DEPUTY DIRECTOR ACCOUNTING AND FINANCE:

REFERENCE IS MADE TO YOUR REQUEST FOR AN ADVANCE DECISION DATED DECEMBER 26, 1970, CONCERNING THE CLAIM IN THE AMOUNT OF 3 MILLION VIETNAMESE PIASTERS ($VN) ($25,423.73 AT THE CONVERSION RATE OF $118 VN EQUALS $1.00) SUBMITTED BY CONG THANH ENTERPRISES OF SAIGON, RVN UNDER CONTRACT NO. F62111-69-C-0088.

ON OR ABOUT FEBRUARY 26, 1969, THE SAIGON AREA PROCUREMENT OFFICE OF THE UNITED STATES AIR FORCE ENTERED INTO A CONTRACT WITH CONG THANH FOR APPROXIMATELY 5,100 CUBIC METERS OF GRAVEL AND APPROXIMATELY 1,000 CUBIC METERS OF SAND. IN THE COURSE OF DELIVERIES ON APRIL 11, 1969, IT WAS DISCOVERED THAT SOME OF THE TRUCKS HAD FALSE BOTTOMS AND CONSEQUENTLY THE GOVERNMENT WAS NOT OBTAINING THE AMOUNT OF GRAVEL AND SAND FOR WHICH IT HAD CONTRACTED. THERE IS ALSO EVIDENCE TO INDICATE THAT CERTAIN OF THE MATERIAL DELIVERED UNDER THE CONTRACT DID NOT MEET SPECIFICATIONS. WIRE OF JUNE 5, 1969, THE CONTRACT WAS TERMINATED FOR DEFAULT FOR FAILURE TO DELIVER THE MATERIALS AT THE RATE CALLED FOR UNDER THE CONTRACT.

THE ISSUE PRESENTED IS WHETHER IN THE CIRCUMSTANCES THE CONTRACTOR MAY BE PAID FOR THE SAND AND GRAVEL DELIVERED TO AND ACCEPTED BY THE GOVERNMENT OR WHETHER PAYMENTS MAY NOT BE MADE BECAUSE OF THE INDICATIONS OF FRAUD. THE APPLICABLE PROVISION OF LAW, 28 U.S.C. 2514, STATES IN PART 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."

THE UNITED STATES COURT OF CLAIMS INTERPRETED THE ABOVE STATUTE IN LITTLE V UNITED STATES, 138 CT. CL. 773 (1957) AS FOLLOWS:

"IT IS TRUE THAT THE FORFEITURE STATUTE QUOTED ABOVE WAS NOT INTENDED TO FORFEIT AN OTHERWISE VALID CLAIM OF A CLAIMANT MERELY BECAUSE, IN SOME OTHER UNRELATED TRANSACTION, HE HAD DEFRAUDED THE GOVERNMENT. BUT WHERE, AS IN THE PRESENT CASE, FRAUD WAS COMMITTED IN REGARD TO THE VERY CONTRACT UPON WHICH THE SUIT IS BROUGHT, THIS COURT DOES NOT HAVE THE RIGHT TO DIVIDE THE CONTRACT AND ALLOW RECOVERY ON PART OF IT."

IN 44 COMP. GEN. 110 (1964), CONSISTENT WITH THE COURT'S OPINION IN LITTLE, AND IN DISCUSSING A REDUCTION IN A FRAUDULENT PORTION OF AN OTHERWISE VALID CLAIM, WE STATED THAT:

"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."

IN A SIMILAR CASE, 45 COMP. GEN. 406 (1966), A CONTRACTOR WAS DEFAULTED WHEN IT WAS DISCOVERED THAT THE CONTRACTOR SUBMITTED FRAUDULENT INFORMATION TO THE GOVERNMENT REGARDING PHYSICAL FITNESS OF EMPLOYEES. HOWEVER, THE CONTRACTOR HAD OTHERWISE PERFORMED SUCCESSFULLY AND THIS OFFICE DETERMINED THAT THE CONTRACTOR SHOULD BE PAID FOR WORK PROPERLY PERFORMED WHERE THE GOVERNMENT RECEIVED A BENEFIT AND SINCE, AMONG OTHER REASONS, THE FRAUD WAS NOT COMMITTED FOR THE PURPOSE OF SECURING THE PAYMENT OF A CLAIM.

IN THE CASE AT BAR, THE FILE CONTAINS EVIDENCE INDICATING THAT THE FRAUD WAS COMMITTED BY THE TRUCK DRIVERS WHO WERE INDEPENDENT CONTRACTORS RATHER THAN EMPLOYEES OF THE CONTRACTOR. IN ADDITION, THE OFFICE OF SPECIAL INVESTIGATION MADE A SPECIAL INQUIRY INTO THIS CASE AND FOUND NO EVIDENCE THAT THE CONTRACTOR WAS IN COLLUSION WITH THE TRUCK DRIVERS. THE EVIDENCE ALSO INDICATED THAT THE CONTRACTOR HAD PAID HIS SUPPLIER FOR THE FULL AMOUNT OF MATERIALS CLAIMED TO HAVE BEEN DELIVERED.

IN ACCORDANCE WITH THE FOREGOING, THE CONTRACTOR SHOULD BE PAID AT THE CONTRACT RATE FOR THE MATERIALS ACCEPTED BY THE GOVERNMENT AS MEETING THE SPECIFICATIONS. THE FILE SUBMITTED WITH YOUR REQUEST IS RETURNED.