B-114809, SEP. 5, 1962

B-114809: Sep 5, 1962

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THESE VOUCHERS WERE PAID IN RELIANCE UPON REPRESENTATIONS MADE BY YOU WHEN. 525.40 IS THE TOTAL OF EXCEPTIONS TAKEN BY OUR AUDITORS AND REPRESENTS THE AMOUNT PAID TO THE BEFORE-MENTIONED FIRMS DURING THE PERIOD INVOLVED. A REVIEW OF THE RECORDS AND DOCUMENTS MAINTAINED BY YOU IN CONNECTION WITH THESE TRANSACTIONS MAKES IT IMPOSSIBLE TO DIFFERENTIATE BETWEEN PAID VOUCHERS COVERING LEGITIMATE PURCHASES AND THOSE FOR WHICH NO SUPPLIES WERE FURNISHED. ANY CLARIFICATION MUST BE MADE BY THE COURTS AND THE BURDEN IS UPON YOU TO SEEK SUCH CLARIFICATION. THE RULE IS WELL SETTLED THAT THE AMOUNT TO THE CREDIT OF A FORMER EMPLOYEE IN THE RETIREMENT FUND. WERE FORFEITED BECAUSE OF THE COMMISSION OF A VARIETY OF OFFENSES IN NO WAY RELATED TO THE NATIONAL SECURITY.

B-114809, SEP. 5, 1962

TO MR. FRANK F. LILLY:

ON JULY 17 AND AUGUST 16, 1962, YOUR ATTORNEY, MR. D. ROBERT CERVERA, WROTE TO OUR OFFICE IN YOUR BEHALF PROTESTING THE SET OFF OF MONIES IN YOUR CIVIL SERVICE RETIREMENT ACCOUNT AGAINST AN INDEBTEDNESS IN THE PRINCIPAL AMOUNT OF $30,525.40.

THIS AMOUNT INCLUDES PAYMENTS ERRONEOUSLY MADE TO THOMAS F. SCOTT AND COMPANY AND M. S. GINN AND COMPANY, WASHINGTON, D.C., DURING THE PERIOD APRIL 1, 1953, TO MARCH 27, 1956, AS THE RESULT OF VOUCHERS CAUSED BY YOU TO BE SUBMITTED FOR THE PURPOSE OF PAYMENT FOR SUPPLIES ALLEGEDLY FURNISHED TO THE BUREAU OF NARCOTICS, TREASURY DEPARTMENT. THESE VOUCHERS WERE PAID IN RELIANCE UPON REPRESENTATIONS MADE BY YOU WHEN--- IN POINT OF FACT--- YOU KNEW THAT ALL SUCH SUPPLIES HAD NOT BEEN FURNISHED. THE $30,525.40 IS THE TOTAL OF EXCEPTIONS TAKEN BY OUR AUDITORS AND REPRESENTS THE AMOUNT PAID TO THE BEFORE-MENTIONED FIRMS DURING THE PERIOD INVOLVED. A REVIEW OF THE RECORDS AND DOCUMENTS MAINTAINED BY YOU IN CONNECTION WITH THESE TRANSACTIONS MAKES IT IMPOSSIBLE TO DIFFERENTIATE BETWEEN PAID VOUCHERS COVERING LEGITIMATE PURCHASES AND THOSE FOR WHICH NO SUPPLIES WERE FURNISHED. THIS FACT LEAVES OUR OFFICE IN THE POSITION OF NOT BEING ABLE TO DETAIL THE ACTUAL DAMAGES SUFFERED BY THE GOVERNMENT BECAUSE OF YOUR ACTIONS. NO OFFER IN COMPROMISE OF THE GOVERNMENT'S CLAIM WHICH MAY BE REFERRED TO THE DEPARTMENT OF JUSTICE FOR CONSIDERATION HAS BEEN RECEIVED FROM YOU. THEREFORE, ANY CLARIFICATION MUST BE MADE BY THE COURTS AND THE BURDEN IS UPON YOU TO SEEK SUCH CLARIFICATION. SEE CHARLES V. UNITED STATES, 19 CT.CL. 316, 319 (1884) AND EASTMAN KODAK COMPANY OF NEW YORK V. SOUTHERN PHOTO MATERIALS COMPANY, 273 U.S. 359, 379 (1927).

AS TO THE GOVERNMENT'S USE OF SET OFF AGAINST YOUR RETIREMENT FUND, THE RULE IS WELL SETTLED THAT THE AMOUNT TO THE CREDIT OF A FORMER EMPLOYEE IN THE RETIREMENT FUND, WHEN PAYABLE, OR THE AMOUNT OF HIS RETIREMENT ANNUITIES, WHEN PAYABLE, MAY BE APPLIED IN LIQUIDATION OF HIS INDEBTEDNESS TO THE UNITED STATES. 21 COMP. GEN. 1000. THIS RULE HAS BEEN RECOGNIZED AND AFFIRMED BY THE COURTS, O-LEARY V. UNITED STATES, 82 CT.CL. 305 (1936); BOERNER V. UNITED STATES, 30 F.SUPP. 635 (E.D. NEW YORK 1939), AFFIRMED ON APPEAL BY THE CIRCUIT COURT OF APPEALS, SECOND CIRCUIT AT 116 F.2D 387 (1941) AND UNITED STATES, V. UNITED STATES FIDELITY AND GUARANTY COMPANY, 35 F.SUPP. 959 (E.D.PENN. 1940).

YOUR ATTORNEY REQUESTS THAT ANY SUMS SET OFF FROM YOUR RETIREMENT FUND BE RETURNED TO THE CIVIL SERVICE COMMISSION SO THAT YOUR RETIREMENT BENEFITS CAN BE REINSTATED AS PROVIDED BY THE ACT OF SEPTEMBER 26, 1961, PUBLIC LAW 87-299, 75 STAT. 17. THIS ACT IN PART RESTORES CIVILIAN ANNUITY BENEFITS WHICH, UNDER THE ACT OF SEPTEMBER 1, 1954, CH. 1214, 68 STAT. 1142, 5 U.S.C. 2281, WERE FORFEITED BECAUSE OF THE COMMISSION OF A VARIETY OF OFFENSES IN NO WAY RELATED TO THE NATIONAL SECURITY. A STUDY OF THE LEGISLATIVE HISTORY OF PUBLIC LAW 87-299 SHOWS THAT IT WAS NOT DESIGNED TO RELIEVE PERSONS OF THE OBLIGATION TO REPAY DAMAGES TO THE GOVERNMENT RESULTING FROM THEIR WRONGDOING. SPECIFICALLY, THE SENATE COMMITTEE ON POST OFFICE AND CIVIL SERVICE IN ITS REPORT ON H.R. 6141, 87TH CONGRESS, S.REPT.NO. 862, 87TH CONG., 1ST SESSION 4, REPORTED AS FOLLOWS:

"THE COMMITTEE DESIRES TO MAKE IT CLEAR THAT, IN ANY CASE WHERE AN EMPLOYEE- OFFENSE HAS RESULTED IN INDEBTEDNESS TO THE UNITED STATES, THE GOVERNMENT HAS FULL LEGAL AUTHORITY TO OBTAIN RESTITUTION BY DEDUCTING ANY SUCH INDEBTEDNESS FROM RETIREMENT PAYMENTS AUTHORIZED BY THIS BILL. * *

THEREFORE, IT IS CLEAR THAT UNTIL YOUR INDEBTEDNESS HAS BEEN PAID OR THE GOVERNMENT'S CLAIM OTHERWISE SETTLED, NO AMOUNTS MAY BE RELEASED FOR RECREDIT TO YOUR RETIREMENT ACCOUNT.

IN THE FINANCIAL STATEMENT THAT FOLLOWS, IT WILL BE NOTED THAT SOME OF THE FIGURES REPRESENT A CHARGE OF 6 PERCENT INTEREST ON THE PRINCIPAL AMOUNT. IN CASES WHERE FRAUD IS INVOLVED, INTEREST IS CHARGED IN ACCORDANCE WITH THE WELL-ESTABLISHED RULE THAT AN IMPLIED CONTRACT IS RAISED BY LAW FOR THE IMMEDIATE REPAYMENT OF MONEY FRAUDULENTLY OR WRONGFULLY OBTAINED AND THAT INTEREST FROM THE DATE OF PAYMENT TO THE FRAUDULENT RECIPIENT IS RECOVERABLE. UNITED STATES V. UNITED STATES FIDELITY AND GUARANTY CO., 236 U.S. 512, 528 (1915) AND UNITED STATES V. RODIEK, 120 F.2D 760 (2ND CIR. 1941). IN SUCH CASES, THE INTEREST IS COMPUTED AT THE RATE PROVIDED BY THE LAW OF THE FORUM, GODDARD V. FOSTER, 17 WALL. 123 (U.S. 1872). WHETHER THE FORUM BE DETERMINED TO BE THE DISTRICT OF COLUMBIA, THE PLACE OF RECEIPT OF THE MONIES, OR MARYLAND, YOUR RESIDENCE, THE 6 PERCENT INTEREST RATE WOULD BE FOR APPLICATION. SEE SECTION 2701 OF TITLE 28 OF THE DISTRICT OF COLUMBIA CODE AND SECTION 1 OF ARTICLE 49 OF THE MARYLAND CODE.

IN CASES OF SUCCESSIVE FRAUDULENT PAYMENTS SUCH AS THOSE HERE INVOLVED, APPLICATION OF THE INTEREST RATE ON EACH PAYMENT COMMENCES ON THE DATE OF EACH SUCH PAYMENT AS INDICATED IN OUR CERTIFICATE OF INDEBTEDNESS. JUNE 21, 1956, YOU WERE MAILED A CERTIFICATE OF INDEBTEDNESS IN THE MATTER.

A STATEMENT OF YOUR INDEBTEDNESS CURRENT TO AUGUST 24, 1962, FOLLOWS:

CHART

PRINCIPAL INTEREST

INTEREST FROM DATE OF PAYMENTS THROUGH $30,525.40

12-9-55 $ 2,975.22

INTEREST FROM 12-10-55 ON $30,525.40

THROUGH 8-24-62 12,283.75

$15,258.97

LESS:

SALARY, LUMP-SUM LEAVE, AND

REFUND OF BOND DEDUCTION WHICH

WERE AVAILABLE FOR SET OFF ON

12-9-55 $1,049.99

REMITTANCES:

PAID BY YOU TO DEPARTMENT

JUSTICE AND DEPOSITED

C/D 20 DATED 12-1-57 50.00

DO. 28 DO. 4-1-58 55.00

DO. 41 DO. 6-26-58 10.00

DO. 12 DO.9-10-58 15.00

DO. 25 DO. 12-19-5815.00

DO. 40 DO. 4-3-59 10.00

PAID BY THOMAS F. SCOTT AND CO.

8-27-59 2,513.07

PAID BY GINN'S STOCKETT-FISKE

10-26-59 1,671,19

CIVIL SERVICE COMMISSION

FORWARDED A CHECK ON 6-20-60

TO COVER RETIREMENT

DEDUCTIONS FROM YOUR PAY PLUS

INTEREST THEREON 4,708.13

ON 3-1-62 CIVIL SERVICE

COMMISSION FORWARDED A

CHECK OFR 496.67

FIVE (5) ANNUITY CHECKS AT

$149 EACH 745.00 $11,339.05

$11,339.05 $30,525.40 $ 3,919.92

AS OF AUGUST 24, 1962, THERE IS AN UNPAID INDEBTEDNESS OF $34,445.32. INTEREST CONTINUES TO ACCRUE ON THE UNPAID PRINCIPAL OF $30,525.40 AT THE DAILY RATE OF $5.01787 FROM AUGUST 25, 1962, UNTIL PAID.

IF IT IS YOUR DESIRE TO HAVE MR. CERVERA REPRESENT YOU BEFORE OUR OFFICE, A POWER OF ATTORNEY TO THAT EFFECT SHOULD BE FURNISHED US. ..END :

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