B-133647 October 30, 1957

B-133647 October 30, 1957

Fred W. Kaess, Esquire United States Attorney 813 Federal Building Detroit 26, Michigan

Attention: John L. Owen, Esquire, Assistant United States Attorney

Re: William J. Long, 13120 Canonbury, Detroit 5, Michigan - Claim for $409.70 plus interest

Dear Mr. Kaess:

Your letter of July 22, 1957, requests our advice concerning the above- captioned case and a clarification of the subject of interest as applied to certain types of General Accounting Office claims.

You report that in response to your demands for payment of the sum of $409.70 plus interest, the balance due in the above-captioned case as evidenced by our Cerfificate of Indebtedness, the debtor veteran expressed amazement at his being asked to pay such sum since he already had repaid $540 pursuant to an order of United States District Judge Frank A. Picard, dated December 30, 1949, adjusting him guilty of violation of the Servicemen's Readjustment Act of 1944--and imposing as a condition of probation the requirement that he repay that sum at the rate of $25 per month. Hence, you request our advice as to whether you should proceed against the debtor veteran for the sum stated in our Certificate of Indebtedness.

The record indicates that Long, the debtor veteran, received readjustment allowance for 36 weeks under the provision of the Servicemen's Readjustment Act of 1944. During 27 of those weeks he actually was employed. That made him ineligible to receive such allowance for such weeks but he recceived such allowance by reason of deliberate misrepresentation of his employment status. He thereby received $540 on the basis of his false claims. In addition, section 1300 of the Servicemen's Readjustment Act of 1944, 38 U.S.C. 696R; provides that a claimant who knowingly accepts an allowance to which he is not entitled forfeits his right to receive any further readjustment allowance under the act. Long's misrepresentations began with the first week of the 36 week period for which he received allowances; hence, section 1300 required the forfeiture of any allowance subsequently received, even though Long may have been unemployed and otherwise eligible during a particular subsequent week. Since 9 such weeks were included in the employment status, Long must forfeit the $180 received therefor. Accordingly, the total principal amount to be recovered from Long is $720, consisting of $540 obtained by him through false claims and $180 forfeited in accordance with section 1300. It will be noted from our Certificate of Indebtedness dated May 14, 1957, file reference DW-Z-320196, copy attached, that no intrest was charged therein as to the $180 forfeiture. However, interest was charged against the $540 obtained through false claims, computed upon each individual payment involved from the date of such payment. This interest charge is based upon 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 & Guaranty Co., 236 U.S. 512, 528; United States v. Rodiek, 120 F. 2d 760, affirmed 315 U.S. 783, rehearing denied 316 U.S. 707; 47 C.J.S. Interest 813. Also the Certificate of Indebtedness indicates that the periodic payments made by Long have been applied in accordance with the equally well-established rule, known as the "United States Rule," that partial payments are to be applied first aginst accrued interest and the balance, if any, against the principal balance. See 47 C.J.S. Interest 866, and cases cited therein. In view of the periods of time involved and the relatively large amounts of interest generated thereby, Long's payments totaling $540, applied against the interest-bearing amount of $540 obtained by fraud, effected a reduction of the principal amount thereof to $216.59, which in accordance with the rule stated above will continue to bear interest as indicated until paid.

both Long and the United States Probation Officer appear to feel that Long has completely dischaged this debt by complying with the terms of the restitution order entered by Judge Picard in the original cases against him for violation of the Servicemen's Readjustment Act. However, it is well settled that the outcome of a criminal Action is not determinative of and does not satisfy civil liability, and that the sentence in a criminal action is not res judicate so far as a subsequent civil action, arising out of the same facts on which the criminal acation was based, is concerned. See United States ex rel Marcus v. Hess, 317 U.S. 537, 548; Helvering v. Mitchell, 303 U.S. 391, and cases cited therein.

In view of the above, we conclude that the outstanding balance of Long's indebtedness as computed in our Certificate of Indebtedness is correct and proper under existing law and judicial precedants, and our opinion is that you should proceed against Long for the sum stated therein. In the event it becomes necessary to institute suit to collect this suj, we suggest that interest be claimed in the complaint an the $180 forfeiture from the date of our first demand therefor, November 5, 1954 in addition to the interest on the $216.59 balance of the $540 obtained by fraud as indicated in our Certificate of Indebtedness.

While you request clarification of the subject of interest and its applicability to certain types of General accounting Office claims, your letter does not clearly indicate the type of claim in which you are particularly interested. Hence, our reply to this portion of your letter must of necessity be general. Of course, where interest on an indebtedness in required by statute or contract, our Certificate of indebtedness must provide therefor. You question appears to be directed to those instances where interest is not so required. In the case of an indebtedness wherein interest is not provided by statute or contract and my fraud is involved--an, for example, the $180 forfeiture in the Long case--we do not charge interest unless and until it become necessary to institute quit in order to collect, in which event interest is assessed from the date of our fist demand for payment. Conversely, in cases where interest is not provided by statute or contract but fraud is involved--as, for example, the $540 obtained by false representations in the Long case-- interest is charged in accordance with judicial precedents as indicated above. In that connection attention is directed to the attached copy of our letter of October 8, 1954, B-121323, to the Attorney General covering the subject of interest and readjustment allowance debts. We hope that this general statements of our policy on assessing interest against debts owed the United States will serve the purpose of your inquiry.

Sincerely yours,

Joseph Campbell Comptroller General of the United States

Enclosure