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INC.: REFERENCE IS MADE TO LETTERS DATED AUGUST 10 AND 31. WAS WITHHELD AND APPLIED IN LIQUIDATION OF THE INDEBTEDNESS OF ZENITH INDUSTRIES. IT IS STATED IN THE LETTER OF AUGUST 10TH THAT THE INTERNAL REVENUE SERVICE THROUGH A RECENTLY COMPLETED EXHAUSTIVE INVESTIGATION HAS ESTABLISHED THAT THERE IS NO RELATIONSHIP BETWEEN THE THREE NAMED CORPORATIONS AND THAT "IT SEEMS MORE THAN PASSING STRANGE THAT YOUR OFFICE CAN SUMMARILY AND ARBITRARILY FIND TO THE CONTRARY ON THE BASIS OF NO PROBATIVE EVIDENCE.'. THERE IS NO EVIDENCE HERE THAT THE INTERNAL REVENUE SERVICE HAS ESTABLISHED THAT THERE IS NO RELATIONSHIP BETWEEN THE THREE CORPORATIONS NAMED. GRANTING THAT SUCH A DECISION WAS MADE BY THAT AGENCY.

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B-113198, SEP. 13, 1956

ATLANTIC AND PACIFIC WIRE AND CABLE COMPANY, INC.:

REFERENCE IS MADE TO LETTERS DATED AUGUST 10 AND 31, 1956, FROM ROTHSTEIN AND ROTOLO, IN YOUR BEHALF, RELATIVE TO SETTLEMENTS BY THE CLAIMS DIVISION OF OUR OFFICE WHERE THE AMOUNT OF $20,407.18 OTHERWISE FOUND DUE TO ZENITH INDUSTRIES, INC., NATIONAL MAGNET WIRE CORPORATION AND ATLANTIC AND PACIFIC WIRE AND CABLE COMPANY, INC., WAS WITHHELD AND APPLIED IN LIQUIDATION OF THE INDEBTEDNESS OF ZENITH INDUSTRIES, INC., AND NATIONAL MAGNET WIRE CORPORATION TO THE UNITED STATES BY REASON OF DEFAULTS UNDER, AND OVERPAYMENTS IN CONNECTION WITH, CONTRACTS WITH GENERAL SERVICES ADMINISTRATION AND THE DEPARTMENTS OF THE AIR FORCE, ARMY, NAVY AND COMMERCE.

IT IS STATED IN THE LETTER OF AUGUST 10TH THAT THE INTERNAL REVENUE SERVICE THROUGH A RECENTLY COMPLETED EXHAUSTIVE INVESTIGATION HAS ESTABLISHED THAT THERE IS NO RELATIONSHIP BETWEEN THE THREE NAMED CORPORATIONS AND THAT "IT SEEMS MORE THAN PASSING STRANGE THAT YOUR OFFICE CAN SUMMARILY AND ARBITRARILY FIND TO THE CONTRARY ON THE BASIS OF NO PROBATIVE EVIDENCE.'

THERE IS NO EVIDENCE HERE THAT THE INTERNAL REVENUE SERVICE HAS ESTABLISHED THAT THERE IS NO RELATIONSHIP BETWEEN THE THREE CORPORATIONS NAMED. GRANTING THAT SUCH A DECISION WAS MADE BY THAT AGENCY, SUCH A DECISION WOULD BE BINDING ON OUR OFFICE ONLY IN CONNECTION WITH INCOME TAX MATTERS. THE MANNER IN WHICH DISPOSITION OF THE INSTANT MATTER WAS EFFECTED BY OUR OFFICE WAS IN CONFORMITY WITH WELL-ESTABLISHED PROCEDURES SANCTIONED UNDER THE LAWS GOVERNING THE PERFORMANCE OF ITS AUTHORIZED FUNCTIONS. THE CLAIM WAS CONSIDERED UNDER THE PROVISIONS OF SECTION 236 OF THE REVISED STATUTES, AS AMENDED BY SECTION 305 OF THE ACT OF JUNE 10, 1921, 42 STAT. 24, SETTING FORTH THAT---

"ALL CLAIMS AND DEMANDS WHATEVER BY THE GOVERNMENT OF THE UNITED STATES OR AGAINST IT, AND ALL ACCOUNTS WHATEVER IN WHICH THE GOVERNMENT OF THE UNITED STATES IS CONCERNED, EITHER AS DEBTOR OR CREDITOR, SHALL BE SETTLED AND ADJUSTED IN THE GENERAL ACCOUNTING OFFICE.'

THE POSITION NOW TAKEN THAT THE THREE CONCERNS ARE UNRELATED IS IN OPPOSITION TO THE CONCLUSION STATED IN OUR DECISIONS OF JANUARY 27, AND FEBRUARY 18, 1953, TO YOU. IT IS DESIRED TO AGAIN EMPHASIZE THE FACT THAT WHERE, AS HERE, THE RECOGNITION OF A CORPORATION AS A DISTINCT LEGAL ENTITY WOULD DEFEAT PUBLIC CONVENIENCE OR JUSTIFY A WRONG, AMONG OTHER ABUSES, THE LAW WILL DISREGARD THE ORGANIZATION AS A SEPARATE ENTITY. MCCASKILL CO. V. UNITED STATES, 216, U.S. 504. COURTS WILL LOOK BEYOND A CORPORATE ENTITY WHENEVER JUSTICE REQUIRES, HAMILTON RIDGE LUMBER SALES CORPORATION V. WILSON, 25 F.2D 592, AND WILL GO BEHIND SUCH ENTITY TO DETERMINE AN ATTEMPTED EVASION OF FEDERAL LIABILITY. SEE PALMOLIVE CO. V. CONWAY, 43 F.2D 226.

ON THE BASIS OF THE FACTS THEN, AND NOW, AVAILABLE THERE APPEARS TO BE SUFFICIENT DOUBT AS TO THE RIGHT OF THE COMPANIES TO PAYMENT OF THE AMOUNTS CLAIMED WITHOUT SETOFF TO SATISFY THEIR OBLIGATIONS TO THE UNITED STATES. IN INSTANCES WHERE THE FACTS INVOLVED RAISE A QUESTION AS TO THE PROPRIETY OR VALIDITY OF A CLAIM "IT IS THE UNDOUBTED RIGHT AND DUTY" OF THE ACCOUNTING OFFICERS OF THE GOVERNMENT TO REJECT A CLAIM IN WHOLE OR IN PART "AS THEIR JUDGMENT DICTATES"--- LONGWILL V. UNITED STATES, 17 C.CLS. 288, 291--- LEAVING THE CLAIMANTS TO PROSECUTE THEIR CASES IN A COURT OF LAW, FOR "THAT IS THE MAIN PROTECTION WHICH THE ACCOUNTING OFFICERS CAN SECURE FOR THEMSELVES AND FOR THE GOVERNMENT IN THE ESPECIALLY OF CLAIMS AS TO WHICH THERE IS A REASONABLE SUSPICION OF FRAUD, IRREGULARITY, OR ERROR.' CHARLES V. UNITED STATES, 19 C.CLS. 316, 319.

ACCORDINGLY, THE ACTION TAKEN IN THE MATTER APPEARS TO HAVE BEEN PROPER.

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