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CONTRACTS - DISPUTES - FRAUD EFFECT DIGEST: WHERE A GOVERNMENT FINANCE OFFICER SUSPECTS THAT A CONTRACTOR'S CLAIM IS TAINTED BY FRAUD. INDIANA 46249-0160 THIS IS IN RESPONSE TO A LETTER DATED JULY 29. DOUBLE "LL" WAS AWARDED CONTRACT NO. 806.68 OF DOUBLE "LL"'S CLAIM AND MODIFIED DOUBLE "LL"'S CONTRACT TO REFLECT THAT THIS AMOUNT WAS DUE THE CONTRACTOR. THE CONTRACT AND CLAIM WERE FORWARDED TO THE FINANCE AND ACCOUNTING OFFICER FOR PAYMENT. THE FINANCE AND ACCOUNTING OFFICER DETERMINED THAT THE CLAIM WAS TAINTED BY FRAUD AND WAS NOT PAYABLE. THE CLAIMS COURT POSSESS EXPRESS AUTHORITY TO DETERMINE WHETHER FRAUD EXISTS IN THE PRESENTATION OF A CLAIM AND WHETHER FORFEITURE IS WARRANTED. WHERE A GOVERNMENT FINANCE OFFICER REASONABLY SUSPECTS THAT A CLAIM IS TAINTED BY FRAUD.

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B-219809, SEP 17, 1985, OFFICE OF GENERAL COUNSEL

CONTRACTS - DISPUTES - FRAUD EFFECT DIGEST: WHERE A GOVERNMENT FINANCE OFFICER SUSPECTS THAT A CONTRACTOR'S CLAIM IS TAINTED BY FRAUD, HE SHOULD REFUSE TO APPROVE IT PENDING RESOLUTION OF THE CLAIM BY THE CLAIMS COURT, WHICH HAS JURISDICTION TO DETERMINE THIS ISSUE.

FINANCE AND ACCOUNTING OFFICER:

MCALESTER ARMY AMMUNITION PLANT

MCALESTER, OKLAHOMA 74501-5000

THRU: ASSISTANT COMPTROLLER FOR FINANCE AND ACCOUNTING

DEPARTMENT OF THE ARMY

INDIANAPOLIS, INDIANA 46249-0160

THIS IS IN RESPONSE TO A LETTER DATED JULY 29, 1985, FROM THE ASSISTANT COMPTROLLER FOR FINANCE AND ACCOUNTING, REQUESTING AN ADVANCE DECISION AS TO THE PROPRIETY OF PAYMENT OF A CLAIM SUBMITTED BY DOUBLE "LL" CONTRACTORS, INC. (DOUBLE "LL").

DOUBLE "LL" WAS AWARDED CONTRACT NO. DAA31-81-C-0046 TO REHABILITATE DC TYPE MAGAZINES AT THE MCALESTER ARMY AMMUNITION PLANT IN OKLAHOMA. SEPTEMBER 29 AND NOVEMBER 29, 1983, DOUBLE "LL" FILED CLAIMS FOR WORK PERFORMED IN REHABILITATING THE MAGAZINES. ON MAY 2, 1985, THE CONTRACTING OFFICER SUSTAINED $51,806.68 OF DOUBLE "LL"'S CLAIM AND MODIFIED DOUBLE "LL"'S CONTRACT TO REFLECT THAT THIS AMOUNT WAS DUE THE CONTRACTOR. THE CONTRACT AND CLAIM WERE FORWARDED TO THE FINANCE AND ACCOUNTING OFFICER FOR PAYMENT. AFTER REVIEWING A MAY 1, 1985, REPORT PREPARED BY THE ARMY CRIMINAL INVESTIGATION COMMAND (CIC), HOWEVER, THE FINANCE AND ACCOUNTING OFFICER DETERMINED THAT THE CLAIM WAS TAINTED BY FRAUD AND WAS NOT PAYABLE. YOU ASK WHETHER THE CLAIM SHOULD BE PAID.

THE FORFEITURE STATUTE, 28 U.S.C. SEC. 2514 (1982), WHICH APPEARS TO BE APPLICABLE HERE, PROVIDES FOR THE FORFEITURE OF CLAIMS AGAINST THE UNITED STATES WHERE A CLAIMANT PRACTICES OR ATTEMPTS TO PRACTICE FRAUD "IN THE PROOF, STATEMENT, ESTABLISHMENT, OR ALLOWANCE" OF THE CLAIM. THE STATUTE FURTHER PROVIDES THAT "IN SUCH CASES THE CLAIMS COURT SHALL SPECIFICALLY FIND SUCH FRAUD OR ATTEMPT AND RENDER JUDGMENT OF FORFEITURE." THUS, THE CLAIMS COURT POSSESS EXPRESS AUTHORITY TO DETERMINE WHETHER FRAUD EXISTS IN THE PRESENTATION OF A CLAIM AND WHETHER FORFEITURE IS WARRANTED.

IT HAS BEEN OUR POSITION, THEREFORE, THAT PRELIMINARY TO FINAL RESOLUTION BY THE CLAIMS COURT, WHERE A GOVERNMENT FINANCE OFFICER REASONABLY SUSPECTS THAT A CLAIM IS TAINTED BY FRAUD, HE SHOULD REFUSE APPROVAL OF THE CLAIM. SEE 44 COMP.GEN. 110, 116 (1964). IN THIS MANNER, THE MATTER WILL BE RESERVED FOR SCRUTINY BY THE CLAIMS COURT WHERE THE FACTS CAN BE DETERMINED JUDICIALLY UPON SWORN TESTIMONY AND COMPETENT EVIDENCE.

THE CIC REPORT FOUND THAT DOUBLE "LL" HAD CLAIMED $9,099.46 MORE FOR COMPENSATION FOR EMPLOYEES THAT PERFORMED RAILROAD REPAIR SERVICES THAN THE CERTIFIED PAYROLLS SHOWED ACTUALLY WAS DUE. THE REPORT ALSO FOUND THAT DOUBLE "LL" HAD INFLATED THE COST OF SMALL TOOLS AND MATERIALS USED FOR RAILROAD CONSTRUCTION; DUPLICATED THESE COSTS IN THE TOTAL SUM OF THE CLAIM; AND HAD MISREPRESENTED ITS STATUS AS A SMALL BUSINESS IN ORDER TO BE CONSIDERED FOR THE CONTRACT. BASED ON THIS RECORD, WE BELIEVE THE FINANCE AND ACCOUNTING OFFICER HAS A REASONABLE BASIS FOR FINDING THAT DOUBLE "LL"'S CLAIM WAS TAINTED BY FRAUD AND, THUS, REFUSING APPROVAL OF THE CLAIM.

THE FINANCE AND ACCOUNTING OFFICER THEREFORE SHOULD CONTINUE TO WITHHOLD PAYMENT OF THE CLAIM PENDING THE CLAIMANT'S DECISION WHETHER TO PURSUE THE MATTER IN THE CLAIMS COURT AND, IN THAT EVENT, THE CLAIMS COURT'S RULING ON THE QUESTION OF FRAUD.

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