570 F.2d 924 | Ct. Cl. | 1978
Lead Opinion
This case comes before the court on
defendant’s exceptions to the recommended decision of Trial Judge Thomas J. Lydon, filed March 14, 1977, pursuant to Rule 134(h), having been submitted to the court on oral argument of counsel and the briefs of the parties. Upon consideration thereof, since the court agrees with the trial judge’s recommended decision, as hereinafter set forth,
OPINION OF TRIAL JUDGE
Lydon, Trial Judge: Plaintiff, Fred Hageny, filed a petition in this court seeking to recover damages attributable to the suspension of a contract he had with the Forest Service, Department of Agriculture. Under this contract, plaintiff purchased the right to cut and remove some 1,390,500 board feet of timber from designated trees in the Eagle River Ranger District, Nicolet National Forest, Vilas County, Wisconsin. The suspension of plaintiffs right to continue work on the contract was based on his alleged "unauthorized tree marking” during the course of contract performance.
In its amended answer to the petition, defendant asserted two counterclaims and a special plea in fraud. Under its first counterclaim, defendant sought to recover $3,488.84, based on a provision in the contract, because of plaintiffs unauthorized cutting and removal of 278 trees during contract performance. This figure represented the double stumpage value of the 278 trees. Under its second counterclaim, defendant sought to recover $556,000 ($2,000 X 278 trees) and double damages of $6,977.68 ($3,488.84 x 2) on the authority of the False Claims Act, 31 U.S.C. §§ 231-35. In support of its second counterclaim, defendant alleged that "Fred Hageny and divers other persons, combined and conspired to defraud the Government of the United States by illegally marking and/or cutting and removing 278 trees and attempted to perpetrate 278 separate frauds and false claims knowing the same to be false, fictitious and fraudulent.” In its special plea in fraud, defendant asked the court to declare the claims advanced by plaintiff in his petition as forfeited to the United States, pursuant to the provisions of 28 U.S.C. § 2514 because plaintiff "has practiced, or attempted to practice, fraud against the United States in the presentation * * * of its claims in its petition.”
Consideration of defendant’s first and second counterclaims has been largely a factual inquiry. Resolution of the questions presented by these counterclaims has been governed in large part by defendant’s ability, or inability, to meet the burden of proof cast upon it by the nature of the counterclaims it pleaded. On the trial record, it has been concluded that defendant, by a preponderance of the evidence, met its burden of establishing a right to recover from plaintiff the sum of $3,488.84 under its first counterclaim. On the other hand, defendant has failed to meet its burden of establishing, by clear and convincing evidence, that plaintiff violated the False Claims Act, supra, so as to justify recovery under its second counterclaim. The reasons for these conclusions are hereinafter set forth in this opinion.
I
In 1969, and for some time prior thereto, plaintiff, operating in an individual capacity, had been in the business of logging timber.
The Nicolet National Forest was managed and protected by the Forest Service, Department of Agriculture. The Forest itself was divided into Ranger Districts. Each District was supervised by a Forest Ranger. At all times material herein, Gary H. Keppen (Keppen) was the Forest Ranger in charge of the Eagle River Ranger District, which District was located in the northeast section of Wisconsin. Keppen’s duties included, inter alia, the preparation of Information For Bids (IFB) relative to sale of Forest timber and the administration of timber sale contracts.
Sometime in 1968, an area of roughly 483 acres in the Eagle River Ranger District was designated by the Forest Service as the site for a prospective timber sale. This sale area was broken down into four Payment Units. The perimeter of the sale area and the perimeters of the Payment Units were identified by blue paint markings on perimeter trees. This timber sale was known to all concerned as the Kentuck Lake Sale. It was to be a selective-cut timber sale.
In order to obtain information necessary for the preparation of an IFB on the Kentuck Lake Sale, Keppen cruised the sale area. Thereafter, he took a crew of Forest Service employees into the sale area and marked those trees which were to be cut by the successful bidder. Appropriate data was taken relative to each marked tree which subsequently was translated into meaningful information on the IFB on which bidders would act. The trees selected to be cut and removed from the sale area were marked by the Forest Service crew with a special orange paint in two places, i.e., at eye level (roughly diameter breast high (DBH)) and at the stump. This orange paint was manufactured especially for the Forest Service by the Nelson Paint Company, Iron
The IFB on the Kentuck Lake Sale produced two bids. Since plaintiffs bid was the high one, he was awarded a contract on November 25, 1969, wherein for a total price of $31,426.50 he was given the right to cut designated trees, i.e., trees "marked with orange paint at DBH and on the stump” within the confines of the sale area.
Around the first of July 1970, plaintiff paid the Forest Service the purchase price applicable to Payment Unit No. 1 and commenced logging in said area. After completing
As indicated earlier, plaintiff contracted in his individual capacity. In performing the Kentuck Lake Sale contract, plaintiff utilized the services of three crews. Each crew consisted of a cutter, i.e., one who fells the tree and thereafter cuts the tree into logs, and a skidder, i.e., one who operates a piece of machinery (called a skidder) which drags the logs from the woods to a road from which they can be transported to a lumber mill and/or buyer. Without elaboration, these crews can properly be considered independent contractors. The crews negotiated with plaintiff relative to the price of their services. These negotiations generally centered on the price per timber cord or thousand board feet (MBF) to be paid for timber cut and removed from the sale area. In essence, payment to them
On the morning of December 4, 1970, Keppen discovered wet paint on the stump of a cut tree as well as on two standing trees in Payment Unit No. 2 in an area where Neal Marvin, a cutter, and his cousin, Ronald Marvin, a skidder, were working. The trees were painted in the manner followed by the Forest Service, i.e., at DBH and at the stump. There was a foot of recent snow on the ground, and, because of the absence of any other tracks in the area, it seemed reasonable to conclude that the Marvins, who were working in that area that morning, were responsible for the painting of those trees. However, the Marvins denied painting the trees when questioned by Keppen at that time.
Keppen, on December 4, 1970, took paint samples from the wet paint on the stump and on one tree. These paint samples were analyzed by the Nelson Paint Company and found to be non-Forest Service paint. On December 11, 1970, Keppen took paint samples from eight more marked trees in the same area of Payment Unit No. 2. Analysis of these paint samples showed seven of the trees had been marked with Forest Service paint whereas one tree had been marked with non-Forest Service paint.
Confirmation of the fact that non-Forest Service paint was being used to mark trees suggested the commission of a possible trespass on property of the United States. Accordingly, Keppen was required to prepare, and he did prepare, a Trespass Report dated January 8,1971. By letter dated January 8, 1971, Keppen notified plaintiff that his contract was suspended "until further notice in writing by the Forest Supervisor * * * because of the unauthorized tree marking discovered on 12/4/70.”
In April 1971, Keppen and his Forest Service crew performed a thorough, controlled and reliable recruise of Payment Unit Nos. 4, 1 and 2. The recruise was conducted on the assumption that the results thereof might be subjected to the scrutiny of litigation. Further, all doubts about whether a stump or tree was improperly marked or whether a stump was marked at all were to be resolved in favor of plaintiff. All stumps in these Units were examined. Marked trees which had not been cut were also examined.
Some 8,970 hardwood stumps were examined during the recruise effort. Two-hundred and nine (209) paint samples were taken from these stumps as well as from standing trees. Analysis by the Nelson Paint Company revealed that 52 stumps had been painted with non-Forest Service paint. This supported a. conclusion that 52 trees had been improperly marked, cut and removed from Nicolet National Forest during the course of plaintiffs logging operations in Payment Unit Nos. 4, 1 and 2. The 52 improperly marked and cut trees were broken down as follows: 8 stumps in Payment Unit No. 4; 36 stumps in Payment Unit No. 1; and 8 stumps in Payment Unit No. 2.
Examination of the 8,970 stumps during the recruise established that 226 stumps had not been painted (marked) at all and justified the conclusion that these 226 unmarked trees were cut and removed from the Nicolet National Forest without contractual authorization during the course of plaintiffs logging operations in Payment Unit Nos. 4, 1 and 2. As to these 226 stumps, 36 stumps were located in Payment Unit No. 4; 105 stumps in Payment Unit No. 1; and 85 stumps in Payment Unit No. 2.
The record preponderates in favor of a finding that plaintiff, operating through 3 two-man crews, cut and removed from Payment Unit Nos. 4,1 and 2 some 278 trees which were not designated for cutting and removal by the contract which he had with the Forest Service. The stumpage value of these 278 trees was determined to be $1,744.42. The 226 unmarked trees which were cut and
Under the contract, plaintiff agreed to pay double stumpage value for each undesignated tree he cut and removed from Nicolet National Forest during his logging operations. The double stumpage value of the 278 trees referred to above was $3,488.84 ($1,744.42 x 2). Although the Forest Service billed plaintiff for the double stumpage value of the 278 undesignated trees he cut and removed from the Forest, plaintiff has so far failed to pay for these trees.
II
The record in this case supports recovery by defendant on its first counterclaim in the sum of $3,488.84. The contract clearly provided that for each undesignated tree cut and removed from the Kentuck Lake Sale area, plaintiff would pay the Forest Service the double stumpage value of each such tree (contract provision BT3.23). Plaintiff was fully conversant with the language, operation and reach of this contract provision. Further, the cutting and removal of undesignated trees were the subject of discussion between plaintiff and Keppen. Both men agreed on how undesignated trees cut and removed from the sale area would be handled, i.e., the Forest Service would bill plaintiff at the end of the contract for each undesignated tree cut and removed at the double stumpage value of said tree. There is no dispute over the interpretation and operation of the contract provision in question. The question to be resolved is whether plaintiff did in fact cut and remove 278 undesignated trees from the sale area.
The recruise effort established with a degree of reliability that 278 undesignated trees were cut in the sale area. The record preponderates in favor of a finding that these 278 trees were removed from the sale area by the logging crews engaged by plaintiff.
The double stumpage value determinations by the Forest Service of the 278 trees in question were not seriously challenged by plaintiff. The record indicates these value determinations were arrived at in a fair, reasonable and objective manner. The double stumpage value of the 278 trees is found to be $3,488.84. Defendant is therefore entitled to recover that amount.
Ill
A
Defendant’s second counterclaim, based on the False Claims Act, 31 U.S.C. §§ 231-35 (1970), seeks to recover from plaintiff forfeiture payments of $556,000 (278 trees X $2,000) and double damages of $6,977.68 ($3,488.84 X 2). Section 231 of the False Claims Act provides in pertinent part as follows:
Any person * * * who shall make or cause to be made, or present or cause to be presented, for payment or approval [to an officer of the United States], any claim upon or against the Government of the United States, or any department or officer thereof, knowing such claim to be false, fictitious or fraudulent, or who, for the purpose of obtaining or aiding to obtain the payment or approval of such claim, makes, uses, or causes to be made or used, any false bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or fictitious statement or entry, or who enters into any agreement, combination or conspiracy to defraud the Government of the United States, or any department or officer thereof, by obtaining or aiding to obtain the payment or allowance of any false*425 or fraudulent claim, * * * shall forfeit and pay to the United States the sum of $2,000, and, in addition, double the amount of damages which the United States may have sustained by reason of the doing or committing such act, together with the costs of suit; and such forfeiture and damages shall be sued for in the same suit. [See Miller v. United States, 213 Ct. Cl. 59, 61-62, 550 F.2d 17, 18-19 (1977) for the official text of the Act as set out in the Revised Statutes.]
Defendant seeks to give the False Claims Act provision, supra, a very broad application so as to embrace any type of fraudulent act, without qualification, that results in a monetary or property loss to the United States. It relies, in this regard, on its reading of United States v. Bornstein, 423 U.S. 303 (1976); United States v. Neifert-White Co., 390 U.S. 228 (1968) and a number of other District Court and Court of Appeal decisions. However, it is clear that the False Claims Act was not designed to reach every kind of fraud practiced on the government. United States v. McNinch, 356 U.S. 595, 599 (1958); see also United States v. Marple Community Record, Inc., 335 F.Supp. 95, 99-100 (E.D. Penn. 1971); Cahill v. Curtiss-Wright Corp., 57 F.Supp. 614, 616 (W.D. Ky. 1944).
The above observation raises a question that must be considered initially in this case, i.e., whether the conduct of plaintiff on which defendant relies constitutes a claim, or claims, within the purview of the False Claims Act. Plaintiff has not addressed himself to this question and one might accordingly assume that he considers the alleged conduct to fall within the ambit of the Act. Since plaintiff did not confront this question, defendant’s brief has met the substance of this question with broad generalizations supported by statements it has found in the various False Claims Act decisions it has cited. These supporting statements must be read in the context of the factual circumstances in which they were rendered. In every case relied on by defendant the conduct complained of included the submission in one form or another of an alleged fraudulent document, considered to be a claim, upon which governmental action was sought.
It is clear in this case that plaintiff did not submit in any form, written or otherwise, a "claim” seeking to recover money or property from the government. Defendant does not argue to the contrary. The conduct on which defendant relies, and on which it premises its False Claims Act counterclaim, involves the cutting and removal by plaintiffs logging crews of undesignated trees from the Nicolet National Forest. While the cutting and removal of these trees was not authorized by contract or otherwise, it was viewed as a trespass by the Forest Service, and indeed may have constituted a wrong doing against the government (e.g., tort, or conversion, or deceit, or theft), no manifestation of the submission of a claim — formal or informal— preceded and/or accompanied and/or followed accomplishment of the act of cutting and removing said trees.
Defendant admits that claims within the purview of the False Claims Act are generally presented in some written form which seeks to recover money or property from the government. However, it argues that the Act should not be so restrictively or rigidly read. It maintains, in essence, that any fraudulent conduct involving loss of government property, whether manifested in some written form or by conduct without any written predicate, falls within the
In support of its position, defendant, for example, relies on the following statement to be found in United States v. Neifert-White Co., supra, "* * * the Act was intended to reach all types of fraud, without qualification, that might result in financial loss to the Government. * * *” (390 U.S. at 232.)
In my opinion, a serious question exists as to whether the alleged conduct of plaintiff, relied on by defendant, constitutes a "claim” within the purview of the False Claims Act. However, under the circumstances of this case, resolution of such a question can be, and therefore should be, pretermitted. This action is deemed warranted because
B
The degree of proof necessary to establish fraud demands more than a preponderance of the evidence. First National Steamship Co. v. United States, 106 Ct. Cl. 601, 621-22 (1946). Indeed, it is clearly established that defendant has the burden of proving by "clear and convincing” evidence that plaintiffs conduct constituted fraud against the government within the purview of the False Claims Act. Law v. United States, 195 Ct. Cl. 370, 440-41 (1971); Eastern School v. United States, 180 Ct. Cl. 676, 694, 381 F.2d 421, 432 (1967). Defendant’s burden is such that the evidence of record must be so clear and convincing that the mind can rest with safety upon a finding that fraud has been established. New York Market Gardeners’ Ass’n v. United States, 43 Ct. Cl. 114, 138 (1908). On this record, it is concluded defendant has failed to carry the heavy burden imposed on it in this regard.
Defendant’s fraud claim against plaintiff rests on the charge that plaintiff and other persons combined and conspired to defraud the government by illegally marking and/or cutting and removing 278 trees from the Nicolet National Forest. As indicated earlier, 226 unmarked trees were cut and removed from the sale area, and 52 improperly painted (marked) trees were cut and removed from the sale area. While defendant directs its fraud charge at the 278 cut and removed trees, the facts require that the two categories of trees, i.e., unmarked trees and improperly painted trees, be discussed separately.
As to the unmarked trees cut and removed, it is difficult to find the ingredients necessary to support a fraud charge.
Plaintiff and Keppen, the Forest Ranger, discussed the cutting of undesignated trees, and both agreed on how such occurrences were to be handled. It was agreed between plaintiff and Keppen, by contract and by conduct, that all unmarked (undesignated) trees cut and removed during contract performance by plaintiff would be paid for by plaintiff at the end of the contract at double stumpage value rates. Keppen maintained a scale book in which he noted data applicable to unmarked trees he discovered plaintiffs crews had cut and removed during the logging operations. The data he recorded in this scale book enabled the Forest Service to determine at a later date the stumpage value of said trees.
Keppen, after an inspection, approved contract performance in Payment Unit Nos. 1 and 4 knowing that unmarked trees had been cut and removed by plaintiffs logging crews, although he did not know at the time he approved logging operations in these two Units that 141 unmarked trees had been cut and removed.
Keppen testified that if he had discovered, during the course of policing Payment Unit Nos. 1, 4 and 2, that some 226 unmarked trees had been cut and removed by plaintiffs logging crews he would handle them as outlined
There is absolutely no evidence in the record relative to an agreement or conspiracy on the part of plaintiff and his crews to deliberately cut and remove unmarked trees from the sale area. Defendant has not established that there was a scheme or a plan or an effort to defraud the government by cutting and removing unmarked trees from the sale area. Plaintiff agreed to pay for each and every unmarked tree the logging crews cut and removed and the Forest Service agreed to bill him for each and every unmarked tree cut and removed.
Defendant maintains that plaintiff engaged in a fraudulent scheme to defraud the government by improperly painting (marking) and thereafter cutting and removing some 52 trees from the sale area. In support of this charge, defendant relies on the following testimonial evidence.
Defendant produced James M. Johnson of Crandon, Wisconsin, as a witness. The substance of Johnson’s testimony was that in the summer or early fall of 1970, he drove to a wooded area with plaintiff and Douglas James Champine for the purpose of painting trees. As noted earlier, plaintiff had been awarded the Kentuck Lake Sale contract on November 25, 1969, although he did not commence logging operations until July 1970. Johnson testified that he and Champine painted trees for a couple of hours. Johnson claimed he painted around 100 trees himself. Johnson testified that plaintiff did not paint any trees. Indeed, according to Johnson, plaintiff never spoke one word to Johnson during the entire episode. According to Johnson, plaintiff walked through the woods while he and Champine were painting trees and occasionally plaintiff would motion with his hand toward a tree, which action indicated to Johnson he wanted that tree painted. Johnson testified that Champine told him they were on the Kentuck Lake Sale area and that plaintiff had the contract to cut the trees in this area.
The conflicting testimony of plaintiff and Johnson serves to bring Champine to center stage. Pursuant to a standard pretrial order issued in the case under Rule 111, defendant listed Champine as a proposed witness in its pretrial submission. Defendant, however, did not call Champine as a witness, nor did defendant explain why it failed to call him as a witness. Under such circumstances, defendant’s failure to call Champine as a witness supports an inference that his testimony would be unfavorable to defendant. Estate of Ridgely v. United States, 180 Ct. Cl. 1220, 1231 n.5 (1967). Such an unfavorable inference corroborates Johnson’s admission, noted supra, that Champine does not agree with his testimony as to the painting episode.
One other observation serves to cast doubt on the testimony of Johnson. The recruise results revealed that approximately 72 stumps and standing trees had been improperly painted in the sale area. Such results do not support Johnson’s testimony as to the large number of trees he and Champine painted in the sale area.
The record relative to Johnson’s testimony is conflicting. His testimony failed to engender a feeling of believability. It certainly failed to establish clearly and convincingly that plaintiff conspired to defraud the government by illegally painting trees, or causing trees to be painted, in the Kentuck Lake Sale area..
Defendant produced Lawrence Jack Wilson as a witness. Wilson was a member of one of the three crews plaintiff engaged to cut and remove trees from the sale area. Each
Wilson’s testimony was devoid of any time frame or sale area location relative to the Tom Hageny incident and his subsequent painting activities. The findings of fact detail some of the problems created by Wilson’s lack of testimonial preciseness in this regard. Wilson admitted he never had any conversations with plaintiff about painting trees. Indeed, he admitted plaintiff never told him to paint trees. He testified that plaintiff was not around much and that plaintiff never saw him painting trees and he never told plaintiff he was painting trees.
Plaintiff, in his testimony, denied that he was present at the time Wilson claims Tom Hageny gave him the quart of orange paint.
Wilson’s testimony was not persuasive. His account of critical events, as indicated earlier, was lacking in reliable specificity as to time and place. Moreover, his account of painting a lot of timber does not comport in any reasonable way with the recruise results, a fact noted, supra, relative to Johnson’s testimony. Further, there was no corroboration of Wilson’s testimony in the record.
It seems reasonable to assume, as Wilson did, that Lykins would have known of Wilson’s tree painting
Wilson’s testimony, when viewed in the light of the entire record, fails to show clearly and convincingly that plaintiff conspired to defraud the government by improperly painting trees, or causing trees to be painted, in the sale area. At best, it merely shows that Wilson may have painted trees in the sale area on his own initiative.
Defendant also produced as witnesses Neal Marvin and his cousin Ronald Marvin. The Marvins were one of the three crews which logged the timber for plaintiff on the Kentuck Lake Sale. Neal Marvin was a cutter and Ronald Marvin was a skidder. The Marvins were the ones who were caught painting trees in Payment Unit No. 2 on December 4, 1970 by Keppen. Defendant maintains that the testimony of the Marvins corroborates its contention that plaintiff masterminded a tree-stealing scheme to defraud the Forest Service. The record does not support such an assertion.
The Marvins admitted to painting trees in the Kentuck Lake Sale area during contract performance. Parenthetically, they had denied painting trees when confronted by Keppen on December 4, 1970, and thereafter. Their testimony was conflicting as to the number of trees they painted. Neal Marvin claimed he only painted some 10 to 12 trees at one point, and yet, at another point, claimed he painted some 50 trees. Neal Marvin claimed he never painted and cut a tree unless the tree was damaged by logging operations or was in the path of a skidder.
In his testimony, plaintiff stated that he never saw anyone painting trees in the sale area; that he never gave any paint to anyone for purposes of painting trees in the sale area; that he never told anyone to paint trees in the sale area; and that he never authorized anyone to paint trees in the sale area.
Plaintiff testified that it was common knowledge that loggers were painting and cutting trees in the Nicolet National Forest. Keppen verified this fact in his testimony. Plaintiff testified that he wondered whether the crews he engaged painted and cut trees in the sale area during the
The testimonial evidence relied on by defendant to support its charge that plaintiff was part of a conspiracy and/or scheme to defraud the government of its property was conflicting, confusing, and lacking in probative reliability. See W. H. Harrison Co. v. United States, 101 Ct. Cl. 413, 418-20 (1944). Under no reading of the record in this case can this testimonial evidence be considered clear and convincing evidence that plaintiff practiced, or attempted to practice, fraud against the United States in the performance of his timber sale contract with the Forest Service. Defendant has failed to meet the heavy evidentiary burden cast upon it relative to the fraud charge it has pleaded in this case. See Law v. United States, supra, 195
The concurring opinion of Judge Nichols follows the opinion of the trial judge which has been adopted by the court.
Whereas the court adopts the trial judge’s separate findings of fact, which are set forth in his-report filed March 14, 1977, they are not printed herein since such facts as are necessary to the decision are contained in his opinion.
The facts are set out in exhaustive detail in the Findings Of Fact. Only a brief summary of those facts are set out hereinafter, sufficient, it is believed, to place the contentions of the parties in proper perspective.
Under the contract, plaintiff also had the right to cut certain undesignated trees such as aspen and balsam fir trees. In general the designated trees were hardwood trees and it was estimated that the great majority of the timber sale trees were hardwood trees. The undesignated trees were primarily pulpwood trees.
Keppen first met with plaintiff, after the December 4 incident, on December 11, 1970. At the time of this meeting, plaintiff had been told by the Marvins that they had, in fact, painted these trees. However, plaintiff did not tell Keppen about this revelation because he felt Keppen already knew it since the only persons in the area on the morning of December 4 were the Marvins, and it should have been obvious to anyone that the Marvins painted the trees. Further, plaintiff felt Keppen was out to pin the tree marking incident on him and thus he refused to cooperate in any way with Keppen by voluntarily supplying information. The record indicates clearly that the Marvins painted the trees in question on their own initiative.
Plaintiff never did complete the contract. With the approval of the Forest Service, plaintiffs brother, Don Hageny, was allowed, after payment of the purchase price applicable to Payment Unit No. 3, to complete the contract by cutting and removing appropriate trees from said Payment Unit. It would appear from the record that plaintiff had no desire to complete the contract and the Forest Service had no thoughts of allowing him to do so. However, there is no correspondence subsequent to January 8, 1971, in the record of further dealings between plaintiff and the Forest Service, relative to plaintiffs future performance of the contract.
The recruise results showed that 18 standing trees in Payment Unit No. 1 and 2 standing trees in Payment Unit No. 2 were marked with non-Forest Service paint. The record does not indicate whether any standing trees marked with Forest Service paint were discovered during the recruise. As to Payment Unit No. 1, there is no explanation why these 18 trees were not cut and removed or why these standing marked trees were not detected by Keppen when he approved logging operations in the Unit. The presence of these standing marked trees raises an' unanswerable question of whether or not these trees were painted after plaintiff had completed logging operations in Payment Unit No. 1.
Plaintiff concedes that he should pay for undesignated trees cut and removed
See, for example, United States v. Bornstein, 423 U.S. 303 (1976), United States v.
The language in the Neifert-White Co. case must be read in the context of the issue in that case. The question in that case was whether a "claim” (loan application to Commodity Credit Corporation), within the meaning of the False Claims Act, must be read in a narrow sense so as to embrace only claims or demands for favorable action by the government on loan applications for payments due and owing from the government. The Supreme Court rejected such a narrow reading of the term "claim” and held it covered any claim or demand for favorable action by the government upon a loan application regardless of whether existing payments were due and owing from the government. It was in this context that the language relied on by defendant was utilized.
As to Payment Unit Nos. 1 and 4, Keppen testified he had recorded in his scale book data relative to some 12 unmarked cut and removed trees he discovered while policing contract performance in those Units. Keppen considered 11 of these trees to have been cut unintentionally and one tree to have been cut intentionally. Keppen’s scale book was not made a part of the record in this case. It could be that a greater number of unmarked cut trees were recorded therein than Keppen’s testimony, based on memory, reflected. It is not unreasonable to conclude from the record that greater scrutiny by Keppen of plaintiff’s logging operations would have revealed a greater number of cut and removed unmarked trees. There is no evidence that plaintiff or his crews attempted to conceal by overt acts or otherwise the cutting and removing of the 226 unmarked trees in issue.
He also testified he would have exercised greater scrutiny in his policing activities had he known that a large number of unmarked trees were being cut and removed. Moreover, he operated on the general assumption that unmarked trees were cut unintentionally. If he believed unmarked trees were being deliberately cut, he would take the matter up with the contractor. There is absolutely no evidence in the record that each of the 226 trees was deliberately cut and removed by plaintiff. Plaintiff testified that he did not intentionally cut unmarked trees. As to the one unmarked tree that Keppen felt was intentionally cut there is testimony in the record that it was unintentionally cut to free a felled tree that had lodged itself in the unmarked tree. On this record, defendant has failed to carry its burden of proving that plaintiff or his crews deliberately and intentionally cut and removed 226 trees from the Nicolet National Forest.
The fact that plaintiff did not pay for the 226 unmarked trees when billed by the Forest Service neither adds to nor detracts from the question of whether plaintiff committed fraud against the government in cutting and removing these trees. By awarding defendant a judgment on its first counterclaim, the court has, in effect, required plaintiff to live up to its contractual agreement and pay the bill submitted by the Forest Service for the cutting and removal of those trees.
Neither party listed Tom Hageny as a witness in the pretrial submissions each made pursuant to Rule 111. The record does not indicate whether he was available for testimonial purposes, nor does the record provide any explanation why he was not called by either party as a witness. Under the circumstances, no inference will be drawn one way or another relative to his absence as a witness. See McClure v. United-States, 98 Ct. Cl. 381, 388 (1943).
He claimed he took to painting trees because Keppen caught him cutting up an
It is perhaps necessary to mention again that the crews utilized by plaintiff are best characterized as independent contractors. Plaintiff did not feel he had any control over the crews while they were in the woods. They negotiated with plaintiff relative to the price at which they would agree to cut and haul timber from the woods. This price was based on the number of board feet of timber logged by the crews. As a result, the more timber the crews cut and hauled from the woods, the more money the crews would make. Of course, it also meant more money to plaintiff when he sold the timber. However, the fact that each crew benefited from the volume of timber cut and removed from the sale area serves to discredit defendant’s contention that plaintiff was the primary beneficiary of unauthorized tree cutting and removal. Under the circumstances of this case, it would not be reasonable to impute the improper tree painting activities of the logging crews to plaintiff. Cf. Wagner Iron Works v. United States, 146 Ct. Cl. 334, 337-39, 174 F. Supp. 956, 958-59 (1959).
The Marvins were not viewed as impressive witnesses. There were some inconsistencies in their testimony, and their initial denial of any involvement in tree painting in the sale area served to reduce their overall credibility rating.
Plaintiffs testimony revealed that he was fully acquainted with the "tricks” of the logging trade. His demeanor and testimony generated a suspicion on the part of the trier of fact that he knew what was going on in the woods, i.e., that tree painting was going on to some degree in the sale area. This suspicion does not embrace speculation that he therefore must have ordered, directed, controlled, or encouraged tree painting in the sale area. Suspicion and speculation, however, do not rise to the level of clear and convincing evidence. A finding of fraud must rest on something more substantial than suspicion or speculation. See Dubois Constr. Corp. v. United States, 120 Ct. Cl. 139, 175, 98 F. Supp. 590, 597 (1951); Terrill v. United States, 35 Ct. Cl. 218, 222 (1900). Indeed, even a hint of fraud will not support a finding of fraud, see Eastern School v. United States, supra, 180 Ct. Cl. at 698, 381 F.2d at 434, nor will the existence of fraud be presumed. DeLuca v. United States, 69 Ct. Cl. 262, 264, cert. denied, 282 U.S. 862 (1930).
On December 13, 1970, two of plaintiffs skidder machines were burned in the sale area not far from where the wet paint was discovered on December 4, 1970. Plaintiff pointed to this occurrence as an example of the form a reprisal could take.
Plaintiff was quite upset with the fact that although the Marvins had been caught painting trees in the sale area, Keppen, while prohibiting them from working in that area of Payment Unit No. 2 where the wet paint incident on December 4, 1970, took place, did allow the Marvins to continue logging timber in other parts of the sale area after said incident.
Concurrence Opinion
concurring:
I concur in the result. I agree as to defendant’s first counterclaim. As to the second, I think the court should have adopted the trial judge’s analysis of the False Claims Act in part III A of his opinion, except for the last three sentences thereof. These I would strike, and substitute a flat statement that plaintiffs acts as asserted by defendant did not constitute false claims under the statute, 31 U.S.C. §§ 231-235. This would render the discussion in part III B moot.
As to the removal of 226 unmarked trees, this, if wrongful, was simple larceny. Plaintiff misused his right to go into the forest for the marked trees, to steal others he found there. No false assertion was made by word or act. As regards the 52 falsely marked trees, analysis in more depth is required, but essentially larcenous conduct is likewise revealed. False marking may be the basis of a False Claims Act assessment, as it was in United States v. Bornstein, 423 U.S. 303 (1976), where the false markings supported false invoices. If the false markings in this case had been devised to deceive Government inspectors in checking out the logs, before plaintiff was allowed to remove them from the forest, there might be a different and closer case. Here, however, their use was only to deceive the forest rangers making a post audit of the stumps after the cutting was over. This is comparable to a jewel thief leaving a paste gem behind so that his theft of a real one will not be so soon discovered. It is still larceny.
The Bornstein opinion, in characteristic present day style, has its most important statement, for our purpose at least, in a footnote. This is footnote 8, at 313, reading:
This Court has noted that in construing § 5438 [of the Revised Statutes] "we are actually construing the provisions of a criminal statute. Such provisions must be carefully restricted, not only to their literal terms but to the evident purpose of Congress in using those terms,*438 particularly where they are broad and susceptible [of] numerous definitions.” United States v. McNinch, 356 U.S., at 598. See also Rainwater v. United States, 356 U.S. 590, 592-593.
It is explained earlier and in the references that the original statute was split up by the codifiers into civil and criminal sections, now entirely separate, but having been originally one. The definitions of the penalized acts must receive the strict construction of a criminal statute. An alleged offense, to generate a penalty, must pass both halves of a dual test. It must meet the literal language, and it must conform to the purpose judges suppose the Congress had in mind. The alleged liability of Mr. Hageny utterly fails to satisfy either part of this standard, or standards.
The defendant apparently would have us hold that the above analysis is superseded by the dictum in United States v. Neifert-White Co., 390 U.S. 228, 232 (1968) "that the Act was intended to reach all types of fraud, without qualification, that might result in financial loss to the Government.” This statement one might say cannot be of the highest authority, because it is not in a footnote, but in any case the later footnote in Bornstein shows it cannot have been intended to overrule prior authority in the premises, or if it wás, it is now overruled in its turn.
In United States v. McNinch, 356 U.S. 595, 599 (1958), the Court of Appeals for the Third Circuit is quoted with approval as saying
[T]he concept of a claim against the government normally connotes a demand for money or for some transfer of public property.
Mere larceny does not meet that standard, whether or not associated with an effort to disguise the theft or defer its discovery by false marking. It does not meet the literal language, nor does it come within the legislative purpose so far as the record as to that has come down to our time.
I am uncomfortable with the trial judge’s analysis of the facts in his part III B. I am compelled to admit that our Rule 147(b) has a special application to a case such as this, where the credibility of witnesses is so large a factor. Moreover, the "clear and convincing evidence” rule, that was rightly applied, imposes on the defendant, which seeks
I think the trial judge has failed to give proper weight to the rule that demonstrated false statements by an accused, when his conduct is questioned, are to be taken as evidence of a consciousness of guilt. United States v. Strickland, 509 F.2d 273 (5th Cir. 1975, op. by Nichols, J., sitting by designation), and cases cited.
In Finding 15(d) (adopted but not printed by the court), I read:
At the meeting on December 11, plaintiff was aware that the Marvins had painted the three trees in question because the Marvins had told him they had done so. However, plaintiff did not tell Keppen this fact at any time. Instead, plaintiff told Keppen that the trees were painted by someone out to get him. Indeed plaintiff advised Keppen he (Keppen) could have painted the trees. * * *
Keppen was the forest ranger who first discovered the false painting of the trees. The trial judge also found that plaintiff lied about tree marking procedure in Finding 19(b). In Finding 19(g) the trial judge found that plaintiff testified that no complaints were ever made against him respecting his logging operations, whereas the record showed the Wisconsin State Division of Forestry and Recreation had made such a complaint and had debarred him from bidding on future sales of timber from state forests.
I would have been comfortable with a finding that whatever otherwise was deficient in defendant’s proofs was supplied by these evidences of consciousness of guilt.
The trial judge in my view greatly overemphasizes the inferences to be drawn from the fact that defendant failed to offer the testimony of two witnesses it said at pre-trial it would produce. It may be a legitimate inference that, if put on the stand, their testimony would have been adverse to
Defendant accepts the finding of 278 misappropriated trees for the purposes of its first counterclaim, but attacks it under the second, solely for the purpose of sustaining its witnesses. The trial judge discredits them on the ground the total number of trees they claimed to have mismarked greatly exceeded the numbers found, only 52. Defendant explains this by saying that when making his count, the forest ranger did not know that the miscreants who mismarked the trees simulated old paint by mixing motor oil with it. This seems to me a sufficiently plausible explanation why more mismarked trees were not found, to avoid discredit to the witnesses. At any rate, we all know it is human nature to exaggerate our sins once we start confessing any of them. This exaggeration does not prove we are free of sin.
The entire set of circumstances convinces me that plaintiff was privy to the mismarking. He was the principal beneficiary of it. It is hardly believable that the cutter
Further, I think defendant’s counsel is entitled to this much acknowledgement of the strength of his case, in view of plaintiffs attack on him as conducting a witch hunt or vendetta. It is asserted against him as an offense, that he traveled up into the Wisconsin woods, looking for witnesses. As a taxpayer, I would hope all Government counsel were so zealous. But there are easier ways of winning a lawsuit, than to persuade rural characters to testify against a rural claimant.
Since I wrote the above and circulated it to my colleagues on the panel, my attention was invited, in a different context entirely, to the recommended decision of Trial Judge Schwartz, filed August 16, 1977, in O’Brien Gear & Machine Co. v. United States, No. 105-72, in which he holds the "claim,” as he calls it, of the plaintiff for redetermination of its Renegotiation Act liability, to be forfeit for fraud in the prosecution under 28 U.S.C. § 2514. He gives a broad construction to the word "claim” as used in that statute, which, as he shows, has been part of the statutory framework of Court of Claims jurisdiction since 1863. He emphasizes that the "claim” is "a word of many meanings, to be determined in the context of the purpose of the statute in which it is found.”
Since the plaintiff has noted its intent to except, and the case will come before a panel of this court at some future date, it would be inappropriate for me to express either agreement or disagreement with Trial Judge Schwartz, and I do not do so. But I deem it necessary to notice his opinion to this extent: I wish to make explicit what was only
CONCLUSION OF LAW
Upon the findings of fact and the foregoing opinion, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that defendant is entitled to recover on its first counterclaim the sum of three thousand four hundred eighty-eight dollars and eighty-four cents ($3,488.84) and that defendant is not entitled to recover on its second counterclaim and special plea in fraud and said second counterclaim and special plea in fraud are herein dismissed. The court further concludes, implementing its judgment order of January 9,1976, in this case, that plaintiff is not entitled to recover on the claims asserted in his petition and that said petition is herein dismissed.
