Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Posner

decided: August 12, 1959.


Author: Hastie

Before GOODRICH, KALODNER and HASTIE, Circuit Judges.

HASTIE, Circuit Judge.

The complaint of the United States in this case alleges that the original defendant, Abraham Epstein, who died and whose executors were substituted as defendants before trial, joined with a war veteran, Jack Grollman in a fraudulent scheme involving the improper use of Grollman's veteran's preference to obtain for Epstein and two corporations controlled by him surplus property which the government had made available for sale. Invoking a civil remedy provided by the Surplus Property Act, 63 Stat. 392, 40 U.S.C.A. § 489, the government recovered double the consideration involved in one transaction and was denied recovery in another. Cross appeals followed.

Concerning government property alleged to have been acquired for transfer to Regal Corrugated Box Co., one of the Epstein controlled corporations, there was evidence that Epstein suggested to Jack Grollman, one of his employees, that Grollman obtain a veteran's preference certificate and use it to purchase certain lithography and paper products from the War Assets Administration. There was also evidence that Epstein and Grollman understood before the purchases in suit were made that the property to be acquired was intended for use in the business of Regal. Pursuant to this plan Epstein assisted and directed Grollman in the preparation and execution of an application for a veteran's priority certificate. In that application there appear statements, which Egpstein knew to be false, that Grollman was the proprietor of a business at a stated address with a stated number of employees.

Epstein then used his standing and credit to obtain a bank loan, loans from Regal and other financing to provide the money needed for the purchase of surplus property in the name of Grollman. Beyond that Epstein actually selected the property to be purchased. Grollman then went through the procedures of buying the surplus paper products in his own name and reselling the merchandise to Regal at a price, determined by Epstein, which was substantially in excess of the government selling price.

Regal paid this resale price to Grollman who, at Epstein's direction, retained a percentage of the resale profit to be used to pay income tax on the gain. The amount of the profit after taxes was then paid to Estein by the device of drawing and cashing Grollman's checks payable to "cash" and delivering the currency to Epstein. Thus, the evidence indicated, as the district court found, that it was not Grollman but Epstein and Regal who were the principal parties and beneficiaries in this series of transactions.

The statute under which this suit has been brought reads as follows:

"(b) Every person who shall * * * enter into an agreement, combination, or conspiracy to use * * * any fraudulent trick, scheme, or device, for the purpose of securing or obtaining, or aiding to secure or obtain, for any person any payment, property, or other benefits from the United States or any Federal agency in connection with the procurement, transfer, or disposition of property under this chapter, * * *."

"(2) shall, if the United States shall so elect, pay to the United States, as liquidated damages, a sum equal to twice the consideration agreed to be given by the United States or any Federal agency to such person or by such person to the United States or any Federal agency, as the case may be; * * *." 40 U.S.C.A. § 489(b) (2).

In terms of this statute the district court quite properly viewed the evidence as clearly disclosing Epstein as the initiator, principal actor and principal beneficiary of a scheme to obtain government property and dispose of it at a profit to himself through falsely representing that a veteran was purchasing the property in his own interest.As we read the evidence, it is strongly persuasive that Grollman was simply not buying and reselling government property on his own account, but was merely an agent, controlled and directed by Epstein, purchasing and reselling in Epstein's interest while using quite transparent procedures to set up a merely colorable proprietorship of a veteran. For under the transaction as disclosed in the record there appears to have been no time at which Epstein did not direct and control every significant step in the enterprise. Add the fact that the resale profits after estimated taxes were surrendered to Epstein and it seems entirely clear that he was the principal and the real party in interest.

A separate point is made that subsection 489(b) (2) of Title 40, as quoted above, expressly limits the United States to the recovery of twice the consideration moving to o from "such person". It is then argued that "such person" means the person who is to be held liable. But careful reading of the first sentence of subsection (b) seems to us to indicate that "such person" as used in the subsection (2) means, in relation to the language of subsection (b), "any person" who gets government property. At the same time liability is imposed not merely on "any person" who gets government property by fraud, but more broadly, on "every person" who participates in the fraudulent scheme. Even if we should be wrong in this analysis we would still have no difficulty in supporting the conclusion that it was Epstein through his agent Grollman who, within the meaning of the statute, received the property in suit from the government and resold it at a profit to Regal.

To avoid the conclusion reached by the court below as to the true nature of the transactions in suit, the appellants argue that the finding that the profits on the resale to Regal were turned over to Epstein was based on the inadmissible hearsay and, therefore, improper. But Grollman himself testified:

"* * * The balance of the profit [after setting aside a sum for taxes] was to be given back to Mr. Epstein - was given back to Mr. Epstein in the form of various and ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.