United States v. McNinch

PETITIONER: United States
LOCATION: United States District Court for the Northern District of Illinois, Eastern Division

DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the Fourth Circuit

CITATION: 356 US 595 (1958)
ARGUED: Apr 01, 1958
DECIDED: May 26, 1958

Facts of the case


Media for United States v. McNinch

Audio Transcription for Oral Argument - April 01, 1958 in United States v. McNinch

Earl Warren:

Number 146, United States of America, Petitioner, versus Howard A. McNinch et al.

Mr. Doub you may proceed.

George Cochran Doub:

If the Court please.

These are three separate cases decided by the Court of Appeals for the Fourth Circuit.

Each involves the proper scope of the Civil False Claims Act.

In the McNinch case, originating in South Carolina, the Fourth Circuit held that the Civil False Claims Act did not apply to fraudulent applications for loans guaranteed by the Federal Housing Administration.

In the Toepleman case, originating in North Carolina, the Fourth Circuit held that the Civil False Claims Act did not apply to fraudulent applications for loans to the Commodity Credit Corporation because it was a wholly owned government corporation, and a wholly owned government corporation, according to the Fourth Circuit, is not a part of the Government of the United States.

And in the Cato case, originating in the Eastern District of Virginia, the same decision was made.

Now, the facts in the McNinch case were these, the defendants where the officers and -- and the salesmen of an unincorporated home construction business.

They presented to a South Carolina bank, an FHA approved lending institution, a false and fraudulent FHA loan application on the forms of FHA for the purpose of obtaining FHA guaranteed loans for the construction or repair of homes.

Now, the applications were fraudulent and fictitious.

They included false credit reports in order to bring the applications within the eligibility provisions of the statute.

Our complaint under the Civil False Claims Act alleged, the applications or claims were filed with the intent that they should be reported to and accepted by FHA for insurance.

That is the guarantee.

Well, in reliance upon the integrity of the applications, the bank approved the loans, reported them to FHA, FHA guaranteed payment of the loans to the bank in the event of a default and the bank made the loan as guaranteed by FHA to these applicants.

And those actual payments were obtained.

Now, the compliant further alleges a conspiracy by the defendants to defraud the United States under this -- the same provisions of the Civil False Claims Act and it alleges in that connection that the defendants obtained 2000 counterfeit credit report forms of a credit company for this fraudulent purpose.

Now, I might say, because great significance is attached to -- to this fact by the lower court and by the defendants, after the discovery of the fraud, but before these suits were instituted and before criminal suits were instituted, the defendants bought back these -- these notes, so there's been no default on the notes and there has been no loss by FHA.

Now, the facts in these cases are typical of thousands referred by the FHA to the Department of Justice originating all over the United States.

As a matter of fact, this type of fraud, our experience shows that my division is more prevalent numerically.

We have more cases numerically of this type than under any government program.

Now under --

Felix Frankfurter:

When did this -- when did this problem, under this general statute, first began to show the difficulties the courts have found it, or at least have reached results that you now seek to get upset in time?

George Cochran Doub:

Well this is -- this is the first decision of the Court of Appeals.

Felix Frankfurter:

It must have been a District Court decision, how do they go?

George Cochran Doub:

They go both ways.

Felix Frankfurter:

When do they begin to go one way or the other?

What I'm getting at is I'm always troubled.

The department takes a long time to get a ruling from this Court instead of getting an elucidation of ambiguity on the hill.

George Cochran Doub: