Continental Management, Inc. v. United States

527 F.2d 613, 208 Ct. Cl. 501, 1975 U.S. Ct. Cl. LEXIS 165
United States Court of Claims·Decided December 17, 1975·No. No. 223-74·Published·Cited by 56 cases

Opinion

Davis, Judge,

delivered the opinion of the court:

Continental Management and State-Side Investment have sued the United States for sums allegedly due them under contracts of mortgage insurance issued by the Federal Housing Administration (FHA). The Government has responded with an answer, a special plea in fraud, and four counterclaims. Only the first counterclaim, in which the Government seeks to collect from plaintiffs an amount equal to the sum of bribes paid by a former president of the plaintiffs’ predecessor corporation to employees of the FHA and the Veterans Administration (VA), is before the court at this time on the parties’ cross-motions.

[505] Continental Management, formerly Inter-Island Mortgagee Corp. (Inter-Island), and State-Side Investment, a wholly owned subsidiary of Continental Management and the successor of the former Inter-Island of Puerto Pico, are mortgage bankers. Until 1972 they (their predecessors) were FHA-approved mortgagees, engaged in originating mortgages for insurance by the FHA or for guaranty by the YA. The companies were suspended as approved mortgagees in that year because an extensive FBI investigation uncovered evidence that officers and employees of Inter-Island had violated federal statutes prohibiting bribery, conspiracy, and the making of false statements to the Department of Housing and Urban Development. The FBI in its investigation focused, as does the Government in its first counterclaim, on the activities of Stanley Sirote, then president and a member of the board of directors of Inter-Island and then and now the principal stockholder of Inter-Island/Continental Management. In an affidavit executed before the suspensions, Sirote detailed payments of money and gifts made by him to numerous FHA and YA employees responsible for appraising property and approving or disapproving applications for mortgage insurance or guaranty submitted by Inter-Island. Subsequently, Sirote pleaded guilty to four bribery charges, and four FHA employees 'also pleaded guilty to bribery.1

The counterclaim challenged here asks for recovery from plaintiffs of the bribes paid by Sirote to the federal employees. The claimants move to dismiss this cross-demand as failing to state a claim; the defendant has reacted by seeking summary judgment that the companies are liable on this counterclaim. As will appear, we hold that the counterclaim embodies a proper demand and that the existing record is sufficient to sustain summary judgment for the Government.

The basic underlying facts are indisputable. The payment of the bribes is attested by Sirote’s criminal convictions, the convictions of the bribed federal employees, and by Sirote’s own affidavit. Clearly, he was a conscious wrongdoer. His [506] conduct violated not only moral precepts but also the federal criminal statute prohibiting bribery of officials, 18 U.S.C. § 201 (f), and the rigid standard of conduct established by that statute. Cf. United States v. Mississippi Valley Generating Co., 364 U.S. 520, 549-51, 559 (1961). There is also no doubt that Inter-Island and its successors are responsible for his acts, committed while he was president of Inter-Island. See Wagner Iron Works v. United States, 146 Ct. Cl. 334, 337-38, 174 F. Supp. 956, 958 (1959), and cases cited. On the other hand, there is no proof or suggestion that the bribes were related, in any specific way, to the particular mortgage transactions on which plaintiffs sue.

Thus, the issue raised by the parties’ cross-motions is whether Sirote’s actions give rise to liability by the briber to the Government for an amount equal to the bribes, where the Government has shown only that such unlawful payments were made and has not proved direct or specific monetary injury. Contending that the Government must prove the damage resulting from the illegal acts, the plaintiffs assert, as their major point, that the Government’s failure to allege provable, measurable damages and a nexus between Sirote’s conduct and specific monetary harm to the Government calls for dismissal of the counterclaim, or at best a remand for trial. The defendant replies that the interference with the principal-agent relationship between it and its employees is damage enough, as well as a compensable wrong, that it need prove no other injury, and that on this type of record the amount of the bribes is a sufficient measure of damage.2

Free access — add to your briefcase to read the full text and ask questions with AI

Continental Management, Inc. v. United States, 527 F.2d 613, 208 Ct. Cl. 501, 1975 U.S. Ct. Cl. LEXIS 165 (cc 1975).

527 F.2d 613 (Continental Management, Inc. v. United States) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

Thomas Baltrusaitis v. UAW
133 F.4th 678 (Sixth Circuit, 2025)
Supreme Foodservice GmbH
Armed Services Board of Contract Appeals, 2024
State of Louisiana v. Guidry
Fifth Circuit, 2007
State of Louisiana v. Robert Guidry
489 F.3d 692 (Fifth Circuit, 2007)
Williams Electronics Games, Inc. v. Garrity
366 F.3d 569 (Seventh Circuit, 2004)
FRANKLIN MED. v. Newark Public Sch.
828 A.2d 966 (New Jersey Superior Court App Division, 2003)
Bank One v. United States
62 Fed. Cl. 474 (Federal Claims, 2003)
Barrett Refining Corporation v. United States
242 F.3d 1055 (Federal Circuit, 2001)
PHILIP MORRIS, INCORP. v. Grinnell Lithographic Co.
67 F. Supp. 2d 126 (E.D. New York, 1999)
United States v. Bouchey
949 F. Supp. 9 (District of Columbia, 1996)
United States v. Moffitt, Zwerling & Kemler, P.C.
83 F.3d 660 (Fourth Circuit, 1996)
Supermex, Inc. v. United States
40 Cont. Cas. Fed. 76,897 (Federal Claims, 1996)
Haustechnik v. United States
40 Cont. Cas. Fed. 76,886 (Federal Claims, 1996)