Syllabus.

217 U.S.

UNITED STATES v. OBERLIN M. CARTER.

OBERLIN M: CARTER v. UNITED STATES.

EX PARTE: IN THE MATTER OF THE UNITED STATES, PETITIONER.

APPEALS FROM THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT.

PETITION FOR WRIT OF PROHIBITION.

Nos. 551, 552. No. 10, Original. Argued January 13, 14, 1910.--Decided April 18, 1910.

Where both the courts below have concurred upon material facts, the burden rests on the appellant to satisfy this court that such conclusions are erroneous.

Where both courts below have found on conceded facts the appellant accountable for illicit gains the burden rests on him to satisfy the courts that such conclusion is erroneous as matter of law.

A public official may not retain any profit or advantage realized through an interest in conflict with his fidelity as an agent. Where an officer of the United States secretly receives a part of the profits gained by others in the execution of contracts with the Government over which he has control, the United States is entitled to a decree in equity for the amount so received; and this, even if the Government cannot prove fraud or abuse of discretion on the part of such officer or that it has suffered actual loss. In determining whether an officer of the Government has been guilty of fraud in connection with contracts under his control, abnormal profits arouse suspicion and demand clear explanation.

The receipt in any manner as a gratuity or otherwise by an officer of the United States of a share of profits on government contracts under his control through a third party is the same, as to his liability to account therefor, as though he received such share direct from the contractor.

The fact that a close friend of the accused, having intimate relations with him in connection with the matter in suit, and whose testimony would benefit him if statements made by accused in regard to their relations are true, does not voluntarily appear in any of several proceedings, but sees the accused convicted, justifies a presumption that his testimony would not have borne out the defense.

When an officer of the United States has received a share of profits from contracts under his control the Government is not limited, in a suit to recover the same and in which it has impounded securities, to the traced securities; the officer must account for all his gains and, under a prayer for other and general relief, the Government is entitled to a judgment for money had and received to its use, and may enforce it against any property of the defendant including property in the hands of third parties with notice of how it was obtained.

The Government in a suit to recover illicit gains is justified in agreeing to allow the payment of certain expenses connected with the litigation and to determine title of securities which have been impounded by it with difficulty, and in regard to which there are conficting claims, in consideration of the surrender of the securities to abide the decision of the court in the case.

Where two courts in succession have concurred in finding that counsel fees are reasonable as allowed. this court does not feel authorized to disturb the finding.

An agreement on the part of one holding securities in trust, to turn over all that have not been disposed of bona fide, is not necessarily broken by a failure to turn over some that are held under claim that they were retained for services and disbursements properly earned and incurred, even if the claim cannot be sustained, if it is made in good faith and the question submitted to the court.

Where a stipulation for surrender of securities in suit is made by the Government and other parties, even though the Government may make what appears to be a bad bargain, the stipulation must be observed if it is actually a contract.

172 Fed. Rep. 1, affirmed.

THE facts are stated in the opinion.

Mr. Marion Erwin, with whom Mr. Edwin W. Sims was on the brief for the United States, Appellant in No. 551 and

Argument for the United States.

217 U.S.

Appellee in No. 552, and The Solicitor General for the United States in No. 10, Original:1

The right of the Government to the full measure of the relief prayed in its bill in this cause, and granted to it by the decree of the Circuit Court of Appeals, depends primarily upon the sufficiency of the proof establishing the conspiracy between Oberlin M. Carter and the contractors to defraud the United States as charged in the bill.

The proof submitted established that in devising projects of improvement, drafting specifications, advertising, letting contracts, supervision and acceptance, large discretion and options were reserved to and exercised by Carter as engineer officer in charge.

The proof establishes the fact that during the period in controversy, Carter's discretion and options after the letting of the contracts were so exercised uniformly as to create the largest possible profit to the contractors at the expense of the United States, and did in fact cause an advance of. more than 300 per cent.

The foregoing facts cannot be seriously disputed, but it is asserted the exercise of the discretions which Carter claimed he had the right to use in the manner in which they were exercised, were either justified by special circumstances excusable for absence of corrupt motive.

The Government claims that the element of corrupt motive is demonstrated by the proof especially by the establishment of the system of division by currency deposits aggregating more than $578,299.66 up to 1896-which method of concealment raises an overwhelming presumption of the existence of the conspiracy. Wharton Criminal Evidence, §§ 32-38; The Slavers, 2 Wall. 401; Rea v. Missouri, 17 Wall. 543.

1 The briefs in this case were very voluminous, amounting in all to over 600 pages; they were largely on the facts, the record consisting of over thirteen thousand pages, and it has not been practicable to make abstracts of them except on a few points of law referred to.

217 U.S.

Argument for the United States.

The facts proved supply the corrupt motive in the acts of Carter by which the exorbitant profits were created, and establish the existence of the fraudulent relations between Carter and the contractors, as the ultimate fact. Tiedeman on Equity Jur., § 235; Eaton on Equity, § 135.

Both the Circuit Court and Circuit Court of Appeals in this cause, having found as an ultimate fact that all of the profits of the contracts are fraudulent profits, and that the Government is entitled to recover all the investments made therewith in the hands of Carter or his agents, or other persons taking with notice, this court will not disturb the finding unless shown to be clearly erroneous. Stuart v. Hayden, 169 U. S. 1-14; Brainard v. Buck, 184 U. S. 105; Towson v. Moore, 173 U. S. 17; Dravo v. Fabel, 132 U. S. 487; Baker v. Cumming, 169 U. S. 189; Smith v. Burnett, 173 U. S. 430, 436; Sabine v. The Richmond, 103 U. S. 540.

The fundamental question of the guilt of Oberlin M. Carter of conspiracy with Benjamin D. Greene and John F. Gaynor to defraud the United States in the river and harbor contracts under consideration has been passed upon affirmatively prior to the decrees in the present suit, by numerous courts, notably in the following proceedings in this and other courts: Verdict of guilty against Captain Carter by General CourtMartial.

Reviewed by Attorney General Griggs and affirmed by President McKinley, September 29, 1899. See Carter Case, 22 Opin. Atty. Genl., 589.

Reviewed by this court and sentence affirmed on habeas corpus. Carter v. McClaughy, 183 U. S. 365.

Verdict of guilty against Benjamin D. Greene and John F. Gaynor, on trial by jury on indictment, April 12, 1906, U. S. Dist. Court, Southern Dist. Ga. United States v. Greene, 146 Fed. Rep. 803.

Reviewed and affirmed on writ of error by U. S. Circuit Court of Appeals, Fifth Circuit. Greene v. United States, 154 Fed. Rep. 401-414.

VOL. CCXVII-19

Argument for the United States.

217 U.S.

Petition of Greene and Gaynor for certiorari denied by this court. Greene v. United States, 207 U. S. 596.

Although owing to Carter's pleading the statute of limitations before the court-martial, barred criminal prosecution for acts done in connection with all the contracts let prior to 1896, the convictions in the criminal cases were for acts done under the contracts of 1896, alone, and the bulk of the assets sought to be recovered in the present suits are charged to have arisen from funds fraudulently diverted under contracts let from 1891 to 1895, the proof shows that the conspiracy was in continuous operation from 1891 to 1897 under all the contracts.

When the object is to show system, subsequent as well as prior offenses when tending to establish identity or intent can be put in evidence. Wharton, Crim. Ev., §§ 32, 38.

As to tracing trust funds and trusts ex maleficio, see 2 Pomeroy's Eq. Jr., 2d ed., 1053.

As to elections which the cestui que trust may exercise in respect to the right to claim fraudulently diverted property or its proceeds, or to take a money judgment for the trust assets dissipated, and also as to the election which may be exercised as to the remedy at common law or in equity, see May v. Claire, 11 Wall. 217; Smith v. Vodges, 92 U. S. 186; Moore v. Crawford, 130 U. S. 122; Oliver v. Piatt, 3 How. 333; 17 A. & E. Enc. Law, 475.

Where the trustee commingles trust money with his own. the right and lien of the beneficiary attaches to this entire combined fund. 2 Pomeroy's Eq. Jr., § 1076; Eaton on Equity, $210.

If the trustee has withdrawn and dissipated a part of the commingled fund from a bank account, there will be a conclusive presumption that he dissipated his own fund and the balance not dissipated will be held to be the trust fund. The ordinary rule attributing the first withdrawals to the first payments into the account does not apply. Nat. Bk. v. Ins. Co., 104 U. S. 68; Knatchball v. Hallett, 13 Ch. Div. 696.