United States v. Richard K. Ehrlich and Lurline Gardens Limited Dividend Housing Partnership

643 F.2d 634 28 Cont.Cas.Fed. (CCH) 81,354 UNITED STATES of America, Plaintiff-Appellee, v. Richard K. EHRLICH and Lurline Gardens Limited Dividend Housing Partnership, Defendants-Appellants. No. 79-3304. United States Court of Appeals, Ninth Circuit. Argued and Submitted Feb. 4, 1981. Decided April 23, 1981. Sanford R. Demain, Van Nuys, Cal., argued, for defendants-appellants; Martha Goldin, Goldin & Goldin, Hollywood, Cal., on brief. William S. Freeman, Dept. of Justice, Washington, D. C., for plaintiff-appellee. Appeal from the United States District Court for the Central District of California. Before WRIGHT and CANBY, Circuit Judges, and MURPHY, Senior District Judge. * EUGENE A. WRIGHT, Circuit Judge: I. FACTS 1 Section 236 of the National Housing Act, 12 U.S.C. § 1715z-1 (1976), authorizes the Secretary of Housing and Urban Development to insure mortgages and subsidize interest payments on behalf of the sponsors of low income housing projects. This case involves a project sponsored by Lurline Gardens, a limited partnership. Richard Ehrlich was Lurline's sole general partner, and was the general contractor for the project. 2 An insurable mortgage is limited, in a…

I. FACTS

Section 236 of the National Housing Act, 12 U.S.C. § 1715z-l (1976), authorizes the Secretary of Housing and Urban Development to insure mortgages and subsidize interest payments on behalf of the sponsors of low income housing projects. This case involves a project sponsored by Lurline Gardens, a limited partnership. Richard Ehrlich was Lurline’s sole general partner, and was the general contractor for the project.

An insurable mortgage is limited, in a case such as this, to 90% of the replacement costs of the project. Replacement costs include construction costs.

The interest subsidy reduces the sponsor’s interest payments to one percent of the amount of the mortgage and the larger the mortgage, the larger the subsidy.

HUD initially estimates the construction and other costs of a project to determine the maximum insurable mortgage. Upon completion of the project, the sponsor must submit a statement of actual costs to HUD. If the costs are less than estimated, the insurable mortgage is reduced, and the sponsor must repay a portion of the principal to the mortgagee.

Interest subsidies are paid directly to the mortgagee who submits a monthly voucher to HUD. It lists…

concurring in part and dissenting in part.

I concur in all of the opinion of Judge Wright except Part III, subdivision A. With that portion of the opinion, which affirms the imposition of 76 forfeitures, I respectfully dissent. My reading of United States v. Bornstein, 423 U.S. 303 , 96 S.Ct. 523 , 46 L.Ed.2d 514 (1976), compels me to conclude that appellant is liable for no more than two forfeitures under Rev.Stat. §§ 5438 and 3490.

It is true, as the majority opinion points out, that in Bornstein the subcontractor that caused the prime contractor to submit 35 false claims had no knowledge or control over the number of separate claims the prime contractor chose to submit. In my view, however, this point is not the essential part of Bornstein . The central point is found in Bomstein’s rejection of the Government’s argument that the subcontractor should be held liable for 35 forfeitures:

423 U.S. at 312 , 96 S.Ct. at 529 (emphasis supplied). The Supreme Court’s position is made even more clear by the language immediately following:

Id. (Emphasis supplied).

In my view, the majority here deviates from the teaching of Bornstein by subjecting the appellant to forfeitures based not…