PURCELL, et al v. MWI CORPORATION, et al

Filing 472

MEMORANDUM OPINION to the Order granting Plaintiffs a Judgment. Signed by Judge Gladys Kessler on 2/10/14. (CL, )

..

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,
ex rel. ROBERT R. PURCELL,
Plaintiffs,

v.

Civil Action No. 98-2088 (GK)

MWI CORPORATION,
Defendant.

MEMORANDUM OPINION

This matter comes before the Court for ruling after a jury
trial.

The jury found Defendant MWI Corporation

("Defendant" or

"MWI") liable for violations of the False Claims Act
U.S.C.

§

The

3729(a) (1),
parties

(2).

were

ordered

to

addressing the issue of damages.
Government")

("FCA"), 31

submit

supplemental

briefs

Plaintiff United States

filed a Motion for Entry of Judgment

("the

("U.S. Mot.")

[Dkt. No. 458]. Defendant MWI Corporation ("Defendant" or "MWI")
filed

a

Memorandum

Calculation

of

Subsequently,
Memorandum
Purcell

Points

Damages

the

("U.S.

of

( "MWI

Government
Resp. ")

("Relator"

Government and MWI' s

or

and

Authorities
Mem. ")

filed

a

No.

[Dkt.

463],

[Dkt.

"Purcell")

filed

Regarding

Response
Relator
a

No.

the
459] .

to

MWI' s

Robert

Response

to

R.
the

Calculation of Damages Regarding Entry of

Judgment

("Relator

Resp. ")

[Dkt.

Response to United States'
465] .

After

of

the

464],

Submissions

consideration

representations

No.

of

parties

and

( "MWI Resp. ")

the

filed
[Dkt.

submissions,

those

at

MWI

damages

hearing

a

No.
the
held

December 19, 2013, and the entire record herein, the Court will
now

address

the

issues

raised

and

determine

the

amount

of

damages.
A.

In

Factual Background
1992,

MWI,

a

Florida

corporation,

arranged

to

sell

irrigation pumps and other equipment to seven Nigerian states.
The total sale price was $82.2 million dollars.
To
Nigeria

finance

these

("Nigeria")

sales,

sought

MWI

and

and the

received eight

Export- Import Bank of the United States
the

United

States

that

Federal

finances

and

Republic of

loans

from

the

("Ex- Im") , an agency of
facilitates

transactions

between U.S. exporters and international buyers. Ex-Im agreed to
finance the deal and loan Nigeria $74.3 million dollars. Nigeria
would pay back the $74.3 million dollars,
and

fees,

and

the

individual

Nigerian

as well as interest

states

would

pay

the

Nigeria,

it

remainder of the $82.2 million dollar price.
Before
required

Ex-Im

MWI

to

would
submit

approve
a

the

"Letter

loans
of

to
Credit

Supplier's

Certificate" for each of the eight loans. On each of those eight
-2-

Letter of Credit Supplier's Certificates,

MWI attested that it

had only paid "regular commissions" in connection with the pump
sales.
After Ex-Im approved the loans, but before it disbursed any
funds,

it

required

Certificate."
Certificates

MWI
that

MWI

to

attested
it

had

submit
on

a

fifty

paid

only

"Disbursement

Supplier's

Disbursement

Supplier's

"regular

commissions"

in

connection with the pump sales. Thus, MWI submitted eight Letter
of

Credit

Supplier's

Certificates

and

fifty

Disbursement

Supplier's Certificates to Ex-Im. 1
In 1998, Relator Robert Purcell,

a former employee of MWI,

filed this action against MWI under the FCA

[Dkt.

No.

1]

He

alleged that MWI paid commissions in excess of 30 percent of the
contract prices for the irrigation pumps and equipment to its
long-time

Nigerian

,, 35-37.

Purcell

"irregular"

sales

agent,

alleged that

Alhaji
those

Mohammed

Indimi.

Id.

commission payments were

and thus should have been disclosed on all of the

Supplier's Certificates that MWI submitted to Ex-Im. Id.

1

MWI argued for the first time in its Response that the
Complaint
identified
only
48
Disbursement
Supplier's
Certificates and did not
identify any Letter of
Credit
Supplier's Certificates. MWI Resp. at 10. At trial, MWI did not
challenge the Government's evidence or testimony regarding 58
total Supplier's Certificates, and therefore the Court accepts
these figures as correct.
-3-

In April of 2002,
and

filed

a

("Complaint")

the United States decided to intervene,

complaint

which

[Dkt.

18] .

No.

commissions paid to Indimi,

then
Based

governed
in part

the

proceedings

on the

amount

of

which at the time was estimated to

be approximately $28 million dollars, 2 the Complaint alleged two
violations

of

the

FCA

(Counts

I

and

II)

and

two

claims for unjust enrichment and payment by mistake

common

law

(Counts III

and IV)
The

case

was

litigated

for

several

years

before

Judge

Ricardo M. Urbina. After Judge Urbina's retirement, the case was
reassigned

to

Judge

Colleen Kollar-Kotelly,

and

then

to

this

Court. After resolving many pre-trial motions, the case went to
trial on November 6, 2013.
Counts I and II of the Complaint,

the FCA violations, were

to be decided by the jury. It was instructed that,
that MWI had violated the FCA,

if it found

it was to identify the specific

number of false claims and then "assess the amount of damages,
2

At trial, the Government argued that MWI had paid $25 million
dollars in commissions to Indimi, not $28 million. See, e.g.,
Pls. Opening St., Trial Tr. Nov. 8, 2013, A.M. Session at 25:912 (telling jury it needed "to decide whether MWI knew or should
have known that the $25 million payment to Mr. Indimi was
irregular and that it should have been disclosed"); Pls. Closing
Arg., Trial Tr. Nov. 21, 2013, A.M. Session at 50:20-22 ("$25
million in Ex-Im funds went into the bank account of MWI's
Nigerian agent Alhaji Indimi."); id. at 76:10-12 (suggesting
that amount United States "unknowingly paid to Mr. Indimi," $25
million, be considered as measure of damages) .
-4-

if any,

that the

[G] overnment sustained because of MWI' s acts."

Closing Instructions,
41:13:18

(quoting

Trial Tr.

31

U.S.C.

Nov.

21,

2013 A.M.

3729(a) (1),

§

which

Session at
states

that

defendant is liable for "3 times the amount of damages which the
Government sustains because of the act of that person").
Iri order to assess the appropriate amount of damages,

the

jury was instructed, under United States v. Science Applications
Int'l

Corp.,

626

F.3d

1257,

1278-79

(D.C.

Cir.

2010),

that

damages were "the amount of money the government paid because of
the false claims over and above what it would have paid had MWI
not made the false claims," and that it would need to "set an
award

that

puts

the

would

have

been

in

false."

Closing

[G] overnment
if

the

in

the

defendant's

Instructions,

Trial

Tr.

same

position

claims
Nov.

had
21,

as

it

not

been

2013

A.M.

Session at 41:19-24. 3
On

November

Plaintiffs

on

25,

both

dismissed Counts

III

2013,
Counts

the
I

jury
and

and IV of

returned

II.

The

the Complaint,

a

verdict

Government

for
then

its common law

claims, with prejudice. Trial Tr. Nov. 25, 2013, A.M. Session at
22:18-20.
3

The Government did not object to the damages instructions. MWI
objected, arguing that the Court should instruct the jury that
the Government also had to prove proximate causation and actual
reliance. Closing Instructions, Trial Tr. Nov. 20, 2013, P.M.
Session at 121:22-25.
It had no other objections to the
instruction. Id. 122:10-12.
-5-

B.

Standard of Review

Under

the

FCA,

[the

"if

finds

jury]

liability,

its

instruction is to return a verdict for actual damages, for which
the

court

court

alone

alone

then

sets

determines

any

any multiplier,

separate

penalty."

Cook

U.S.C.

§

calculate

3729(a)).

the

Thus,

it

as

the

Ill.

Cty.,

United States ex rel. Chandler, 538 U.S. 119, 132
31

just

v.

(2003)

is

now

the

Court's

"civil penalty of not

less

than $5,000

(citing
job

to

and not

more than $10,000, plus 3 times the amount of damages which the
Government
§

sustains

because

of"

MWI' s

actions.

See

31

U.S. C.

3729 (a)
The

"chief purpose of the

(Act's civil penalties)

was to

provide for restitution to the government of money taken from it
by

fraud,

and

that

the

device

of

[treble]

damages

plus

a

specific sum was chosen to make sure that the government would
be made completely whole." United States v. Bornstein, 423 U.S.
303,

314

317 U.S.

(1976)
537,

(citing United States ex rel. ·Marcus v.

551-52

(1943)).

Hess,

In order to make the Government

"whole," the Supreme Court has instructed that "the Government's
actual damages are to be
made

for

compensatory

[trebled]
payments

before any subtractions are
previously

received

Government from any source." Bornstein, 423 U.S. at 316.

-6-

by

the

C.

Actual Damages

First, the jury found that MWI knowingly presented 58 false
or fraudulent claims for payment to the Government, in violation
of 31 U.S.C.
Second,

it

§

3729(a) (1).

found

that

Verdict Form,

the

amount

of

at 1

[Dkt.

damages

No.

the

453].

Government

sustained because of those claims was $7,500,000. Id.
The
records

jury
and/or

Government's
claims
Verdict

also

for

false

decision
payment,

Form,

Government

found

at

that

MWI

statements
to

pay

or

in

found

that

sustained

that

because

were

approve

violation

It

2.

knowingly

of

of

or

U.S.C.

§

amount

those

58

material

false

31

the

made

of

false
to

the

fraudulent
3729(a) (2).
damages
records

false

the
or

statements was $7,500,000.
The

Government

concedes

that

the

damages for both counts is $7,500,000.

total
U.S.

only party that disagrees is the Relator,

amount
Mot.

of

3 at

actual
1.

The

who argues that the

jury intended to award $7.5 million in damages for each count,
for a total of $15 million. Relator Resp. at 2-3.
Relator's

argument

that

the

jury

split

the

amount

of

damages between the two counts is nothing more than speculation.
Relator ignores the important fact that the jury identified the
same 58 Supplier's Certificates for both Counts. At trial,
Government argued that each of the
-7-

58

the

Supplier's Certificates

constituted

a

Closing Arg.,

false

claim

and/or

Trial Tr. Nov. 21,

a

false

statement.

Pls.'

2013, A.M. Session at 62:12-13

("MWI's certifications on the 58 Supplier's Certificates that it
submitted to

Ex-Im were

false.").

Thus,

jury determined that the same conduct,
Supplier's

Certificates,

was

a

it

is

clear that

the

the submission of the 58

violation of

both Count

I

and

Count II. To aggregate the two sums would be to punish MWI twice
for the same conduct, which would "amount to a double recovery."
See Kakeh v.
122

(D.D.C.

permitted

United Planning Org.,
2009)

to

Inc.,

655 F.

Supp.

2d 107,

("It is well-settled that a plaintiff is not

recover

multiple

awards

for

the

same

injury.")

(citing supporting cases) .
The jury found that the 58 false certifications damaged the
Government

by $7,500, 000

and

therefore

that

is

the

amount

of

actual damages.
D.

Treble Damages

An entity found liable for a violation of the FCA is liable
for "3 times the amount of damages which the Government sustains
because of

the

act

of

that person."

31 U.S. C.

§

3 72 9 (a) .

The

parties agree that the first step in calculating treble damages
is to treble the actual damages amount.
at

316.

Thus,

the

treble

damages

$22,500,000.
-8-

See Bornstein, 423 U.S.

amount

is

$7,500,000

x

3

E.

Offset for Compensatory Payments Under Bornstein

The

real

and difficult

issue

in

the

calculation of

total damages is whether, under Bornstein, MWI is entitled to an
offset

of

the

$108

received from the

million dollars
federal

that

the

Ex-Im eventually

Nigerian government as

repayment

of

the loans at issue.
1.

Bornstein

United States v. Bornstein

involved

with a prime contractor,

a

Government

contract

Model Engineering.

for

423 U.S.

radio

kits

at 307. A

subcontractor, United, knowingly sold Model Engineering electron
tubes for inclusion in the radio kits that did not conform to
the

specifications

Government

of

discovered

the

the

Government

nonconforming

After

contract.
electron

tubes,

the
Model

Engineering paid the Government the difference in value between
the radio kits as specified in the contract and the radio kits
as supplied with the nonconforming electron tubes. Id.
Subsequently,

the Government sued United under the FCA and

prevailed. Id. at 308. A key issue before the Supreme Court was
whether the amount of damages owed by United to the Government
should be offset by the amount of Model Engineering's payments
to the Government,

or whether the amount of damages should be

-9-

doubled 4

before

Engineering's
Government

any

subtractions

should

Id.

314.

payments.

did

not

argue

at

that

Model

be

made

for

Model

Significantly,
Engineering's

the

payments

should not be deducted at all -- the question was when to deduct
the payments.
"abandoned"

See

the

id.

at

position

n. 9

314

that

(noting that

"any

Government

compensatory

payments

had
it

received should not be deducted from its statutory damages at
all").
After evaluating the "language and purpose" of the FCA, the
Supreme Court concluded that,

"in computing the double damages

authorized by the Act, the Government's actual damages are to be
doubled

before

any

subtractions

are

made

for

compensatory

payments previously received by the Government from any source."
Id. at .316-17.
2.

Issue Presented

It is undisputed that Nigeria eventually paid approximately
$108

million to the Ex-Im on the loans at

issue

the $74.3

million dollar principal and $33.7 million dollars in interest
and
that

fees.

MWI

Nigeria

argues
paid

that,
the

under Bornstein,
Government

4

should

the
be

$108

million

considered

The FCA was amended in 1986 and now provides for treble, not
double, damages. See Cook Cty., Ill. v. United States ex rel.
Chandler, 538 U.S. 119, 129-30 (2003) (discussing Congressional
modernization of FCA in 1986, including raising the ceiling on
damages from double to treble) .
-10-

"compensatory
from

any

payments

source"

previously
subtracted

and

received
from

damages MWI owes the Government.
exceeds
damages,

the

$22.5

MWI

million MWI

insists that,

by

the

the

Government

amount

of

treble

Because the $108 million far

owes

the

government

as

after applying the offset,

treble
it owes

nothing to the Government in damages.
MWI

also

argues

that

an

offset

for

these

payments

is

mandatory under Bornstein and that the Court has no discretion
about whether or not to apply it in this case. MWI Mem. at 2-4.
That is incorrect.

Bornstein did not define what constituted a

"compensatory payment," nor did it address the argument raised
by

the

Government

in

this

case

that

certain

compensatory

payments need not be deducted from statutory damages.
at

314

n.9.

Moreover,

the

Bornstein Court

did not

423 U.S.
address

a

situation where the compensatory payments to be subtracted are
larger than the

single damages amount,

much less,

as

in this

case, entirely dwarf the treble damages amount.
Thus, there are several questions raised in this case that
were neither raised nor addressed in Bornstein.
that

Bornstein

resolves

this

issue

ignores the complexity of the issue.

-11-

without

MWI' s argument

further

analysis

3.

MWI's Alleged "Influence" of Nigeria's Repayment

The Government's first argument is that the Nigerian loan
repayments were

not

"compensatory payments"

because

they were

only made after MWI lobbied Nigeria to repay its loans at the
expense of other loans due the Ex-Im. U.S. Mot. at 3-5. For the
reasons set out below,
failed

to

government

prove
to

the Court concludes that the Government

that

repay

MWI

the

did

MWI

in

fact

loans

lobby

after

the

learning

Nigerian
that

its

conduct was being investigated. Nor has the Government provided
any evidence that Nigeria would have paid off other loans to the
Ex-Im if it had not paid off the MWI loans.
The primary evidence the Government

identifies in support

of its argument is the deposition testimony of Steve Ahaneku, a
Nigerian attorney. Ahaneku did not testify at trial, nor did the
Government

call

him

as

a

witness

at

the

damages

hearing.

Instead, the Government relies on Ahaneku's deposition testimony
that

"someone

at

Nigerian officials

[MWI]

talked to

[him]

specifically about

about

repaying

talking
the

to

the

EXIM loans

that related to the Eight-State Projects." U.S. Mot. Ex. 2 at 3. 5
Based on this deposition testimony,
that after MWI

"became aware of a

5

the Government argues

criminal

investigation into

Though the parties did not raise the issue, this testimony
would likely have been inadmissible at trial as hearsay. Fed. R.
Evid. 802.
-12-

their conduct," MWI paid Ahaneku "to convince Nigerian officials
to pay off the MWI loan while other Exim loans were in default."
U.S.

Mot.

at

3.

The

testimony clearly does

not

support

this

having

these

allegation.
The

Government's

conversations

assertion that Ahaneku was

"right around the time"

investigation is incorrect.

that MWI

discovered the

Ahaneku identified the time period

when he was asked to speak to Nigerian officials about repaying
the loans as between 1995,

1996,

and 1997.

Id.

at 2. Although

the parties dispute when MWI became aware of the investigation
into its conduct,

the Government does not suggest that MWI was

aware of any investigation prior to December 1998. U.S. Resp. 7
n.3.

That

discussing

date

is

in his

well

after

deposition.

the

Thus,

period

that

Ahaneku' s

Ahaneku

was

testimony about

speaking to Nigerian officials in the mid-1990s does not support
the Government's assertion about what MWI did after it became
aware of the investigation in the late 1990s.
Second,

Ahaneku's

testimony

does

not

support

the

Plaintiffs' argument that MWI lobbied Nigerian officials to pay
off the MWI loans because MWI feared future liability.
Ahaneku

testified

that

MWI

sought

to

discuss

the

Instead,

loans

with

Nigerian officials because "officials come and go." Id. Ex. 2 at
2.

Ahaneku noted that MWI was interested in assuring that the
-13-

loans

were

repaid

because

outstanding obligation.

"it

is

an

obligation,

it's

an

The name is associated with it so they

would like it to be tidied up." Id. at 3. The Government did not
cite to any other portions of Ahaneku's deposition that impeach
the

credibility of

cite

to

any

this

other

witness

testimony

or his

or

testimony,

evidence

that

nor

did

contradicts

it
the

testimony. 6
Consequently,
Court

that

Ahaneku' s

the fact that,
conduct,

the

Government

testimony

has

failed

stands

for

to

persuade

anything

other

the
than

before MWI knew about any investigation into its

its agent spoke to Nigerian officials in an attempt to

ensure that loans that involved MWI were repaid.
Other
supports

evidence

its

testimony of

allegations.
James

stated that Nigeria
U.S.
there

Mot.

at 4,

was

marshaled by the

Ex.

"nothing

Hess,

The

Government

Government

Ex- Im' s

"singled out"

Chief

However,

improper"

about

the

Financial

the MWI

3 at 1.

notes

also

loans

fails

to

deposition

Officer,

who

for repayment.

Hess also testified that
Nigeria

choosing

to

make

those payments, and that the Ex-Im would "rather have that money
than not have it." Id. at 2.
The
lawsuit,
6

Government
in 2002,

emphasizes

that

after MWI

knew about

it retained an American lawyer,

Naturally, there was
the deposition.

an opportunity for
-14-

this

Warren Glick,

cross-examination at

to determine Nigeria's indebtedness on the MWI loans. U.S. Mot.
at

4.

The

Government

argues

that

MWI

paid

Glick

to

request

information about the loans from the Ex-Im under the Freedom of
Information Act

( "FOIA") ,

information

used

remaining

and

balance.

it

Id.

at

and
to

insinuates
influence

4-5.

Again,

that

MWI

Nigeria
the

took

to

repay

the

does

not

evidence

that

support the Government's chain of inferences.
The record shows that the vast majority of the loans were
repaid well in advance of Glick's FOIA request. 7 Indeed, Ex-Im's
response

to

Glick's

FOIA

request

states

that

the

remaining

balance on the loans was approximately $270,000. U.S. Mot. Ex. 5
at 2. That constitutes less than 1% of the entire amount of the
loans in question.

In addition,

the Government has presented no

evidence that anyone from MWI interacted-with Nigerian officials
about the MWI loans after the FOIA request was made. Thus,

the

evidence

its

cited by the Government

simply does

not

support

allegations.
In addition,

the Court notes that,

even if the Government

had identified evidence that MWI petitioned Nigeria to pay off
7

Approximately 42% of the loans were repaid by December 1998,
the earliest date the Government suggests MWI could have known
about an investigation into its conduct. See Def. Exs. 321, 331,
364, 370, 382, 397, 416, 424. The loans were almost entirely
paid off by May 3, 2001, over seven months before MWI received a
copy of the Relator's Complaint and sent its FOIA request to the
Ex-Im. See id.; see also U.S. Mot. Ex. 5 at 2 (Glick's FOIA
request, dated January 16, 2002).
-15-

the MWI loans,

such actions would not have been inappropriate.

The Government cites no law,
from

lobbying

Nigeria

to

regulation, or case precluding MWI
take

particular

actions

within

Nigeria 1 s discretion. 8 See MWI Mem. at Ex. 3 at 6 (Hess testimony
that there was nothing "inappropriate or impropertt about Nigeria
choosing

to

repay

the

MWI

loans) .

The

Government

fails

to

acknowledge the indisputable fact that Nigeria has the right to
pay off its debts in whatever order it chooses.
The Government tries to avoid this fact by inferring that,
had MWI not petitioned the Nigerian government to pay off the
MWI loans,· Nigeria would have applied those funds to other Ex-Im
loans.

Again,

proposition.

it
Thus,

provides
the

no

evidence

Government 1

S

to

support

argument

is

that
pure

speculation.
Since the Government has failed to provide a factual basis
for its allegation that Nigeria repaid the loans in question at
MWI, s

behest,

or that Nigeria did so at

loans to the Ex-Im,

the expense of other

the Court rejects the Government,s argument

that Nigeria 1 s repayments were not "compensatory payments. 11
8

Moreover, the evidence at trial showed that the Ex-Im actually
required MWI to lobby Nigeria to repay other loans it owed to
the Government as a prerequisite to granting the loans in this
case. Test. of William Bucknam, Trial Tr. Nov. 8, 2013 P.M.
Session at 51:7-53:2 (testifying that Ex-Im officials required
MWI to collect unrelated arrearages from Nigeria in order to
make credits operative) .
-16-

4.

"Compensatory Payments"

The

next

issue

that

Nigerian

loan

repayments

must
are

be

addressed

"compensatory

is

whether

payments''

the

under

Bornstein. 9 Neither the parties nor the Court have identified any
factually-comparable
provides

helpful

case

guidance

under
on

the

this

False

issue.

Claims
In

Act

that

the

absence

of

specific guidance, the Court looks to Bornstein and its progeny.
As noted above,

the Government did not argue in Bornstein

that prime contractor Model Engineering's settlement payments to
the

Government

Government

argue

were
that

not

compensatory

payments,

compensatory payments

nor

did

should not

the

offset

9

MWI claims that the Government is judicially estopped from
•
arguing that the Nigerian repayments are not "compensatory." MWI
Resp. at 2-3. A court may invoke judicial estoppel "where a
party assumes a certain position in a legal proceeding, succeeds
in maintaining that position, and then, simply because his
interests have changed, assumes a contrary position." Moses v.
Howard Uni v. Hosp., 606 F. 3d 789, 798 (D.C. Cir. 2010) (internal
quotation marks and citations omitted) . MWI points out that the
Government argued before trial that evidence of Nigerian
repayment should not be presented to the jury specifically
because
the
repayments
were
compensatory
payments
under
Bornstein.
Id.
(citing
United
States'
Mot.
Seeking
Reconsideration of the Court's Damages Rulings, at 4-5 [Dkt. No.
416] )
This Court did not adopt the Government's position that the
Nigerian repayments were "compensatory payments" that would
necessarily offset
any
damages.
See
Order
on Mot.
for
Reconsideration at 8 [Dkt. No. 425] (noting that if the jury
determined the Government suffered damages, "the Court will then
decide" whether MWI is entitled to a reduction based on
Nigeria's repayments) (emphasis added) . Thus, the Government did
not "succeed" in maintaining its position, and judicial estoppel
is inapplicable.
-17-

the FCA liability of the subcontractor.

The only question was

when the payments should be used to offset liability -- before
or after calculation of treble damages. See 423 U.S. at 314 n.9
(noting

that

Government

compensatory payments

"abandoned"

it

the

position

that

"any

received should not be deducted from

its statutory damages at all").
The

Supreme

abandoned this

Court

posited

position

that

"for the

the

Government

reason that

may

have

since United is

liable to Model for Model's payment to the United States, United
would in effect be assessed triple damages under such a rule."
Id.

ThGs,

case

the Court recognized the basic principle that,

involving

Government

is

accordingly.

joint
a

See

shared
United

tortfeasors,
liability
States

the
that

ex

to

liability
must

rel.

be

Bunk

in a
the

apportioned
Birkart

v.

Globistics, Nos. 1:02-cv-1168, 1:07-cv-1198, 2011 WL 5005313, at
*16

(E.D. Va. Oct. 19, 2012)

("It is generally agreed that when

a plaintiff settles with one of several joint tortfeasors,
non-settling
settlement.")
v.

defendants

are

entitled

(citation omitted);

Bill Harbert Int'l Constr.,

(D.D.C. 2007)

to

a

credit

for

United States ex rel.

Inc.,

501 F. Supp.

2d 51,

the
that

Miller
54-55

(noting that "where there is a settlement between

the plaintiff and one defendant,

the liability of the remaining

non-settling defendants must be calculated with reference to the
-18-

jury's

allocation

responsibility")

of

the

(internal

defendant's

non-settling

quotation

citation

and

marks

omitted).
That

reasoning

could

be

used

to

distinguish

this

case,

because no evidence was presented nor argument made that Nigeria
should be

jointly or severally liable for MWI' s

See United States v.
Iowa 2008)

for

anothe~

562 F.

Supp.

2d 1017,

claims.

1025

(N.D.

(noting that Bornstein does not stand for "the broad

proposition that
credit

Hawley,

false

any

party,"

proposition

a

defendant

amounts
but

that

a

in a

recovered

instead

FCA case
by

the

"stands

tortfeasor,

for

such

is

United
the

as

entitled to

a

States

quite

a

from

different

subcontractor,

is

entitled to a credit for compensation that the United States has
recovered from another tortfeasor, such as a prime contractor").
However, the majority of post-Bornstein cases have not made this
distinction.
Rather,

the

cases

have

applied

Supreme

the

Court's

statement in Bornstein that the offset encompasses "compensatory
payments

previously

U.S.

316

at

arisen

in

received

(emphasis
cases

where

from
In

added)

loans

made

payments

on

loans,
the

-19-

source"

particular,

individuals

fraudulently procuring federal
those

any

were

literally.
this

found

issue
liable

423
has
for

but the beneficiaries of
underlying

loans

to

the

Government.

See

United

States

49253, at *6

(D.N.J. Mar. 26,

entitled

offset

to

v.

Heck,

1987)

including

No.

08-0875,

1987

WL

(holding that defendant was

"amounts

recovered

from

other

parties"); United States v. Ekelman & Ass'n, Inc., 531 F.2d 545,
547

(6th

Cir.

1976)

(decided

holding that offset
the

should include

veteran-mortgagor

Globe Remodeling Co.,
pre-Bornstein,

that

immediately after

by

the

196 F.
offset

"any amount

government") ;
Supp.

for

Bornstein and

652

United

(D. Vt.

"repayments

recovered from
States

1960)

to

the

v.

(finding,
government

from the borrowers who defaulted" should be made "after doubling
the original losses").
Evaluating this line of cases,

the District Court for the

District of Puerto Rico observed:
Nothing
in these
cases
holds
or
suggests
that
Bornstein's recoupment rule turns on the nature or
sdurce of the particular recoupment. Indeed, Bornstein
itself forecloses such an interpretation. Bornstein
twice
emphasized
that
its
holding
applies
to
subsequent payments received from the government "from
any source."
United States v.
at

*11. (D.P.R.

Irizarry-Colon,
June

9,

2006)

No.

05-1607,

2006 WL 6911517,

(quoting Bornstein,

423

U.S.

at

316)
The Government has brought no case to the attention of this
Court

that

underlies

holds

that

third-party

payments

on

a

loan

that

FCA liability should not be considered "compensatory
-20-

payments." In the absence of any contrary precedent, this Court
finds

that

previously

Nigeria's
received

repayments

from

any

"compensatory

are

source,"

and

payments

should thus

offset

MWI's liability.
5.

The

Limitation on the Amount
Loss"

Government

repayments

are

argues

that,

of

if

even

"compensatory payments"

Offset

and

to

"Original

loan

Nigeria's

should

offset

the

amount MWI owes in damages, the Court should limit the amount of
the offset to the "original loss" of $7.5 million dollars.
To

justify its

Court must
amount

reasoning,

the Government

segregate Nigeria's repayment

repaid

and

the

amount

it

into the

repaid

portion of the loan." U.S. Resp. at 2-3.
otherwise would allow
separate obligations

"doublecounting,"

argues that

on

the

"legitimate"

"the

fraudulent

It insists that to do
because

there

are

two

-- Nigeria's original obligation to repay

the loans and MWI's new obligation to pay damages. Id.
The Government has identified no precedent from either the
Supreme Court or our Court of Appeals that has applied such an
analysis.
courts

Its

argument

evaluated

Defendant

had

restitution

how

rests

to

on

calculate

pleaded guilty

prior

to

a

two

and

civil

a

in which

Bornstein

paid

FCA

-21-

cases

an

suit.

offset

amount
U.S.

in

Resp.

district
when

a

criminal
at

5-6

(discussing United States ex rel. Schaefer v. ContiMed Concepts
No.
II

04-400

11
)

Cal.

2010 WL 1485660

1

and United States v.
2007))

(W.D. Ky. Apr. 12
Eghbal

These cases are

475 F.

1

2010)

1

Supp.

1

("Schaefer

2d 1008

(C.D.

factually distinguishable and do

not provide sufficient support for the Government s position.
1

Eghbal pleaded guilty to criminal charges of conspiring to
defraud the United States by fraudulently assisting purchasers
to obtain mortgages

insured by the

Department

of Housing and

Urban Development in connection with the sale of 62 properties.
Eghbal, 475 F. Supp. 2d at 1011. He paid $1,346,220 in criminal
restitution based on those 62 properties. Amended Judgment and
Commitment Order/
Cal. Jan. 27
The

1

United States v.

1

No.

03-cr-465

(C.D.

2004).

Government

then brought

based on 27 of the 62 properties.
Government

Eghbal

sought

damages

of

an

FCA suit

against

Eghbal

475 F. Supp. 2d at 1011. The

$2.8

million,

trebled

to

$8.4

million/ less $2.1 million it recovered on re-sale and "Eghbal's
restitution payments of $499,387.
The Government argues
district

court

compensatory

has

payment

that

discretion
as

an

Id.

11

this
to

case demonstrates

apply

offset.

The

only

a

Court

that

portion

of

disagrees.

a
a

The

parties in Eghbal did not dispute that the portion of the $1.3
million

restitution payment

that
-22-

related

to

the

27

loans

at

issue in the civil suit was $499,387. Id. This comports with the
facts

underlying

the Government's

civil

suit

the

FCA suit

only related to 27 of the 67 loans at issue in Eghbal's criminal
proceeding. Thus, the district court was not choosing to apply a
portion of Eghbal's compensatory payments -- the court was only
applying the portion of Eghbal's restitution that was,

in fact,

compensatory, based on the scope of the FCA case.
Schaefer is similar. Defendant Conti pleaded guilty to one
count of altering a prescription in 2007.

See United States ex

rel. Schaefer v. ContiMed Concepts, No. 04-400, 2009 WL 5104149,
at *2

(W.D.

almost

Ky.

Dec.

$80,000

in

17,

2009)

criminal

("Schaefer I").
restitution

Conti then paid

to

the

Center

for

Medicare Services and the State of Kentucky for various schemes
and conspiracies to alter and falsify medical records, including
the

altered

prescription

underlying

Judgment and Commitment Order,
cr-152

his

criminal

United States v.

Conti,

No.

06-

(W.D. Ky. March 24, 2008); Order, United States v. Conti,

No. 06-cr-152

(W.D. Ky. July 27, 2009).

The Government brought a civil FCA suit,
Court found that,
from

liability.

denying

the

based on the guilty plea,
elements

prescription under 31 U.S.C.
5104149,

at *6.

of
§

one

Conti was estopped

claim

3729(a) (2).

and the District

of

Schaefer I,

The court later found that the
-23-

falsifying

a

2009 WL

"actual damages

from that

single

count

[were]

$404.24.

Schaefer II,

11

2010 WL

1485660, at *3. It trebled that amount, and found that Conti was
liable for $1212.72,

in addition to a civil penalty of $5,500,

for a total of $6,712.72. Id.
Conti argued that the approximately $80,000 he had paid in
criminal

restitution

should offset

his

entire

civil

judgment.

Id. The Government argued that "only the compensatory portion of
the

judgment

should

be

offset,

id.,

11

and

the

Court

subtracting only "the compensatory component, $404.24,

11

agreed,
from the

civil judgment. Id. at *4.
Thus,

the Schaefer and Eghbal courts

portion

of

factual

conduct

subsequent

the

criminal

restitution

underlying

FCA case

the

payment

false

claim

related
at

issue

should be offset under Bornstein.

the excess amounts paid in criminal
unrelated conduct,

found that only the
to

the

in

the

Because

restitution were paid for

the Court refused to apply those amounts as

an offset.
Here,

the

Government

argued,

and

the

jury

found,

that

Defendant was liable for its certifications on all 58 Supplier's
Certificates related to the eight Nigerian loans.
repayments

were

related

to

those

same

eight

The Nigerian

Nigerian

loans.

Thus, Schaefer and Eghbal do not provide guidance in a situation

-24-

such as

this

one,

where

the

entire

amount

paid by Nigeria

is

unquestionably related to the underlying false claims.
The Government makes a public policy argument that allowing
Nigeria's
will

repayments

"severely

accountable

to

offset

undermine

for

the

entirety

Congress's

defrauding

the

intent

United

However,

to

States

from engaging in similar misconduct." U.S.
omitted).

into

Court

payments

will

made

and

defendants

deter

at 6

others

(citation

and

to divide Nigeria's

non-compensatory

payments

in

that the jury found liability for all of the

loans in their entirety.
this

liability

neither the language of the statute nor any

compensatory

light of the fact

MWI

hold

Resp.

prior case provides support fdr this Court
repayments

of

Thus,

subtract

by

the

Nigeria

instructed in Bornstein.

in accord with the cases cited,
full

from

amount

the

423 U.S.

at

of

trebled
316

the

damage

compensatory
amount,

(holding that

as

"actual

damages are to be doubled before any subtractions are made for
compensatory payments previously received by the Government from
any source")

(emphasis added) .

This result accords with the Supreme Court's declaration in
Bornstein that

"the device of

[treble]

sum was chosen to make sure that
completely whole."
taken by MWI

to

Id.

at

persuade

314.
the

damages plus a

the government would be made

Despite
Government

-25-

specific

the
to

fraudulent
make

these

actions
loans,

•·

they were
Indeed,

in fact

paid back

the Government

in full

received a

with

total

interest

o"f

and fees.

approximately $108

million on these loans from Nigeria -- $33.7 million more than
the largest amount

it pursued in damages,

$74.3 million.

That

$33.7 million alone exceeds the $22.5 million in treble damages
owed

by MWI.

Thus,

the

Government

has

whole" because of Nigeria's repayments,

been
and,

"made

thus,

completely

granting MWI

an offset for those payments does not conflict with Bornstein.
The Court also notes that this outcome is in accord with
United States ex rel. Davis v. Dist. of Columbia,

679 F.3d 832

(D.C.

Columbia

Cir.

2012).

Davis

submitting

a

supporting

documentation.

however,

Medicaid

sued

the

District

reimbursement
Id.

at

claim

834.

Davis

of

without
did

not

for

adequate
allege,

that any medical services that the Government paid for

were not provided. Id. at 840. Thus, because the only defect was
documentary,

the

Court

of Appeals upheld the

district

court's

conclusion that "[t]he Government got what it paid for and there
are no damages." Id. Although the factual and procedural posture
of

that

case

is

very

different,

Davis

still

stands

for

the

proposition that there are cases where fraud on the Government
has occurred but, because the Government has gotten what it paid
for, the Government's recovery is limited to civil penalties.

-26-

In short,

the Court concludes that,

contradictory precedent,
dollars

repaid

by

in the absence of any

the Court will apply the $108 million

Nigeria

against

the

$22.5

million

trebled

damage amount. Thus, MWI owes nothing in damages. 10
F.

Civil Penalties

The Court now turns to the appropriate amount of statutory
civil penalties which should be imposed. 11 The FCA establishes a
statutory penalty of $5,000 to $10,000 for each false claim or
false

statement.

31

U.S.C.

§

3729(a)

(establishes

that

liable

entity must pay "civil penalty of not less than $5,000 and not
more than $10,000").

10

The jury identified 58 false claims. 12

If Congress agrees with the Government that this result is
undesirable, it could change either the wording of the treble
damage provision or increase the civil penalties, as it has done
in the past. See, e.g., False Claims Amendments Act of 1986,
Pub. L .. 99-562, § 2 (7), 100 Stat. 3153 (raising the civil fines
and changing the multiplier for damages from double to treble).
11
MWI did not argue that it was entitled to any offset against
the amount it owes in statutory civil penalties.
12
MWI
initially agreed with Plaintiffs
that
the
jury's
determination that MWI made 58 false claims provided the
appropriate number of penal ties. However, in its Response, MWI
argued for the first time that the Complaint did not identify
the eight Letter of Credit Supplier's Certificates and only
identified 48 Disbursement Supplier's Certificates, and now
argues that 48 was the appropriate number of false claims for
the Court to use in setting civil penalties. MWI Resp. at 10.
As noted above, see supra note 1, MWI did not challenge the
Government's testimony or evidence at trial identifying 58 total
Supplier's Certificates issued on the underlying loans at issue
in this case. The jury found each of those documents to be a
false
claim and/ or
false
statement.
Thus,
MWI' s
belated
challenge to the jury's finding will be denied, and the Court
-27-

The

parties

agree

that

the

appropriate

range

for

the

statutory penalties is $5,000 to $10,000. 13 The determination of
the

appropriate

statutory civil

penalty

is

firmly

discretion of the district court. Bill Harbert,
at 56

(citing Cook County,

agree

that

the

circumstances"

Court
in

538 U.S.

should

determining

the

501 F. Supp. 2d

at 132) . The parties also

consider
the

within

the

"totality

appropriate

of

the

amount

of

penalties. U.S. Mot. at 7; MWI Mem. at 16. As the district court
observed in Bill Harbert:
Though there is no defined set of criteria by which to
assess the proper amount of civil penal ties against
the defendant,
the Court finds that an approach
considering
the
totality
of
the
circumstances,
including such factors as the seriousness of the
misconduct, the scienter of the defendants, and the
amount of damages suffered by the United States as a
result of the misconduct is the most appropriate.
will set civil penalties based on the 58 false claims identified
by the jury.
13
The Federal Civil Penalties Inflation Adjustment Act of 1990
("Adjustment Act"), Pub. L. No. 101-410, § 5, provides for
periodic increases to civil monetary penal ties. In 1996, the
Omnibus Consolidated Rescissions and Appropriations Act of 1996
was passed, and it included the Debt Collection Improvement Act
of 1996 ("Improvement Act"). Pub. L. No. 104-134, § 31001. The
Improvement Act amended the Adjustment Act to require the head
of
each agency to
regularly adjust
civil
penalties
for
inflation. Id. § 13001(s) (1) (A). In 1999, the Department of
Justice complied by issuing regulations raising such penalties,
including False Claims Act penalties. 64 Fed. Reg. 47,099,
47,903-04 (Aug. 30, 1999). However, the regulations specified
that the increase was only "effective for violations occurring
on or after September 29, 1999." Id. 47,903. The parties agree
that the conduct at issue here took place before that date, and,
thus, MWI is not subject to the increased penalties.
-28-

501 F. Supp. 2d at 56
the

circumstances,

factors,

(citation omitted). Under the totality of

including

consideration

of

the

enumerated

the Court finds that the appropriate penalty is $10,000

per false claim for the following reasons.
First, the Court finds that the evidence regarding scienter
weighs in favor of a high penalty in this case.
the

Court

President

finds
of

that

there

was

had

actual

knowledge

MWI,

evidence

Specifically,

that

that

the

Mr.

Eller,

commissions

should have been disclosed. When repeatedly asked whether or not
Indimi's

commissions

were

disclosed

on

Supplier's

the

Certificates, Eller refused to answer directly.

Instead, he kept

repeating that MWI "would have never done anything wrong." Test.
of David Eller,
108:17;

Trial Tr.

111:10-112-1

Nov.

8,

2013, A.M.

Session at 106:6-

(the Court asking Eller the question).

insisted he was "just an engineer,"

id.

at 109:21,

He

and claimed

that he signed the Supplier's Certificates on the advice of his
attorney,

William

Bucknam,

or

his

Chief

Financial

Officer,

Thomas Roegiers. Id. at 107:6-13; 109:10-21; 111:2-3; 113:12-14.
However,
approved

MWI

every

employees
commission

testified
MWI

that

personally

including

Indimi's

Trial Tr. Nov.

19, 2013,

paid,

commissions. Test. of Thomas Roegiers,

Eller

A.M. Session at 20:9-23; Test. of Juan Ponce, Trial Tr. Nov. 13,
2013,

A.M

Session

at

9:22-10:8,
-29-

14:14-21.

Moreover,

Eller

testified

that

MWI

never

paid

any

other

agent

on

any

other

combined project a total commission of more than $5 million, far
less

than some of

projects.
would

the

commissions

Indimi was paid for

single

Id. at 120:11-22. Thus, despite his protests that MWI

never

engage

in

wrongdoing,

several

signed

Eller

Supplier's Certificates declaring that no irregular commissions
had been paid even though he knew that Indimi's commissions were
significantly higher than average commission rates,

even within

MWI.
Second,
deliberate

the

evidence

misconduct,

of

which

actual

goes

to

suggests

knowledge

the

seriousness

of

the

offense. Juan Ponce, MWI's Vice President of International Sales
and

a

credible

witness,

"we

testified,

knew

that

we

were

violating .

the rules. We just hoped that we would never get

caught."

of

Test.

Juan

Ponce,

Trial

Tr.

Nov.

13,

2013,

A.M.

Session at 35:3-4. This evidence that MWI deliberately withheld
information about
acquire

financing

Indimi' s
supports

commissions
a

finding

from Ex-Im in order to
that

"the

conduct

was

deliberate and serious enough to weigh in favor of applying the
maximum civil penalty." Bill Harbert, 501 F. Supp. 2d at 56.
Third, the Court considers the "amount of damages suffered"
by

the

Government.

The harm to

the

Government

was

more

than

monetary -- it went to the integrity and purposes of the Ex-Im's
-30-

programmatic goals. See Test. of Rita Rodriguez, Nov.

14,

2013,

A.M. Session at 20:1-7 (discussing Ex-Im's goals to support U.S.
jobs

and

to

avoid

any

involvement

with

bribery) .

Given

that

approximately a third of the total loan amount went to a single
Nigerian individual, the goal of the Ex-Im to finance loans that
primarily benefit U.S.

exporters and workers was not achieved.

Test. of David Chavern, Trial Tr. Nov. 12, 2013, A.M. Session at
(noting that

70:16-21

primarily

to

"purpose of the bank's financing
finance

commissions;

it's

to

is not

finance

the

export of goods and services"); see also Ab-Tech Const.,

Inc. v.

United States,

31

(noting

that

are

the

penal ties
costs

of

Fed.

Cl.

429,

intended to

corruption,"

(Fed Cl.

434-35

1994)

"compensate the Government

which

include

the

associated with abuse of a federal program)

"societal

for

cost"

(internal quotation

marks and citation omitted) .
The Court also notes that the Government expended a massive
amount of resources to pursue this case over the years.

In the

damages hearing, Government counsel represented that over 11,000
hours had been spent on the case. This consideration is relevant
to determining the appropriate civil penalty.
Int'l,
2007)

Inc. v. United States,
(considering

investigating

that

79 Fed.

Government

and prosecuting

this
-31-

See Morse Diesel

Cl. 116, 125-26
had

case

to

"spent
date"

(Fed. Cl.
13

in

years

deciding

maximum

civil

Peters,

927

penalties

F.

Supp.

were

363,

"the costs of detection,
of

appropriate

civil

warranted);

368-69

(D.

United

Neb.

States

v.

(considering

1996)

investigation and prosecution" as part

penalties);

Ab-Tech,

31

Fed

Cl.

at

435

(determining that maximum civil penalty was "fully justified in
light of the extensive diversion of resources"

that uncovering

defendant's fraud necessitated).
Considering the
concludes

that

a

totality of

civil

penalty

the
of

circumstances,
$10,000

per

the

Court

false

claim

provides appropriate deterrence,

reflects the seriousness of the

misconduct

actual

and

evidence

of

knowledge,

and

helps

compensate the Government for the incredible amount of resources
invested

in

identifying

and

litigating

this

lengthy

case

to

successful conclusion.
G.

Conclusion

The jury found that MWI violated the False Claims Act by
making

58

false

claims

and that

the Government

suffered $7.5

million dollars in damages. Even after the damages are trebled,
the amount
its

loss.

that Nigeria repaid compensated the Government
MWI

is

responsible,

however,

penalties.

-32-

for

$580,000

for

in civil

An Order directing the Clerk to enter judgment accordingly
shall accompany this Memorandum Opinion.

~~~·

February 10, 2014

Gla ys Kess er
United States District Judge

Copies to: attorneys on record via ECF

-33-