USA et al v. E-BIOFUELS, LLC et al
Filing
390
ORDER denying Plaintiff-Relator Alexander Chepurko's 374 Motion for Sanctions and Default Judgment. See Order for details. Copy to Joseph Furando and Chad Ducey via US Mail. Signed by Magistrate Judge Mark J. Dinsmore on 3/3/2020. (SWM) (Main Document 390 replaced on 3/4/2020) (SWM).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
UNITED STATES OF AMERICA, ex rel.
ALEXANDER CHEPURKO,
Plaintiff-Relator,
v.
E-BIOFUELS, LLC., et al.,
Defendants.
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No. 1:14-cv-00377-TWP-MJD
ORDER ON MOTION FOR SANCTIONS AND DEFAULT JUDGMENT
This matter is before the Court on Plaintiff-Relator Alexander Chepurko’s Motion for
Sanctions and Default Judgment Pursuant to Rule 37(b) as to Defendant Christine Furando’s
Failure to Obey a Discovery Order [Dkt. 374]. For the reasons set forth below, the Court
DENIES the motion.
I. Background
Defendant Christine Furando (hereinafter referred to as “Furando”) and her husband,
Joseph Furando, owned two companies, Caravan Trading, LLC (“Caravan”) and Cima Green,
LLC (“Cima”) (hereinafter “the Companies”), which were used in a biodiesel scheme to defraud
the Environmental Protection Agency through its Renewable Fuel Standards program. In related
criminal cases, Joseph Furando, the Companies, and others were convicted of defrauding the
United States and ordered to pay restitution of more than $56 million. In this case, which is
brought pursuant to the False Claims Act, Plaintiff-Relator Chepurko seeks to recover, on behalf
of the United States, amounts he alleges were obtained by the Defendants through this scheme.
Furando, who was the majority owner of the Companies, was not indicted for any
criminal offense. She alleges that her husband actually controlled the Companies and that she
was an innocent spouse, unaware of any misdeeds by her husband. However, Furando signed
plea agreements and the factual bases for the agreements on behalf of Cima and Caravan and
personally appeared as the representative of Cima and Caravan to plead guilty on their behalf in
the related criminal case.
On July 26, 2019, the Court granted Chepurko’s motion to compel Furando to provide
complete answers to Chepurko’s interrogatories and document requests. [Dkt. 365.] The
discovery requests that were the subject of that motion sought information and documents
regarding the biodiesel scheme, Furando’s role in the Companies, and the assets of Furando, her
husband, and their companies. In its order granting the motion to compel, the Court found that
Furando had waived her objections to the discovery requests by failing to respond to them in a
timely manner. In fact, Furando missed her deadline to respond to the requests by many months.
The Court also found that Furando’s objections would have been overruled even if they had not
been waived. The Court ordered Furando to do the following within 21 days of the date of the
Order:
Furando shall serve properly verified supplemental interrogatory responses to
Interrogatories Nos. 1, 2, 6, 7, 8, and 9, that comply with the Court’s instructions
set forth above, including setting forth, in detail, Furando’s efforts to obtain
responsive information from other sources. These responses shall be
comprehensive—that is, they shall not just include any new information, but shall
also include all previous information provided in response to all of PlaintiffRelator’s Interrogatories, so that the entirety of each response is properly verified.
Id. at 14.
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II. Discussion
In the instant motion, Chepurko takes issue with the information provided by Furando in
response to the Court’s order on the motion to compel (hereinafter referred to as “Amended
Response”) with regard to Interrogatory No. 1 and Interrogatories Nos. 7 and 9. Chepurko
argues that Furando willfully failed to comply with the Court’s order and that the sanction of
entry of default judgment against her is the appropriate remedy for that failure.
Interrogatory No. 1
Interrogatory No. 1 reads as follows:
Identify the name and, if known, the address and telephone number
of each individual likely to have discoverable information about
the claims or defenses in this action—along with the subjects of
that information.
[Dkt. 375-1 at 3.] Chepurko argues that Furando’s Amended Response to this interrogatory
failed to comply with the Court’s requirement that she give a comprehensive response because it
omits three individuals who were listed in her original response. In her response to the instant
motion, Furando explains that one of the three individuals is now deceased and the other two
were originally listed erroneously, as they are potential character witnesses but are not “likely to
have discoverable information about the claims or defenses in this action,” which is what the
interrogatory seeks. While it certainly would have been preferable for Furando to include this
information in her Amended Response, the failure to do so, by itself, clearly is not grounds for
default judgment. Furando did not omit responsive information in her Amended Response, and
her failure to explain the absence of the three individuals could have been cleared up with a
simple phone call or email.
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Interrogatories Nos. 7 and 9
Interrogatories Nos. 7 and 9 and Furando’s original responses thereto read as follow:
7. Please explain your claim to ownership of any of the assets seized by the
government and that are subject to the forfeiture orders that were the subject of
the plea agreement that you signed and entered into as an owner of the two
companies, [Caravan and Cima].
Response: I am a Member only. See claim filed in case number
13-cr-00189, Doc. 432.
9. For each asset or real estate that has been seized by the government and is
subject to any forfeiture order for which you claim to be the rightful owner
describe the sources and amounts of income used to purchase each asset or real
estate, identify the date of purchase and each person or entity who purchased
the asset or real estate; identify the approximate dates on which those sources
of income used to purchase the assets or real estate were earned, and by whom;
and identify the bank accounts from which each payment for the purchase of
each such asset or real estate originated.
Response: Objection. This interrogatory is [sic] contains multiple
compound questions which assume numerous facts; it is vague
and ambiguous; overly broad, unduly burdensome and
vexatious.
Nevertheless, at this time I am unable to answer these
questions as I do not recall without my memory being
refreshed by documents. On information and belief the
documents responsive to these requests have been seized by
agents of the federal government.
[Dkt. 353-12 at 7-8.] As to each of these interrogatories, Furando’s response in her Amended
Response was: “On advice of counsel, at this time I invoke my right under the Fifth Amendment
not to answer this question on the grounds I may incriminate myself.” [Dkt. 375-1 at 21, 24.]
Chepurko argues that the Court’s ruling in its order on the motion to compel that Furando
had waived her objections to the discovery requests by failing to provide timely responses to
them encompassed her invocation of her Fifth Amendment rights. Therefore, he argues,
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Furando’s attempt to invoke those rights in her Amended Response constituted a willful failure
to comply with the Court’s order which justifies the sanction of entry of default judgment.
The Court disagrees with the premise of Chepurko’s argument. Invoking one’s right
under the Fifth Amendment is not an “objection,” and the Court certainly did not intend its ruling
that Furando had waived her objections to include an implicit finding that she also had waived
the fundamental right against self-incrimination. Therefore, Furando’s responses did not violate
the Court’s order.
The Court recognizes that Chepurko cites to cases that, to varying degrees, support his
argument. See [Dkt. 375 at 7 n.4]. With all due respect, the Court finds that the cited cases are
based on a mistaken reading of Supreme Court precedent. Each of them ultimately relies on
various Supreme Court cases that include some variation of the statement that the Fifth
Amendment privilege “is not a self-executing mechanism; it can be affirmatively waived, or lost
by not asserting it in a timely fashion.” See Adams v. Cananagh Communities Corp., 1988 WL
64097 at *1 (N.D. Ill. 1988) (citing Maness v. Meyers, 419 U.S. 449, 466 (1975)); United Auto.
Ins. Co. v. Veluchamy, 747 F.Supp.2d 1021, 1026 (N.D. Ill. 2010) (citing Roberts v. United
States, 445 U.S. 552, 559 (1980)); Davis v. Fendler, 650 F.2d 1154, 1160 (9th Cir. 1981) (citing
Maness); S.E.C. v. Kiselak Capital Group, LLC, 2011 WL 4398443 (N.D. Tx. 2011) (citing
Davis); U.S. Commodity Futures Trading Commission v. American Bullion Exchange Abex
Corp., et al., 2014 WL 12601560 (C.D. Cal. 2014) (citing Davis); In re Wolf, No. 14 B 27066,
2018 WL 2386813 (Bankr. N.D. Ill. May 24, 2018) (citing, inter alia, Maness and Davis). 1 But
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Chepurko cites to United States v. Mickman, 1992 WL 74173, at *1 (E.D. Pa. Mar. 27, 1992),
as supporting its request for default judgment. Mickman involved discovery requests served on
two corporate defendants. After the corporate defendants failed to respond to the requests in any
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the Supreme Court cases on which these cases rely simply do not stand for the proposition that a
litigant can lose the privilege against self-incrimination by failing to assert it in her initial
response to discovery requests, or by failing to answer discovery requests in a timely manner.
Roberts involved a criminal defendant who argued that his failure to assist in a criminal
investigation should not have been considered as a sentencing factor because it amounted to
punishing him for exercising his Fifth Amendment right. The Court held that the defendant’s
failure to bring the issue “in some manner . . . to the attention of the tribunal which must pass
upon it,” 445 U.S. at 560, that is, the sentencing judge, meant that he had waived the argument.
Maness involved the issue of whether an attorney could be held in contempt for advising his
client to assert the privilege against self-incrimination. The Supreme Court noted:
way, the plaintiff filed a motion to compel, which was granted. The corporate defendants still
made no response. The plaintiff then filed a motion for sanctions, to which the corporate
defendants also made no response. The court granted the motion for sanctions and ordered the
corporate defendants to make complete responses or face default judgments. In response to that
order, counsel for the corporate defendants sent a letter to the court stating that the corporate
defendants were unable to prepare any answers to the discovery requests “because defendant
Mark Mickman, ‘the sole director and officer of both corporations and . . . the only individual in
a position to respond to discovery on behalf of the corporations,’ had elected to exercise his Fifth
Amendment privilege, and would not provide any information responsive to plaintiff’s requests.”
Id. at *2. In ruling on the plaintiff’s motion for default judgment against the corporate
defendants, the court held that default judgment was appropriate because “[a]s a corporation, the
corporate defendants have no Fifth Amendment privilege,” id. at *4 (citing Braswell v. United
States, 487 U.S. 99, 102 (1988), and although Mickman, as an individual, was likely “entitled to
refuse to provide any oral testimony . . . including answers to interrogatories, this does not
relieve the corporation of its duty to answer them.” Rather, “[u]nder these circumstances, the
corporation has an obligation to appoint an agent who can, without fear of self-incrimination,
furnish the requested information.” Id. (citing United States v. Kordel, 397 U.S. 1, 8 (1970)).
Further, the court found that “[i]f the defendants were legitimately unable to respond because of
Mr. Mickman’s assertion of the privilege, they were required to submit timely responses
asserting their inability to comply with individual requests on this ground . . . [or, a]lternatively,
they might have applied for a protective order under Rule 26(c).” Id. They did neither, despite
being given a second opportunity by the court. It is disingenuous of Chepurko to assert that
these facts are “almost identical[] to the circumstances here.” [Dkt. 375 at 12.]
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The privilege against compelled self-incrimination would be drained of its
meaning if counsel, being lawfully present, as here, could be penalized for
advising his client in good faith to assert it. The assertion of a testimonial
privilege, as of many other rights, often depends upon legal advice from someone
who is trained and skilled in the subject matter, and who may offer a more
objective opinion. A layman may not be aware of the precise scope, the nuances,
and boundaries of his Fifth Amendment privilege. It is not a self-executing
mechanism; it can be affirmatively waived, or lost by not asserting it in a timely
fashion. If performance of a lawyer’s duty to advise a client that a privilege is
available exposes a lawyer to the threat of contempt for giving honest advice it is
hardly debatable that some advocates may lose their zeal for forthrightness and
independence.
Maness, 419 U.S. at 465-66 (footnotes omitted). The waiver alluded to by the Supreme Court
would occur if the client gave incriminating testimony. Cf. Minnesota v. Murphy, 465 U.S. 420,
429 (1984) (“[A] witness confronted with questions that the government should reasonably
expect to elicit incriminating evidence ordinarily must assert the privilege rather than answer if
he desires not to incriminate himself.”); United States v. Kordel, 397 U.S. 1, 10 (1970) (person
who provided answers to interrogatories in civil case without asserting the constitutional
privilege was “in no position to complain” that he was compelled to give testimony against
himself when his answers were used in his later criminal prosecution); Day v. Bos. Edison Co.,
150 F.R.D. 16, 21 (D. Mass. 1993) (“There is no question but that the privilege against selfincrimination can be waived, not only explicitly but also implicitly by failing to assert it. Thus if
a witness who is compelled to testify, does, in fact, testify and during testimony reveals
information instead of claiming the privilege, the witness can be said to have waived the
privilege as to the information disclosed.”) (citing Garner v. United States, 424 U.S. 648, 653
(1976)). Therefore, absent coercion, the giving of testimony ordinarily will result in a finding
that the right to invoke the Fifth Amendment has been waived as to that testimony. Here
Furando has not provided information that she now wishes to take back; she has invoked her
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constitutional right against self-incrimination to justify her refusal to provide information in the
first place. 2
As the Seventh Circuit has noted, “‘every reasonable presumption should be indulged
against’ waiver of a fundamental trial right,” and that “heightened standard of waiver has been
applied to . . . the right against self-incrimination.” Walton v. Briley, 361 F.3d 431, 433 (7th Cir.
2004) (quoting Hodges v. Easton, 106 U.S. 408, 412 (1882)) (additional citations omitted); see
also Carnley v. Cochran, 369 U.S. 506, 514 (1962) (“It has been pointed out that courts indulge
every reasonable presumption against waiver of fundamental constitutional rights and that we do
not presume acquiescence in the loss of fundamental rights.”) (citation and internal quotation
marks omitted)). The Court finds that Furando’s failure to timely respond to Chepurko’s
discovery requests and her failure to invoke the Fifth Amendment in her initial responses do not
satisfy this “heightened standard of waiver.”
Finally, Chepurko argues for the first time in his reply brief that it is “unlikely” that
Furando has adequately asserted her Fifth Amendment rights because it is “unclear how
providing the information sought in interrogatory nos. 7 and 9 would open Ms. Furando up to
criminal liability, when she is merely a party in interest in a forfeiture proceeding.” [Dkt. 379 at
11-12.] Chepurko did not raise this issue in his opening brief, and in any event has not
developed it sufficiently to merit the Court’s attention. See Schaefer v. Universal Scaffolding &
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In his reply brief, Chepurko argues that Furando “partially answered these same interrogatory
questions previously in her original late responses to [Chepurko’s] interrogatories that were
served on August 23, 2018 and did not raise the Fifth Amendment at that time. This contradicts
any claim of good cause for only asserting the objection now.” [Dkt. 379 at 8.] However,
Furando’s original answers to Interrogatories Nos. 7 and 9 were non-answers, which is precisely
why Chepurko filed, and the Court granted, a motion to compel her to provide substantive
answers to them.
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Equip., LLC, 839 F.3d 599, 607 (7th Cir. 2016) (“Perfunctory and undeveloped arguments are
waived, as are arguments unsupported by legal authority.”); Draper v. Martin, 664 F.3d 1110,
1114 (7th Cir. 2011) (“It is not this court’s responsibility to research and construct the parties’
arguments.”).
III. Conclusion
For the reasons set forth above, Chepurko’s Motion for Sanctions and Default Judgment
Pursuant to Rule 37(b) as to Defendant Christine Furando’s Failure to Obey a Discovery Order,
[Dkt. 374], is DENIED.
SO ORDERED.
Dated: 3 MAR 2020
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Distribution:
Service will be made electronically
on all ECF-registered counsel of record
via email generated by the Court’s ECF system.
Service via U.S. Mail to:
JOSEPH FURANDO
65853-050
FORT DIX - FCI
FORT DIX FEDERAL CORRECTIONAL INSTITUTION
Inmate Mail/Parcels
P.O. BOX 2000
Joint Base MDL, NJ 08640
CHAD DUCEY
11801-028
TERRE HAUTE - FCI
TERRE HAUTE FEDERAL CORRECTIONAL INSTITUTION
Inmate Mail/Parcels
P.O. BOX 33
TERRE HAUTE, IN 47808
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