Thomas et al v. Black & Veatch Special Projects Corp.
Filing
140
MEMORANDUM AND ORDER granting 121 Motion for Summary Judgment; denying 132 Motion for Leave to File; denying as moot 134 Motion for Discovery. Signed by District Judge Daniel D. Crabtree on 6/5/2015. (hs)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
UNITED STATES OF AMERICA,
ex rel. KEVIN THOMAS, and
CAROLYN THOMAS,
Plaintiff,
Case No. 11-2475-DDC-JPO
v.
BLACK & VEATCH SPECIAL
PROJECTS CORP.,
Defendant.
_____________________________________
MEMORANDUM AND ORDER
Relator plaintiffs Kevin Thomas and Carolyn Thomas bring this qui tam action alleging
violations of the False Claims Act (“FCA”), 31 U.S.C. §§ 3729, et seq., on behalf of the United
States against defendant Black & Veatch Special Projects Corporation. Relators assert that
defendant knowingly submitted legally false requests for payment to the government and the
government paid those requests. This matter comes before the Court on defendant’s Motion for
Summary Judgment (Doc. 121), relators’ Motion for Leave to File Surreply Memorandum in
Opposition to Defendant’s Motion for Summary Judgment (Doc. 132), and relators’ Motion to
Reopen Discovery for the Limited Purpose of Taking Deposition of William Van Dyke (Doc.
134). For the reasons explained below, the Court grants defendant’s motion (Doc. 121) and
denies both of relators’ motions (Docs. 132, 134).
I.
Procedural Background
Relators filed their Complaint on August 23, 2011 (Doc. 1). Their claims arise from
defendant’s contract with the United States Agency for International Development (“USAID”) in
support of the Kandahar Helmand Power Project (“KHPP”) in Kandahar, Afghanistan. Relators
1
allege that defendant knowingly sought false payment from the United States for wages and
expenses of seven employees for whom defendant fraudulently obtained work visas and permits
from the Afghan government. Because defendant’s contract with USAID requires defendant to
comply with Afghan law, relators contend that defendant has presented false claims.
Consistent with 31 U.S.C. § 3730(b)(2), relators served a copy of the Complaint on and
disclosed their material evidence and information to the Attorney General of the United States
and the United States Attorney for the District of Kansas. The government declined to intervene
under the authority conferred by 31 U.S.C. § 3730(b)(4)(B) (Doc. 8).
Relators amended their Complaint on March 15, 2013 (Doc. 18). The Court subsequently
granted them leave to file a Second Amended Complaint on May 20, 2013 (Doc. 48). It alleges
that defendant violated the FCA under both the express false certification theory and the implied
false certification theory. Defendant moved to dismiss the Second Amended Complaint under
Rule 12(b)(6) (Doc. 49). The Court dismissed relators’ express false certification claim but
declined to dismiss their implied false certification claim (Doc. 56).
II.
Uncontroverted Facts
The following facts are uncontroverted or, if controverted, are stated in the light most
favorable to relators as the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007).
A. KHPP Contract
Defendant and USAID entered into Contract No. 306-C-00-11-00506-00 on December 9,
2010. The contract’s purpose is “to support the Kandahar Power Initiative (KPI), a critical
component of the U.S. government’s Counterinsurgency (COIN) strategy in Southern
Afghanistan.”1 Doc. 122-2 at 4. The contract is part of a larger USAID program designed to
1
USAID changed the name of the Kandahar Power Initiative (“KPI”) to the Kandahar Helmand Power Project after
the contract was signed.
2
increase development of Afghanistan’s South-East Power System and connect it with other
electrical grids in Afghanistan. Its primary objective aims to increase the supply, quantity, and
distribution of electrical power, with particular emphasis on the city of Kandahar. Doc. 122-2 at
8.
The contract designates defendant as the “Contractor” for this project. Section B.2
provides, “[f]or the consideration set forth below, the Contractor shall provide the performance
requirements described in Section C and the deliverables or outputs described in Section F.”
Doc. 122-2 at 4. In turn, Section F.4.A lists six deliverable components, along with thirteen subcomponents. All involve constructing, installing, repairing, refurbishing, and renovating electric
generation and distribution equipment in and around Kandahar. Doc. 122-2 at 35-39. Section
C.4 sets out 14 performance requirements that defendant must satisfy. Those requirements are:
(1) Environmental Assessment; (2) Procurement and Subcontracting; (3)
Commodities/Equipment Procurement and Installation; (4) Management and Supervisory
Responsibilities; (5) Coordination and Implementation of Work; (6) Quality Control/Quality
Assurance; (7) Safety; (8) Contract Performance Support; (9) Cost Control Reporting System;
(10) Pre-Construction Conferences; (11) Schedule; (12) Project Completion and Turnover
Activities; (13) De-mining; and (14) Measuring and Monitoring. Doc. 122-2 at 20-25.
The contract incorporates by reference 128 federal and USAID acquisition regulations.
Doc. 122-2 at 62-65. Among other contractual obligations, these regulations require defendant
and its employees to: (1) comply with all applicable United States and host country laws (48
C.F.R. § 52.225-19(d)); (2) secure all “passports, visas, entry permits, and other documents
required . . . to enter and exit the foreign country” (48 C.F.R. § 52.225-19(e)(2)(iii)); and (3) as
3
directed by USAID’s Contracting Officer, remove and replace personnel who violate the terms
of the contract (48 C.F.R. § 52.225-19(h)).
Defendant also must disclose to USAID’s Office of the Inspector General (“OIG”) and
USAID’s Contracting Officer, in writing and in a timely fashion, any evidence that defendant, its
employees, or subcontractors have committed “(A) A violation of Federal criminal law involving
fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States
Code; or (B) A violation of the civil False Claims Act (31 U.S.C. [§§] 3729-3733)” in
connection with the award, performance, or closeout of the contract. Doc. 122-2 at 66-67.
The contract also requires defendant to “provide all engineering, procurement,
construction, and other material, equipment and/or services necessary to complete and
successfully commission each of the six components in accordance with the requirements of this
Contract.” Doc. 122-2 at 9. USAID has the right to take possession of and use all or any portion
of the work performed by defendant upon “substantial completion.” Doc. 122-2 at 32-33. The
contract defines “substantial completion” to mean the “stage in the progress of the work as
determined and certified by the Contracting Officer in writing to the Contractor, on which the
work (or a portion designated by the government) is sufficiently complete and satisfactory.”
Doc. 122-2 at 32. Taking possession or using the work upon substantial completion does not
constitute acceptance. Doc. 122-2 at 33. And all work remains subject to USAID’s final
inspection and acceptance.
Defendant submits invoices for payment to USAID’s Office of Financial Management
every two weeks. When defendant submits invoices, it simultaneously submits a copy of each
invoice and a voucher listing all products and services provided during each two-week period to
USAID’s Contracting Officer’s Technical Representative (“COTR”). The COTR reviews and
4
approves the vouchers and authorizes payment of a “proper invoice” within 14 days of receiving
them. Under 48 C.F.R. § 52.232-16(c), USAID’s Contracting Officer may reduce or suspend
payment if it finds substantial evidence that defendant failed to comply with any material
requirement of the contract.
When defendant completes all work on a deliverable component or subcomponent
(excluding any continuing obligations), the contract requires USAID’s Contracting Officer to
issue a notice of final acceptance. Final payment occurs after all required tests are completed
satisfactorily, a final inspection confirms that all known defects were corrected and all work is
complete, and defendant submits all completion documentation. Section G.5(c) provides that the
government must make any payments due under a voucher “[u]pon compliance by the
Contractor with all provisions of this contract, acceptance by the Government of the work and
final report, and a satisfactory accounting by the Contractor of all Government-owned property
for which the Contractor had custodial responsibility.” Doc. 122-2 at 47.
By December 23, 2014, USAID had issued notices of final completion and acceptance on
10 of the contract’s 13 deliverable subcomponents. Notices of final completion and acceptance
are currently pending on the three remaining subcomponents. In December of 2013, USAID and
defendant modified the original contract to include additional work awarded to defendant. The
additional work is expected to continue through November of 2015.
B. Requirements To Obtain Afghan Work Permits and USAID Employee Approval
Before working in Afghanistan, all of defendant’s non-Afghan employees must obtain
work visas and work permits from the Afghan government. The Afghanistan Ministry of Labor,
Social Affairs, Martyrs & Disabled and its Ministry of Foreign Affairs (the “Ministries”) issue
visas and permits to foreign citizens working in Afghanistan. As part of the visa and permit
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application process, foreign citizens must submit copies of educational diplomas, degrees,
certificates, or other credential documents to the issuing Ministries. According to the parties, if
an application packet does not include a diploma or degree, clerks at the Ministries sometimes
will attempt to solicit bribes before they will process the application. According to defendant, it
is defendant’s policy not to pay bribes.
The contract requires defendant to obtain USAID approval of all employees who will
work on the project outside the United States. Before an employee arrives in Afghanistan,
defendant must submit a “Form 1420—Contractor Employee Biographical Data Sheet” to
USAID. This form contains a section where defendant lists each employee’s diplomas, degrees,
work experience, or other qualifications. The Form 1420s submitted by defendant do not
reference the forged educational documents discovered by relators.
C. Relators’ Discovery of Forged Educational Documents
Relators Kevin Thomas and Carolyn Thomas worked for defendant in Afghanistan from
April 18, 2011, until they resigned on July 16, 2011. On June 25, 2011, Mr. Thomas discovered
forged educational documents for seven employees working in Afghanistan. Mr. Thomas is one
of the seven. Mr. Thomas found the forged documents on a shared network drive accessed via a
USAID-owned desktop computer. The computer is identified as “LighteningBug 1A,” and it
was located in defendant’s human resources office in Kabul. Nearly all of defendant’s
employees in Afghanistan could access this computer. Immediately after finding these forged
documents, Mr. Thomas reported his discovery to defendant’s acting “Chief of Party,” Lynn
Liikala-Seymore. When Ms. Liikala-Seymore received Mr. Thomas’s report, she secured
LighteningBug 1A and removed it from service.
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Two days later, on June 27, 2011, Mr. Thomas contacted the USAID OIG. He provided
the OIG with copies of the forged documents, a spreadsheet containing contact information for
each employee named in the forgeries, and a list of all employees who were present on the
project site when the documents were discovered.
Two more days later, on June 29, 2011, Ms. Thomas met with representatives from the
OIG at the USAID compound in Kabul. She presented the OIG with additional copies of the
forged documents and described their discovery. Later, Ms. Thomas described the OIG’s
reaction to this discovery, saying that they did not appear interested in them. She also said that
the OIG told her the documents were an issue between defendant and the Afghan Government,
and that USAID was interested in them only if defendant “was using these forgeries to get more
money out of USAID.” Doc. 122 at 12.
Ms. Liikala-Seymore also met with the USAID OIG on June 29, 2011, to discuss the
forged documents. She also provided the OIG with information about defendant’s human
resources personnel involved in acquiring Afghan visas and work permits. At OIG’s request,
Ms. Liikala-Seymore forwarded a copy of a memorandum describing an exit interview of former
employee, Khalid Afridi. Mr. Afridi, an Afghan national, was a visa expediter who had
performed his work primarily on LighteningBug 1A. During his exit interview, Mr. Afridi
asserted that another one of defendant’s employees, Dr. Manizha Hadi, may have tried to frame
him as the person who forged the documents. Defendant provided the USAID OIG with Mr.
Afridi’s email address so that they could question him about the forged documents.
In July of 2011, Ms. Liikala-Seymore met with USAID COTR, Tom Bauhan. After that
meeting, Mr. Braun understood that defendant’s personnel in Afghanistan had created forged
educational documents for employees and had submitted those documents to the Afghan
7
government to obtain work permits. Defendant also informed USAID’s Contracting Officer,
Alvera Reichert, that defendant’s personnel may have created and submitted forged educational
documents to the Afghan government. Despite this knowledge, USAID did not reduce or
suspend payment of defendant’s invoices. Also, USAID did not ask defendant to remove any of
its employees from the project.
Defendant and USAID each conducted independent investigations into the forged
documents. Defendant made three attempts to obtain copies of the documents filed at the
Afghan Ministries on behalf of its seven employees. The Ministries did not provide copies of the
filed documents to defendant. USAID’s attempts to retrieve copies of the documents from the
Ministries also failed.
Defendant’s investigation included a third-party forensic analysis of all relevant
computers to determine who had created the forged documents. In November of 2011, defendant
informed the USAID OIG that its analysis had concluded that someone had stored and modified
the documents on LighteningBug 1A, the computer primarily used by Khalid Afridi. Defendant
also informed the USAID OIG that its analysts had searched the computers issued to relators,
and there was no evidence that someone had created or modified the forged documents on their
computers. Defendant surrendered the seven computers examined and also provided the USAID
OIG with a copy of its forensic report.
D. 2013 Submission of Forged Documents
After relators had discovered the forged documents, defendant attempted to remove all
electronic and paper copies of the documents from its files. Despite its efforts, in May of 2013,
defendant learned that it had inadvertently filed two forged documents with the Afghan
8
Ministries. Defendant had filed the forged documents on May 19, 2012, and September 15,
2012, with work permit renewal applications for two employees.
Defendant promptly notified USAID’s Contracting Officer and Senior Legal Advisor. It
provided USAID with the dates when it had obtained the two work permits and the amount of
time its employees worked under those permits. Even though it knew that the employees had
worked in Afghanistan under work permits obtained with forged documents, USAID did not
reduce or refuse payment of defendant’s invoices. And USAID did not take any other adverse
action against defendant.
III.
Relators’ Motion for Leave to File Surreply
Before addressing defendant’s Motion for Summary Judgment, the Court, first, must
determine whether it should consider relators’ proposed Surreply (Doc. 132-1). Defendant filed
its Motion for Summary Judgment (Doc. 121) and Memorandum in Support (Doc. 122) on
December 23, 2014. Relators filed their Memorandum in Opposition (Doc. 128) on January 26,
2014, and defendant filed a Reply (Doc. 131) on February 13, 2015. Following this initial round
of briefing, relators filed a Motion for Leave to File Surreply Memorandum (Doc. 132).
Defendant opposed relators’ request to file a Surreply (Doc. 133), and relators filed a Reply on
that issue (Doc. 136).
D. Kan. Rule 7.1(c) limits briefing on motions to the initial motion (including a
memorandum in support), a responsive brief or memorandum, and a reply brief or memorandum.
“Surreplies typically are not allowed.” COPE v. Kan. State Bd. of Educ., No. 13-4119-DDCJPO, 2014 WL 6819462, at *2 (D. Kan. Dec. 2, 2014) (citing Taylor v. Sebelius, 350 F. Supp. 2d
888, 900 (D. Kan. 2004), aff’d on other grounds, 189 Fed. Appx. 752 (10th Cir. 2006)).
“[S]urreplies are permitted only with leave of court and under ‘rare circumstances.’” Id.
9
(quoting Humphries v. Williams Natural Gas Co., No. 96-4196-SAC, 1998 WL 982903, at *1
(D. Kan. Sept. 23, 1998)). Circumstances may warrant a surreply if a moving party presents new
material, including new evidence or new legal arguments, in its reply. Id. (citing Green v. New
Mexico, 420 F.3d 1189, 1196 (10th Cir. 2005); Doebele v. Sprint/United Mgmt. Co., 342 F.3d
1117, 1139 n.13 (10th Cir. 2003)). A court may not rely on new material first presented in a
reply without granting the non-movant leave to file a surreply. See Conroy v. Vilsack, 707 F.3d
1163, 1179 n.6 (10th Cir. 2013) (“[A] district court abuses its discretion only when it both denies
a party leave to file a surreply and relies on new materials or new arguments in the opposing
party’s reply brief.”). “The rules governing the filing of surreplies ‘are not only fair and
reasonable, but they assist the court in defining when briefed matters are finally submitted and in
minimizing the battles over which side should have the last word.’” COPE, 2014 WL 6819462,
at *2 (quoting Humphries, 1998 WL 98293, at *1 (citation and internal quotation marks
omitted)).
Realtors request leave to file a Surreply to address: (1) defendant’s submission of
evidence about its communications with USAID to obtain witness declarations of former USAID
employees; (2) defendant’s argument that relators only may prevail with USAID testimony that
payment would have been refused or reduced had USAID known of the forged documents; (3)
defendant’s reliance on United States ex rel. Smith v. Boeing Co., 05-1073-MLB, 2014 WL
5025782 (D. Kan. Oct. 8, 2014), for the first time in its reply; and (4) defendant’s reliance on
United States ex rel. Davis v. District of Columbia, 679 F.3d 832 (D.C. Cir. 2012) for the first
time in its reply.
Defendant opposes relators’ motion for leave to file a Surreply. It argues that the
evidence of its communications with USAID and argument about the absence of USAID
10
testimony supporting realtors’ position are not new, and that it offered both in response to
relators’ Memorandum in Opposition. Defendant also argues that Smith and Davis do not
support new legal theories, and both cases are relevant to arguments contained in relators’
Memorandum in Opposition.
The Court finds that relators’ proposed Surreply does not address any “new material”
advanced by defendant in its Reply. Instead, the proposed surreply advances new legal argument
and expands arguments that relators made or could have made in their Memorandum in
Opposition. “This is precisely why our Court typically does not allow surreplies.” COPE, 2014
WL 6819462, at *3 (citing Hall v. Whitacre, No. 06-1240-JTM, 2007 WL 1585960, at *1 (D.
Kan. May 31, 2007) (finding “utterly no justification for [a] surreply” that “essentially provides
additional and longer arguments, which also could have been submitted in the first response”);
E.E.O.C. v. Int’l Paper Co., No. 91-2017-L, 1992 WL 370850, at *10 (D. Kan. Oct. 28, 1992)
(striking a surreply because “[t]he paper exchanges between parties must have an end point” and
courts should not permit them to “become self perpetuating”).
Defendant’s communications with USAID do not constitute “new material” that could
justify the proposed Surreply. Defendant’s Reply (Doc. 131 at 5-7, 28) included the USAID
communications in response to relators’ arguments. Specifically, defendant offered the
communications to rebut an objection that it failed to comply with USAID’s “Touhy” regulations
when it acquired declarations from two USAID employees.2 This evidence, submitted in
response to an existing objection, is not “new material.” See COPE, 2014 WL 6819462, at *3
(finding that “a response to an existing argument made by plaintiffs” is not new material). In
2
USAID’s “Touhy” regulations are codified at 22 C.F.R. §§ 2061, et seq., and they outline the procedure USAID
employees follow to disclose agency materials or testify in response to a subpoena, order, or demand in legal
proceedings when USAID is not a party. See United States ex rel. Touhy v. Ragen, 340 U.S. 462, 468-69 (1951)
(affirming regulation prohibiting federal employees from disclosing agency documents or testifying without consent
of the agency head).
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addition, relators possessed defendant’s USAID communications for 34 days before they filed
their Memorandum in Opposition. Thus, their memorandum could have included the arguments
they now seek to advance in the proposed Surreply. A court should not grant leave to file a
surreply if the requesting party could have included its argument in an earlier response. See
Hall, 2007 WL 1585960, at *1.
Defendant also contends that relators misportray its argument about relators’ lack of
USAID testimony. The Court agrees. Contrary to relators’ Motion for Leave to File Surreply
(Doc. 132), defendant’s Reply does not contain a new argument that testimony from a USAID
official is “strictly necessary” for relators to prevail. Instead, defendant offers its argument about
relators’ lack of USAID testimony in response to existing arguments made by both parties.
Indeed, relators’ Reply in support of its motion for leave to file surreply concedes that if
defendant “does not contend testimony of a USAID official is strictly necessary for Relators to
prevail in this case, then Relators agree [that] they do not need to address that contention in a
surreply.” Doc. 136 at 2.
Finally, the two cases that defendant cited for the first time in its Reply are not “new
material.” It is evident that defendant has cited Smith in response to relators’ arguments that
compliance with Afghan law is a prerequisite to payment under the contract and was material to
USAID’s payment decision. Doc. 131 at 27-30. It is also evident that defendant cites Davis to
meet relators’ theory of damages—a theory advanced in their Memorandum in Opposition. Doc.
131 at 46-49. Relators request leave to explain why Smith and Davis are not relevant to this
case. Doc. 136 at 2. But permitting “a surreply in response to an argument that is not ‘new’
contradicts our rules governing briefing on motions.” COPE, 2014 WL 6819462, at *4 (citing
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D. Kan. Rule 7.1(c) (limiting briefing on motions to the motion, a supporting memorandum, a
response, and a reply)).
The Court thus denies relators’ Motion for Leave to File Surreply Memorandum (Doc.
132). While it will not consider the proposed Surreply in its analysis, the Court has reviewed the
arguments advanced by the proposed Surreply and has concluded that they would not alter the
outcome of defendant’s Motion for Summary Judgment. The Court would reach the same
conclusion, with or without the Surreply’s arguments.
IV.
Relators’ Motion to Reopen Discovery
Next, the Court turns to relators’ Motion to Reopen Discovery for Limited Purpose of
Taking Deposition of William Van Dyke (Doc. 134). Relators request an order permitting them
to depose Mr. Van Dyke, defendant’s president, about a December 1, 2014 memorandum he sent
to USAID. The memorandum contains this statement: “BVSPC and USAID OIG investigated
this event extensively at the time of the allegations.” Doc. 134 at 10. Because the memorandum
was created and produced after discovery had closed, relators argue that they have not had a
chance to question Mr. Van Dyke’s knowledge of the investigation and the basis for his
statement. Defendant opposes relators’ motion.
In their Reply Memorandum supporting their motion to reopen discovery (Doc. 139),
relators explain that they do not seek to depose Mr. Van Dyke to add to the summary judgment
record. They do not contend “that they did not (or were unable to) present facts sufficient to
defeat [defendant’s] summary judgment motion . . . .” Doc. 139 at 2. Instead, relators seek Mr.
Van Dyke’s deposition only to use it trial. Doc. 139 at 2.
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Given this clarification, the Court concludes that it need not rule on the motion to reopen
discovery before determining the merits of defendant’s Motion for Summary Judgment (Doc.
121). Accordingly, relators’ Motion to Reopen Discovery (Doc. 134) is denied as moot.
V.
Summary Judgment Standard
Turning to the summary judgment motion itself, the Court, first, repeats the well-
established standard governing this motion: Summary is appropriate if the moving party
demonstrates that there is “no genuine dispute [about] any material fact” and that it “is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). When applying this standard, the Court
views the evidence and draws inferences in the light most favorable to the non-moving party.
Nahno-Lopez v. Houser, 625 F.3d 1279, 1283 (10th Cir. 2010) (citing Oldenkamp v. United Am.
Ins. Co., 619 F.3d 1243, 1245–46 (10th Cir. 2010)). A disputed “issue of fact is ‘genuine’ ‘if the
evidence is such that a reasonable jury could return a verdict for the non-moving party’ on the
issue.” Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “An issue of
fact is ‘material’ ‘if under the substantive law it is essential to the proper disposition of the
claim’ or defense.” Id. (quoting Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.
1998) (citing Anderson, 477 U.S. at 248)).
The moving party bears “‘both the initial burden of production on a motion for summary
judgment and the burden of establishing that summary judgment is appropriate as a matter of
law.’” Kannady v. City of Kiowa, 590 F.3d 1161, 1169 (10th Cir. 2010) (quoting Trainor v.
Apollo Metal Specialties, Inc., 318 F.3d 976, 979 (10th Cir. 2002)). To meet this burden, the
moving party “‘need not negate the non-movant’s claim, but need only point to an absence of
evidence to support the non-movant’s claim.’” Id. (quoting Sigmon v. CommunityCare HMO,
Inc., 234 F.3d 1121, 1125 (10th Cir. 2000)).
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If the moving party satisfies its initial burden, the non-moving party “‘may not rest on its
pleadings but must bring forward specific facts showing a genuine issue for trial [on] those
dispositive matters for which it carries the burden of proof.’” Id. (quoting Jenkins v. Wood, 81
F.3d 988, 990 (10th Cir. 1996)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986);
Anderson, 477 U.S. at 248–49. “To accomplish this, the facts must be identified by reference to
affidavits, deposition transcripts, or specific exhibits incorporated therein.” Adler, 144 F.3d at
671 (citing Thomas v. Wichita Coca-Cola Bottling Co., 968 F.2d 1022, 1024 (10th Cir.), cert.
denied, 506 U.S. 1013 (1992)).
Summary judgment is not a “disfavored procedural shortcut.” Celotex, 477 U.S. at 327.
To the contrary, it is an important procedure “designed ‘to secure the just, speedy and
inexpensive determination of every action.’” Id. (quoting Fed. R. Civ. P. 1).
VI.
Analysis
Defendant moves for summary judgment on relators’ FCA claims for two reasons. First,
defendant argues that relators cannot show that its invoices submitted to USAID were legally
false under an implied certification theory. Second, defendant asserts, even if relators could
prove the invoices were legally false, they cannot establish that USAID suffered any damages.
The Court addresses each of these arguments, in turn, in the next two subsections.
A. False or Fraudulent Claims Under the FCA
The FCA “‘covers all fraudulent attempts to cause the government to pay out sums of
money.’” United States ex rel. Conner v. Salina Reg. Health Ctr., 543 F.3d 1211, 1217 (10th
Cir. 2008) (quoting United States ex rel. Boothe v. Sun Healthcare Grp., Inc., 496 F.3d 1169,
1172 (10th Cir. 2007)). The FCA’s qui tam provisions permit a private plaintiff to bring civil
actions on behalf of the government. 31 U.S.C. § 3730(b). And while the government “may
15
intervene and take over a private plaintiff’s case, [31 U.S.C. §§ 3730(b)(2) and (c)(3)], it often
declines to do so.” United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163,
1167 (10th Cir. 2010). If the government declines to intervene, a private plaintiff may proceed
as a relator on behalf of the government. 31 U.S.C. § 3730(d)(2). A relator is entitled to a
portion of any civil penalty and damages awarded. Id.
The substantive provisions of the FCA impose civil liability against any person who
“knowingly presents, or causes to be presented, a false or fraudulent claim for payment or
approval,” 31 U.S.C. § 3729(a)(1)(A), or “knowingly makes, uses, or causes to be made or used,
a false record or statement material to a false or fraudulent claim,” § 3729(a)(1)(B). A person
who violates the FCA is subject to treble damages and a civil penalty between $5,000 and
$10,000. § 3729(a)(1).
To violate § 3729(a)(1), one must act knowingly. But there is no requirement that a
payee act with a specific intent to defraud the government. § 3729(b)(1)(B). Instead, a payee
must have acted with actual knowledge of the false information, or with a reckless disregard for
or deliberate ignorance of the truth or falsity of the information. § 3729(b)(1).
FCA liability under § 3729(a) may result either from a factually false or legally false
claim for government payment. Lemmon, 614 F.3d at 1168. A factually false claim arises when
a claimant submits “‘an incorrect description of goods or services provided or a request for
reimbursement for goods or services never provided.’” Id. (quoting Conner, 543 F.3d at 1217).
In contrast, a legally false claim generally requires a relator to show that a payee falsely certified
compliance with a statute, regulation, or contract provision “as a condition to government
payment.” Conner, 543 F.3d at 1217 (quoting Mikes v. Straus, 274 F.3d 687, 697 (2d Cir.
2001)) (emphasis in original).
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The Tenth Circuit recognizes two kinds of legally false claims—one based on an express
false certification and another based on an impliedly false certification. Lemmon, 614 F.3d at
1168; Conner, 543 F.3d at 1217; Shaw v. AAA Eng’g & Drafting, Inc., 213 F.3d 519, 531 (10th
Cir. 2000). An express false certification occurs when a payee “‘falsely certifies compliance
with a particular statute, regulation, or contract term, where compliance is a prerequisite to
payment.’” Lemmon, 614 F.3d at 1168 (quoting Conner, 543 F.3d at 1217). The certification
need not involve a literal certification, and, instead, can arise from any false statement “that
relates to” the payee’s claim. Id.; see also United States ex rel. Hendow v. Univ. of Phoenix, 461
F.3d 1166, 1172 (9th Cir. 2006) (“So long as the statement in question is knowingly false when
made, it matters not whether it is a certification, assertion, statement, or secret handshake; False
Claims liability can attach.”). A FCA plaintiff can bring an express false certification claim
under § 3729(a)(1)(A) or § 3729(a)(1)(B).
An implied false certification “requires ‘only the presentation of a false or fraudulent
claim for payment or approval’ without the additional [§ 3729(a)(1)(B)] requirement of a ‘false
record or statement.’” Lemmon, 614 F.3d at 1168 (quoting Shaw, 213 F.3d at 531-32). As a
result, implied false certification claims focus “on the underlying contracts, statutes, or
regulations themselves to ascertain whether they make compliance a prerequisite to the
government’s payment.” Id. at 1168-69 (quoting Conner, 543 F.3d at 1218). “If a contractor
knowingly violates such a condition while attempting to collect remuneration from the
government, he may have submitted an impliedly false claim.” Id.
Besides proving that a payee falsely certified compliance as a prerequisite to payment, a
relator asserting either an express false certification claim or an implied false certification claim
must demonstrate that the false certification was material. Id. at 1169. A false certification is
17
material if it has “a natural tendency to influence, or [is] capable of influencing, the payment or
receipt of money or property.” § 3729(b)(4). “Thus, a false certification . . . is actionable under
the FCA only if it leads the government to make a payment which, absent the falsity, it may not
have made.” Lemmon, 614 F.3d at 1169 (citing Conner, 534 F.3d at 1219).
Relators here premise their claim on an implied false certification theory. Thus, to
survive summary judgment, relators must adduce specific facts from which a rational jury could
find that: (1) defendant knowingly submitted legally false claims for payment to the
government; (2) the government paid the claims; and (3) had the government known of the
falsity, it may not have paid the claims. See Lemmon, 614 F.3d at 1169. No dispute exists about
the fact of payment. Everyone agrees that the government paid defendant’s invoices. The
parties disagree, though, about the other two elements of relators’ implied false certification
theory.
Relators contend that defendant submitted legally false claims to USAID by impliedly
certifying its compliance with Afghan law. In its memorandum, defendant argues that relators’
FCA claims fail because compliance with Afghan law is not a prerequisite to payment under the
contract. Defendant also notes that no dispute exists whether it disclosed the facts and
circumstances surrounding the forged documents to USAID immediately after relators
discovered them. Because USAID has continued to pay its invoices, defendant argues that
compliance with Afghan law is not a condition to government payment.
Relators’ claim essentially relies on a two-part argument. First, they argue that the
contract expressly requires compliance with all provisions before payment. In support of this
argument, relators cite Section G.5(c) of the contract, which provides in relevant part:
Upon compliance by the Contractor with the all provisions of this contract,
acceptance by the Government of the work and final report, and a satisfactory
18
accounting by the Contractor of all Government-owned property for which the
Contractor had custodial responsibility, the Government shall promptly pay the
Contractor any moneys (dollars or local currency) due under the completion
voucher.
Doc. 122-2 at 47 (emphasis added). Relators contend a jury could determine “that the United
States found compliance with all contractual provisions important, particularly because a jury
could conclude from this provision that compliance with all provisions is directly connected to
the United States’ ability to adjust payment.” Doc. 128 at 65. Relators then note that Federal
Acquisition Regulation § 52.225-19, incorporated by reference into the contract, requires
defendant and its personnel to comply with all applicable United States and host country laws.
Doc. 128 at 68. Because defendant fraudulently obtained permits and visas in violation of
Afghan law, relators assert, it failed to comply with a contractual prerequisite of payment.
The second prong of relators’ argument directly addresses the materiality requirement of
an implied false certification claim. Relators argue that defendant intentionally misled USAID
and withheld information about the forged documents. Specifically, they contend the record
shows that defendant: (1) may have misled USAID into believing relators created the forged
documents; (2) may have altered or destroyed paper copies of its filed visa and permit
applications; and (3) improperly withheld its ethics committee report from USAID. In light of
these allegations, relators claim, a jury could conclude that USAID, if fully informed, may have
refused payment of defendant’s invoices—or at least reduced them.
The summary judgment facts, even when the Court views them in the light most
favorable to relators, will not abide a FCA claim. While substantial disagreement exists whether
compliance with Afghan law was a prerequisite to payment, relators fail to present facts
demonstrating a genuine issue whether USAID may have reduced or refused payment to
defendant—i.e., whether compliance with Afghan law was material to the government’s payment
19
decision. See Lemmon, 614 F.3d at 1169 (“[A] false certification . . . is actionable under the
FCA only if it leads the government to make a payment which, absent the falsity, it may not have
made.”); Conner, 543 F.3d at 1219-20 (“If the government would have paid the claim despite
knowing that the contractor has failed to comply with certain regulations, then there is no false
claim for purposes of the FCA.”); see Adler, 144 F.3d at 670 (“An issue is ‘genuine’ if there is
sufficient evidence on each side so that a rational trier of fact could resolve the issue either
way.”). The Court comes to this conclusion for two reasons, and either one, independent of the
other, warrants summary judgment.
First, the uncontroverted facts cannot support relators’ contention that defendant misled
USAID into paying its invoices. Relators argue that even after defendant informed the USAID
OIG that its forensic analysis had searched and cleared the computers issued to relators,
defendant continued to imply that relators had forged the documents by noting that their personal
computers were excluded from the analysis. Doc. 128 at 71-72. Relators fail to cite any
admissible evidence that could support this contention. Instead, they speculate about defendant’s
intentions and USAID’s understanding of the forensic analysis. This speculation is insufficient
to support relators’ argument. See Bones v. Honeywell Int., Inc., 366 F.3d 869, 875 (10th Cir.
2004) (“To defeat a motion for summary judgment, evidence, including testimony, must be
based on more than mere speculation, conjecture, or surmise.”).
The uncontroverted facts show that defendant, shortly after Mr. Thomas discovered the
forged documents, informed the USAID OIG that it was investigating whether relators had
created them. But the uncontroverted facts also show that defendant provided a copy of its
forensic report to the USAID OIG in November of 2011. The report stated that defendant’s
third-party analyst had found no evidence suggesting that the forged documents originated from
20
relators’ computers or were modified on them. The report also determined that the computer
known as LighteningBug 1A had created several of the forged documents. This computer,
located in defendant’s Kabul human resources office, was used primarily by Khalid Afridi. In
sum, the summary judgment record contains no evidence permitting a rational jury to conclude
that defendant misled USAID to pay based on an implication that relators had created the forged
documents.
Summary judgment also is warranted for another reason. Even when viewed in the light
most favorable to relators, the uncontroverted facts provide no basis for a rational jury to find
that USAID may have reduced or refused payments had they seen paper copies of defendant’s
employee files. Relators note that the leader of defendant’s human resources department in
Afghanistan, Mark Whitehouse, testified that he maintained paper copies in Kabul of filed permit
applications. According to Mr. Whitehouse, he sent Kevin Miller to Kabul to obtain copies of
the applications. Dennis Owens, defendant’s Division Compliance Officer, and Tamara
McNulty, defendant’s Senior Division Counsel, each testified that Mr. Miller could not locate
copies of the filed applications. Regardless of whether paper copies were located, defendant
informed USAID that it did not maintain organized records of the documents it filed with the two
Ministries.
Relators’ argument presents no genuine issue of fact whether viewing defendant’s paper
files was (or may have been) material to USAID’s payment decision. Both defendant and
USAID tried, independently, to obtain copies of the filed permit applications from the Afghan
government. After each party’s requests went unfulfilled, USAID directed defendant to halt its
efforts to obtain the filed applications. At that time, neither USAID nor defendant had
21
determined whether defendant had filed the forged documents. Nevertheless, USAID continued
to pay defendant’s invoices.
Indeed, at defendant’s request and with USAID’s approval, USAID’s COTR, Mr.
Thomas Bauhan, executed a witness declaration on December 19, 2014. In it, he testified that
defendant informed him in July of 2011 that its personnel may have created and submitted
altered diploma documents to the Afghan government. He also testified that he was not aware,
as USAID’s COTR, of any alleged or actual conduct by defendant that warranted withholding
payment under the contract. Doc. 123-5 at 3. Alvera Reichert, USAID’s Contracting Officer,
also executed a witness declaration with USAID’s approval on December 18, 2014. Ms.
Reichert testified that defendant informed her that its personnel may have created altered
educational documents and submitted them to the Afghan government. Doc. 125-6 at 2.
Relators’ implied false certification claim cannot overcome the undisputed facts
established in these two USAID declarations. Mr. Bauhan and Ms. Reichert were the two
USAID representatives charged with overseeing, reviewing, and approving defendant’s work and
its invoices under the contract. Both Mr. Bauhan and Ms. Reichert knew about defendant’s
conduct. And the uncontroverted facts establish that no USAID representatives, including Mr.
Bauhan and Ms. Reichert, saw copies of the documents actually filed with the Afghan Ministries.
Yet, USAID, at Mr. Bauhan and Ms. Reichert’s direction, continued to pay defendant’s invoices.
Relators speculate that USAID “might have” reduced or refused payment to defendant if it had
known that defendant had violated Afghan law. Doc. 128 at 69. But the USAID declarations
and undisputed facts, even when viewed in relators’ favor, demonstrate that defendant’s
compliance with Afghan law was not material to the government’s decision to pay defendant’s
invoices. See United States ex rel. Owens v. First Kuwaiti Gen. Trading & Contracting Co., 612
22
F.3d 724, 729 (4th Cir. 2010) (finding that evidence that government officials were aware of any
alleged defects and accepted a contractor’s work anyway “effectively negates the fraud or falsity
required by the FCA.”) (citation and internal quotation marks omitted).
For the same reasons, the uncontroverted facts do not support relators’ argument that
USAID may have reduced or refused payments if it had known about the allegations contained in
defendant’s ethics committee report. USAID conducted an independent investigation of the
forged documents. The uncontroverted facts show that both defendant and relators informed
USAID of the allegation that two of defendant’s employees, Mr. Whitehouse and Mr. Afridi,
may have created the forged documents to obtain work permits and visas. Both parties also
provided USAID with the names of relevant witnesses, including Mr. Afridi, Mr. Whitehouse,
and Dr. Manizha Hadi. And as defendant notes, relators’ First Amended Complaint alleged that
the forged documents ‘“were created at the immediate direction of Mark Whitehouse, BVSPC’s
Human Resources Director working in Afghanistan.’” Doc. 131 at 34 (quoting Doc. 18 at 7).
USAID nonetheless continued to pay defendant, even though it knew about these allegations and
even though it had decided that it could not determine whether defendant had filed the forged
documents. That defendant’s ethics committee report may have mattered to the government’s
payment decision thus lacks any anchor in the summary judgment record.
USAID’s conduct after relators filed suit also demonstrates that compliance with Afghan
law did not matter to the government’s payment decision. Relators commenced this action and
provided a copy of the Complaint and a statement of all material evidence to the government on
August 23, 2011. At that time, defendant had submitted at least nine invoices for USAID
payment. Doc. 120 at 3-4. Since then, defendant has submitted at least forty-seven invoices to
USAID. Doc. 120 at 4-9. USAID never demanded that defendant refund any amount paid. Nor
23
has it reduced or withheld payment of an invoice submitted after relators filed suit. Instead,
USAID has accepted and paid for all deliverable components completed by defendant under the
contract. USAID even elected to amend the contract to award defendant more work in
Afghanistan.
USAID’s conduct after relators filed this action demonstrates that defendant’s
compliance with Afghan work permit and visa requirements did not matter to the government’s
payment decision. See Conner, 543 F.3d at 1219-20 (“If the government would have paid the
claims despite knowing that the contractor has failed to comply with certain regulations, then
there is no false claim for purposes of the FCA.”); United States ex rel. Yannacopoulos v.
General Dynamics, 652 F.3d 818, 831 (7th Cir. 2011) (affirming summary judgment against an
FCA claim, the Seventh Circuit explained: “[T]he agency failed to take action when it actually
learned of the supposed misrepresentation. In that case, speculative testimony about how that
party may have acted if it had discovered that misrepresentation earlier cannot raise a genuine
issue of fact as to materiality.”); United States ex rel. Smith v. Boeing Co., No. 05-1073, 2014
WL 5025782, at *27 (D. Kan. Oct. 8, 2014) (granting summary judgment and explaining that
any lingering doubt whether a contractor’s representations and non-disclosures mattered to the
government’s purchase decision was “dispelled by the actions of the government purchasers after
learning of relators’ claims”).
Relators have failed to show a basis for a rational jury to find that defendant submitted
legally false claims for government payment. The uncontroverted facts, even when viewed in
relators’ favor, show that defendant’s compliance with Afghan law was not material to the
government’s decision to pay. Defendant thus is entitled to summary judgment.
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B. Existence of FCA Damages
The Court next turns to the issue of damages and considers whether it provides a second,
independent basis for summary judgment.
Defendant argues that summary judgment is also appropriate because relators cannot
demonstrate that the government has sustained damages under the FCA. This contention
deserves the Court’s consideration, as it is a reason for summary judgment that is separate and
distinct from that decided above. See Rimbert v. Eli Lilly & Co., 647 F.3d 1247, 1256-57 (10th
Cir. 2011) (“Although this court may affirm [summary judgment] on any ground apparent in the
record, affirming on legal grounds not considered by the trial court is disfavored.”) (citations
omitted).
A violation of the FCA subjects a party to a civil penalty and “[three] times the amount of
damages which the Government sustains because of the act of that person.” 31 U.S.C. §
3729(a)(1). Under the FCA, courts measure the amount of damages sustained by the government
as “the difference between what the government actually paid and the amount it would have paid
in the absence of the fraudulent claim.” United States ex rel. Woodard v. Country View Care
Ctr., Inc., 797 F.2d 888, 893 (10th Cir. 1986) (citing United States v. Thomas, 709 F.2d 968, 972
(5th Cir. 1983); United States v. Coop. Grain and Supply Co., 476 F.2d 47, 63 (8th Cir. 1973)).
“In calculating FCA damages, the fact-finder seeks to set an award that puts the government in
the same position as it would have been if the defendant’s claims had not been false.” United
States v. Science Applications Int’l Corp., 626 F.3d 1257, 1278 (D.C. Cir. 2010) (“SAIC”) (citing
United States ex rel. Miller v. Bill Harbert Int’l Const., Inc., 608 F.3d 871, 904 (D.C. Cir. 2010);
United States ex rel. Harrison v. Westinghouse Savannah River Co., 352 F.3d 908, 922-23 (4th
Cir. 2003)).
25
Both parties cite SAIC as support for their position on the damages issue. In SAIC, the
defendant, a scientific, engineering, and technological applications company, contracted with the
Nuclear Regulatory Commission (“NRC”). Id. at 1261-62. The defendant agreed to provide the
NRC with technical assistance and expert analysis in support of agency rulemaking. Id. at 1262.
The defendant’s output under the contract included several written reports. Id. After defendant
had completed its work, the government brought an FCA action claiming that the defendant’s
other engagements with for-profit companies violated a contractual prohibition against conflicts
of interest. Id. at 1263. At trial, a jury returned a verdict for the government and awarded as
damages the full amount paid to defendant under the contract. Id. at 1264. The D.C. Circuit
overturned the jury verdict because of an instructional error, holding that the government bears
the burden of proving damages. Id. at 1280. It also held that the government could recover the
full amount paid only if it showed that the FCA violation prevented it from receiving anything of
value. Id. at 1279.
Here, defendant argues that relators cannot show that the government has sustained any
damages because USAID, unlike the United States in SAIC, received the full value of goods and
services it contracted to receive. Defendant notes that USAID was aware of relators’ allegations
in 2011 and has continued to accept and pay the full amount of defendant’s invoices. Relators
counter this argument, contending that the contract required defendant to provide “all services
necessary” to complete defendant’s work. These services included acquiring work permits and
visas for its employees. Relators thus argue that USAID did not receive the full value of the
goods and services it contracted to receive. Relators contend that they, like the United States in
SAIC, are entitled to a jury’s determination of damages.
26
The alleged FCA violation in SAIC is different from the ones relators advance here. The
SAIC contract required the defendant to analyze NRC regulations and draft expert reports
describing its conclusions. There, a conflict of interest diminished the unbiased nature, and thus
the value of the defendant’s reports. The D.C. Circuit held that the government was entitled to a
jury’s determination of the value lost because of defendant’s conflict. Here, in contrast, the
uncontroverted facts show that USAID knew about the allegations against defendant and did not
reduce or refuse payment of defendant’s invoices. This conduct indicates that the allegations
against defendant did not diminish the value of defendant’s work under the contract.
As articulated above, relators’ implied false certification claim fails to demonstrate that
defendant’s compliance with Afghan law was material to the government’s payment decision.
Moreover, the uncontroverted facts, even when viewed in the light most favorable to relators,
will not support relators’ claim for damages under the FCA. As defendant notes, relators and
defendant informed USAID of the forged documents shortly after their discovery in June of
2011. Still, USAID has continued to approve and accept all completed work, and has paid the
full balance of defendant’s invoices. Because USAID knew about the allegations against
defendant and still continued to pay all amounts due under the contract, relators cannot establish
that the government may have reduced or refused payment because of the alleged falsity. See
SAIC, 626 F.3d at 1279 (“To establish damages, the [plaintiff] must show not only that the
defendant’s false claims caused the government to make payments that it would have otherwise
withheld, but also that the performance the government received was worth less than what it
believed it had purchased.”).
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VII.
Conclusion
Defendant has established that no genuine issues of material fact exist and that it is
entitled to judgment as a matter of law against relators’ FCA implied false certification claim.
Accordingly, for the reasons explained by this Order, the Court grants summary judgment for
defendant.
IT IS THEREFORE ORDERED BY THE COURT THAT defendant’s Motion for
Summary Judgment (Doc. 121) is granted.
IT IS FURTHER ORDERED THAT relators’ Motion for Leave to File Surreply
Memorandum (Doc. 132) is denied.
IT IS FURTHER ORDERED THAT relators’ Motion to Reopen Discovery for
Limited Purpose of Taking Deposition of William Van Dyke (Doc. 134) is denied as moot.
IT IS SO ORDERED.
Dated this 5th day of June, 2015, at Topeka, Kansas.
s/ Daniel D. Crabtree______
Daniel D. Crabtree
United States District Judge
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