United States of America et al v. Berger Group Holdings, Inc. et al

Filing 194

OPINION. Signed by Chief Judge Jose L. Linares on 7/11/18. (cm, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

UNITED STATES OF AMERICA ex rd.
HAROLD SALOMON,

Civil Action No.: 17-5456 (JLL)

Plaintiff

OPINION

V.

DERISH M. WOLFF et ano.,
Defendants.

LINARES, Chief District Judge.

This matter comes before the Court by way by the United States of America’s Motion to
Strike Affirmative Defenses pursuant to Rule 12(f) of the Federal Rules of Civil Procedure (ECF
No. 156) and Motion for Partial Judgernent on the Pleadings pursuant to Rule 12(c) of the Federal
Rules of Civil Procedure. (ECF No. 162). The United States (‘Govemrnent”) partially intervened
in Plaintiff Harold Salornon’s qui tarn civil action on April 27, 2016.

(ECF Nos. 2, 79).

Defendants have opposed the Government’s motions (ECF Nos. 169, 170), to which the
Government has replied.

(ECF Nos. 177, 178).

The Court decides this matter without oral

argument pursuant to Rule 78 of the Federal Rules of Civil Procedure. For the reasons set forth
below, the Court denies both motions.
I.

BACKGROUND’

Pursuant to the False Claims Act, 31 U.S.C. §sS 3729—3733 (“FCA”), Plaintiff/Relator
Harold Salomon (“Relator”), brought this qtti tarn civil action seeking to recover monetary

This background is derived from the Government’s Inten’enor Complaint. which the Court must accept as true at
this stage of the proceedings. See Aiston v. Countywide fin. Coip., 585 f.3d 53, 758 (3d Cir. 2009).

damages and civil penalties from Defendants for, inter a/ia, knowingly submitting or causing to
be submitted false claims to agencies of the Government. (ECF No. 83, (“IC”)

¶

13). Relator

worked for the Louis Berget Group Inc. (“LBG”) from March 2002 to October 2005. (IC

¶

15).

While working for LBG, Relator prepared overhead rate statements submitted by LBG to the
Government. (IC

¶

16). The Government partially intervened in Relator’s qui tarn action under

the FCA on April 27, 2016. (IC

¶ 20).

Defendant Wolff contends that Government investigators

and auditors received information from Relator months prior to his filing of the qui tarn complaint.
(ECF No. 169 at 2).
Defendant Derish M. Wolff is presently a resident of Miami, Florida. (IC

¶ 21).

He was

the president and chief executive officer of LBG from 1982 to 2002, and chairman of the board of
BG Holdings from 2002 to 2010. (Id.). Defendant Salvatore J. Pepe is presently a resident of
Tuckahoe, New York and was the controller of LBG from 2000 to 2006, and chief financial officer
of LBG from 2006 to 2009. (IC

¶ 24).

Non-party Precy Pellettieri, an alleged co-conspirator, was

the general accounting manager and assistant controller of LBG from September 2000 to May
2006, and controller of LBG from June 2006 to June 2009. (IC

¶ 27).

The Government alleges

that Defendant Wolff admitted, in his guilty plea, between 2003 and 2006 he was involved in the
“journal entry” scheme discussed below, and that Defendant Pepe admitted, also in his guilty plea,
to his involvement in the scheme between September 2001 to August 2007. (IC

¶ 86).

“LBG is a New Jersey corporation with its corporate headquarters in East Orange, New
Jersey.” (IC

¶ 29).

LBG has “over 3,000 employees and operates more than 140 offices across

the United States and throughout the world.” (IC

¶ 30).

LBG is in the business of construction,

engineering, and environmental work performed outside of the United States. (IC

2

¶ 31).

“Since September 11, 2001, LBG

won

several large [cost-plus]2 contracts for international

reconstruction work in Afghanistan and Iraq,” funded by the United States Agency for
International Development (“USAID”). (IC

¶

35). Compensation under a cost-plus contract is

composed of reimbursement of direct costs and indirect costs, and payment of a fee. (IC

¶ 37).

In this case, LBG had a single cost pooi (“AA”) for expenses such as payroll, accounting,
executive management, rent, and insurance. (IC ¶ 58). The AA pool was divided into international
and domestic costs. (IC

¶ 59).

International costs were composed of Government costs involving

direct labor from United States citizens (“GG”) and costs for international contracts involving
direct labor of foreign nationals (“GF”).

(IC

¶

59-60).

The Government relied on LBG’s

certifications for its GG and Gf costs in 1998 and 2002 to negotiate “Billing Rates” from fiscal
Year 1998 to fiscal Year 2006 for contract payments to LBG. (IC

¶

67-72). The shaded cells

depicted below reflect the billing rates for the aforementioned fiscal years:
fiscal Year
199$
1999
2t)t)t)
2001
2(102
2003
2004

2005
20t)6

—

CC Rate Reported by LRG
to Government in 1CS
144.2(1 percent
146.60 percent
146.9t) petcent
144.9$ percent
143 51 percent
147.04 reent
147.66 percent
140,7t3 percent
148.3() percenr

-

Billing Rate
143.10 percent
144.20 percent
144.2(1 percent
14420 percent

143 ii percent
143.5 l2en_
j51crccn

143.51 percent
143.51 percent

3

2

“With cost-plus contracts, the Government relies on overhead rates reported by the contractor during contract
negotiation to
calculate the amount of indirect costs payable by the Government.” (IC j 41). “For any given cost
pooi, an overhead rate may be calculated by dividing the total annual indirect costs collected in the cost pooi
(Numerator) by an a1location base’—a unit of measure common to all contacts covered by one, or a set of, cost pools
(Denominator).” (IC ¶ 49) (emphasis in original). “If a final overhead rate is higher than the Billing Rate
the
contractor may be entitled to additional payments from the Government.” (IC i 56). In this case, the Government
alleges that Defendants falsely inflated costs collected in the “GG” cost pool to increase the overhead rate to over
140%.
The Court notes that this grid is a copy from the Government’s moving brief and was not created by the Court.
Any errors contained therein and the footnote were in the original.
.

.

.

.

3

.

The Government alleges that Defendants “knowingly and falsely inflated” their overhead
rates and, accordingly, “every claim for payment under a Government contract that relied on these
rates constituted a false claim.” (IC

¶

73). According to the Government, Defendants “caused

LBG to make thousands of such claims” between 2001 and 2006. (IC

¶

73). For support, the

Government points to claims submitted by LBG to USAID under a 2004 Iraq Vocational Training
and Employment Services (“VTES”) contract. (IC

¶ 35,

73). The table depicted below reflects a

sample of invoices submitted by LBG to USAID:
Exhibit B

‘

l4’. 51%

518,398.86

516.1 t)4.86

Dcc. 2004

143.51%

1.100.906.86

1,100,906.86

2! 18/2005

Jan. 2005

143.51%

1.580.576.27

1,580,576.27

52970694

3/17/2005

Feb. 2005

143.51%

1.489.599.02

1,489,59902

5

52670840

4/1820(15

Mar, 2005

143.51%

1,169.063.70

1.169.063,70

6

52670979

520 20(15

Apr. 20(15

143,51%

1,539.200.%X

1,537.201.68

7

52671136

6/17/2005

May 2005

143.51%

2,182.075.79

2,168.933.38

8

52671424

7’27/2005

June 2005

143.51%

1.785.77539

l,7X5.7?5.39

9

52671582

829 2005

July 2005

143.51%

2.082.361.30

2,0$2.36I.3t)

It)

62670118

9.29:2005

Aug. 2005

143.51%

2,299.961.24

2,299.961.24

II

62670203

lO/27’2005

Sept. 2005

143.51%

2.567.709.6!

2,567.709.6!

12

2670612211)

I 1/30/2005

Oct. 2005

143.51%

1,843,23?.3(

1,843.237.36

52670299

12/20/201)4

2

52670455

1/21/2005

3

52670686

4

The Government further alleges that Defendants “conspired to bill indirect costs
falsely inflated overhead rates.” (IC

¶

...

at

78-79). The Government also asserts that Defendants

falsified their “overhead i-ate statements.’proposals, Billing Rate proposals, and related cost
accounting data,” by allocating indirect costs directly to the GG pool and manipulating costs in the
allocation base of the overhead rate. (IC

¶ 79-80).

Under the Federal Acquisition Regulation and the terms of LBG’s contracts, “LBG may
directly allocate indirect costs to the GG cost center only if: (a) such costs were incurred
4

specifically and exclusively in support of GG work, and (b) LBG has

not

indirectly allocated other

such costs, incurred for the same purpose in like circumstances, to the GG cost center through the
AA allocation procedure.”

(IC

¶

$1).

However, the Government alleges that Defendants

“conspired to violate this requirement” through “improper use of accounting codes GG997A and
GG997B” in two ongoing costs schemes. (Id.).
The first alleged scheme occurred in LBG’s East Orange headquarters in New Jersey
through the GG997A accounting code. The GG997A code was created to “capture costs” incurred
by the headquarters “that specifically and exclusively benefitted LBG’s international Government
contracts.” (IC

¶

$2). Indirect costs that benefitted all of LBG’s divisions, such as salaries for

executive management and corporate labor, should have gone to the AA pool first and then
allocated to GG997A in proportion to the direct labor used on GG contracts. (IC

¶

$3). The

Government further asserts that Defendants conspired to ttse GG997A to “charge the Government
more than its fair share of corporate headquarters costs.” (IC

¶ $3).

The Government specifically

alleges that Defendants and Pellettieri billed time to GG997A, despite the fact that they did not
spend all of their time working exclusively on GG contracts, and instructed their subordinates who
worked in the headquarters, including Salornon, to “do the same.” (IC

¶ $4).

The Government also alleges that “[i]n addition to improperly billing time to GG997A,
Defendants and their co-conspirators reclassified time that had been properly billed to AA.” (IC

¶

$5).

Specifically, Defendants allegedly moved hours “billed by corporate headquarters

employees from AA to GG997A, even though the hours had not been devoted exclusively to GG
[related] work.” (Id.). The reclassification was done through an accounting method known as a
‘journal entry” on a periodic basis without LBG’s employees’ knowledge or consent. (Id.).

5

Defendant Wolff argues that he “narrowly tailored his admitted conduct” in his guilty plea
to questions which dealt exclusively with “the 2003 to 2006 journal entries that reclassified the
work hours of some LBG employees” and did not admit to allegations outside the Superseding
Information. (ECF No. 170 at 2-4). Defendant also contends that the 2003 to 2006 journal entries,
although used to calculate Government overhead rates, “were not used on

any

invoices submitted

to the Government or ttsed to bitt the Government.” (ECF No. 170 at 5) (emphasis in original).
The Government claims that Defendant Wolff s allegedly fraudulent conduct was “more
extensive” between 2001 to 2003. (IC

86). The Government asserts that Defendant Wolff

charged “hundreds of hours of his time directly to the Government via GG997A while charging
most or all of the remainder of his time to AA.” (IC

¶

$6:a). Additionally, the Government

contends that Defendant Wolff aid Defendant Pepe, along with Pellettieri, communicated several
times on ways to get the “target” GG rate over 140 percent via reclassification of employee work
hours (including their own) in the corporate headquarters. (IC

¶ 86:b-g).

These policies allegedly

included redirecting hundreds of costs from GF to GG and reclassifying dozens of LBG’s non-GG
indirect costs, including “payroll taxes” and “employee benefits” from AA to GG997A. (IC

¶

86:i-89).
Additionally, the Government asserts that, “on instructions from [Defendant] Wolff in or
around 2001,” Defendants in LBG’s Washington, D.C. office engaged in a second scheme by
charging rent, telephone bills, and office supplies costs to GG contracts through the accounting
code GG9973. (IC

¶ 90).

The Government argues that “[l]ike the GG997A scheme, the GG997B

scheme falsely inflated LBG’s GG Rates, Billing Rates, invoices and vouchers. and ultimately,
LBG’s recovery of indirect costs from the United States.” (IC ¶ 93). Furthermore, the Government
alleges that Defendants conspired to inflate the GG rate by improperly manipulating the “allocation

6

base” of GG and GF cost pools. (IC

¶ 94-97).

Defendants “disproportionally sub-allocated” costs

to GG and GF rates by removing short-term consultant fees from the “[d]ornestic allocation base”
and adding “direct local labo; costs” to the GF base. (IC

¶J

98-100). To further decrease GG

costs, Defendants used general ledger accounts titled “Labor Does Not Drive Overhead” and
“Consultant Don’t Drive OH” to conceal direct labor costs. (IC

¶

101). Lastly, Defendant Pepe

allegedly “experimented” with the GG Rate equation to create 12 unique GG rates at the “desired
level of 145%” for the GG rate. (IC

¶J

102-103).

The Government claims that Defendants’ submission of allegedly false GG rates and
general allocation bases in the two alleged schemes was “material to the Government’s payment
of LBG’s falsely inflated invoices and vouchers.” (IC

¶

105). Hence, LBG’s manipulation of

billing rate proposals induced the United States “to agree to falsely inflated” rates. (IC

¶ 106-107).

Moreover, Defendants allegedly “ensured that the Government would not be motivated to revise
the prevailing Billing Rate” by reporting GG Rates consistently around 140 percent. (IC

¶

110).

The Government contends that if USAID had known that when “properly calculated, those rates
would have been well below 140 percent” it would have paid “millions less for LBG’s services.”
(ICf 108, Ill).
Defendants also allegedly “knew that these false claims, statements, and records were
material to the Government’s payment of LBG.”

(IC

¶

112).

To support its position, the

Government cites Defendants’ guilty pleas as well as Defendants’ routine discussions of ongoing
GG allocation at meetings of senior management and board members. (IC

¶

114-116).

For

example, the Government contends that there was an alleged meeting where Defendant Pepe
presented a GG rate below 140 percent and Defendant Wolff disparaged Defendant Pepe as a “GG
assassin.” (IC

¶

117).

7

In 2004, USAID placed pressure on LBG to prepare a disclosure report on LBG’s
compliance with the Government’s Cost Accounting Standards (“CAS”) for cost-plus contracts.
(IC

¶ 44,

118). In response, a memorandum was distributed for an operating committee meeting

on December 2004 which allegedly warned Defendant Wolff that submitting a disclosure report
would put LBG’s GG997B scheme “at risk” and result in a decrease of “$960,000 for the GG rate
calculation.” (IC

¶

11$). Subsequent memos on LBG’s indirect cost accounting schemes were

prepared with Defendant Pepe’s assistance for operating committee meetings. (IC

¶

119). A

memo prepared for a 2005 operating committee and titled “Management Structure in a CAS
Environment” stated that “LBG runs the risk of not recovering $4.9 million of its GG overhead”
if they frilly complied with CAS. (IC

¶

120).

A future memo prepared for a 2006 operating committee meeting and titled “Overhead
Recovery” recognized that LBG would likely only have “partial success” in “defending GG997A
and GG997B.” (IC

¶

121). In response, Defendant Wolff, and others, allegedly decided at an

operating committee meeting to withdraw LBG’s Incurred Cost Submission (“ICS”), which
detailed the indirect costs incurred for the preceding fiscal year and proposed an overhead rate for
that same year. (IC

¶ 53.

123). The Government asserts that the potential financial impact of the

issue of “overhead recovery” was estimated at $18 million at the time of LBG’s ICS withdrawal.
(IC

¶

123).
The Government alleges that a subsequent memo titled “Louis Berger Overhead Recovery

Issues” was prepared for aboard of directors meeting in 2007. (IC

¶

124). The memo stated that:

(a) “it did not appear that LBG had made any effort ‘to develop systems to assure accurate
reporting of GG charges so that alterations would be unnecessary;’ (b) ‘senior management
instituted a procedure of altering the time charges’

8

.

.

.

‘afier the fact without employees’

knowledge” to maintain a “140% GG rate;” and (c) “no more than a third” of GG997B charges
“could be legitimately charged to GG.” (IC

¶

125).

The memo allegedly concluded with a

statement from LBG’s chief operating officer stating that Defendant Wolff “directed all GG
charges.” (Id.).
Accordingly, the Government has partially intervened in this action asserting the following
claims: Count I

—

11— False Claims in violation of 31 U.S.C.
of3l U.S.C.

§ 3729(a)(3); Count

Conspiracy in violation of the False Claims Act, 31 U.S.C.

§ 3729(a)(l); Count III False Statements in violation
—

§ 3729(a)(2) and 31 U.S.C. § 3729(a)(1)(B); and, Count IV Reverse False Claims

in violation of3l U.S.C.

—

§ 3729(a)(7).

In his answer and affirmative defenses. Defendant Wolff contends that the Government
“deliberately delayed the unsealing of the complaint in this action for some 10 years

“

(ECF

No. 169 at 1). Defendant argues that, in 2009, the Government “forced [Defendant] Wolff to
remove himself from any business activity involving the Government under the threat that LBG
would be debarred from getting Government work if he refused.” (ECF No. 169 at 3). Defendant

further alleges that in 2010, the Government demanded that Mr. Wolff be terminated from LBG.
(Id.). Once Mr. Wolff was terminated, the Government allegedly took improper steps to seize
Defendant Wolff’s assets “to be paid to him upon his separation from LBG

.

.

.“

(Id.).

Defendant claims that, in 2011, “the Government formally notified Mr. Wolff that he was
a target of its criminal investigation, and offered him a pre-indictment guilty plea, which he
rejected.” (Id.). On October 13, 2013, “Government civil attorneys, not Salomon, conducted a
meeting with Mr. Wolff s attorneys to advocate its view of the civil qtti tarn claims and to present
a settlement offer of S 16 million in civil damages.” (Id.). Defendant alleges that, on April 26,

9

2016, the Government requested that sealed documents, including its applications for sealing
extensions, remain under seal to “shield its improper conduct” from Defendant Wolff (Id.).

II.

LEGAL STANDARD

A. Strike Affirmative Defenses

In resolving a motion to strike defenses pursuant to Rule 12(f), the Court “may strike from
a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous
matter.” Fed. R. Civ. P. 12(f). In doing so, the Court may act: “(1) on its own; or (2) on motion
made by a party either before responding to the pleading or, if a response is not allowed, within 20
days afier being served with the pleading.” (Id.).
“[Clourts recognize that a motion to strike can save time and litigation expense by
eliminating the need for discovery with regard to legally insufficient defenses.” f.D.I. C. v.
White. 828 F. Supp. 304. 307 (D.N.J. 1993); see also United States v. Geppert Bros., 63$ F. Supp.
996, 998 (E.D. Pa. 1986). In this regard, courts have stricken affirmative defenses as legally
insufficient where the arguments raised therein had previously been addressed and rejected by that
court. See, e.g., AMEC Civil, LLC v. DMJII/I Harris, Inc., 2007 U.S. Dist. LEXIS 8344 (D.N.J.
Feb. 6, 2007). Nevertheless, the Third Circuit has cautioned that courts “should not grant a motion
to strike a defense unless the insufficiency of the defense is ‘clearly apparent.” Cipollone v.
Liggett Gip., Inc., 789 F.2d 181, 188 (3d Cir. 1986); see also United States cx rd. Spay v. CVS
Careinark Corp.. 2013 U.S. Dist. LEXIS 58273 (E.D. Pa. Apr. 24, 2013). In light of this standard,

“motions to strike are not favored and will typically be denied unless the allegations have no
possible relation to the controversy and map caitse prejudice to one of the parties, or if the

10

allegations con/itse
*

the issues in the case.” AMEC Civil, LLC, 2007 U.S. Dist. LEXIS 2344, at

13 (quotation omitted) (emphasis added).
B. Judgment on the Pleadings

Pursuant to Rule 12(c), the movant for judgment on the pleadings must establish: 1) that
no material issue of fact remains to be resolved; and 2) that he is entitled to judgment as a matter
of law. See Rosenau v. Uni/luid Coip., 539 R3d 218, 221 (3d Cir. 200$) (citing Jablonski v. Pan

Am. World Airways, Inc., $63 F.2d 229, 290-91 (3d Cir. 198$)). In resolving a motion made
pursuant to Rule 12(c), the Court must view the facts in the pleadings and the inferences therefrom
in the light most favorable to the non-movant. See Rosenau, 539 F.3d at 221. Hence, a motion
made pursuant to Rule 12(c) should not be granted “unless the moving parti’ has established that

there is

no

law.” Perez

material isstte of fact to resolve, and that it is entitled to judgment as a matter of
i’.

Grif/In, 304 F. App’x 72, 74 (3d Cir. 2008) (citing Mdc v. fRB, 359 F.3d 251, 253

(3d Cir. 2004)) (emphasis added). In resolving such motions, that Court may also consider: 1)
items attached to the complaint; 2) those matters referenced in the complaint; 3) matters of public
record; and 4) matters integral to or upon which a plaintiffs claim is based. See Pension Benflt
Gitar. Coip. v. White Consol. Inthts.. 99$ F.2d 1192, 1196 (3d Cir. 1993). With this framework

in mind, the Court turns now to the Government’s arguments.
ANALYSIS

III.
A. Motion to Strike Affirmative Defenses

The Government’s Motion for Partial Judgement on the Pleadings relies, in part, on the
success of its Motion to Strike Defendant’s Fifth, Sixth, and Seventh Affirmative Defenses.
Therefore, the Court will first address the Government’s Motion to Strike. For the following

11

reasons, the Government’s Motion to Strike Defendants Affirmative Defenses is denied.
To bring an affirmative defense, a Defendant must provide an argument which is not
“redundant, immaterial, impertinent, or scandalous

.

.

.

.“

Fed. R. Civ. P. 12(0. In this case,

Defendant Wolff asserts in his Fifth Defense that the Government’s failure to timely unseal the
docket was purposefully done to gain improper advantages over Defendant. (ECF No. 169 at 5).
Defendant specifically alleges that by purposefully keeping the docket sealed, the Government
obtained “one-sided discovery”, negotiated an eight-figure settlement, and kept Defendant
“unaware of the allegations against him

.

.

.

.“

(Id.). In addition, Defendant claims in his Seventh

Defense that the Government’s procedural misconduct precludes application of the “relation back
provision” of the FCA and bars the Government’s claims. (Id.).
At this juncture in the pleadings, the Court must accept that the Defendant’s factual
allegations are of similar weight to the Government’s contentions in the Intervenor Complaint.
While the Government believes Defendant Wolff s defenses are “ripe for striking,” this Court finds
that the facts alleged by Defendant are material and, if proved, would possibly preclude Defendant
from being subject to liability. (ECF No. 156-I at 3). If Defendant can prove through discovery
that the Government engaged in procedural misconduct or failed to afford Defendant due process,
then Defendant can provide a plausible defense to the Government’s civil FCA action. This is a
material fact that must be fleshed out during discovery. Therefore, the Court will not strike any of
the affirmative defenses at this juncture.
B. Motion for Partial Judgment on the Pleadings

As noted above, for a motion for judgment on the pleadings under Rule 12(c), the movant
must establish that: (1) the movant is entitled to judgment as a matter of law; and (2) there are no
material issues of fact which remain to be resolved. See Rosenau, 539 F.3d at 221. In resolving a

12

motion made pursuant to Rule 12(c), the Court must view the facts in the pleadings and the
inferences therefrom in the light most favorable to the non-movant. See Rosenau, 539 F.3d at 221.
The Government asserts, in part, that it is entitled to Partial Judgernent on the Pleadings
because Defendant’s affirmative defenses are insufficient to stand against a Motion to Strike.
While the Government argues that it has “demonstrated the hollowness of any of [Defendant]
Wolff s defenses.” this Court found that Defendant’s affirmative defenses were, at this junction,
sufficient to survive the Government’s Motion to Strike. (ECF No. 178 at 2). Therefore, the
existence of Defendant’s affirmative defenses is alone sufficient to overcome the Government’s
motion for judgment on the pleadings.
While the Government asks the Court to recognize the preclusive effect of Defendant
Wolff s prior criminal conviction as to Wolff’s civil liability on Count One of the Complaint, the
Court finds that there are two genuine issues of fact regarding the scope of Defendant’s guilty plea.
(ECF No. 178 at 1-2).

The Government argues in Count I of the Intervenor Complaint that

Defendant Wolff conspired “from at least July 1, 2000 through June 30, 2006,” to present false
claims for Government contracts in violation of the FCA. (IC

¶

129). In contrast, Defendant

contends that he only admitted in the Superseding Information to “knowingly and intentionally”
conspiring to defraud the United States “as early as in or about 2003 through in or about 2006
.“

.

(ECF No. 162-1 at 1). Clearly, there is a discrepancy in the accounts between the two parties

regarding the time period Defendant allegedly began presenting false claims for Government
contracts in violation of the FCA (“at least July 1, 2000” compared with “in or about 2003”). (ECF
No. 162-1, at 1) (IC

¶

129). These factual discrepancies are material facts that cannot be resolved

without further litigation.
An additional issue of fact exists regarding Defendants’ allegedly fraudulent use ofjournal

1,

Ii

entries. The Government avers that Defendants Wolff and Pepe, along with Pellettieri, improperly
“reclassed hundreds” of costs which caused the Government to pay LBG “tens of millions of
86-89). However, Defendant Wolff contends that

dollars to which it was not entitled.” (IC

¶ 8,

these journal entries were “not used

any invoices submitted to the Government or used to

on

bitt the Government.” (ECf No. 170 at 5) (emphasis in original). It is critical for the Court to
understand which of these contrasting allegations is true before determining whether to apply civil
penalties under the FCA to Defendant Wolff’s use of journal entries.

Hence, because the

Government’s Motion for Partial Judgment on the Pleadings, in part, relies on the success of its
Motion to Strike, and because both parties have raised issues of genuine fact which have yet to be
resolved, the Court denies the Government’s Motion for Partial Judgment on the Pleadings.
IV.

CONCLUSION

For the aforementioned reasons, the Government’s Motion to Strike Defenses (ECF No.
156) and Motion for Partial Judgment on the Pleadings (ECF No. 162) are hereby denied. An
appropriate Order accompanies this Opinion.
)
DATED: July

iP, 201$
J SEL.LARES
ief Judge, United States District Court

14