U.S. v. Coastal General Const. Services Corp.

• Decision Date: 09 January 2004
• Docket Number: No. CIV.1994-189.,CIV.1994-189.
• Citation: 299 F.Supp.2d 483
• Parties: UNITED STATES of America, ex. rel. the VIRGIN ISLANDS HOUSING AUTHORITY, Plaintiff/Relator, v. COASTAL GENERAL CONSTRUCTION SERVICES CORPORATION, Coastal Fabrication Corporation, William Koenig, Esther Koenig, Leonard Childs, Carl Kruse, Advanced International, Inc., Gregory C. Budnick, Cornistone, Inc., and Peter Firestone, Defendants.
• Court: U.S. District Court — Virgin Islands

Page 483

299 F.Supp.2d 483

UNITED STATES of America, ex. rel. the VIRGIN ISLANDS HOUSING AUTHORITY, Plaintiff/Relator, v. COASTAL GENERAL CONSTRUCTION SERVICES CORPORATION, Coastal Fabrication Corporation, William Koenig, Esther Koenig, Leonard Childs, Carl Kruse, Advanced International, Inc., Gregory C. Budnick, Cornistone, Inc., and Peter Firestone, Defendants.

No. CIV.1994-189.

District Court, Virgin Islands, Appellate Division, D. St. Thomas and St. John.

January 9, 2004.

Vincent Frazer, Esq., St. Thomas, VI, for Relator.

Richard Vartain, Esq., Washington, DC, for Plaintiff.

William and Esther Koenig, St. Thomas, VI, Pro se.

MEMORANDUM

MOORE, District Judge.

I. INTRODUCTION

On December 29, 1994, The Virgin Islands Housing Authority ["VIHA" or "plaintiff"] brought this qui tam action against the Coastal General Construction Services Corporation, corporation president William Koenig, corporation vice-president Esther Santiago Koenig and related parties pursuant to 31 U.S.C. § 3730(b)(1) of the False Claims Act, 31 U.S.C. § 3729-3733. The VIHA complaint alleged that the defendants produced and presented several false claims, statements and documents in violation of the False Claims Act. (VIHA Compl. ¶ 1.) On July 5, 1995, the United States notified the Court that it was intervening and proceeding with the action pursuant to 31 U.S.C. § 3730(b)(2) and (4). On November 13, 1996, the United States filed its complaint.

The United States' has moved for partial summary judgment against defendant William Koenig. Because the United States has established that his criminal conviction estops William Koenig from contesting the motion, I will enter partial summary judgment against William Koenig and assess a civil penalty of $50,000 against him.

II. FACTUAL AND PROCEDURAL HISTORY

The United States alleges that the defendants submitted numerous false claims, statements and documents to the VIHA during two separate construction contract arbitrations involving the Donoe and Bovoni housing projects. (U.S.Compl.¶¶ 1-32.) The United States Department of Housing and Urban Development ["HUD"] provides federal funds to VIHA, bringing the actions within the scope of the False Claims Act.¹ The complaint alleges that the defendants violated the False Claims Act as follows: making false claims in violation of section 3729(a)(1) in Count I, making false statements in violation of section 3729(a)(2) in Count II, and conspiring to defraud the United States in violation of section 3729(a)(3) in Count III. (Id. at ¶¶ 33-44.) As relief on Counts I-III, the United States asks for treble damages, all penalties or costs allowed under the False Claims Act, and post-judgment interest. (Id. at 15.)

On November 13, 1997, a grand jury returned an indictment against William Koenig and Esther Koenig. Criminal Count I charged that William and Esther Koenig conspired to defraud VIHA and HUD through inflated claims made during the arbitration demanded by Coastal, in violation of 18 U.S.C. § 371. Counts II-XII were separate false statements submitted to the arbitrator, in violation of 18 U.S.C. § 1001. Counts XIII-XVII were individual mailings sent "for the purpose of executing and in furtherance of such scheme" in violation of 18 U.S.C. § 1341.

On April 22, 1998, William and Esther Koenig were convicted.² See United States v. William Koenig, Esther Koenig, et al., Crim. No.1997-155 (D.V.I.). Relying on these convictions, the United States moved for partial summary judgment against both William and Esther Koenig. The Koenigs appealed their convictions and the Third Circuit Court of Appeals affirmed William Koenig's conviction and vacated Esther Koenig's conviction. United States v. William Koenig and Esther Santiago Koenig, No. 99-4073 and No. 99-4077, bench op. at 4, 5 (3d Cir. Dec. 4, 2001).

The United States has renewed its motion for partial summary judgment solely against William Koenig.³ The United States argues that William Koenig's criminal conviction collaterally estops the defendant from denying civil liability for submitting false statements and claims under sections 3729(a)(1) and (2) of the False Claims Act as well as under the common law. In addition, the United States urges the Court to assess the maximum civil penalty of $10,000 against Willaim Koenig for each false record or statement used to support the false Donoe claim, rather than just one civil penalty for the whole Donoe arbitration. (Id. at 15.)

III. DISCUSSION

A. Motion for Summary Judgment Standard

Summary judgment shall be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c); see also Sharpe v. West Indian Co., 118 F.Supp.2d 646, 648 (D.Vi.2000). The nonmoving party may not rest on mere allegations or denials, but must establish by specific facts that there is a genuine issue for trial from which a reasonable juror could find for the nonmovant. See Saldana v. Kmart Corp., 42 V.I. 358, 360-61, 84 F.Supp.2d 629, 631-32 (D.Virgin Islands 1999), aff'd in part and rev'd in part, 260 F.3d 228 (3d Cir.2001). Only evidence admissible at trial shall be considered and the Court must draw all reasonable inferences therefrom in favor of the nonmovant.

B. William Koenig's Conviction Collaterally Estops him from Contesting the False Claims Cause of Action

1. Statutory collateral estoppel

The United States correctly cites 31 U.S.C. § 3731(d) as estopping a defendant who is found guilty of fraud or false statements in federal court from denying the crime's "essential elements" in a False Claims Act action brought for the "same transaction." 31 U.S.C. § 3731(d). Therefore, because William Koenig was found guilty of knowingly and willfully making ten false statements during the Donoe arbitration in violation of 18 U.S.C. § 1001, he is statutorily estopped from denying those same elements in this civil action. See United States v. DiBona, 614 F.Supp. 40, 41-42 (E.D.Pa.1984) (finding that defendant's conviction under 18 U.S.C. § 1001 for false statements estopped him from denying liability under section 3729 of the False Claims Act).

William Koenig's conviction of the substantive false statement charges in Counts II-V and VII-XII have been affirmed on appeal and the following "essential elements" may be given collateral effect: during the 1992 Donoe project arbitration William Koenig knowingly and willfully made and caused to be made false, fictitious and fraudulent statements or representations concerning material facts within the jurisdiction of a department of the United States, namely, the Department of Housing and Urban Development, by claiming with supporting documents various costs that were not, in fact, direct costs of the Donoe project, each count in the criminal conviction constituting a separate fraudulent act.

a. Civil False Claim Count I

Count I of the civil complaint alleges that William Koenig, among others, knowingly violated section 3729(a)(1) of the False Claims Act with respect to both the Donoe and the Bovoni project. The False Claims Act imposes liability under this section on any person who "knowingly presents, or causes to be presented, to an officer or employee of the United States Government ... a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a)(1). A jury found William Koenig guilty beyond a reasonable doubt of knowingly making false statements of material facts to HUD by documenting fictional costs for the Donoe project. This necessarily establishes civil liability by a preponderance of the evidence for knowingly presenting the same false claim for payment or approval to the United States under 3729(a)(1). Therefore, based on statutory collateral estoppel, summary judgment shall be entered against William Koenig on Count I for the Donoe project claims. Contrary to the defendant's assertions, "there is no constitutional impediment to a grant of summary judgment on the issue of liability in a False Claims action when summary judgment is based on facts established in a criminal conviction and incorporated into the civil suit." United States v. Mickman, 1993 WL 541683, *2 (E.D.Pa.) (citing United States v. Halper, 490 U.S. 435, 438, 109 S.Ct. 1892, 104 L.Ed.2d 487 (1989)).

b. Civil False Claim Count II

Count II alleges that William Koenig, among others, knowingly violated section 3729(a)(2) of the False Claims Act with respect to both the Donoe and the Bovoni project. (U.S.Compl., ¶¶ 37-40.) The False Claims Act broadens liability under this section to include any person who "knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved." 31 U.S.C. § 3729(a)(2). Although the United States concedes that HUD has never actually paid or approved the Donoe claim, it asserts that such approval or payment is not required for liability under subsection (a)(2).

Subsections 3729(a)(1) and (a)(2) of the False Claims Act had been combined in one section, 31 U.S.C. § 231, until Congress recodified the provisions in 1982. Section 231 provided:

Any person ... who shall make or cause to be made, or present or cause to be presented, for payment or approval, to or by any person or officer in the civil ... service of the United States, any claim [(a)(1)] upon or against the Government of the United States, or any department or officer thereof, knowing such claim to be false, fictitious, or fraudulent, or who, for the purpose of obtaining or aiding to obtain the payment or approval of such claim [(a)(2)], makes, uses, or causes to be made or used, any false bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or fictitious statement or entry [shall be liable etc.].

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