U.S. v. Hawley

• Decision Date: 23 June 2008
• Docket Number: No. C 06-4087-MWB.,C 06-4087-MWB.
• Citation: 562 F.Supp.2d 1017
• Parties: UNITED STATES of America, Plaintiff, v. Russell T. HAWLEY and Hawley Insurance, Inc., Defendants.
• Court: U.S. District Court — Northern District of Iowa

562 F.Supp.2d 1017

UNITED STATES of America, Plaintiff, v. Russell T. HAWLEY and Hawley Insurance, Inc., Defendants.

No. C 06-4087-MWB.

United States District Court, N.D. Iowa, Western Division.

June 23, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Martha A. Fagg, U.S. Attorney's Office, Sioux City, IA, for Plaintiff.

Bruce Brian Green, Philip J. Willson, Willson & Pechacek, PLC, Council Bluffs, IA, for Defendants.

MEMORANDUM OPINION AND ORDER REGARDING THE PARTIES' MOTIONS IN LIMINE

MARK W. BENNETT, District Judge.

                TABLE OF CONTENTS
                I.  INTRODUCTION.........................................................1021
                II. LEGAL ANALYSIS.......................................................1023
                    A. Rule 104..........................................................1023
                    B. The Government's Motion...........................................1023
                       1.  The evidence at issue.........................................1023
                       2. Admissibility of evidence of reimbursement and payment
                           procedures....................................................1023
                          a. Arguments of the parties....................................1023
                          b. Analysis................................................... 1024
                    C. The Defendants' Motion............................................1027
                       1. The evidence at issue..........................................1027
                       2. Evidence disclosed after the close of discovery................1027
                          a. Arguments of the parties....................................1027
                          b. Analysis....................................................1029
                       3. Hawley's tax returns and other financial information...........1032
                          a. Arguments of the parties....................................1032
                

                b. Analysis....................................................1033
                       4. References to "experts"........................................1035
                          a. Arguments of the parties....................................1035
                          b. Analysis....................................................1035
                       5. Expert opinions on legal issues and results to reach...........1038
                          a. Arguments of the parties....................................1038
                          b. Analysis....................................................1039
                       6. Evidence that Hawley signed the names of insureds..............1043
                          a. Arguments of the parties....................................1043
                          b. Analysis....................................................1044
                              i. Hawley's forgery of signatures..........................1044
                             ii. Hawley's acceptance of forged signatures................1046
                       7. Other "bad acts" evidence......................................1046
                          a. Arguments of the parties....................................1046
                          b. Analysis....................................................1047
                              i. Other crop years and other crop land....................1047
                             ii. Evidence of Hawley's involvement in bankruptcy fraud...1047
                       8. Memoranda of witnesses' statements.............................1048
                          a. Arguments of the parties....................................1048
                          b. Analysis....................................................1049
                             i. Admissibility pursuant to Rule 803(5)....................1050
                            ii. Use pursuant to Rule 612.................................1050
                       9. Evidence of plea agreements....................................1052
                          a. Arguments of the parties....................................1052
                          b. Analysis....................................................1053
                III.  CONCLUSION.........................................................1054
                

I. INTRODUCTION

In this civil action by the United States against defendants Russell T. Hawley and Hawley Insurance, Inc., (collectively "Hawley"), the United States alleges that Hawley engaged in improper conduct that allowed ineligible farmers to obtain and make claims against multi-peril crop insurance (MPCI) policies that were sold by Hawley, issued by North Central Crop Insurance (NCCI), and reinsured by the Federal Crop Insurance Corporation (FCIC), for certain crop land in South Dakota. The factual background to this action is set forth in some detail in the court's April 3, 2008, ruling on the parties' cross-motions for summary judgment. See United States v. Hawley, 544 F.Supp.2d 787, 791-94 (N.D.Iowa 2008).

For present purposes, suffice it to say that the government alleges that Hawley knew that Ed Marshall owned the crop land in question, that Mark Hoffman had rented the land from Ed Marshall, and that Donald Kluver was actually farming the land in 2000. Nevertheless, Hawley submitted to NCCI a crop insurance application for the 2000 crop year in the names of Sydney and Stanley Winquist for an interest in crops on the crop land. The Winquists later made claims against the MPCI policy on which the FCIC ultimately reimbursed NCCI for crop insurance indemnities and paid premium subsidies for the 2000 crop year totaling $145,540. The Winquists and Kluver were later prosecuted for conspiring to make fraudulent crop insurance claims relating to the crop land for crop year 2000. Kluver entered into a plea agreement and the Winquists entered into pretrial diversion agreements.

Similarly, the government alleges that, just before the application deadline for the 2001 crop year, Hawley submitted to NCCI an application for crop insurance for the crop land in the name of, and purportedly signed by, Ed Marshall. The application had been hand-delivered to Hawley by Mark Hoffman, so Hawley had not seen Marshall sign the application. The FCIC eventually made payments for indemnity payments for crop losses claimed by Marshall and paid premium subsidies on the crop land for the 2001 crop year totaling $159,960. Ed Marshall signed a civil settlement agreement with the United States Attorney's Office for the Northern District of Iowa in which he admitted that he had not signed a timely application for crop insurance nor had he instructed anyone to sign such an application on his behalf and pursuant to which he repaid part of the overpayment alleged.

The United States originally brought claims pursuant to 31 U.S.C. § 3729(a)(1), (a)(2), and (a)(3) of the False Claims Act (FCA), and common-law claims of fraud and payment under mistake of fact. However, the court granted summary judgment in favor of the defendants on Count One, the FCA claim pursuant to 31 U.S.C. § 3729(a)(1) alleging "presentation of a false claim," and as to Count Five, the common law claim for "payment under mistake of fact," but otherwise denied the defendants' motion for summary judgment. See id.¹ Therefore, this matter is scheduled for trial to begin on June 30, 2008, on the following claims: Count Two, the "false record or statement" claim, in which the United States asserts a claim pursuant to 31 U.S.C. § 3729(a)(2) of the FCA alleging that the defendants knowingly made, used, or caused to be made or used false records or statements in order to get false or fraudulent claims paid or approved by the United States; Count Three, the "conspiracy" claim, in which the United States asserts a claim pursuant to 31, U.S.C. § 3729(a)(3) of the FCA alleging that the defendants conspired with others to get false or fraudulent claims allowed or paid by the United States in that the defendants entered into an agreement to submit and process false and fraudulent information in order for ineligible individuals to receive indemnities that would ultimately be reimbursed by the United States through the Federal Crop Insurance Corporation (FCIC); and Count Four, the "common-law fraud" claim, in which the United States alleges that the defendants engaged in common-law fraud by making or using false records and statements or by concealing the true facts surrounding the individuals actually owning the farmland on which MPCI policies were issued and claims were made, knowing that the misrepresentations or concealments were material and knowing and intending that the United States would rely upon them, thereby causing the United States damages. For purposes of the Jury Instructions in this case, the remaining claims will be renumbered as Counts One through Three.

In anticipation of trial, both Hawley and the United States filed motions in limine on May 28, 2008. See Plaintiffs Motion In Limine To Bar Reference To Treble Damages, Penalties, And Reimbursement And Payment Procedures Between The Federal Crop Insurance Corporation (FCIC) And North Central Crop Insurance, Inc. (NCCI) (docket no. 33); Defendants' Motion In Limine Or In The Alternative, For Preliminary Rulings Under Fed.R.Evid. 104(a) (docket no. 34). On June 4, 2008 Hawley filed a Resistance (docket no. 37) to the motion by the United States, and on June 6, 2008, the United States filed a Resistance (docket no. 38) to Hawley's motion. Hawley filed a Reply (docket no. 39) in support of its Motion In Limine on June 13, 2008. The parties did not request oral arguments on their motions in the manner required by applicable local rules, and the court has not found oral arguments to be necessary. Therefore, the court will rule on the motions on the basis of the parties' written arguments.

II. LEGAL ANALYSIS

A. Rule 104

As a preliminary matter, the court notes that Rule 104 of the Federal Rules of Evidence provides, generally, that "[p]reliminary questions concerning ... the admissibility of evidence shall be determined by the court...." FED.R.EVID. 104. Such preliminary questions may depend upon such things as whether the factual conditions or legal standards for the admission of certain evidence have been met. See id., Advisory Committee Notes, 1972 Proposed Rule. This rule, like the other rules of evidence, must be "construed to secure fairness in administration,...