United States ex rel. Farmer v. Republic of Honduras

• Decision Date: 30 January 2020
• Docket Number: CIVIL ACTION NO. 17-00470-KD-N
• Parties: UNITED STATES OF AMERICA ex rel., MURRAY FARMER, et al., Plaintiffs, v. THE REPUBLIC OF HONDURAS, et al., Defendants.
• Court: U.S. District Court — Southern District of Alabama

UNITED STATES OF AMERICA ex rel., MURRAY FARMER, et al., Plaintiffs,
v.
THE REPUBLIC OF HONDURAS, et al., Defendants.

CIVIL ACTION NO. 17-00470-KD-N

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

January 30, 2020

ORDER

This False Claims Act action is before the Court on the motion to dismiss filed by the United States and brief in support; the response filed by Relators Murray Farmer, John P. McAvoy, and Marco Zavala; the United States reply; and additional briefing. (docs. 55, 55-1, 66, 71, 77).¹ The motion was heard on January 16, 2020. Present for the hearing were Jay D. Majors, counsel for the U.S. Department of Justice; Rachel Cochran, counsel for the United States Agency for International Development; and Willie J. Huntley, Jr., counsel for the Relators. Upon consideration, and for the reasons set forth herein, the motion to dismiss is GRANTED.

I. Background

After Hurricane Mitch devastated Honduras in 1998, the United States responded to Honduras' plea for assistance and emergency relief and appropriated $250 million in aid. The United States Agency for International Development (USAID) distributed the aid via grants and contracts. One contract was awarded to DRC, Inc. for reconstruction and expansion of water, sewer and drainage projects. However, DRC, Inc. alleges that after completion, Defendant

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Republic of Honduras, Fondo Hondureno de Inversion Social (FHIS) or USAID failed to fully compensate DRC, Inc. DRC, Inc. filed two claims in the Court of Federal Claims in an effort to be compensated. In a separate suit the United States alleged that DRC, Inc. filed false claims. These suits were settled by each side agreeing to drop their claims.

DRC, Inc. then pursued their claim against FHIS and in 2009 obtained an arbitration award of $51 million from Honduran arbitrators under Honduran law. However, in 2013 the Supreme Court of Honduras refused to confirm the arbitration award. DRC, Inc. also filed a suit against the Republic of Honduras. In DRC, Inc. v. Republic of Honduras, 71 F. Supp. 3d 201 (D.D.C. 2014), DRC sought to enforce, against the Republic of Honduras, the arbitration award that DRC had obtained against FHIS. The Court found that FHIS was a "juridically independent entity" with a "presumption of separateness from the Republic [of Honduras] for purposes of determining whether the Court has subject matter jurisdiction." Id. at 214. Accordingly, the Court determined that because the Republic of Honduras was not a party to the arbitration, they were entitled to sovereign immunity. The Court then dismissed the action for lack of subject matter jurisdiction. Id.

The Relators initially filed this False Claims Act action against the Republic of Honduras; FHIS; Moises Starkman, former Minister of FHIS; Carlos Roberto Flores, former President of the Republic of Honduras; Juan Orlando Hernandez, current President of Honduras; Gabriela Nunez de Reyes, Secretary of State for Finance; Wilfredo Cerrato current Secretary of Finance Republic of Honduras; Jose Manuel Zelaya Rosales, current Secretary of Finance; and Mario Rene Pineda Valle, current Minister of FHIS; and Hector Ramon Trochez, Attorney General for the Republic of Honduras (doc. 1). The Relators alleged that the Honduran government falsely certified that FHIS was a unit of the Honduran government whereas to

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qualify FHIS to receive aid from the United States. The Relators base their claim of falsity on the 2014 District of District of Columbia decision wherein the Court found FHIS to be a separate and independent entity. The Relators thus alleged that the United States has been defrauded. And because FHIS was not eligible to receive the aid, all claims submitted since 2000 by contractors to FHIS, and in turn submitted to USAID and paid by the United States, are false. Therefore, the Honduran Defendants are liable to the United States for damages and penalties totaling approximately $1 billion.

After the United States declined to intervene (doc. 16), the Relators filed an amended complaint (doc. 21). Substantially similar allegations are alleged against the Honduran Defendants as in the original complaint. However, the Relators also add USAID employees as Defendants. Specifically, the Relators raise claims against Paul Christian Tuebner, Mission Director, USAID, individually and in his official capacity; Mauricio Cruz MDDI USAID, individually and in his official capacity; Brad Fujimoto, MDDI USAID, individually and in his official capacity; Carmen Zembrana, SPS USAID, individually and in his official capacity; Christopher Cushings, SPS USAID, individually and in his official capacity; Annette Elizabeth Tuebner, OAA USAID, individually and in her official capacity; Dean Walter OFM USAID, individually and in his official capacity; and Randall Peterson A/DMD USAID, individually and in his official capacity (doc. 21).

With respect to the USAID employee Defendants, the Relators allege that they "corruptly, falsely and fraudulently conspired together to present a false and fraudulent claim to the United States and to have funds and grants from the United States fraudulently transferred and diverted to the Honduran Defendants." (Id., p. 14). The conspiracy is alleged to have occurred in May 2005 (Id., p. 14-15). The Relators allege that these USAID employees and the

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Honduran Defendants allegedly diverted $2.7 million from a contract between DRC, Inc. and FHIS, then diverted $100,000 of the $2.7 million to FHIS to pay legal expenses, and then diverted the remaining $2.6 million to a different construction project. (Id., p. 15).

The United States filed a motion to dismiss the action (doc. 55). The United States disagrees with the Relator's assessment that FHIS was not qualified to receive aid from the United States and also disagrees that the Republic of Honduras falsely certified that FHIS was a...