United States v. Mgmt. Consulting, Inc.

Docket NumberCivil Action No. 1:21-cv-890 (RDA/IDD)
Decision Date24 October 2022
Citation636 F.Supp.3d 610
PartiesUNITED STATES of America, Plaintiff, v. MANAGEMENT CONSULTING, INC., Defendant.
CourtU.S. District Court — Eastern District of Virginia

Gerard J. Mene, LRM: Law, Katy, Alexandria, VA, Kristin S. Starr, William J. Hochul, III, US Attorney's Office, Alexandria, VA, for Plaintiff.

Anne Graham Bibeau, Jonathan Vincent Gallo, Vandeventer Black LLP, Norfolk, VA, for Defendant.

MEMORANDUM OPINION AND ORDER

Rossie D. Alston, Jr., United States District Judge

This matter comes before the Court on the parties' cross-motions for summary judgment. Dkt. Nos. 25; 27. This Court has heard oral argument, and the matter has been fully briefed and is ripe for disposition. Having considered the statement of undisputed facts (Dkt. 23) in addition to each party's motion for summary judgment (Dkt. Nos. 26; 28), memoranda in opposition (Dkt. Nos. 29; 30), reply briefs (Dkt. Nos. 31; 32), and supplemental authority (Dkt. 37), this Court GRANTS summary judgment to Plaintiff United States and DENIES summary judgment to Defendant Management Consulting, Inc. for the reasons that follow.

I. BACKGROUND
A. Factual Background

The factual record in this case is based on a stipulation by both parties, see Dkt. 23, and the filings in a related criminal case, United States v. Thomson, No. 1:10-cr-00067 (E.D. Va.). Defendant Management Consulting, Inc. ("Mancon") is a corporation that served as the prime contractor for two federal government contracts at issue in this case. Dkt. 23 ¶¶ 1, 18. In 2008, Mancon was awarded a prime contract with the U.S. Department of Health and Human Services (the "HHS Contract"), under which they provided services related to the Wounded Warrior Program. Id. ¶ 1. In 2012, Mancon was awarded several prime contracts with the U.S. Marine Corps, involving providing recovery care coordinators and other services to the U.S. Marine Corps Wounded Warrior Regiment (collectively referred to as the "RCC Contract"). Id. ¶ 18. In each contract, Mancon subcontracted work to Armed Forces Services Corporation ("AFSC"), which further subcontracted work to Special Media Enterprises LLC ("SpecMed"). Id. ¶¶ 3-4, 7, 20-21. Mancon also directed some work on the RCC Contract directly to SpecMed through a series of purchase orders. Id. ¶ 22. For Mancon's work as the prime contractor, the United States paid it approximately $240 million under the HHS Contract and $25 million under the RCC Contract. Id. ¶¶ 6, 24.

In exchange for receiving subcontracts and purchase orders from AFSC on the HHS Contract, SpecMed made multiple kickback payments to AFSC executive Brodie Thomson. Id. ¶ 8. To pay for the kickbacks, Thomson directed SpecMed to mark up the amounts in its invoices to AFSC for work performed on the HHS Contract. Id. ¶¶ 9-12. SpecMed also paid kickbacks to Thomson and two other AFSC executives, Sarah Hackett Kim and Nicole Bazemore, in exchange for receiving purchase orders and subcontracts from AFSC on the RCC contract. Id. ¶¶ 25-28. The United States has not presented evidence that Mancon or its employees participated in, were aware of, or benefited from either kickback scheme while performing the contracts. Id. ¶¶ 13-15, 30-32. Furthermore, the United States has not presented evidence that Mancon passed the cost of the kickbacks on to the Government—for either contract. Id. ¶¶ 16, 33.

The kickbacks on the HHS Contract totaled $770,691.58, and the kickbacks on the RCC Contract amounted to $318,111.34. Id. ¶¶ 17, 34. Thus, the total amount of the kickbacks at issue in this case, and the amount the federal government seeks to recover from Mancon, is $1,088,802.92. Id. ¶ 40. AFSC has already paid the United States $4.3 million to resolve civil claims under the False Claims Act, 31 U.S.C. §§ 3729-3733, the Anti-Kickback Act, 41 U.S.C. §§ 8702-8706, the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812, and common-law theories including breach of contract, payment by mistake, unjust enrichment, and fraud. Id. ¶ 37. The parties' settlement included claims based on the HHS Contract, the RCC Contract, and other contracts beyond the scope of this case. Id. Furthermore, Thomson has forfeited property valued at $162,646.98 pursuant to a judgment in a related criminal case. Id. ¶ 38. The Defense Criminal Investigative Service ("DCIS"), the criminal investigative arm of the Office of Inspector General for the U.S. Department of Defense, has incurred about $711,000 in investigative costs to investigate the entire kickback scheme. Id. ¶ 41.

B. Procedural Background

Brodie Thomson, a former executive at AFSC, pleaded guilty to accepting over $4 million in kickbacks on four government contracts, two of which are at issue in this case. United States v. Thomson, No. 1:10-cr-00067 (E.D. Va.), Dkt. 35. Following that criminal prosecution, the United States reached a settlement with AFSC, resolving AFSC's civil liability for the kickbacks on the four contracts at issue in Thomson. Dkt. 23 ¶ 37. On August 3, 2021, the United States filed a Complaint in this Court against Mancon seeking to impose a civil penalty under the strict liability provision of the Anti-Kickback Act, § 8706(a)(2), based on the kickbacks SpecMed paid to AFSC employees on the HHS Contract and RCC Contract. Dkt. 1. Mancon filed an answer on September 28, 2021. Dkt. 4. The parties have stipulated to certain undisputed facts, and the Court granted a joint motion to proceed to dispositive motions based on these stipulated facts and the filings in the criminal case against Thomson. See Dkt. Nos. 21; 23; 24. On July 20, 2022, this Court heard oral argument on the parties' cross-motions for summary judgment. Dkt. 36. The United States filed a notice of supplemental authority on July 22, 2022. Dkt. 37.

II. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 56, "[s]ummary judgment is appropriate only if the record shows 'that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.' " Hantz v. Prospect Mortg., LLC, 11 F. Supp. 3d 612, 615 (E.D. Va. 2014) (quoting Fed. R. Civ. P. 56(a)). "A disputed fact presents a genuine issue 'if the evidence is such that a reasonable jury could return a verdict for the non-moving party.' " Id. at 615-16 (quoting Spriggs v. Diamond Auto. Glass, 242 F.3d 179, 183 (4th Cir. 2001)). The moving party bears the "initial burden to show the absence of a material fact." Sutherland v. SOS Intern., Ltd., 541 F. Supp. 2d 787, 789 (E.D. Va. 2008) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). "Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute exists." Id. (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).

On summary judgment, a court reviews the evidence and draws all reasonable inferences in the light most favorable to the non-moving party. Jacobs v. N.C. Admin. Off. of the Cts., 780 F.3d 562, 570 (4th Cir. 2015) (quoting Tolan v. Cotton, 572 U.S. at 657, 134 S.Ct. 1861, 188 L.Ed.2d 895 (2014)); McMahan v. Adept Process Servs., Inc., 786 F. Supp. 2d 1128, 1134-35 (E.D. Va. 2011) (citing Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003)). This is a "fundamental principle" that guides a court as it determines whether a genuine dispute of material fact within the meaning of Rule 56 exists. Jacobs, 780 F.3d at 570. "[A]t the summary judgment stage[,] the [Court's] function is not [it]self to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

A factual dispute alone is not enough to preclude summary judgment. "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48, 106 S.Ct. 2505. A "material fact" is one that might affect the outcome of a party's case. Id. at 248, 106 S.Ct. 2505; JKC Holding Co. v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). The substantive law determines whether a fact is considered "material," and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Hooven-Lewis v. Caldera, 249 F.3d 259, 265 (4th Cir. 2001). A "genuine" issue concerning a "material fact" arises when the evidence is sufficient to allow a reasonable jury to return a verdict in the non-moving party's favor. Anderson, 477 U.S. at 248, 106 S.Ct. 2505.

III. ANALYSIS

Mancon raises several arguments in opposition to applying the strict liability penalty. Mancon argues that the Anti-Kickback Act is remedial in nature and that the United States cannot recover further after having been "made whole," that charging a penalty in this case would violate the Eighth Amendment, and that Mancon is entitled to an offset against the United States' recoveries in other cases. The Court addresses these arguments in turn.

A. The Anti-Kickback Act's Dual Nature

Mancon asserts that the disposition of this case depends on the purposes of the Anti-Kickback Act. Dkt. 26 at 4. Mancon points to multiple sources describing the Act's nature as compensatory, arguing that the government cannot recover from Mancon after being "made whole" through both its settlement with AFSC and the forfeitures from Thomson in the related criminal case. Id. Though Mancon's argument is fundamentally sound when considered incrementally, its position fails to address the Anti-Kickback Act's text, the hidden costs of kickbacks, and the ineluctable fact that the Act serves both compensatory and...

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