US ex rel. Fine v. Advanced Sciences, Inc., Civ. 91-0794 JC/WWD.
| Decision Date | 06 January 1995 |
| Docket Number | No. Civ. 91-0794 JC/WWD.,Civ. 91-0794 JC/WWD. |
| Citation | 879 F. Supp. 1092 |
| Parties | UNITED STATES of America ex rel. Harold R. FINE, Plaintiff, v. ADVANCED SCIENCES, INC., Defendant. |
| Court | U.S. District Court — District of New Mexico |
Duff Westbrook, Maureen Sanders, Albuquerque, NM, for plaintiff.
Pamela J. Mazza, Andrew P. Hallowell, Philip M. Dearborn, Piliero, Mazza & Pargament, Washington, DC, Gary King, Advanced Sciences, Inc., Albuquerque, NM, for defendant.
THIS MATTER came on for consideration of the Defendant's Motion to Dismiss, filed November 19, 1993. The Court converts this motion to a Motion for Summary Judgment. After reviewing the motion and the memoranda submitted by the parties and after hearing oral arguments, the Court finds that the motion is well taken and will be GRANTED.
The Relator1, Harold R. Fine, makes his claims under the qui tam provisions of the Fraud Claims Act (FCA). 31 U.S.C. § 3730. The Defendant argues that the Court should dismiss the Relator's claims on two grounds. First, as a past employee of the Office of the Inspector General in the Department of Energy (IG/DOE), the Relator is barred from bringing a qui tam action because of the conflict between the FCA and the Inspector General Act (IGA). 5 U.S.C. app. 3 §§ 1-12. Second, the Defendant argues that the Relator fails to satisfy the jurisdictional requirements set out in the FCA.
The IG/DOE employed Harold Fine from 1982 until his resignation on July 15, 1991. The IG/DOE conducts audits and investigations of government contractors to determine whether they follow the regulations and rules governing the performance of federal contracts. Specifically, the IG/DOE monitors the reimbursable costs claimed by government contractors to make sure the costs are deductible under the relevant contract and regulations. The IG/DOE then creates a report detailing the audits and their findings. Mr. Fine's duties at IG/DOE included managing and supervising audits and the preparation of audit reports.
After reviewing audits of Advanced Sciences, Inc. (ASI), Mr. Fine concluded that ASI was intentionally requesting reimbursement for costs that were unreimbursable under the contracting regulations. Therefore, he referred the matter to the investigative branch of IG/DOE, but no actions were taken. Just one month after his resignation from the IG/DOE, Mr. Fine brought this qui tam action based on the information regarding ASI he obtained through his job.
Before filing his qui tam action, Mr. Fine revealed the information regarding ASI's submissions of costs on four occasions. First, Mr. Fine sent a letter unauthorized by his superiors dated March 20, 1990 to Richard Kaheny, Director of Contracting at White Sands Missile Range. This letter contained Mr. Fine's interpretation of the adequacy of ASI's accounting system and financial controls. Second, Mr. Fine gave Donald Sikora, a "volunteer leader" of the American Association of Retired People for New Mexico, a memorandum dated April 9, 1990 and the March 20 letter that he sent to Richard Kaheny. Mr. Fine prepared the April 9 memorandum and entitled it "Referral of Possible False Claims by Contractor." In it, Mr. Fine expressed his concerns regarding ASI to the investigative branch of IG/DOE. Third, Mr. Fine also gave a copy of the March 20 letter to Burt Mazer, an accountant with a private firm, to get his opinion on Mr. Fine's analysis of ASI's accounting system. Fourth, Mr. Fine's attorney, Duff Westbrook, sent a letter to Senator David Pryor in which he generally explained Mr. Fine's allegations concerning ASI among other matters.
The first step in the analysis is to briefly review the qui tam provisions of the FCA. Section 3730 allows for persons who know of fraud against the federal government to sue for the government to recover the fraudulently obtained funds. 31 U.S.C. § 3730(b). The FCA grants a bounty to a successful relator that can range up to 30% of the damages recovered by the government to encourage the exposure of fraud. Id. at § 3730(d). The government has the option in a qui tam action to step into the place of the relator and to sue in its own right. Id. at § 3730(b). Moreover, the government is entitled to treble damages if a violation of the FCA can be proven by the relator or the government. Id. at § 3729(a).
The United States refused to replace the Relator as allowed by section 3730. Instead, the United States filed an Amicus Curiae Brief arguing that an Inspector General (IG) employee lacks standing to bring a qui tam action based on information gathered during the performance of his duties.
Other courts have recounted in detail in history of qui tam actions. See, e.g., U.S. v. X. Quinn, 14 F.3d 645, 649-51 (D.C.Cir. 1994). It is sufficient for this analysis to note that the qui tam statute has gone through several different changes between the time it was first drafted in 1863 and the present. During this period, Congress has sought to prevent fraud against the government by empowering citizens to act as private attorneys general using qui tam actions. Congress has attempted to design the FCA to balance the creation of incentives for whistle-blowing insiders to come forward with information on fraud against the discouragement of plaintiffs who have no independent knowledge of fraud. See id. at 649. The present jurisdictional requirement in section 3730 of the FCA represents Congress' most recent attempt to strike this balance.
In its current form, the FCA limits the courts' jurisdiction over four matters. 31 U.S.C. § 3730(e). First, the courts lack jurisdiction over actions brought by former or present members of the armed forces. Id. at § 3730(e)(1). Second, the courts may not exercise jurisdiction over actions brought against members of Congress, the judiciary or the upper levels of the executive branch. Id. at § 3730(e)(2). Third, the courts are precluded from presiding over matters that are already the subject of a civil suit in which the United States is a party. Id. at § 3730(e)(3). Finally, the courts lack jurisdiction over actions:
... based upon the public disclosure of allegations or transaction in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
Id. at § 3730(e)(3), (4)(A). An "original source" is:
... an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section that is based on the information.
The Defendant moved to dismiss the Relator's claims pursuant to Section 12(b) of the Federal Rules of Civil Procedure without specifying the applicable subsection. The jurisdictional aspects of the Defendant's motion appear to require the application of Rule 12(b)(1), and generally, a court cannot convert a 12(b)(1) motion to a Rule 56 motion for summary judgment. Wheeler v. Hurdman, 825 F.2d 257, 259 (10th Cir.1987). However, if the jurisdictional requirement is based upon the same statute that provides for the substantive claim, then the jurisdictional issues are properly decided under Rules 12(b)(6) and 56. Id., and see Redmon v. U.S., 934 F.2d 1151, 1155 (10th Cir.1991). Here, the same section of the FCA that provides for qui tam actions sets out the jurisdictional requirements. Because I have relied on the affidavits and other material submitted by both parties, I convert the 12(b)(6) motion to one for summary judgment.
It is well settled that government employees generally can bring qui tam actions based on information acquired during the performance of their duties as long as they satisfy jurisdictional requirements. See, e.g., United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1501 (11th Cir.1991). As pointed out by Mr. Fine, Congress has not expressly prohibited IG employees from bringing qui tam actions. Nonetheless, I construe the FCA to prohibit IG employees from filing qui tam actions. Without this bar, the availability of these FCA actions will undermine the intended effectiveness of the IGA.
Congress intended both the FCA and the IGA to strengthen the government's anti-fraud measures, but designed them to uncover fraud in different ways. Congress intended the FCA to encourage individual citizens with knowledge of fraud to divulge the information. On the other hand, Congress designed the IGA to provide a governmental agency with not only independent authority but with civil and criminal investigative powers to use in pursuing fraud.
The primary mission of the offices of Inspectors General is to prevent, deter and identify fraud, abuse and waste in government operations and programs. 5 U.S.C. app. § 2(2)(B). Congress' intent was to create an investigative body that would be free of conflicts and competing interests and thus could effectively investigate fraud. See S.Rep. No. 1071, 95th Cong.2d Sess., 6-7 (1978). When Congress passed this statute it was concerned about:
... government inefficiency, and thus created offices of Inspector General in a number of departments and agencies. The Report of the Senate Committee on Governmental Affairs on the legislation referred to "evidence that makes it clear that fraud, abuse and waste in the operations of Federal departments and agencies and in federally funded programs are reaching epidemic proportions." The Committee blamed these failures in large part on deficiencies in the organization and incentives of executive branch auditors and investigators. The Inspectors General were, therefore, to...
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