US v. Advance Tool Co., 94-0062-CV-W-1.

CourtUnited States District Courts. 8th Circuit. Western District of Missouri
Citation902 F. Supp. 1011
Docket NumberNo. 94-0062-CV-W-1.,94-0062-CV-W-1.
PartiesUNITED STATES of America, Plaintiff, v. ADVANCE TOOL COMPANY and William R. McGillivray, Defendants.
Decision Date14 July 1995

902 F. Supp. 1011

UNITED STATES of America, Plaintiff,
ADVANCE TOOL COMPANY and William R. McGillivray, Defendants.

No. 94-0062-CV-W-1.

United States District Court, W.D. Missouri, Western Division.

July 14, 1995.

902 F. Supp. 1012

Thomas Larson, Assistant United States Attorney, Kansas City, MO, for plaintiff.

William R. McGillivray, Mancelona, MI, pro se.


DEAN WHIPPLE, District Judge.


This civil action was brought by the United States against Defendants Advance Tool Company ("Advance Tool"), a Michigan corporation, and William R. McGillivray ("McGillivray"), president and sole owner of Advance Tool, in his individual capacity. Plaintiff's motion for default judgment as to Advance Tool was granted by this Court's

902 F. Supp. 1013
order dated August 22, 1994, and the case proceeded to trial against McGillivray in his individual capacity. A bench trial was held on March 27, 30 and 31, 1995. Prior to trial, Plaintiff abandoned Counts II and III of the Complaint. Count I seeks recovery under the False Claims Act ("FCA"), 31 U.S.C. § 3729, et seq. In the alternative, Plaintiff seeks recovery in Count IV under common law theory of payment under mistake of fact, and in Count V under a common law theory of fraud.1

At trial, Plaintiff called thirteen (13) witnesses, introduced the deposition testimony of five (5) witnesses, and introduced fifty-nine (59) exhibits. McGillivray, appearing pro se, cross-examined witnesses and argued his case, however, he did not testify, call any witnesses or otherwise present any evidence. After hearing all the evidence presented at trial, the Court determined that McGillivray had violated the FCA, and that Plaintiff was entitled to receive from McGillivray actual monetary damages in the amount of $210,863.33 together with $5,000.00 per false invoice submitted by him. Those findings are hereby supplemented and modified pursuant to FED.R.CIV.P. 52(b).2 As further set forth below, the Court finds that McGillivray violated the FCA, and is liable to Plaintiff in the amount of $365,000.00.


1. During the time period outlined in the Complaint, January 1, 1988 to March 4, 1992, McGillivray was president and sole owner of Advance Tool, a Michigan corporation with its principal place of business at 407 Rose Street, Mancelona, Michigan 49659.

2. At all times relevant to this action, McGillivray acted on behalf of Advance Tool and on his own behalf in all his dealings with the Federal Supply Service ("FSS") of the General Services Administration ("GSA").

3. During the time period outlined in the Complaint, the FSS of GSA, 1500 East Bannister Road, Kansas City, Missouri, through contract specialists and purchasing agents, sought bids or quotations from various sources for purchases of hand tools and parts ("tools") required by the military and other governmental agencies. McGillivray responded to the requests, and the FSS obtained quotations on numerous tools from McGillivray and ordered tools from McGillivray on numerous occasions.

4. Purchases of the tools in question were made pursuant to the small purchase procedures provided for in certain Federal Acquisition Regulations ("FARS"), codified at 48 C.F.R., Chapter 1, Part 13. All of the solicitations were for small quantities of tools, in fact, some of the solicitations requested bids for only one or two tools of each type.

5. McGillivray received numerous Requests for Quotations on GSA's Standard Form 18, which were issued under Blanket Purchase Agreements ("BPA's") as authorized by the FARS at 48 C.F.R. Chapter 1, Subpart 13.2. The terms and conditions attached to and made a part of the Requests for Quotations specified, inter alia, that, "unless clearly indicated in the offer that an `equal' product is offered, the offer shall be considered as offering a referenced brand name product."

6. In addition to receiving the Requests for Quotations, McGillivray also was contacted by telephone by FSS purchasing agents for the purpose of soliciting McGillivray's quotations on various hand tools pursuant to GSA's "open market" purchasing procedures.

7. Under both the Blanket Purchase Agreement and the open market purchasing procedures, GSA sought to purchase tools, each of which was identified in documents sent to McGillivray, or in telephone conversations with McGillivray, by a National Stock Number ("NSN"). For each tool identified by an NSN, GSA establishes written descriptions of the tool, including, in appropriate cases, the name of the manufacturer(s) producing

902 F. Supp. 1014
the tool, and the manufacturer's part number for the tool

8. For purchasing purposes, particularly under the small purchase provisions of the FARs, certain NSN descriptions call for the tool produced by the particular manufacturer(s) named in the description. Tools called for under such NSN descriptions are referred to as "brand name" by FSS. Other NSN descriptions call for tools produced by a named manufacturer or an equivalent or "equal" tool. Tools called for under such NSN descriptions are referred to as "brand name or equal" by FSS.

9. The BPA's provide that if a supplier wishes to furnish tools other than, but equal to, brand name tools, the supplier is required to insert the name of the product in the solicitation or otherwise clearly identify the product. In addition, a supplier wishing to submit an "equal" is required to submit a sample of the tool, drawings, or a description of its salient characteristics so that FSS and GSA can determine whether the proposed "equal" product is acceptable. If a tool submitted as a proposed "equal" is found to be acceptable, it will be added to the NSN description for future purchasing activity.

10. McGillivray was advised of the procedure for obtaining approval for substitute or "equal" tools by the terms and conditions of the Requests for Quotations to which he responded. Further, the purchase orders sent to McGillivray specified that the tools to be supplied were to be in accordance with the applicable NSN descriptions.

11. During the time period outlined in the Complaint, McGillivray received orders for 74 different types of tools, all but one of which was either a "brand name" request or a "brand name or equal" request. While the Court heard evidence concerning the one order McGillivray received for a tool to be supplied pursuant to item specifications contained in a drawing, Plaintiff made no attempt to explain why this item was relevant to a determination of McGillivray's liability to Plaintiff under the FCA.3

12. During the time period outlined in the Complaint, in response to the purchase orders received from FSS, McGillivray furnished 1301 tools that were fabricated for him by small machine shops in Michigan. McGillivray knew that none of the tools furnished by Advance and McGillivray was a tool made by the manufacturer(s) named in the NSN description for the tool. None of the tools furnished by Advance and McGillivray was submitted by them for evaluation by GSA to determine whether the tool to be furnished was equal to the brand name tool requested in the purchase order.

13. McGillivray admitted to investigators that it was his practice to obtain either a sample of an NSN tool or the manufacturer's drawing(s) for a tool, and then either to "reverse engineer" from the tool sample or use the drawing(s) as a basis for ordering tools from machine shops in Michigan. The tools which the Michigan machine shops manufactured for McGillivray were then shipped by McGillivray to fill the GSA purchase orders which, by listing or referring to particular NSN's, called for brand name tools.

14. Among the specific brand name tools requested by the FSS were tools manufactured by Cummins Engine Company, Grove Valve and Regulator Company, Somat Corporation, Outboard Marine Corporation and Hamilton Standard, a division of United Technologies Corporation. Deposition testimony from representatives of these companies indicated that neither McGillivray nor Advance Tool was authorized to utilize the proprietary drawings of these companies to design or manufacture tools. In addition, testimony from the small machine shop operators who manufactured tools for McGillivray indicated that in the instances in which McGillivray provided drawings to be utilized to manufacture tools, all identifying data had been removed, including the manufacturer's name and the part number.

15. McGillivray represented to GSA that Advance Tool was a manufacturer of numerous NSN tools, but he failed to disclose that the tools he was selling to the government

902 F. Supp. 1015
were not manufactured under license from or agreement with the manufacturers listed in the NSN descriptions. McGillivray also failed to disclose that the tools he was selling to the government had been fabricated in small machine shops from specifications derived through a "reverse engineering" process, rather than having been fabricated according to specifications furnished by the manufacturers listed in the NSN descriptions

16. McGillivray admitted to investigators that the tools he supplied did not meet certain specifications. For example, McGillivray admitted that he coated some tools with black spray paint rather than the black oxide coating specified in the NSN descriptions. The NSN specifications uniformly required that the part number and manufacturer's name be displayed on the tools. McGillivray also admitted to investigators that he did not place part numbers or his company's name on the tools, as required by NSN specifications, because he did not have liability insurance and he did not want the tools to be traced back to him.

17. When McGillivray was asked by Michelle Rossi ("Rossi"), a GSA employee at the time, whether he was in fact supplying the tools described in the purchase orders, McGillivray falsely stated that he had been furnished the proprietary drawings from...

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