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Virginia Lawyers Weekly Article on Qui Tam Actions to Enforce Tariffs

By Zachary Kitts on March 21, 2025 in , , , ,

 

 

 

 

 

 

Virginia Lawyers Weekly Article on Qui Tam Actions to Enforce Tariffs

Recently I was quoted in an article in Virginia Lawyers Weekly on the use of the federal False Claims Act — and specifically the qui tam provisions of the FCA — to enforce trade tariffs.  You can read the full article here.

What exactly are tariffs anyway?

Tariffs are collected at the time an item is imported into the United States, and basically operate as a kind of tax on imported items of foreign manufacture.  In addition to serving as a source of revenue for the government, tariffs also serve to protect and stimulate domestic industries because they make foreign items more expensive.  They also serve as a tool of international diplomacy, because lower tariffs can be dangled before other countries to encourage them to come into line with American priorities.

Tariffs, of course, are nothing new and evidence of them has been found in the ancient Greek city-state of Athens.  In the United States — where the government initially had no authority to tax  — tariffs were a major source of revenue after the Tariff Act of 1789.  The Trump administration, however, has made tariffs a central part of its efforts to stimulate domestic manufacturing, and has done so to a much greater extent that past presidential administrations.  At the time of this writing, it appears that the government is in the process of working out the exact levels of tariffs to be imposed, and there is still a great deal of speculation about the exact form — and amount — any new tariffs will eventually take.

But there is one thing about which no one needs to speculate:  as tariffs increase, there will be a increased incentive to cheat…and enforcement of the tariffs will require qui tam relators and their counsel if they are to be effective.

What is the link between the qui tam provisions of the federal False Claims Act and tariffs?

Tariffs are assessed at the time the item is imported into the United States and are based on the ad valorem value of the items.  In other words, the tariff is calculated as a percentage of the value of the item.  This makes it possible to avoid customs duties in two main ways:  first, by under declaring the value of the items at the time of import and, second, by misrepresenting the items as something other than what they are.

The federal False Claims Act is, therefore, specifically useful for tariff enforcement because it incentivizes individuals with knowledge of wrongdoing to come forward and file a qui tam action.  The U.S. Customs and Border Patrol is responsible for collecting tariff duties on all imported items, and it does so by requiring all importers to file a CBP Form 7501.

This is the document that serves as the “claim” to the United States.  As I tell people nearly every week, my approach to FCA cases is always to find the “claim” at issue and work backwards from there.  The specific false claim that would be found in the CBP Form 7501 would fall under 31 U.S.C. §3729(a)(1)(G) which makes it illegal to “knowingly make, use, or cause to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government…”.

This type of false claim is often called a “reverse false claim” because it concerns making a false or fraudulent claim to avoid paying money to the government, instead of making a false or fraudulent claim to obtain money from the government.

As a result of the truly massive volume of imports that come into the United States every single day, customs officials are unable to inspect every single container and therefore rely on the honesty of importers when filing their CBP 7501.  Virginia is home to some of the busiest deep-water ports not only in the United States but in the world; in 2022 the Virginia Port Authority recorded a record-breaking 3.7 million twenty-foot equivalent units or “TEUs”.  Each ship that comes into Norfolk holds, on average, about 15,000 of these units.  Enforcement of tariffs by the men and women of the CBP would simply be unthinkable — there simple isn’t enough manpower to comb through 3.7 million TEUs each year.

But a qui tam relator, on the other hand, has personal knowledge of wrongdoing and can streamline enforcement of any new tariffs instituted by the Trump administration.  As I said in the Virginia Lawyers Weekly article, Virginia qui tam lawyers are well-positioned to bring these cases, as Virginia has some of the highest-volume ports in the world.

We should see an uptick in these types of claims fairly soon…stay tuned readers!

 

Virginia False Claims Act Lawyers

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Recent False Claims Act Developments

By Zachary Kitts on March 4, 2025 in , , , ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

Recent False Claims Act Developments

As regular readers know, qui tam provisions — which allow a private citizen to bring suit in their own name as well as in the name of the government — are an ancient tradition of the English common law and are, in fact, older than the United States.  Although the qui tam provisions of the false claims act are an ancient concept, the colonial governments of the New World established qui tam statutes on an unprecedented scale, in part because the large territories and sparse populations under their control made effective law enforcement difficult to say the least.

Despite this historical — and Constitutional — pedigree, from time to time defendants have attempted to raise various constitutional arguments against the qui tam provisions of the false claims act.  With a single recent exception in a single U.S. District Court, those arguments have universally fallen flat.

Today’s post is part one of a two-part post, and outlines a brief history of qui tam/false claims act litigation; part two of this series we will take a look at the recent opinion and what is likely to happen next.

Historical Background to the Qui Tam Provisions of the False Claims Act

Following the American Revolution and the adoption of the U.S. Constitution, the First Congress enacted numerous laws with qui tam provisions. See Bowsher v. Synar, 478 U.S. 714, 723-24 (1986) (acts of the First Congress “provide[] contemporaneous and weighty evidence of the Constitution’s meaning since many of the Members of the First Congress had taken part in framing that instrument”).  In U.S. ex rel. Marcus, the Supreme Court held that “[s]tatutes providing for actions by a common informer, who himself had no interest whatever in the controversy other than that given by statute, have been in existence for hundreds of years in England, and in this country ever since the foundation of our government.” United States ex rel. Marcus v. Hess, 317 U.S. 537, 541 n.4 (1943).

Virginia, like most of the other original colonies, has had many laws with qui tam provisions during her long history.  The first published qui tam opinion in Virginia legal history seems to have occurred under the Colonial Courts, in the 1730 case of Churchill v. Blackburn.  Indeed, before the year 1900 there were at least 34 qui tam cases in decided in Virginia that resulted in published opinions, including Commonwealth ex rel Walker v. Southern Express Company, 92 Va. 59, 22 S.E. 809 (1895).

In Southern Express, the relator – unceremoniously referred to therein as the “informer”— brought suit to enforce a penalty under sections 1215 and 1220 of the Virginia Code of 1887, which set a rate for rail carriers and prohibited rail carriers from charging fees in excess of a certain amount.  Section 1215 set forth the allowable fee rail carriers could charge, and section 1220 allowed any person who found a carrier charging more than the set amount to come forward, prosecute the case, and receive half of the fine.  At that time, the fine was a steep $100.  In today’s dollars, after inflation, that fine would come to just under $4,000.

A Look at the Recent Developments

As I said in the introduction, despite this long and historical pedigree, from time-to-time defendants have raised various arguments against the constitutionality of the false claims act and its qui tam provisions.  With one very recent exception in a single district court, these arguments have universally met with a signal lack of success.

Constitutional attacks on the law are primarily based on three theories.  The first argument was that relators lacked “standing” under Article III of the Constitution because they sued for an injury suffered by the United States and not for an injury they suffered themselves.  Second, some defendants argued that the qui tam provisions violate Article II of the Constitution because they infringed on the Executive Branch’s authority to “take care that the laws be faithfully executed.”  Third, some defendants have argued that the FCA is unconstitutional because Article II gives the Executive – and not the Legislative – power to appoint officers of the United States.

For decades every court that considered these challenges upheld the constitutionality of the false claims act’s qui tam provision.  See United States ex rel. Stone v. Rockwell Int’l Corp., 282 F.3d 787 (10th Cir. 2002); Riley v. St. Luke’s Episcopal Hosp., 252 F.3d 749 (5th Cir. 2001) (en banc); United States ex rel. Taxpayers Against Fraud v. Gen. Elec. Co., 41 F.3d 1032 (6th Cir. 1994); United States ex rel. Kelly v. Boeing Co., 9 F.3d 743 (9th Cir. 1993); see also United States ex rel. Kreindler & Kreindler v. United Techs. Corp., 985 F.2d 1148 (2d Cir. 1993).  These courts all concluded that the Act does not offend the separation of powers principle because the Executive Branch retains sufficient control over qui tam litigation and because qui tam relators, who pursue only one individual case, are not officers of the United States and do not exercise government power.

The Polansky Opinion Kicks Off a New Round of Challenges

The June 2023 Supreme Court decision in U.S. ex rel. Polansky v. Executive Health Resources, Inc. 599 U.S. 419,143 S.Ct. 1720 216 L.Ed.2d 370 (2023) kicked off the most recent battle.  Stay tuned for Part Two of this post!

 

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The federal False Claims Act is Important because it reduces corruption in American Society

By Zachary Kitts on October 6, 2022 in , , ,

Russian tank destroyed by Ukrainians when it ran out of gas

 

 

 

 

 

 

The federal False Claims Act limits corruption in American Society

As this blog has discussed before, people tend to get distracted by the (sometimes) enormous sums of money the United States recovers using the federal False Claims Act.  While this is understandable — and certainly the money is important and the government itself likes to do press releases  about the total amount of money it recovers each year — it is important to stop every so often and look at the real importance of the federal FCA, which in my opinion is limiting corruption in the United States, and preventing corruption from becoming part of American culture.

The on-going war in Ukraine shows clearly why the elimination of fraud is an important objective.  The Russian invasion of Ukraine has faltered for many reasons, but chief among them is the simple fact that the Russian Army is   — like Russian society in general — corrupt at every level.

Backdrop of the War in Ukraine

As most readers will know, on February 24, 2022 Russia invaded Ukraine launching the first true war on the Eurasian landmass since World War II ended in 1945.  As any student of history and culture knows, a strong, credible, argument can be made that the Russians are some of, if not the, most brutal people on earth.

And of course armies are the product of their particular society, which means the much-feared Russian Army is made up of the most brutal people on earth.  On top of this, the Russians in general boast cutting-edge technological know-how and ability.

And the Russian Federal is more or less controlled by a single man, Vladimir Putin, in what some have called “a willing dictatorship.”  Unlike the Soviets before him, Putin never had to put up a wall to keep Russians from leaving and, until recent events, there was little true evidence of serious discontent in Russian society.

Putin is also a product of the cold-war era KGB with all that that entails.  One does not rise to the top of an organization like the KGB without being ruthless, brutal, and politically smart.  He certainly killed or had people killed and he may or may not have completed secret work for the KGB in New Zealand under a false name.

The President of Ukraine, by way of contrast, made his name playing Paddington the Bear and winning Dancing with the Stars.  You can see how everyone thought this would go at the start.  President Zelensky and his government were expected to fold effortlessly — like an expensive, well-maintained lawn chair — and head for the west, where they all could have accepted university positions and spent the rest of their lives writing books and earning speaking fees.

But that is not what happened.  Zelensky stood and fought, and the rest of Ukranian society took their cue from him.  This kind of thing is unusual in places like Ukraine, by the way.  It is well known that in certain cultures people in positions of power who start a war use their power to keep themselves (and their loved ones) safe and well out of harm’s way after the shooting starts.  But Zelensky stayed put, and so did his wife and children…they vowed to all die together.

Ukranians, and the rest of world, were inspired by this.  As a result, not only did the Russian army fail to take the capital and topple Zelensky’s government, but after less than one month of fighting the Russian advance stalled and was unable to do anything other than sit back and lob rockets and artillery rounds at civilians.

And now, as this post is written, the Ukranians are on the offensive and have regained thousands of square miles of territory and multiple cities and villages previously held by the Russians.  In fact, the Russians have been pushed out of some of the very territories that they purported to annex this month.  It is tough to see how 97% of the population supposedly endorsed the Russian annexation…

The Russians are certainly backpedaling, but Putin has  called up several hundred thousand reserves;  furthermore, anyone who knows their history know that it is a major error to count the Russians Army — or the Russian people — out.

Major failures almost always have multiple causes, and this war is no different.  The Russian invasion has failed for lots of reasons, but corruption is a key factor.  That Russian tank you see featured in this post?  It was destroyed by Ukranians when it ran out of gas and was abandoned by its crew.

Corruption in the Russian Army

It is well-known that corruption is endemic in Russian society.  As I mentioned above, an Army is a product of its society, so it should come as little surprise that the Russian Army is largely corrupt.  But the word corruption is an emotionally-laden term that has many uses.  So what do I mean?

Google has given me two very nice, very complementary, definitions of the word “corruption:

1. dishonest or fraudulent conduct by those in power, typically involving bribery.
2. the process by which something, typically a word or expression, is changed from its original use or meaning to one that is regarded as erroneous or debased.
I would combine these two definitions into something like “the process by which those with authority are diverted or distracted from their original duties by efforts to benefit themselves.”

As I have written before, we tend to think only of powerful, wealthy people as corrupt.  And it is true that as the old Slavic saying goes, “A fish always start rotting at the head.”  But in society generally (and especially in a unique, insular culture like the military) when the people at the top are corrupt, the people right below the people at the top also become corrupt, perhaps because corrupt people tend to hire only hire other corrupt people, or perhaps out of necessity to survive.  So then the people right below them become corrupt, and so on ad infinitum all the way to the lowly private right at the bottom.

Most people agree that the entire Communist Block was rife with corruption.  And as we know two things based on human experience:  first, once a culture of corruption is imbedded in a society, it is very difficult to dislodge; and second, once imbedded, a culture of corruption will not remain static, but will get worse.

In 1995 the Los Angeles Times reported that Russian infantrymen were selling rifles, hand grenades, and even rockets to the Chechen guerillas they were supposed to be fighting.  (In an addition sign of corruption the L.A. Times says that the infantrymen extracted promises from the rebels that they would only shoot officers.)

According to the L.A. Times article, when the Russians were unable to sell their equipment, they would simply throw it away.  This is most definitely a type of corruption as well…

So we should not be surprised, when we see videos of Russian soldiers given food that is years out of date.  When we read reports from 2011 that fraud and corruption had become an epidemic in the Russian military, we can be certain that it has only gotten worse over the last eleven years.

And its so easy for those in military positions to be corrupt.  A major part of military affairs is logistics — food, water, gasoline, weapons, radios, bullets, batteries, vehicles, boots, tires, socks, etc., etc.  And all of these things have a high street value or black market value.

Retired Army Lt. Gen. Ben Hodges put it this way in an interview with U.S. News:

“These are the kinds of things that are the result of either total incompetence or corruption: false reporting, people signing off on things that actually don’t meet standards, and of course the individual Russian soldier. It’s legendary the stealing that they do…”

A fish might start rotting at the head but the rot always grows.

To be fair, the existence of the federal FCA is not all that is required.  Certainly Putin or anyone else could pass a law styled after the FCA, but it would be dead in the water because Russia lacks a robust legal system — that is, fair and impartial courts and a group of dedicated professional lawyers (inside and outside the government) who prosecute these cases.

So with every single False Claims Act settlement I see, I sleep just a little bit easier at night, because I know a seed of corruption has failed to take root in our country.

Virginia False Claims Act Lawyers

 

 

 

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Blog Author Zachary Kitts Announces Second-Largest Settlement in Virginia for 2021

By Zachary Kitts on April 15, 2022 in , , , , , , ,

picture of Va Lawyers Weekly image for top settlements of 2021

 

 

 

 

 

VaQuiTamLaw.com Announces Qui Tam was Second-Largest Settlement for 2021

The results are in folks, and I am pleased to announce that my firm’s previously-announced qui tam settlement in United States ex rel. Bishop v. Level 3 Communications, et al. was the second-largest settlement in Virginia for 2021 according to Virginia Lawyers Weekly.  The total settlement on behalf of the United States — as reported to Virginia Lawyers Weekly, more on that below — was $12,772,843.00.  This puts us well behind number one, which was for $18.7 million — and congratulations, by the way, to Robert Redmond and his powerhouse team at McGuireWoods for this achievement…

Each and every year, Virginia Lawyers Weekly compiles the largest civil settlements in Virginia and publishes the list in a special issue.  It is always nice to find your case on the list — as I have in 2012, 2017, 2018 and now 2021 — and in qui tam practice this is not only for the obvious financial reasons.  If you practice in the area of qui tam litigation, it is nice to find a qui tam case on the list — whether it is mine or someone else’s — because it establishes the world of qui tam practice just a bit more in the legal world.

Background: Qui Tam Practice Under the federal False Claims Act

As regular readers know, qui tam cases are cases brought under a statute like the federal False Claims Act — or a comparable state statute like the Virginia Fraud Against Taxpayers Act — that allow any person with knowledge of fraud or false claims on a government entity by another “person” to bring a case 0n their own behalf and on behalf of the government.

Because a litigant is bringing a case not only in her own name but also in the name of the government, these cases require a number of unusual procedural hurdles.  Among those unusual hurdles, cases are filed under seal and served only on the government (or governments, as the case may be).  The government then does its own investigation and determines whether it wishes to intervene (and take control of the case) or decline to intervene and let the relator proceed on his or her own.

As a reward for bringing the case, the relator receives a percentage of the government’s recovery.  The percentage varies depending on several factors, primarily whether the government intervenes or not.  If the government intervenes, the relator’s recovery ranges from a low of 15% to a maximum of 25%.  On the other hand, if the government does not intervene, the relator has the right to advance the litigation on his or her own; in a non-intervened case the relator’s reward increases to a minimum of 25% and a maximum of 30%.

On top of these amounts, the relator is also entitled to receive her “reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees and costs.”

The results in United States of American ex rel. Stephen Bishop v. Level 3 Communications, LLC, et al.

As the Bishop case illustrates better than most, there is no such thing in this world as a free lunch.  There is no free lunch because although recoveries in these cases can be quite large, they are neither easy nor quick.  Relators and their lawyers earn every dollar they make, and they might have to wait quite a long time…

The case was originally filed in November of 2013.  As might be predicted, a complex case resulted in a complex investigation.  The defendant in the civil qui tam case, Level 3 Communications LLC, is a “tier-one internet provider,” which means they construct, own and maintain the physical infrastructure of the internet.  During his employment with Level 3, Stephen Bishop learned that his superiors in Level 3’s senior management had paid (and received) bribes and kickbacks and had conspired with several non-Level 3 employees to submit false claims to the United States. When Bishop’s efforts to stop these frauds internally within Level 3 failed, he resigned his employment and hired counsel for this qui tam lawsuit.

The federal Anti-Kickback Act (41 U.S.C. § 8702) makes it illegal for any contractor or subcontractor to pay or receive a kickback or bribe in connection with the award or performance of any federal contract.  This case was actionable under the federal False Claims Act because paying or receiving a kickback or bribe renders subsequent invoices to the government “false,” as the United States does not pay claims tainted by kickbacks or bribes.

The investigation eventually resulted in four parallel criminal indictments in October 2017 — Level 3 executives Tim Donelson and Ron Capallia were indicted along with a government employee named Kekoa Lumho and Level 3 subcontractor William S. Wilson.

Of those four criminal indictments, defendant Tim Donelson committed suicide just before the original trial in October of 2018.  Another Level 3 executive, Ron Capallia, pled guilty more or less right away and cooperated with the government.  Capallia and Wilson elected to go to trial.  The first attempt resulted in a criminal mistrial at the end of October 2018.

The retrial began on June 4, 2021, and the jury returned guilty verdicts on June 24, 2021, after less than a full day of deliberations.  Defendants Lumho and Wilson received stiff prison sentences earlier this year.  Lumho got 7.5 years and Wilson got 15 years…

The United States also intervened in the civil case, and Mr. Bishop received 23% of the government’s recovery or $2,937,753.96.  On top of that, my firm received an additional $255,000.00 for attorney’s fees, costs and litigation expenses under 31 U.S.C. §3730(d), which brought the total settlement amount to $13,027,843.  This was still not enough to get us up to number one this year, however…

Conclusion

I would like to thank all of the government lawyers who worked so diligently and for so long on this case, especially AUSAs Gerard Mene and Krista Anderson.  In particular, Krista did a great job when, in 2021, she became the third civil AUSA to be assigned to this case…Gerard and Krista not only delivered a great result, but they did it with style and class and top-notch professionalism…

 

Virginia False Claims Act Lawyers

 

 

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K&G Law Group Announces Partial Settlement of Qui Tam Action for $12.7 million (Part I)

By Zachary Kitts on June 25, 2021 in , , , ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

FOR IMMEDIATE RELEASE — JUNE 25, 2021

I am happy to announce the partial settlement of my longest-ever running qui tam case — United States ex rel. Stephen Bishop v. Level 3 Communications, Inc., et al. for $12.7 million.  The civil settlement agreement was actually effective earlier this month, but I wanted to wait until the criminal re-trial — which began on June 8 and ended on June 24 — was complete to do this blog post.

The United States Attorney’s Office for the Eastern District of Virginia also waited to do its official press release about the civil settlement until the criminal trial was over.

And, what do you know: last night (i.e., after less than one full day of deliberation) the guilty verdict came against the two remaining criminal defendants, one of whom, William S. “Bill” Wilson, is also a defendant in my First Amended Complaint filed in June of 2014.  The other criminal defendant, Kekoa Lumho, was an employee of the DoD-OIG and was thus not a potential party to my qui tam.

The settlement is a partial one because the civil qui tam against Wilson was on hold pending the outcome of this criminal trial.  Now that that part is we can move forward with the qui tam claims against Wilson.

Background to the Civil Qui Tam Settlement

The defendant in this civil settlement, Level 3 Communications, Inc., is one of only six tier-one internet services providers in the world — in other words, they are one of only six companies that construct, own, maintain and extend the physical infrastructure of the internet.  Level 3 earns its living by charging tolls for the use of its infrastructure.

This naturally makes the United States Government quite involved in Level 3’s work.  Not only is Uncle Sam a major customer of Level 3, but the maintenance, construction — and above all extension — of broad-band internet is at the top of Uncle Sam’s list of priorities.

During his employment with Level 3 my client Stephen Bishop (who served as a Senior Program Manager for the Level 3 federal sector) became aware that his supervisors — Timothy Donelson and Ron Capallia — had received bribes and kickbacks and had conspired with DoD-OIG employee Kekoa Lumho as well as the owner of a Level 3 subcontractor to submit false claims to the United States.

When Mr. Bishop’s efforts to stop these frauds internally within Level 3 failed, he resigned his employment and hired counsel for this qui tam lawsuit.  He came to me in the fall of 2013 and we filed the case in November of that year.

Yes, that means this case took almost eight full years to resolve…and yes, there is a backstory there…but first my theory of the case.

Interplay Between Violations of the Anti-Kickback Act (41 U.S.C. § 8701) and the federal False Claims Act

Mr. Bishop’s case turned primarily on the payment and receipt of bribes and kickbacks by Level 3 executives — and the mischief that always seems to flow from (or maybe it follows) people who pay and receive bribes and kickbacks.

If you think I am over-stating the case about mischief following bribes or kickbacks, just look at this article in from the on-line publication Wireless Estimator back in 2017.  People who start out with bribes and kickbacks always seem to “graduate” to more serious criminality.

The federal Anti-Kickback Act (41 U.S.C. § 8702) makes it illegal for any contractor or subcontractor to pay or receive a kickback or bribe in connection with the award or performance of any federal contract.  Paying or receiving a kickback or bribe renders subsequent invoices “false” as defined in the FCA because the United States does not pay claims tainted by kickbacks or bribes. Such claims are, therefore, ineligible for payment — or at least that was my theory of this case.

Stay tuned dear readers, more to come…

Virginia False Claims Act Lawyers

 

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PRESIDENTIAL IMPEACHMENT PART II OF II: WHAT’S PAST IS PROLOGUE

By Zachary Kitts on February 7, 2020 in ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

BOOK REVIEW:  AN AFFAIR OF STATE:  THE INVESTIGATION, IMPEACHMENT, AND TRIAL OF PRESIDENT CLINTON by Judge Posner

(Part Two of Two)

 

In Part One of this book review, we covered the distinction Judge Posner draws between private morality and public morality, and the importance of that distinction for Presidential Impeachment and legal ethics.  There is a bit more to cover on this topic, especially as it factors into the decision to impeach Clinton.

To sum up the final section of Part One of this review, I left off by describing Posner’s distinction between private morality and public morality.  Private morality is what we expect from our friends, neighbors, family, coworkers, employees, business associates, etc.  We expect them to abide faithfully by the agreements they make, and we consider it a serious breach of private morality if they knowingly and intentionally lie to us.  Also if someone has a known history of failing to abide by their agreements, we think carefully and perhaps think again before we allow this person into our private lives.

On the other hand, we expect our elected officials to lie if it serves the aims of their office and the aims of the country as a whole.  The example I used is international diplomacy – few if any Americans have a problem with the fact that international treaties are frequently ignored or even broken outright as soon as they no longer serve the interests of the United States, and it is safe to assume that we not alone in this regard.

Posner goes on to point out that breaches of private morality by an elected official can, however, rise to the level of a breach of public morality, but even this alone would not suffice to measure the importance of a President of the United States.  Posner allows that in some (perhaps many) situations a President’s moral flaws could well be balanced out by extraordinary executive talent such that any moral failings should be ignored.  Indeed, seen in this light, the mere fact that a President is a liar (or possibly even a criminal) is not, in and of itself, grounds for impeachment.

Posner spends considerable time compiling an impressive list of Clinton’s undeniable talents and then weighs those talents against his moral failings; I will not describe this balancing test here, but this part of the book is especially well-worth the read.

The Undercurrent of Emotionality, the Mystery of Why Conservatives Hated Clinton So Much, and the Failure of the Public Intellectuals

This all feeds directly into an important theme of the book – namely, why conservatives hated Clinton so much.  On the facts of his presidency, there is no reason why conservatives should have hated him.  He governed from a position that was decidedly right-of-center, and he did so in a way that would be impossible for a Democratic president today.

In my own personal recollection of the Clinton presidency, I seem to recall him being “taken out to the woodshed” by Congressional Republicans (and the electorate, who gave the GOP major gains in the 1994 Congressional mid-term elections) over his failed national healthcare law; but, after that, he seemed to have learned his lesson and chose to work with the Republican majority rather than spend the remaining years of his presidency resigned to irrelevance, as Presidents of both parties (and their voters) seem to prefer today.

The list of conservative objectives that Clinton endorsed and pursued following his failed try at healthcare reform is long.  He may well have been even more to the right than a second-term George Bush would have.

In addition to asking why Republicans hated Clinton so, we have to ask: Why did liberals love him?  Prior to the Lewinsky scandal, true leftists in the Democratic party had been at best lukewarm to Clinton, for understandable reasons.  Clinton compromised on everything important to the true leftist — and sometimes he eschewed them completely.

Just as true leftists were not excited about Clinton prior to the Lewinsky scandal, neither were true conservatives enraged.   True enough, there were a small number of true “Clinton haters” kicking around in conservative intellectual circles almost right from the start of his Presidential candidacy.

So how did society go from that to the frenzied and irrational “debate” that followed?  Posner’s answer to this question is compelling and fascinating — and it holds a great deal of relevance to our current political situation; more than that, it is a helpful introduction to human (and political) conflict generally.  The chapter mainly devoted to this analysis is entitled The Kulturekampf.

Given Posner’s analysis of the complex moral and legal issues at work in the Clinton Presidential impeachment, he is not surprised that the Clinton impeachment led to passionate debate among Americans and especially among the intellectual element of our society.  What does surprise him is the emotional nature of the disagreement, and

…the tone in which the issue has been debated, and the recklessness with which many intelligent people, including many academics, took sides passionately and dogmatically before it was possible to know what the facts were, their refusal to face the facts when they became known, their unwillingness to concede any merit to any points made by opponents, their proneness to exaggeration, distortion, and oversimplification, and the sheer unreason demonstrated by so many of the people who became caught up in the public debate…

 

At some point as the Independent Counsel’s investigation moved forward and uncovered more and more evidence of wrongdoing, the left united behind Clinton completely and the right united against him.  This Posner attributes to the “pluralistic sexual morality found in the United States,” and the fact that Clinton’s behavior “forced these attitudes into articulate competition.”  He continues:  “if the Right had been content to criticize Clinton’s conduct, even his sexual conduct, the Left would not have reacted so fiercely.  The Right wished instead to label and condemn him as a representative of a style of life that is common to many liberal academics, urban sophisticates, and unregenerate members of the generation of the 1960’s.”

 

When we add to the mix what Posner describes as the “radical feminists, Hollywood bohemians,” and  “libertines” that quickly joined the Clinton ranks, we begin to understand how the Clinton coalition appeared to many average Americans as an ungodly “Axis of Evil” that more or less replaced the Kremlin as the new American enemy.  As the “mess” (and that is indeed what Posner repeatedly calls it) got bigger, both sides quickly became “frenzied and irrational.”

THE FINAL TWO CHAPTERS

In a book full of important insights into human nature, some of the most important are in the final two chapters.

Posner points out that, psychologically, people have a hard time liking and disliking the same person (or group, or movement) at the same time.  We want people to be all one thing or all the other; as any observer of individual people will tell you in any given circumstance, that is not realistic.  (I myself learned this during my clerkship in the Circuit Court for St. Mary’s County Maryland during numerous criminal sentencings, when convicted criminals are allowed to introduce testimony and evidence of their redeeming qualities.  As an inexperienced young lawyer, I found it amazing that every single criminal had done at least something that was undeniably good and selfless in their lives).

But human beings want to see everyone as all one thing or all the other – and since we couldn’t agree with each other on which one of these Clinton was, we found ourselves in mutually uncomprehending, warring camps.

The remainder of the book is also fascinating for its parallels between war and intense political disagreement — but I will forgo that here.  (Just as in Part One, I had to forgot much of the fascinating discussion of the legal standards for Presidential Impeachment).

On top of all this, the book is a compelling read — you will find it hard to put this book down.

 

Virginia False Claims Act Lawyers

 

 

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PRESIDENTIAL IMPEACHMENT AND LEGAL ETHICS: WHAT’S PAST IS PROLOGUE

By Zachary Kitts on February 6, 2020 in ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

BOOK REVIEW:  AN AFFAIR OF STATE:  THE INVESTIGATION, IMPEACHMENT, AND TRIAL OF PRESIDENT CLINTON by Judge Posner

Today we take a break from our regularly scheduled programming about qui tam claims under the federal False Claims Act.   We will look at some more general stuff about lawyers, litigation, legal ethics, courts, and government as we sometimes do.  This I will do in the form of a book review — only the second I have done in the more than 12 years of this blog.  While the book does not pertain directly to false claims litigation, it is something that should be of interest to lawyers and laypersons alike; the book is AN AFFAIR OF STATE:  THE INVESTIGATION, IMPEACHMENT, AND TRIAL OF PRESIDENT CLINTON by Judge Posner.

The relevance of this book to current events should be apparent and, indeed, that is one of the reasons why I decided to read it in the first place.  But I was not prepared for how relevant a book about the last Presidential impeachment imbroglio would be to the current impeachment imbroglio, especially in terms of the legal ethics involved.  In retrospect this should not have been surprising.  For one thing Presidential impeachments have been very infrequent events; there are only three examples in the history of the United States – at the time Posner wrote this book there were only two – which means each Presidential impeachment will be relevant to every other Presidential impeachment.

Perhaps if we had had a dozen or so Presidential impeachments, they could be organized into various subcategories. (By now I assume, by the way, that most Americans understand that Nixon doesn’t count as a Presidential impeachment because he resigned before he could be convicted in the Senate.)

Second, I consider Judge Posner one of the most astute observers of  society.  His interests extend far beyond law and legal ethics and reach more or less every area of human endeavor.  I would wager, therefore, that he had a hunch that Presidential impeachments (and perhaps political messes) were going to be more frequent in the future.   (Indeed, he discusses the idea of “post-electoral politics” in the book).

Finally, I shouldn’t have been surprised because, as King Solomon states in Ecclesiastes 1:9: The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.

Any review of a book by Judge Posner should begin with a quick discussion of his career.

BACKGROUND ABOUT RICHARD A. POSNER

I provide this background about Judge Posner for my non-lawyer readers, because I am confident that all lawyers are at least familiar with his name and the fact that he was (is) one of the most respected Judges in the history of the English system of laws.  It turns out, however, that defining Judge Posner is not as simple as that.  From one point of view, of course, he was a federal appellate Judge who sat on the Seventh Circuit Court of Appeals from 1981 to 2017.  During that time he authored around 3,400 (!) opinions, and he did so with verve and a style all his own.

But to describe him as a very influential Judge and stop there does the man an injustice.  By his own admission (found in William Domnarski’s fine biography) judging was never more than a “day job in the Hollywood sense.”  In addition to his demanding day job, he maintained a lecturer position at the University of Chicago School of Law and authored hundreds of law review articles during that 36-year period.  He is in fact the most frequently cited legal scholar of the 20th century.

On top of all that he has written more than 40 books on a range of topics only tangentially related to law, including books about sex, plagiarism, asteroids, English literature, and … the impeachment of President William Jefferson Clinton, which is the subject of this book review.

THE BOOK ITSELF

Judge Posner’s book was published in 1999, only months after Clinton was acquitted in the Senate.  In the introduction, he notes that he began writing the book in October of 1998 and finished in February 16, 1999, a mere four days after Clinton was acquitted in the Senate.  As he further notes in his introduction – and I agree with him – this proximity to the actual events avoids some of the usual problems associated with historiography, such as hindsight bias.

This brings me to the topic of Judge Posner’s writing style.  In his written opinions, as well as in his books, he takes a unique approach to writing.  His approach to judging and writing is, I believe, calculated to force lawyers and judges to rethink how they approach (and write about) the law.  He was famous for refusing to use the much-maligned Blue Book of Legal Citation; instead, he prepared his own citation manual, which was two-pages long.  The Posner citation manual was itself attached to a law review article that was about 10 pages long.  We will return to his writing style again and again throughout this review, by the way, because there is no way to separate the man (or his work) from his style.

ORGANIZATION OF THE BOOK

Posner (kind-of) eschews the usual detailed organization of a book of this length.  (It is just under 300 pages).  His book is instead organized into only eight chapters, each of which has its own subparts that are unlisted in the table of contents.  The eight chapters are: (1) The President’s Conduct; (2) Prosecution and Defense; (3) The History, Scope, and Form of Impeachment; (4) Morality, Private and Public; (5) Should President Clinton Have Been Impeached and If Impeached Convicted? (6) The Kulturkampf; (7) Lessons for the Future; and finally (8) The Balance Sheet.

The book is much more than a mere narrative of the ordeal; although some form of narrative is necessary, the narrative is largely limited to Chapter 1, which primarily covers the public record (i.e., the 8,000 pages of Ken Starr’s investigation).  The book also covers, in various sections, the actual crimes (there are some serious ones) committed by Clinton (and whether those crimes would be prosecuted if Clinton had been anyone other than the President); the legal and procedural standards for Presidential impeachment; the range of punishments possible for a President who is impeached; the performance of the lawyers involved in the case … and the golden stripes on the shoulders of Chief Justice Rehnquist’s black robe.

You read that right: Chief Justice Rehnquist’s robes – famously adorned with four yellow stripes on each sleeve – get a penetrating analysis in one of Posner’s intellectual wanderings.  These wanderings, by the way, are one of the most fascinating and engaging elements of Posner’s style – he writes in a manner that is at the same time highly organized and stream-of-consciousness; it must be seen to be believed.

Judge Posner writes: “Judges, including the Justices of the Supreme Court have, for as long as anyone can remember, worn plain black robes.”  (It feels a bit tawdry to say this, but he may in fact be wrong about judicial robes being only black.  The Judges of the Maryland Court of Appeals wear red robes — actually, they are scarlet and not red — and have been so adorned since 1976.

The adoption of red robes in 1976 was in recognition of the bicentennial of the United States and — perhaps paradoxically — of the prior use of red scarlet robes by Judges in Colonial America.

According to a history of these robes, then-Chief Justice Taney recollected that when he had been sworn into the bar around 1796:

             “The first session of the General Court, after I went to Annapolis, made a strong impression upon me. The three judges, wearing scarlet cloaks, sat in chairs placed on an elevated platform; and all the distinguished lawyers of Maryland were assembled at the bar.”  

For the sake of completeness, a history of Judicial Robes compiled by the Maryland Court of Appeals contains some evidence that Judges in Massachusetts and Maine also wore scarlet robes in the 1760’s.

At any rate, Posner shares his opinion about Rehnquist’s robe in plain language that is a little surprising at first.  After all, at the time this was written Posner was (I think) the Chief Judge of the Seventh Circuit Court of Appeals and Justice Rehnquist was the Chief Justice of the United States Supreme Court.

It therefore took guts, I think, to write:  “The most solemn form of American trial was thus presided over by the highest judge in the land dressed in a funny costume.”  And in the conclusion he returns to Justice Rehnquist’s costume when describing the “high drama” of the “Clinton mess” as “Wagnerian in intensity and protraction.”

But then, why would he not share his opinion about Rehnquist’s robe?  What could Rehnquist or anyone else really do to Judge Posner at that point?  I suppose they could give him the cold shoulder at Judicial Conferences and so forth…but that’s about it.

THE MAIN POINTS OF THE BOOK

Because many of the chapters overlap, I have organized the remainder of this book review around what I see as the central themes of the book and its most important contributions to …. To what?  To our system of laws?  To our system of government?  No, this book is a contribution to American society.

The Crimes Committed by Clinton and whether those crimes would be prosecuted if Clinton had been anyone other than the President

 Judge Posner points out early on how Clinton, his legal team and their “fellow-travelers” among public intellectuals were able to successfully muddy the waters about the true nature of the impeachment.  Posner also spares no one in his critical analysis of the various arguments offered.     

Chief among his targets are the public intellectuals.  He notes that the public intellectuals involved failed to contribute anything constructive to the debate; he describes wild public statements made by both left-leaning and right-leaning commentators and then picks those statements apart to show their complete irrationality.

And the answer is yes, normal people do get prosecuted for what Bill Clinton did, all the time.

The Distinction (and Similarities) Between Private Morality and Public Morality: Politicians are Expected to Lie

This books is fascinating for its discussion of the distinctions (and similarities) between private morality and public morality.  Posner points out (and I assume that no thinking person would argue with this) that political leaders generally – and the President of the United States specifically – must lie when necessary and must therefore commit serious breaches of private morality in order to fulfill their duties.  An example that comes to mind is one of international diplomacy.  No thinking person believes that any nation-state enters into a treaty with another nation-state for any reason other than its own selfish interests.  Human history is replete with evidence for this proposition, as well as another important proposition:  once a treaty is in effect, the nation-state parties generally continue to abide by it only as long as the results continue to be in the interests of the nation-state.  Treaties are ignored and even broken outright, and not only when it is necessary, but whenever it is convenient for one of the parties.

Individual citizens of the various nation-states expect (in fact demand) that their leaders will break the rules of international treaties, even though breaking ones’ promises is considered a serious violation of private morality.  So the fact that a President lies (and commits a breach of private morality) should not be surprising; it is rather a part of the job description.

The above example is a clear-cut one, but Posner goes on to explain that violations of private morality by a President can in some instances violate public morality.  In fact, he concludes that is exactly what Clinton did.

Not all Breaches of Private Morality by a Politician are Equal

Clinton’s lie about Monica Lewinsky was not the sort of lie people expect politicians to tell, and not only because it served no greater purpose than Clinton’s own selfish interests.  Rather, it serves as a clear-cut indicator that Clinton had a highly-flawed personality.

Another example Posner gives of Clinton’s poor morality is his (Clinton’s) unabashed involvement of other people – most of whom were drawing a government salary – in his violations of private morality.  Betty Currie, for example, who served as the President’s loyal personal secretary for many years before he became President, was mercilessly roped into the conspiracy by Clinton.

Any leader worth his salt should have refused to rope in such a loyal, low-level employee.  Clinton took advantage of Ms. Currie’s dedication and repaid her for her dedication by exposing her to enormous legal fees and the possibility of prison time.  But he didn’t do this once and he didn’t do it just to Ms. Currie, and the fact that Clinton did this time and again shows a truly ugly side to his personality.

Indeed, there are many ugly facets of Clinton’s personality, as the Clinton impeachment showed.  Another ugly facet was his continued lies even when no one believed him.  As Posner points out, everyone lies at some point in life.  To do so is not necessarily a breach of private or public morality.  Like a politician, every adult recognizes that lies of a certain type are in fact required in some situations.  But to continue to lie to everyone, even after no one believes you, and after your lies have been disproven by incontrovertible physical evidence – here the stain on Monica Lewinsky’s dress – shows a serious character flaw.

Moreover, to date Clinton has never, at any time, admitted any wrongdoing.  Just look at his confession:  he confessed to an “inappropriate relationship” with Lewinsky and to misleading his family, friends, subordinate officials and the American people.

As Posner notes, it is telling indeed that the American people were placed last in his contrition litany.

Stay tuned for Part Two of Two….

 

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Justice Department Recovers over $3 Billion from False Claims Act Cases in Fiscal Year 2019

By Zachary Kitts on January 17, 2020 in ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

False Claims Act Recoveries Top $3 Billion in Fiscal Year 2019

Last week the Department of Justice announced that federal False Claims Act recoveries topped $3 billion in fiscal year 2019.  This announcement of the annual totals has become something of a tradition at the Department of Justice, and many lawyers practicing in this area await it with great anticipation.

History is, I think, a combinaton of two elements: (1) relatively stable long-term trends, and (2) a more or less random series of events.  Many positive long-term trends in this area of law continued last year, as we will see in this post.

Long Term Trends in federal False Claims Act Enforcement Continue, Part I: FCA Cases Brought by Qui Tam Whistleblowers have the Best Results.

It is no surprise that Qui Tam cases continue to result in the lion’s share of FCA recoveries.  (As regular readers know, only cases brought by whistleblowers qualify as qui tam cases).  Of the $3 billion in settlements and judgments reported by the government in fiscal year 2019, over $2.1 billion came from lawsuits filed under the qui tam provisions of the False Claims Act.  That is, by my math, 70% of the government’s total recoveries.

And this is one long-term trend that looks to continue.  Last year, qui tam relators filed 633 cases in the 94 U.S. District Courts.  While this number has increased steadily over time, there was — if memory serves — one year not too long ago where about 1,000 cases were filed.

Long Term Trends in federal False Claims Act Enforcement Continue, Part II:  Healthcare recoveries.

Last year one of the key long-term trends in false claims act enforcement continued, in that health care recoveries were the largest part of the total.  Specifically, of the roughly $3 billion recovered, $2.6 billion of it was the result of health care fraud.  According to the press release, health care recoveries exceeded $2 billion for the tenth consecutive year.

A running total of the recoveries since the 1986 amendments breathed life back into the statute can be found here.

Long Term Trends in federal False Claims Act Enforcement Continue, Part III: Increased Liability for Individual Wrongdoers.

Wrongdoers continued to be individually liable in 2019.  This is a direct result of the continuing influence of the Yates memo (issued in 2015) which announced an increased focus on individual wrongdoers for the first time.

The press release discusses in particular the recovery of millions of healthcare dollars from the individual owners in the Osteo Relief Institutes, Vanguard Healthcare, and Diabetic Care Rx cases.  A little closer to home (and on the non-healthcare front) Luke Hillier (the former CEO of Virginia-based defense contractor ADS, Inc.) paid $20 million to settle allegations that he violated the FCA by fraudulently obtaining federal set-aside contracts reserved for small businesses.

Long Term Trends in federal False Claims Act Enforcement Continue, Part IV:  Non-healthcare Recoveries.

FY 2019 also saw some interesting non-healthcare recoveries.  Among others, the department recovered over $27 million from Northrop Grumman Systems Corporation (NGSC) in a settlement resolving False Claims Act allegations related to two battlefield communications contracts with the United States Air Force.  The settlement resolved allegations that NGSC billed the Air Force for labor hours by individuals stationed in the Middle East who had not worked the hours claimed.

In an interesting case from the Eastern District of Virginia, an Oregon aluminum extrusion manufacturer agreed to pay $46 million to NASA, the Department of Defense, and others to resolve criminal charges and civil claims relating to a 19-year fraud scheme that included falsifying thousands of certifications for aluminum extrusions provided to hundreds of government customers.

Other interesting non-healthcare cases come from the usual suspects, including underpayments of royalties for minerals and natural gas removed from federal lands, false certifications of compliance with environmental laws, and false claims to federal student loan programs.

Long Term Trends in federal False Claims Act Enforcement Continue, Part V: Qui Tam Whistleblower Recoveries in Non-Intervened Cases.

It was also nice to see the government include information on non-intervened cases like the one against Duke University.  That case is particularly note-worthy to fans of this blog because of its size ($112.5 million), its relator share of a 30%, and the fact that it was obtained by our good freind John Thomas at Hafeman Magee & Thomas.  So far as I know, a 30% relator share is unprecedented in a case of that magnitude.

Conclusion

It is indeed good to see all of these positive trends in FCA enforcement continue; stay tuned dear readers, for more updates to come!

 

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Federal False Claims Act Cases are not just about money

By Zachary Kitts on December 19, 2019 in

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

Federal False Claims Act Cases Are Not Just About Money

First off, I am — as regular readers know — a lawyer focusing on complex civil litigation.  Mostly, my cases concern the federal False Claims Act, the Virginia Fraud Against Taxpayers Act, and the false claims statutes of various states.  In each of those cases, I have a qui tam relator as my client — i.e., an individual with non-public knowledge of fraud on the government.

As part of my efforts to keep my clients focused on what we can do — as opposed to what we can’t do — I try to focus them on the money we can recover if our case succeeds.  This is for sound, practical reasons that have nothing to do with money.  Rather, it is because, as noted above, I am lawyer focusing on civil litigation.  We (that is, me and my clients) can’t raise the dead or heal the sick , and we can’t put anyone in prison on our own.  We also can’t fix large problems in society.

Instead, all that we can do is focus on the one case at hand and develop it as best we can.  In the parlance law practice (and elsewhere) this is called controlling the client’s expectations.  It is always important to what lawyers do, but in qui tam/FCA cases it is especially important.  Many times, qui tam relators will want the bad guy to go to prison or receive some other non-monetary punishment, and that is something we just can’t deliver on our own.

That being said, one of the nice things about this area of practice is that each case we successfully prosecute does do a bit of good.  At a minimum, some money is returned to the U.S. Treasury (or the treasury of a state, or both) and one or more bad actors is brought to task.  Hopefully, those same bad actors won’t go on to submit more false claims in the future.  Perhaps also some other folks who were thinking of trying the same thing will read about the case and think better of thier scheme.

But I wouldn’t count on most of those rosy outcomes, at least not in every case.  Nope, federal FCA cases are mostly about money.

Note that I said mostly — the recent case of Dr. Javaid Perwaiz shows that federal false claims act cases are not just about money.  Important goals like patient safety are also accomplished using this law.  Here is a sample of the recent coverage of Dr. Perwaiz’s practice:

 

The indictment reads like a true horror story, and check out the declaration filed in support of the indictment.  This is, of course, just one example and it is a local one in the EDVA…but it is still an example of the good that can be done…

Stay tuned for more on this developing saga…

 

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When is a claim submitted to the United States?

By Zachary Kitts on November 23, 2019 in

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

SECOND CIRCUIT ISSUES IMPORTANT NEW OPINION ON THE TOPIC OF “CLAIMS” TO THE UNITED STATES

As regular readers of this blog know, one of the central issues for lawyers litigating qui tam/false claims act cases is finding the “claims” at issue.  In my humble opinion, the best way to analyze any false claims act case is to find the claim first, and work backwards from there.

Today we will look at an interesting new opinion issued last week on this topic by the United States Court of Appeals for the Second Circuit.  The case is styled United States ex rel. Krause and Bishop v. Wells Fargo, N.A.

But first, a word of caution.  The Federal Reserve System was established in 1913 when the world economy (and even our national economy) was considerably less complex.  As the world-economic system has grown and developed over the last 106 years so too has our understanding of the Fed and what it does.

As Judge Katzman is quick to point out early on in his opinion, the ruling in this case is a narrow one and may well not apply to other issues involving the Fed.  That was likley a wise exercise of judicial restraint, because he recognized that any opinion interpretating critical and fundamental definitions at the Fed could have wide ramifications indeed.

THE FEDERAL RESERVE BANK SYSTEM

“The Fed” is comprised of twelve FRBs, which are separately incorporated banks dispersed geographically throughout the country, and a Board, which is based in Washington, D.C.  The Fed is an independent agency within the executive branch. See 12 U.S.C. §§ 241‐252, 264, 341‐362.

Many people are not aware of this, but when a person “negotiates” a check delivered to them (which is legalese for saying they deposit the check into thier bank account or cash it), they do not actually present a claim to the bank on which the check is drawn.  Rather, they present a claim to the FRB, which then, in turn, presents the claim to the bank on which the check is drawn.  So, in this instance, the FRB serves as a clearinghouse for all checks.

As it turns out, this is most likley the simplest thing the FRB does.  The functions of the Fed are many and varied and, in case anyone has been in a cave recently,  the Fed has a major impact on the world economy.

But alas, the Fed is not financed using tax dollars.  Instead, the Fed is financed by its member institutions — i.e., American banks.  Just as consumers maintain bank accounts at banks like Wachovia and Wells Fargo, banks like Wachovia and Wells Fargo maintain bank accounts at the FRBs.

Also of interest:  by law, the United States Treasury controls the issue of coins, but the Federal Reserve controls the issue of paper money.

THE ALLEGATIONS OF THE QUI TAM COMPLAINT

Relators filed thier case in 2011 in the Southern District of New York.  They alleged that Wells Fargo and Wachovia fraudulently requested loans from the FRBs and that, through the Fed’s emergency lending facilities, “the United States provided significant funding . . . to the Defendants, amounting to at least tens of billions of dollars.”

The relators asserted two theories of liability:  implied false certification and express false certification.

The question is whether a fraudulent loan request made to one of the FRBs is an effort to defraud a private entity or an effort to defraud the United States.  Even more specifically, this question breaks down into three distinct questions:  (1) Are FRB officers and employees officers and employees of the federal government? (2) Are the FRBs “agents of the United States” as defined in the FCA? and (3) Are fraudulent loan requests to the Fed claims to the United States?

The answer to the first question is no, yes and yes, at least in the context of this case…

THE COURT’S NARROW RULING

The opinion makes for an interesting and complex read — in order to do it the justice it deserves, I will cover it some detail in a second post…stay tuned readers.

Virginia False Claims Act Lawyers

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