# United States Court of Appeals

For the Seventh Circuit Chicago, Illinois 60604

Submitted September 2, 2015 *

Decided September 9, 2015

Before

DIANE P. WOOD, Circuit Judge

RICHARD A. POSNER, Circuit Judge

ILANA DIAMOND ROVNER, Circuit Judge

No. 14-3492

THOMAS L. BURSE, Plaintiff-Appellant

,

v

.

MARK GOTTLIEB, et al., Defendants-Appellees

. Appeal from the United States District

Court for the Eastern District of Wisconsin.

No. 13-C-804

William E. Callahan, Jr.,

M agistrate Judge

.

No. 15-1649

THOMAS L. BURSE, Defendant-Appellant

,

v

.

STATE OF WISCONSIN, Plaintiff-Appellee

. Appeal from the United States District

Court for the Eastern District of Wisconsin.

No. 13-C-1200

Lynn Adelman,
J udge

.

* After examining the briefs and record, we have concluded that oral argument is unnecessary. Thus the appeal is submitted on the briefs and record. See F ED

. R. A PP

. P. 34(a)(2)(C). NONPRECEDENTIAL DISPOSITION

To be cited onl y in accordance with Fed. R. A pp . P. 32.1No. 14-3492 & 15-1649 Page 2

O R D E R

We have consolidated these two appeals fo r disposition. Both cases arose after the Wisconsin Department of Transportation discovered that Thomas Burse, a state contractor, falsified his education qualific ations on his resume and overbilled the Department by $ 1.3 million. The Department suspended (and eventually barred) him from the state’s Disadvantaged Business Ente rprise (DBE) program, terminated his state contracts, and withheld payments to Burse in order to mitigate its losses. This forced Burse and his business into bankruptcy, where the state of Wisconsin filed an adversary proceeding under 11 U.S.C. § 523(a)(2)(A). That statute prevents discharge of debts obtained through fraud, and the state invoked it to prevent Burse from discharging through bankruptcy the $882,000 he still owed to the state. The bankruptcy court ruled that the debt was non-dischargeable, the distri ct court affirmed, and in the first of these two consolidated appeals (No. 15-1649) we affirm as well. In a separate suit, the second of our two appeals (No. 14-3492), Burse alleges that he was deprived of his due process rights when he was suspended from th e DBE program without a pre-suspension hearing. The district court granted summary judgment for the defendants, and because Burse received all the process that he was due, we affirm that judgment as well.

The DBE program aims to boost state contra cts awarded to businesses with socially and economically disadvantaged owners who meet state qualifications. Burse and his construction-management company, Buveck, began to participate in Wisconsin’s DBE program in 2003, but in 2010 the state found tw o problems with his participation. The

first was that Burse had lied about his educ ational background. In one resume Burse asserted that he had earned an engineering degree from Illinois State University, but in another he claimed to have an engineerin g degree from Bradley University. After the state asked Burse to verify his Bradley degree, he twice provided forged transcripts, and Bradley University later reported that Burse was not a graduate. The second problem was with overbilling. An audit in 2010 revealed that Burse was billing for the same work twice, inflating the number of hours empl oyees worked, and exaggerating their rate of hourly pay. In the auditor’s opinion, the sheer number of “mistakes” in the records combined with evidence of forged employee signatures on timesheets and unauthorized changes to timesheets established that Burse had committed fraud.

After uncovering these two problems, the st ate sent Burse notice on October 14, 2011, that it was suspending him as a contractor. Th e notice informed him of the reasons that the state had found fraud and overbilling and that Burse owed the state $882,528.24 because of his overbilling. The state also no tified him that it would not approve him for new transportation contracts during the su spension, it was posting his name on theNo. 14-3492 & 15-1649 Page 3

published list of suspended contractors, and it was reviewing his current contracts to determine whether they would be terminated . The state gave him a prompt opportunity for a hearing—fifteen days later—to contes t the suspension, but Burse requested and received longer—to November 25—to resp ond. During the next month the state provided Burse’s attorney examples of th e fraud uncovered in the audit and offered

Burse a chance to submit rebuttal evidence. Burse never responded with any exculpatory evidence. His attorney merely asserted that the state had not specified the grounds for suspension and supplied only limited proof of the audit’s findings or Burse’s involvement in the problems identified in the audit. On December 1, the state barred Burse and his company from future transp ortation contracts and terminated the contracts on his current projects.

Burse filed for bankruptcy, and in an ad versary proceeding the state claimed that

Burse’s debt to the state was obtained th rough fraud and could not be discharged. The bankruptcy court held a trial at which the auditor testified that the widespread overstatements in Burse’s company records co uld not be attributed to mere negligence. The bankruptcy judge did not believe Burse’s response that he did not know that the invoices and timesheets overstated billings. Th e judge observed that Burse signed many of the falsified timesheets, Burse oversaw his company’s billing practices, and his company had a pattern of creating false ti me sheets and bills. The bankruptcy court

therefore found fraud and ruled that the debt was not dischargeable. Burse appealed to
the district court, which affirmed the bankruptcy court’s ruling.

In the first appeal, Burse challenges th e bankruptcy court’s ruling. Our review focuses on the bankruptcy court’s rulings, rathe r than those of the district court, and we review its factual findings for clear error and legal conclusions de novo. See In re
marchFIRST, Inc. , 573 F.3d 414, 416 (7th Cir. 2009). To prove that a debt is non-dischargeable because of fraud, a creditor must prove by a preponderance of evidence that “(1) the debtor made a false re presentation or omission, (2) that the debtor (a) knew was false or made with reckless disr egard for the truth and (b) was made with the intent to deceive, (3) upon which the creditor justifiably relied.” Ojeda v. Goldberg , 599 F.3d 712, 716–17 (7th Cir. 2010).

Burse points to nothing that calls the bank ruptcy court’s ruling into question. As to the first element, Burse does not challenge that the invoices and timesheets contained false representations. On the second elemen t, Burse contends only that no “direct” evidence made him responsible for the “mista kes” that lead to the overbilling. But the bankruptcy judge was entitled to rely on ci rcumstantial evidence, which showed that, by signing inflated timesheets and overseeing a billing system that regularly overchargedNo. 14-3492 & 15-1649 Page 4

the state, Burse knew about the falsehood s and intended to deceive the state. See Matter of Sheridan , 57 F.3d 627, 633 (7th Cir. 1995). For the final element, Burse seems to argue that the state was not justified in relying on his falsified resume fo r his DBE certification because DBE regulations do not require a co llege degree. But the non-dischargeable debt stems from the intentional overbilling, not th e DBE certification. True, the bankruptcy judge said that, “arguably, under that pr emise [that the resume fraud led to an undeserved DBE certification], every dollar that Buvek collected when it acted as a DBE sub should be non-dischargeable.” But the ba nkruptcy judge recogn ized that the state was not asking for repayment of “every” dollar, but rather only the debts from the overbilling. Accordingly, the fraud and no n-dischargeability rulings were proper, so we affirm the first judgment.

The second appeal arises from Burses’s sepa rate suit alleging that his seven-week suspension violated his procedural rights. In it he raises two claims that he continues to pursue on appeal. First, he contends that the state violated due process by suspending him and withholding contract payments befo re it gave him a chance to refute the charges. The district court rejected this clai m. It accepted that Burse was deprived of property interests in the form of both a co ntinued contractual relationship and contract payments. But in light of the st ate’s significant interest in preventing fraud, the minimal risk of an erroneous suspension based on the audit, and the prompt opportunity to oppose the suspension, Burse received due process. The court also rejected Burse’s second claim, which is that by publicizin g his suspension the state defamed him in violation of due process. The judge expl ained that Burse identified no “lost opportunities” because of the posting.

On appeal Burse maintains that the stat e violated due process by denying him a hearing before it suspended him. To prevail on this due process claim, Burse must show that the state deprived him of a protected inte rest and that the procedures it used did not comply with minimum due process requirements. See Hinkle v. White , No. 14-2254, 2015 WL 4297887, at *2 (7th Cir. July 16, 2015). The defendants concede that Burse had a protected interest before it suspended him, so all that we must decide is what process Burse was due. A pre-deprivation hearing is not always required; the need for one depends on the balance “between the benefits and costs of such process .” Siebert v.

Severino , 256 F.3d 648, 659 (7th Cir. 2001) (quoting Penn Cent. Corp. v. U.S. R.R. Vest Corp.

, 955 F.2d 1158, 1163 (7th Cir. 1992)). The three relevant considerations are: (1) the private interest that will be affected, (2) the risk of an erroneous deprivation, and (3) the government interest. See Mathews v. Eldridge , 424 U.S. 319, 335 (1976).No. 14-3492 & 15-1649 Page 5

Balancing these three considerations, we conclude that Burse had no right to pre-suspension process. Burse has a strong in terest in receiving payments for past work and continuing his contractual relationsh ip with the state. But the seven-week suspension limited only Burse’s ability to enter into new state contracts. The state terminated his existing contracts only afte r his debarment, which occurred after he was offered a full hearing, the adequacy of which Burse does not challenge. The second and third considerations outweigh Burse’s privat e interest. The government has a substantial interest in protecting taxpaye rs from fraudulent billing. An d the risk of an erroneous suspension was low because the audit, its fi ndings, and the pre-suspension investigation established reasonable grounds to believe Bu rse had defrauded the state. Those findings obviated the need for a pre-suspension hearing. See Barry v. Barchi , 443 U.S. 55, 64–65 (1979) (a pre-deprivation hearing was unnece ssary for suspending horse-racing license because the suspension was based on prob able cause). Furthermore Burse received immediate notice of the suspension and a pr ompt opportunity to contest the suspension. These added procedures supplied whatever process he was due.

Burse also repeats his claim that, by pub lishing his name on the list of suspended contractors, the state harmed his reputati on and thereby violated due process. A defamation claim ground in due process re quires some showing that the defamatory statements “alter[ed] or extinguish[ed] a ri ght or status recognized by state law.“ Santana v. Cook County Bd. of Review , 679 F.3d 614, 621 (7th Cir. 2012) (quoting Brown v. Michigan City Ind. , 462 F.3d 720, 730 (7th Cir. 2006)). As the district court correctly pointed out, Burse identified no situation in which a prim e contractor ended or refused to enter into a contract because of the posting. Any contract s that Burse lost directly with the state resulted from his suspension, not the posting. The district court thus properly granted summary judgment for the defendants in the second case.

AFFIRMED.