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UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 96-1617

UNITED STATES OF AMERICA, EX. REL.

ANTHONY J. DUNLEAVY

v.

COUNTY OF DELAWARE, EDWIN B. ERICKSON, III EXECUTIVE DIRECTOR; COUNCIL OF THE COUNTY OF DELAWARE, WARD T. WILLIAMS, ESQ., CHAIRMAN; MARYANN ARTY; EDWIN B. ERICKSON; MATTHEW J. HAYES; WARD WILLIAMS, ESQUIRE

Anthony J. Dunleavy,

Appellant.

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 94-cv-07000)

Argued January 30, 1997

Before: BECKER and ROTH, Circuit Judges and BARRY,1 District Judge

(Opinion Filed August 21, 1997)

___________________________________________________ ______________ 1. Honorable Maryanne Trump Barry, United States Di strict Court Judge for the District of New Jersey, sitting by designat ion.Regina D. Poserina, Esq. (Argued)

7415 West Chester Pike Upper Darby, PA 19082

Attorney for Appellant

Francis X. Crowley, Esq. (Argued) Paul D. McNichol, Esq. Blank, Rome, Comisky & McCauley 1400 North Providence Road,
Suite 301 Media, PA 19063

Attorneys for Appellees

Priscilla R. Budeiri, Esq. Lisa R. Hovelson, Esq. Alan Shusterman, Esq. Gary W. Thompson, Esq. Taxpayers Against Fraud The False Claims Act Legal Center
Suite 501 1220 Nineteenth Street, N.W. Washington, D.C. 20036

Attorneys for Amicus-Appellant

OPINION OF THE COURT

ROTH, Circuit Judge:

With this appeal, we examine another chapter in the history of Route 476, known to those in the Philade lphia area, who for so many years awaited its opening, as the "Blue Route." In this qui tam action, Anthony J. Dunleavy (the "Relator") sues Delaware County on behalf of t he United States to recover treble damages in the amou nt of $1,450,000, the return of over $16 million in Depar tment of Housing and Urban Development funds made available to the County from 1992 to 1995, and various other cos ts, interest, and penalties associated with the County' s alleged violations of the False Claims Act (the "FCA" or "A ct"), 31
U.S.C. §§ 3729-3733.

2The district court dismissed Dunleavy's Second Amen ded

Complaint on the ground that it lacked subject matt er jurisdiction because the action was based solely on information or allegations that had been publicly d isclosed through various newspaper articles, a pre-trial memorandum prepared by Delaware County in previous unrelated litigation, several annual audits prepare d by Delaware County and submitted to the federal govern ment, and a 1992 Grantee Performance Report ("GPR") prepa red by Delaware County and submitted to HUD. This appea l raises issues which require us to further define th e circumstances under which a qui tam action will be deemed to be "based upon the public disclosures of allegat ions or
transactions." We find that the district court reli ed upon assumptions which broadened the FCA's Public Disclo sure Bar beyond its intended scope. Hence, we will rever se and remand this case for further proceedings.

I. Facts and Procedural History

The following facts are taken from Dunleavy's Secon d Amended Complaint. For purposes of this motion to dismiss, they, in the main, may be taken as true.2

The events challenged here occurred in 1976 while Dunleavy was working as a consultant to Delaware Co unty. Dunleavy's role was to advise the County with respe ct to HUD's Community Planning and Development programs, HUD's Community Development Block Grant program ("CDBG"), and other related federal government prog rams.

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2. We realize that where jurisdiction is at issue, the norm is not to accord the party whose burden it is to plead jurisdiction the presumption of truth as to facts pleaded that must be resolved in answering that question. See 5A Charles Alan Wright & Arthur R. Miller, Federal Practice

and Procedure § 1350 (Supp. 1996). We are also cognizant that in certain situations in which our jurisdiction is at issue we may be entitled to look beyond the pleadings to satisfy ourselves as to the existence or nonexistence of jurisdiction. See, e.g. , Mortensen v. First Fed. Sav. and Loan

Ass'n , 549 F.2d 884, 891 (3d Cir. 1977). Neither of thes e principles
influences the outcome of this case because our rev iew can be accomplished without relying on these disputed fact s and without consideration of contested matters not appearing in the pleadings.

3In 1976, the County acquired by way of condemnation a

56.6 acre tract of land adjacent to the Smedley Cou nty Park in Nether Providence Township. The tract is known l ocally as the Penza Tract. To make this acquisition, the C ounty appropriated approximately $1,839,500 in funds prov ided by HUD and $685,000 in its own funds.

Despite the County's original plans to expand the p ark, on January 26, 1979, it sold a 26.3 acre portion of the Penza Tract to the Pennsylvania Department of Transportation ("PennDOT") for $1,988,550. PennDOT acquired the land for the planned construction of R oute I476. A short time later, in 1981, the County convey ed an
additional 1.9 acre section of the Penza Tract to P ennDOT for $103,950. Both sales were, however, contingent on pending environmental litigation being resolved in a way that would permit the Blue Route to be constructed through the region. For this reason, the County agr eed to place the proceeds of the two Penza Tract sales in an escrow investment account.

The completion of the Blue Route remained blocked b y litigation for the next several years. In 1988, how ever, the County transferred yet another parcel of the Penza Tract to PennDOT at a cost of $1,000,000.3 The last litigati on barrier to the construction of the Blue Route was r esolved in 1991, when the remaining actions were settled. Construction began again and the Blue Route was ope ned
a short time later.

Dunleavy left the service of Delaware County in 199 2 when his consulting firm's contract was terminated. On November 18, 1994, Dunleavy initiated this qui tam action against Delaware County, the County Council, and ce rtain
current and former members of the Council and offic ers in the County. On March 7, 1995, Dunleavy filed a Firs t Amended Complaint. Then on August 14, he filed a Se cond Amended Complaint without seeking leave of the Cour t or the other parties' consent. On September 15, Dunlea vy

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3. The County disputes the accuracy of this allegat ion, contending that this sale actually involved a different tract of la nd not subject to HUD oversight. This is a factual question for resolutio n on the merits. We
need not address it here.

4belatedly filed a Petition for Leave to Amend which , despite

the procedural irregularity, was granted by the dis trict court on November 8, 1995.

This action remained under seal, as required by 31 U.S.C. § 3730(b)(2), until September 5, 1995. Durin g that period the U.S. Attorney and HUD investigated the v iability of Dunleavy's complaint.4 On August 10, 1995, at th e conclusion of the investigation, the U.S. Attorney issued a Notice of Declination of Appearance, pursuant to 31 U.S.C. § 3730(b)(4)(B), concluding that the matters raised in Dunleavy's complaint did not constitute fraud withi n the meaning of the False Claims Act. At the same time, the U.S. Attorney turned over control of the investigation t o HUD to review the matter for compliance with CDBG guidelin es.

HUD pursued its own investigation of the Penza Trac t fund in March and April of 1996 and issued a Limite d Audit Review on April 29, 1996. As a result of the Audit, HUD made a demand on the County for the return of nearly $2 million in HUD funds. At some point the C ounty and HUD began negotiations to determine the amount of the funds owing to HUD. After learning of the possi bility of settlement, Dunleavy claimed rights to notice and a hearing under § 3730(c)(2)(B) of the FCA. He alsofiled nume rous Freedom of Information Act requests on HUD and on t he U.S. Attorney.

Despite Dunleavy's protests against a settlement, H UD denied him the opportunity to intercede and partici pate in the negotiations. On September 11, 1996, HUD agreed to accept the County's settlement offer of $1,921,699. Under the terms of the settlement, the County was to remi t a check to HUD, and HUD would then return the funds t o the County's line-of-credit where the monies would be available for eligible and fundable activities. Dun leavy unsuccessfully petitioned the district court to sta y the administrative action necessary for settlement.5 Du nleavy then unsuccessfully sought a stay from this Court.

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4. An unknown party did leak information about the suit to the press in
the interim.
5. As of the date of the consummation of the settle ment and of Dunleavy's application to the district court for a stay, Dunleavy's qui tam action had already been dismissed by the district c ourt for want of jurisdiction.

5Dunleavy's Second Amended Complaint alleges three

counts of violation of the False Claims Act, 31 U.S .C. §§ 3729(a)(1), (a)(2), & (a)(7), one count of commo n law fraud, one count of payment under mistake of fact, and one count of breach of contract. Dunleavy's theory is t hat Delaware County defrauded HUD by not reporting and returning proceeds from the sale of the Penza Tract

.

Specifically, Dunleavy contends that the HUD funds used to acquire the Penza Tract were subject to a contra ctual agreement between the County and the federal govern ment. This agreement required the County to follow HUD ru les and regulations which limit the permissible uses of the funds and impose certain reporting requirements on the County. Dunleavy reasons that, since the Penza Trac t was originally acquired with HUD funds, the County was required to treat the monies as "program income" an d to provide accounts of the transactions to HUD. Dunlea vy further contends that, once it became apparent in 1 991 that the County would not reacquire the Penza Tract , the defendants should have known, or knew but recklessl y disregarded, their obligation to report the receipt of the
Penza Tract monies in Annual Audits and Grantee Performance Reports and to repay those moneys to HU D.

On July 12, 1996, the district court dismissed Dunl eavy's Second Amended Complaint, finding that it lacked su bject matter jurisdiction. United States ex rel. Dunleavy v. County
of Delaware , No. 94-7000, 1996 WL 392545 (E.D. Pa. July 12, 1996). The district court held that Dunleavy's action violated the jurisdictional bar of 31 U.S.C. § 3730 (e)(4)(A), which divests the federal courts of jurisdiction ov er qui tam suits "based upon publicly disclosed allegations or
transactions." The trial court found that certain n ewspaper articles, a pre-trial memorandum from unrelated lit igation, and the County's annual audits and GPRs publicly disclosed, prior to the filing of Dunleavy's compla int, both the misrepresented and the actual facts necessary t o complete the inference of fraud. The district court assumed that all these documents were acceptable sources of public
disclosure under the Act. The court then concluded that Dunleavy had not qualified as an original source un der the

Act.

6Dunleavy filed a timely notice of appeal. We have

jurisdiction pursuant to 28 U.S.C. § 1291. Our revi ew of the district court's dismissal of the complaint for lac k of subject matter jurisdiction is plenary. United States ex re l. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co. , 944 F.2d 1149, 1152 (3d Cir. 1991).

II. Discussion

The False Claims Act has been with us in one form o r another since the Civil War. Act of March 2, 1863, ch. 67, § 4, 12 Stat. 698 (1863). The FCA sets out civil an d criminal penalties for persons who knowingly submit false cl aims to the government.

The novel aspect of the FCA is the mechanism Congre ss has chosen for its enforcement. A private person wi th knowledge of fraud against the government, acting a s a de facto "attorney general," can instigate litigation on the government's behalf against the parties responsible . Such suits are known as qui tam actions.6

The FCA contains a built in incentive for a private plaintiff, known as the "relator," to bring suit. U nder the original statute, a prevailing relator could come a way with up to one-half of the damages and forfeitures recov ered and collected.7 S. Rep. No. 345, 99th Cong., 2d Sess., at 10, reprinted in 1986 U.S.C.C.A.N. 5266, 5275. Congress has shrewdly "offset inadequate law enforcement resourc es and encouraged `a rogue to catch a rogue' by inducing i nformers `to betray [their] conspirators.' " United States e x rel. Findley v. FPC-Boron Employees' Club , 105 F.3d 675, 679 (D.C. Cir.

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6. qui tam

action takes its name from the Latin phrase "qui t am pro domino rege quam pro si ipso in hac parte sequitur" meaning "who sues on behalf of the King as well as for himself." Blac k's Law Dictionary 1251 (6th ed. 1990). Qui tam actions have their origins in the Thirteenth century royal courts of England where they were emp loyed as a form of legal fiction. Lightly regarded local courts had ju risdiction over private wrongs. But a recitation that the suit was in the K ing's interest could provide access to the royal courts. See John T. Boese, Civil False Claims and Qui Tam Actions 1-7 (1995).

7. The most recent incarnation of the Act has reduc ed this percentage
but it still remains substantial. See 31 U.S.C. § 3730(d).

71997) (quoting Cong. Globe, 37th Cong., 3d Sess. 95 5-56

(1863)).

The Act requires a qui tam plaintiff, before proceeding with suit, to disclose to the government the inform ation on which the claim is based. 31 U.S.C. § 3730(b). The government then has sixty days to investigate the m atter and to decide whether to intervene. The government also has the option to step into the action at a later d ate. 31 U.S.C. § 3730(c)(3). In either case, the relator is not entitled to a recovery under the Act if the action is one wh ich runs afoul of the jurisdictional bars contained in 31 U. S.C. § 3730(e).

For example, the public disclosure bar operates und er this section to divest the plaintiffs of subject ma tter jurisdiction if: (1) there was a public disclosure; (2) of "allegations or transactions" of the fraud; (3) "in a criminal, civil, or administrative hearing, in a congressiona l, administrative, or Government Accounting Office rep ort, hearing, audit, or investigation, or from the news media."; (4) that the relator's action was "based upon." If the relator fails the public disclosure bar, he or she can only establish subject matter jurisdiction if he or she is an "ori ginal source" of the information. 31 U.S.C. § 3730(e)(4).

A. Effect of HUD Settlement

At oral argument, we questioned the parties about t he viability of this suit after HUD's settlement with the County. Both the parties and this Court agree that, notwith standing the settlement, Delaware County continues to have a n interest in the outcome of this qui tam action because damages may be awarded which exceed the amount paid by Delaware County to HUD in settlement.

There is no question that under certain circumstanc es it is appropriate for the federal government to procee d administratively against a FCA defendant. The Act e xpressly contemplates such a move:

Notwithstanding subsection (b), the Government may elect to pursue its claim through any alternate rem edy available to the Government, including any

8administrative proceeding to determine a civil mone y

penalty. If any such alternate remedy is pursued in another proceeding, the person initiating the actio n shall have the same rights in such proceeding as su ch person would have had if the action had continued
under this section.

31 U.S.C. § 3730(c)(5). What is not clear on the re cord before us is whether the U.S. Attorney and HUD inte nded the settlement with the County to extinguish the government's claims under the FCA or whether the settlement addressed a less serious transgression s uch as a misinterpretation by the County of its obligation s under the CDBG program.8

However, we need not decide whether the settlement terminated the government's rights against Delaware County under the Act, because Dunleavy's right to p roceed with his qui tam

action remains unimpaired. Subsection (c)(5) preserves a relator's right to a percentage of the recovery even when the government chooses to pursue its claim administratively. See United States ex rel. G reen v. Northrop Corp. , 59 F.3d 953, 963-64 (9th Cir. 1995), cert.
denied , 116 S. Ct. 2550 (1996); United States ex rel. DeCarlo v. Kiewit/AFC Enterprises, Inc. , 937 F. Supp. 1039, 1045 (S.D.N.Y. 1996). Because the government never exercised its rights to intervene, the settlement b etween HUD and Delaware County does not negate Dunleavy's ability, as the relator, to proceed independently w ith his qui

tam action.

We agree with the Eleventh Circuit's conclusion tha t the False Claims Act's purpose is not limited to punish ing the wrongs against the general public; the FCA alsofill s a remedial capacity in redressing injury to the indiv idual

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8. In its Notice of Declination to Appear, the gove rnment stated its belief, formed after its investigation of the allegations c ontained in Dunleavy's complaint, that the County's actions did not amount to fraud within the meaning of the FCA. Additionally, it is not clear w hether the investigation undertaken by the government even amo unted to the type of alternate proceeding contemplated in § 3730(c)(5 ). HUD did no more than conduct an audit and make a demand upon Delawa re County for payment, at which point the parties reached a settl ement.

9relator. See United States ex rel. Neher v. NEC Cor p. , 11

F.3d 136, 137 (11th Cir. 1994). In Neher , the court described the reasons for treating a qui tam action as one addressed to the relator's injuries:

First, a qui tam relator can suffer severe emotiona l strain due to the discovery of his unwilling involv ement in fraudulent activity. Moreover, the actual or pot ential ramifications on a relator's employment can be substantial. As several courts have recognized, qui tam relators face the Hobson's choice of "keeping silen t about the fraud, and suffering potential liability (and guilty consciences), or reporting the fraud and suf fering repercussions, some as extreme as dismissal." Final ly,
the relator can suffer substantial financial burden s as a result of the time and expense involved in bringi ng a qui tam action.

Id. at 138 (quoting United States ex rel. Robinson v. Northrop Corp. , 824 F. Supp. 830, 835 (N.D. Ill. 1993).

The legislative history of the 1986 Amendments to t he Act is also instructive. The report accompanying the Se nate version of the amendments, which Congress passed in lieu of those in the House bill, explains the Government 's right to proceed administratively as an alternate remedy to an
FCA action. See S. Rep. 99-345, 99th Cong., 2d Sess. 27, reprinted in 1986 U.S.C.C.A.N. 5266, 5292. While the Government can compel dismissal or settlement of a qui

tam action if it formally intervenes, 31 U.S.C.§ 3730( c), Congress believed that "if the Government declines to intervene in a qui tam action, it is estopped from pursuing the same action administratively or in a separate j udicial
action." Id. , reprinted in 1986 U.S.C.C.A.N. at 5292.

Since Dunleavy, if a proper relator, has an interes t in pursuing his claim independently of the government, the government, which has elected not to intervene, can not compromise Dunleavy's claim even if the government has settled its own claim. A viable case or controversy therefore continues to exist since Delaware County's potentia l exposure in Dunleavy's qui tam action may ultimately exceed that which it accepted in its settlement wit h HUD.

10B. The Public Disclosure Bar

The present language of the Public Disclosure Bar c omes from Congress's extensive amendment of the False Cl aims Act in 1986. As recounted more fully in our opinion in United States ex rel. Stinson, Lyons, Gerlin & Bust amante,
P.A. v. The Prudential Ins. Co. , 944 F.2d 1149, 1152-54 (3d Cir. 1991), the 1986 amendments were an attempt to correct what Congress perceived as a century old im balance between the under-deterrence of the original Act, w hich permitted "parasitic" qui tam actions to be brought by individuals with no independent knowledge of fraud, and
the over-deterrence of the 1943 amendments which de nied jurisdiction over all qui tam actions "based on evidence or information the government had when the action was brought." 31 U.S.C. § 3730(b)(4) (1982) (superseded ). Given that the 1943 Act almost entirely prevented the suc cessful prosecution of qui tam suits, it is apparent from the legislative history of the 1986 amendments that Con gress was mindful of the need "to encourage persons with firsthand knowledge of fraudulent misconduct to report f raud."
Stinson , 944 F.2d at 1154. Moreover, Congress sought to enhance the government's ability to detect fraud by gaining "the cooperation of individuals who are either clos e observers or otherwise involved in the fraudulent a ctivity." S. Rep. No. 345, 99th Cong. 2d Sess. 4, reprinted i n 1986
U.S.C.C.A.N. 5269.

The current version of the Public Disclosure Bar ha s generated a host of interpretive issues, some of wh ich are implicated in this appeal. Among the questions gene rated are the following:

(1) whether the alleged "public disclosure" contain s allegations or transactions from one of the listed sources; (2) whether the alleged disclosure has bee n made "public" within the meaning of the False Claim s Act; (3) whether the relator's complaint is "based upon" this "public disclosure"; and, if so, (4) whether t he relator qualifies as an "original source" under sec tion 3730(e)(4)(B)."

United States ex rel. Fine v. MK-Ferguson Co. , 99 F.3d 1538, 1544 (10th Cir. 1996). We are concerned with only t he first

11two of these four questions. Because we conclude th at

jurisdiction is present based on our finding that "allegations or transactions" of fraud were never c ontained in sources qualifying as "public disclosures" under the FCA, we need not proceed further.

1. Are the Disclosures of "Allegations or Transacti ons"?

We must first determine whether the County has identified any sources which publicly disclosed the alleged fraud or the underlying fraudulent transaction. The County points to four sources for the jurisdictional bar: (i) several newspaper articles discussing the acquisition of th e Penza tract; (ii) a pre-trial memorandum filed with the c ourt in prior unrelated litigation initiated by a community interest group to challenge the County's use of HUD funds; ( iii)
annual financial audits submitted to the federal government pursuant to the County's obligation unde r the Single Audit Act, 31 U.S.C. § 7502; and (iv) a 1992 Grantee Performance Report prepared by the County and submi tted to HUD as required by § 104(e) of the Housing and Community Development Act of 1974, 52 U.S.C. § 5304 (e). For the reasons that follow, we conclude that only the County's GPR, if considered a public disclosure, re veals information crucial to making an inference of fraud

.

In this regard, the crucial question arises from th e statutory language, "based upon the public disclosu re of allegations or transactions." 31 U.S.C. § 3730(e)(4 )(A). We
must consider whether the information disclosed constitutes "allegations or transactions." As anoth er court has explained, "the Act bars suits based on publicl y disclosed `allegations or transactions,' not inform ation." Wang v. FMC Corp. , 975 F.2d 1412, 1418 (9th Cir. 1992).

It is clear that the FCA's reference to "allegation s or transactions" is in the disjunctive, so that disclo sures which reveal either the allegations of fraud or the elements of the underlying fraudulent transaction are suffic ient to invoke the jurisdictional bar. Findley , 105 F.3d at 686-87; United States ex rel. Precision Co. v. Koch Indus., Inc. , 971 F.2d 548, 552 n.2 (10th Cir. 1992); see also Hagood v. Sonoma Water County Agency , 81 F.3d 1465, 1473 (9th

12Cir.), cert. denied , 117 S. Ct. 175 (1996) ("the jurisdictional

bar may be raised by public disclosure unaccompanie d by an explicit allegation of fraud").

The District of Columbia Circuit has devised a usef ul formula for determining the quantum of information that must be disclosed before the jurisdictional bar com es into play:

[I]f X + Y = Z, Z represents the allegation of frau d and X and Y represent its essential elements. In order to disclose the fraudulent transaction publicly, the combination of X and Y must be revealed, from which readers or listeners may infer Z, i.e., the conclus ion
that fraud has been committed.

United States ex rel. Springfield Terminal Ry. Co. v. Quinn , 14 F.3d 645, 654 (D.C. Cir. 1994). The Springfield Terminal court goes on to explain that the inference of frau d requires recognition of but two elements: "a misrepresented state of
facts and a true state of facts." Id. at 655. Injected into the above formula the variables take on the following l abels: "X (misrepresented state of facts) + Y (true state of facts) = Z (fraud)." Findley , 105 F.3d at 687.

It is not seriously contended that the Z variable h as been disclosed here. The record is devoid of any public accusation of wrongdoing against the County before Dunleavy filed his qui tam action. HUD's audit of Delaware County's CDBG Program Penza Tract Fund did not begi n until March 1996 and was itself a product of this s uit. Therefore, unless we find disclosures in the record of both the X and Y variables, we have no reason for callin g down the jurisdictional bar.

In everyday language, a "transaction" generally inv olves "an exchange between two parties or things that reciprocally affect or influence one another." Spri ngfield
Terminal , 14 F.3d at 654 (citing Webster's Third New International Dictionary 55 (1976)). What makes a particular transaction "fraudulent" within the mean ing of
the False Claims Act is less clear. We think it is sufficient, at least in considering the application of the disc losure bar, that the transaction merely be one in which a set o f

13 misrepresented facts has been submitted to the gove rnment.9
This we believe is consistent with the broader defi nitions of fraud employed in the False Claims Act. See Wang , 975 F.2d at 1420 ("The Act's scienter requirement is so mething less than that set out in the common law").

In discussing the contents of his Second Amended Complaint, Dunleavy insists thathis allegation of fraud was not Delaware County's m ere

failure to return the proceeds to HUD. By contrast, Mr. Dunleavy alleged that Delaware County only had the obligation to return the proceeds after the Blue Route opened. Mr. Dunleavy's allegation of fraud, therefo re, is that after the Blue Route opened , Delaware County had an obligation to report or return the proceeds to t he government but failed to do so.

Appellant's Br. at 14. By this statement, we unders tand Dunleavy to contend that the crucial acts by the Co unty necessary to the completion of this fraudulent tran saction were its retention of the proceeds from the sale of the Penza
Tract and its failure to inform HUD that it had the se funds after the opening of the Blue Route ripened the obl igation to return the money.

We view the fraudulent scheme pled in Dunleavy's Second Amended Complaint as having four essential elements for purposes of our jurisdictional inquiry under the FCA's public disclosure bar: (1) the County was the recipient of funds belonging to the federal governm ent; (2) the County had an obligation to repay those funds t o the federal government; (3) the County failed to repay those funds to the federal government after the obligatio n became owing; and (4) the County failed to disclose to the federal government that funds belonging to it were in the C ounty's possession. Elements one through three account for the "actual state of facts," while the fourth element c orresponds to the "misrepresented state of facts."

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9. This broad statement assumes, of course, the rel ator's good faith attempt to make allegations conforming to claims sp ecified in 31 U.S.C. § 3729(a).

14The County identifies three newspaper articles whic h

appeared in February 1980 and discussed Delaware County's purchase and sale of the Penza tract as we ll as its relationship with HUD.10 One of the articles stated "the county paid $1.8 million in federal Community Development funds for the [Penza Tract] property in 1976. . . . In January [1980] the county sold 26 - acres less than
half the tract - to PennDOT for the Blue Route for $1.9 million . . . ." App. at 90. Another article from t he same year reported in greater detail on the possible use s for the sale proceeds:

[Delaware County's Council Chairman, Charlie] Keele r said the original $1.8 million the county spent wit h Community Development funds would have to be spent on projects permitted under that program's regulations. Any additional property accrued in int erest could be spent for other purposes, including improv ing the remaining park area.

App. at 91 (emphasis added). A third article explai ned the
transaction in which the Penza Tract was sold but
contained no references to what would become of the sale's proceeds. App. at 92. The district court viewed all three articles as revealing essential facts about the pur chase and sale of the Penza Tract as well as the use made by the County of CDBG funds and of the Penza Tract sale's proceeds.

The district court also relied on a Pretrial Memora ndum prepared on the County's behalf in an unrelated cit izens' suit against the County. Dunleavy refers to this memorandum in his Second Amended Complaint. Second Amended Compl. at ¶ 24. In the memorandum, County officials represented that proceeds from the sale o f the
Penza Tract to the Commonwealth would "be returned to the Community Development program in accordance wit h HUD regulations." App. at 33. The district court vi ewed the

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10. Although these newspaper articles are not menti oned in the pleadings, there is no reason why they may not be r elied upon in determining whether we possess subject matter juris diction. Indeed, the newspaper articles were appended to the County's Ru le 12(b)(1) Motion
to Dismiss filed in the district court.

15memorandum as a public disclosure of the County's

knowledge of its obligation to return the funds to the
federal fisc.

A third source of information derives from Annual Financial Audits submitted by the County to the fed eral government in accordance with its obligations under the Single Audit Act, 31 U.S.C. § 7501 et seq. These au dits
each contained a Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balance for several accounts including one called the Penza Fun d. The
Penza Fund was described in the audits as a fund

established to account for the proceeds and related investment income on the sale of a County owned tra ct of land to the Commonwealth of Pennsylvania, the County's intention is to use these funds for the purchase of land.

See, e.g. , App. at 94. Despite the changes in the status of the accounts from 1985 to 1993, this description of the fund's purpose remained a constant. The district co urt found that these audits revealed the County's reten tion of the proceeds from the sale of the Penza Tract and t he County's use of the interest from these proceeds.

The final source identified by the parties and reli ed on by the district court is a 1992 GPR submitted by the C ounty to the federal government. In this report, the Coun ty failed to account for the proceeds of the sale of the Penz a Tract
held in its accounts. The district court found that , by omitting the Penza Tract fund from the GPR, the Cou nty completed the disclosure of all material elements o f the
fraudulent transaction since this act "disclosed th e County's alleged failure to report the proceeds to HUD as program income." Dunleavy , 1996 WL 392545, at *3.

Dunleavy now contends that no combination of these documents could have revealed all the necessary ele ments to complete the inference of fraud. In particular, Dunleavy dismisses the GPR as "devoid of any information rel ated to the Penza tract, the escrow fund, or the fraud sche me." Dunleavy insists that the GPR does not complete the
disclosure of the fraudulent transaction because

16[t]he 1992 GPR does not report any program income

related to the sale of the Penza tract. It contains absolutely no information about the escrowed procee ds of the sale of a portion of the Penza tract, the ob ligation to return those proceeds or the use of those procee ds. It is absolutely silent as to any issue that is rel ated the fraud scheme alleged by Mr. Dunleavy.

Appellant's Br. at 22.

The County concedes the accuracy of Dunleavy's read ing of the GPR but argues the significance of this sour ce derives from what the GPR does not say:

[T]he only allegation which arguably was not disclo sed was the actual non-reporting of the proceeds (and t he interest thereon) as Program Income under the CDBG program. However, as shown herein, the County did report the receipt of the proceeds and interest thr ough other public disclosures (i.e. the articles and aud its). . . . [T]he fact of non-reporting was in the posses sion of the Government -- that is, in addition to being the recipient of most (if not all) of the public disclo sures, the Government also received the annual Grantee Performance Report ("GPR") which allegedly omitted the proceeds as Program Income. . . . HUD was in possession of the public disclosures outlined above and was in possession of the GPRs allegedly omitting th e Program Income . . . .

Appellee's Br. at 27. The County maintains that it is the submission of the 1992 GPR to the federal governmen t which completes the inference of fraud since it pub licly exposed the inconsistencies in the County's other statements which acknowledged the County's retentio n and use of program income and interest, and the non-dis closure of that Program Income in the GPR itself.

We conclude that the 1992 GPR is the only source th at, if publicly disclosed, would complete the inference of fraud.11

___________________________________________________ ______________

11. Here there is no evidence that, prior to Dunlea vy's filing of his Complaint, the federal government had done anything more than place this information, along with countless other reams of paper, in some government file room.

17As already stated, no source makes a public allegat ion of

fraud. The remaining sources disclosed only the act ual state of facts, i.e. the County's retention of the Penza Tract proceeds and interest. It is undisputed that only t he 1992 GPR contained the misrepresented state of facts, i.e., the County's failure to inform the federal government t hat it had these funds in its possession.12

Although neither Dunleavy nor the County has produc ed the 1992 GPR as part of the record, they are in app arent agreement that Delaware County was obliged, but fai led, to disclose its possession of the Penza Tract proceeds in the 1992 GPR. Congress explicitly provided for the subm ission of such reports to be used in the Secretary's revie w of program implementation:

Each grantee shall submit to the Secretary . . . a performance report and evaluation report concerning
the use of funds made available under section 5306 of this title, together with an assessment by the gran tee of the relationship of such use to the objectives identified in the grantee's statement [of objective s previously provided to the Secretary]. . . . The grantee's report shall indicate its programmatic accomplishments, the nature and reason for changes in the grantee's program objectives, indications of how the grantee would change its program as a result of its experiences, and an evaluation of the extent to whi ch
its funds were used for activities that benefited l owand moderate-income persons. The report shall inclu de a summary of any comments received by the grantee from citizens in its jurisdiction respecting its pr ogram.

42 U.S.C. § 5304(e) (1992) (emphasis added). Specif ically, HUD regulations imposed a duty to record program in come received or expended as part of the CDBG program. S ee 24 C.F.R. § 570.504(a) (1993).

___________________________________________________ ______________

12. To Dunleavy's way of thinking, disclosures that antedated the opening of the Blue Route are immaterial to our con sideration of the public disclosure bar. We do not agree. While the i nference of fraud may not have been complete until the County's 1992 GPR disclosed the misrepresented state of facts, the elements of the fraud disclosed prior to that point are relevant to such a fraudulent sch eme and do not become immaterial because of the simple passage of time.

18Without the benefit of Dunleavy's insider position,

someone investigating government fraud would be abl e to ascertain that the County had not fulfilled its rep orting obligation only if that individual had access to th e GPR.

2. Is the GPR a Public Disclosure?

Our only remaining task then is to determine whethe r the County's 1992 GPR constitutes a "public disclosure" within the meaning of § 3730(e)(4)(A). Neither party focus sed on this issue;13 instead, both litigants concentrate o n identifying the elements of the alleged fraudulent transactions, under the apparent assumption that th e GPR effected a public disclosure under the "potentially available" standard developed by this Court in Stinson , 944 F.2d at 1157-60. Indeed, the district court shared this vie w of the GPRs in its simple conclusion that "[t]he omission of the Penza Fund from annual GPRs disclosed the County's alleged failure to report the proceeds to HUD as pr ogram income." Dunleavy , 1996 WL 392545, at *3. We believe, however, that this aspect of the case merits more a ttention than it has been given.

To answer the question whether a certain fact has b een "publicly disclosed," we must make two distinct inq uiries. The first is to ask whether the source is one recog nized by the Act. The second posits whether the extent of di sclosure is sufficient to support the conclusion that the in formation contained therein is now public within the meaning of the
Act. Stinson supports this division of our exploration. 944
F.2d at 1154-60. In Stinson , we also undertook a two-part inquiry. We first examined whether the term "civil

. . . hearing" as used in § 3730(e)(4)(A) encompassed doc uments produced by a litigant but not filed with the court as part of discovery proceedings during civil litigation. I d. at 1154- 1157. Upon concluding that the statute did indeed contemplate this aspect of litigation as a source, we next
determined to what extent the disclosure must be ma de

___________________________________________________ ______________

13. Dunleavy does note in passing that "[t]he GPR's are not the types of disclosures enumerated by the statute, and must not be considered as public disclosures." Appellant's Br. at 16-17.

19public before the jurisdictional bar is invoked. Id

. at 1157-

60.

Similarly, we will first consider whether a GPR rep resents a source of disclosure contemplated by Congress in drafting the jurisdictional bar. Section 3730(e)(4)(A) ident ifies the following sources for disclosures: "a criminal, civ il, or administrative hearing, . . . a congressional, admi nistrative, or Government Accounting Office report, hearing, au dit, or investigation, or . . . the news media . . . ." The prevailing
view is that this list constitutes an exhaustive re ndition of the possible sources. We agree. As explained by the Eleventh Circuit, we may safely assume that Congres s knew what it was doing when it crafted the FCA:

The list of methods of "public disclosure" is speci fic and is not qualified by words that would indicate t hat they are only examples of the types of "public disclosure" to which the jurisdictional bar would a pply. Congress could easily have used "such as" or "for example" to indicate that its list was not exhausti ve. Because it did not, however, we will not give the statute a broader effect than that which appears in its plain language.

United States ex rel. Williams v. NEC Corp. , 931 F.2d 1493, 1499-1500 (11th Cir. 1991); see also United States ex rel. Fine v. Advanced Sciences, Inc. , 99 F.3d 1000, 1004 (10th Cir. 1996) (holding that § 3730(e)(4)(A) "defines t he sources of allegations and transactions which trigger the b ar but . . . does not define the only means by which publi c disclosure can occur"); United States ex rel. Doe v . John Doe Corp. , 960 F.2d 318, 323 (2d Cir. 1992) ("Section 3730(e)(4)(A) furnishes an exclusive list of the wa ys in which a public disclosure must occur for the jurisd ictional bar to apply."); United States ex rel. LeBlanc v. R aytheon Co., Inc. , 913 F.2d 17, 20 (1st Cir. 1990) (Section 3730(e)(4)(A) "does not deny jurisdiction over acti ons based on disclosures other than those specified . . . .")

.

The only way to bring the GPR, prepared by the Coun ty, within the language of § 3730(e)(4)(A) is for the G PR to be considered an "administrative . . . report." It is unlikely that Congress intended the public disclosure bar to be i nvoked

20without limitation as to the content or source of s uch

administrative reports. Indeed, we conclude that Co ngress was not referring to administrative reports produce d by non-federal government sources.

As we determined in our review of the FCA in Stinso n , we find that Congress gave us little specific guidance to determine the scope of public disclosure sources, i ncluding "administrative reports." It is noteworthy, however , that the terms "report, hearing, audit, or investigation" ar e modified by the words "congressional, administrative, or Gov ernment Accounting Office." The word "administrative" is ca pable of many meanings. Congress has provided no clear legis lative intent or meaning for it in the FCA. We will, there fore, turn to the doctrine of noscitur a sociis, which permits us to treat this word as one which "gathers its meaning f rom the
words around it." Jarecki v. G.D. Searle & Co. , 367 U.S. 303, 307 (1961); In re Continental Airlines, Inc. , 932 F.2d 282, 288 (3d Cir. 1991); 2A Sutherland Statutory Construction § 47:16 (5th ed. 1992). The applicatio n of this doctrine is especially appropriate where, as here, "a word is capable of many meanings in order to avoid the givi ng of unintended breadth to the Acts of Congress." Jareck i , 367
U.S. at 307.

Our reliance upon this maxim leads to the conclusio n that "administrative" when read with the word "repo rt" refers only to those administrative reports that or iginate with the federal government. We take notice of the fact that Congress and the Government Accounting Office are entities of our federal government. We find it hard to believe that the drafters of this provision intended the wo rd
"administrative" to refer to both state and federal reports
when it lies sandwiched between modifiers which are unquestionably federal in character.

Moreover, a narrow reading of the phrase "administr ative . . . report" does not risk the arbitrary results t hat
motivated our decision in Stinson . There we expressed concern that the crabbed interpretation of the word "hearing" proposed by the relator might produce a s ituation where the jurisdictional question turned on whether a judge was present at a given deposition. Stinson , 944 F.2d at 1157. Here, in contrast, we have good reasons to treat

21reports made by the federal government differently from

those produced by state or local governments or by private individuals. Ordinarily, the party accused of defra uding the federal government is in control of most of the sou rces of information that would effectively reveal wrongdoin g. This information dynamic was, in large part, a motivatin g factor behind the 1986 amendments. Congress emphasized its belief that "[d]etecting fraud is usually very diff icult without the cooperation of individuals who are either close
observers or otherwise involved in the fraudulent a ctivity." S. Rep. 99-345, 99th Cong., 2nd Sess. 4, reprinted in 1986 U.S.C.C.A.N. 5269. Additionally, the Reporting Comm ittee perceived the existence of "a conspiracy of silence " to defraud the federal government. Id. at 6, reprinted in 1986
U.S.C.C.A.N. at 5271.

In these circumstances, the federal government is i llequipped to protect itself by having certain inform ation in its possession. When, as in this case, the defraudi ng party is a local government entity required to submit rep orts to the federal government, those reports have been com piled and produced by a party whose principal motivation (assuming the truth of the fraud claim) is the elim ination of the paper trail of fraud. If state and local govern ment reports were treated as administrative reports unde r the Act, the jurisdictional bar might be invoked throug h information submitted by those bent on convincing a federal agency that no fraud, in fact, was occurrin g. That problem is especially evident here where the County 's GPR is the only source from which the public could have learned of the County's misrepresentations to the federal government.

Moreover, a broad reading of "administrative report s" would be fundamentally inconsistent with the purpos e and tenor of the 1986 amendments. Congress undertook th e amending of the FCA to eliminate the draconian "government knowledge" standard applied since 1943. This
standard barred all actions where it could be shown , no matter how attenuated the case, that the informatio n on which the qui tam suit was based had passed into the possession of the federal government prior to the s uit's filing. See S. Rep. No. 345, 99th Cong., 2d Sess. 10-13,

22reprinted in 1986 U.S.C.C.A.N. 5266, 5275-78 (discussing

inter alia United States ex rel. Wisconsin v. Dean , 729 F.2d 1100 (7th Cir. 1984), where it was held that the st ate of
Wisconsin could not maintain an action based entire ly on that state's investigations of the defendant becaus e the state had conveyed the same information to federal agencies in routine disclosures required by federal law). Concerned about the "conspiracy of silence" and the prevalence of fraud, Congress sought to reforge the balance
between over- and under-deterrence. See S. Rep. No. 345, 99th Cong., 2d Sess. 6, reprinted in 1986 U.S.C.C.A.N. at 5271. The principal intent of the 1986 amendments w as to "have the qui tam suit provision operate somewhere between the almost unrestrained permissiveness represented by the Marcus decision and . . . the restrictiveness of the post-1943 cases, which precl uded suit even by original sources." Stinson , 944 F.2d at 1154.

The expansion of the FCA's definition of "administr ative report" to state and local government reports would in effect return us to the unduly restrictive "government kno wledge" standard. There is no suggestion that HUD had any a ccess to information about the misrepresented state of fa cts beyond what the County submitted in its 1992 GPR. N or is there evidence of any government investigation base d on this information prior to the airing of Dunleavy's allegations. Although under the Stinson standard, this information is potentially accessible by any citize n willing to proceed under the Freedom of Information Act, 5 U.S .C. § 552 et seq., we cannot overlook the fact that Sti nson dealt with information produced on the public record in connection with litigation while here we are concer ned with reports that may be filed away without the receivin g agency being put on notice that there is any reason to giv e them
close attention.14

For the above reasons, we conclude that Congress me ant to bar reliance only on "administrative reports" or iginating with the federal government. Since the 1992 GPR was

___________________________________________________ ______________

14. We do not by this suggest that Stinson 's "potential availability" standard never applies outside the context of litig ation. We only posit the dangers of extending its reach to the context now b efore us.

23prepared by or at the behest of Delaware County, it is not

a source of public disclosure contemplated by Congr ess. Because we have answered the first part of our inqu iry in this manner, we do not need to go on to the issue o f the
extent of disclosure.

III. Conclusion

We reaffirm our holding in Stinson that "[s]ection 3730(e)(4) applies only when information has been p ublicly disclosed through an enumerated method prior to the filing of a qui tam

suit based on that information." 944 F.2d at 1176. However, the facts of this case differ signif icantly
from Stinson . We read 30 U.S.C. § 3730(e)(4)(A)'s reference to "administrative reports" as barring only those a ctions based on administrative reports that originate with the federal government. Because the 1992 GPR is the onl y source which would reveal that Delaware County had not fulfilled its reporting obligation to HUD, we must conclude
that not all essential elements of the fraud have b een publicly disclosed. We will, therefore, reverse the decision of
the district court and remand this matter to it for further proceedings consistent with this opinion.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

24