Court Opinion

ID: 2963441
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:09:46.091557+00
Date Added: 2024-06-11T09:18:19.525768
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                 ____________________

        No. 94-1081

                                    UNITED STATES,

                                      Appellee,

                                          v.

                              GUILLERMO ALEMANY RIVERA,

                                Defendant, Appellant.

        No. 94-1082

                                    UNITED STATES,

                                      Appellee,

                                          v.

                                EDGAR M. STELLA PEREZ

                                Defendant, Appellant.

                                 ____________________

                    [Hon. Raymond L. Acosta, U.S. District Judge]
                                             ___________________

                    APPEALS FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF PUERTO RICO

                                 ____________________

                                        Before

                                Torruella, Chief Judge,
                                           ___________

                           Campbell, Senior Circuit Judge,
                                     ____________________

                              and Stahl, Circuit Judge.
                                         _____________

                                 ____________________

            Robert H. Kiernan  with whom Robert M.  Simels, P.C. was on  brief
            _________________            _______________________
        for appellant Edgar M. Stella Perez.

            Pedro J. Varela for appellant Guillermo Alemany Rivera.
            _______________
            Sushma   Soni,   Attorney,  Appellate   Staff,   Civil   Division,
            _____________
        Department of  Justice, Frank  W. Hunger, Assistant  Attorney General,
                                ________________
        Guillermo  Gil,  United  States   Attorney,  and  Douglas  N.  Letter,
        ______________                                    ___________________
        Attorney, Appellate Staff, Civil Division, Department of Justice, were
        on brief for appellee.

                                 ____________________

                                     June 6, 1995
                                 ____________________

                      CAMPBELL, Senior Circuit Judge.   The United States
                                ____________________

            filed  this  civil  action  in  the  district  court  against

            defendants  Guillermo Alemany  Rivera  ("Alemany") and  Edgar

            Stella  Perez ("Stella").   Seeking  damages under  the False

            Claims  Act  ("FCA"),  31  U.S.C.     3729-3733  (1982),  the

            government alleged  that defendants had caused  a false claim

            for  mortgage loan insurance benefits  to be presented to the

            Department  of Housing  and Urban  Development ("HUD").   The

            district  court  denied  defendants'  motion  to dismiss  and

            granted summary judgment in favor of the government, awarding

            it $1,966,592.  United  States v. Stella Perez, 839  F. Supp.
                            ______________    ____________

            92, 97-98 (D. P.R. 1993).  We hold that  the government filed

            this  suit  after  the   applicable  limitations  period  had

            expired.  We therefore reverse.

                                          I.

                      During the  1970s, Alemany and Stella  engaged in a

            scheme  to defraud HUD and the Department of Health and Human

            Services  ("HHS")  in  connection  with  a  federally-insured

            $12.46  million  mortgage loan.    At that  time,  Stella was

            president, chairman  of the  board of directors,  and medical

            director  of  Hospital  Nuestra  Senora de  la  Guadalupe,  a

            hospital  in  Puerto Rico;  defendant  Alemany  was a  former

            comptroller of the  hospital.  The hospital  had obtained the

            mortgage loan in 1974 from a private lender,  Merrill, Lynch,

            Hubbard,   Inc.  ("Merrill   Lynch"),  for  the   purpose  of

                                         -3-
                                          3

            renovating and expanding its  facilities.  HUD had  agreed to

            insure the  hospital's loan pursuant to  the National Housing

            Act, 12 U.S.C.   1715z-7 (1982).

                      During the course  of the renovation  project, loan

            proceeds   were  periodically   disbursed  to   the  hospital

            according to  the following procedure.   Stella, as president

            of the hospital,  filled out a portion of  a HUD "Form 2403,"

            listing various items of completed construction and attaching

            corresponding invoices.   Stella  then forwarded the  form to

            Merrill Lynch, which  filled out  a portion of  the form  and

            forwarded it to  HUD.  After approving the  disbursement, HUD

            sent a  Certificate of  Mortgage Insurance to  Merrill Lynch.

            Merrill  Lynch then  released loan funds  to the  hospital or

            directly  to the  suppliers and  contractors.   Occasionally,

            loan  funds were  also  disbursed from  a separate  equipment

            escrow account, upon  HUD's receipt of  a letter from  Stella

            with attached invoices for purchased equipment.

                      Defendants siphoned  off  a  portion  of  the  loan

            proceeds through  their control of a  furniture company, Casa

            Cardona,  Inc.,  and  its subsidiary,  an  equipment  company

            called  AAA Hospital  Supply, Inc.,  which they  incorporated

            soon  after the hospital secured the loan.  Through these two

            companies, Stella and Alemany sold equipment  and furnishings

            to the hospital at  substantially inflated prices and charged

            the hospital for equipment that the companies never provided.

                                         -4-
                                          4

            The hospital paid for  the equipment with the  loan proceeds,

            which  were  disbursed  to  the companies  by  Merrill  Lynch

            pursuant  to   the  procedure  described  above.     In  all,

            defendants submitted 20 separate fraudulent requests for loan

            proceeds  between  1974  and  1978, as  to  which  HUD,  upon

            paperwork  furnished by  defendants,  issued certificates  of

            insurance.

                      On May 1, 1979,  the hospital was unable to  make a

            scheduled payment on the loan.  After the 30-day grace period

            expired, the  hospital filed a petition  for bankruptcy under

            chapter 11.  Merrill  Lynch formally declared the loan  to be

            in default on  July 1, 1979.  On July  2, 1979, Merrill Lynch

            filed  a  "Mortgagee's Application  for  Insurance Benefits,"

            along with a  letter notifying HUD of the default  and of its

            intention  to  exercise   its  rights  under  the   insurance

            contract.   The  July 2  document contained  only  very basic

            information, identifying  the project and the  lender.  Then,

            on  July 17,  1979,  Merrill  Lynch  filed  a  more  detailed

            "Mortgagee's  Application  for  Partial Settlement,"  setting

            forth  specific  financial  information  about  the defaulted

            loan,  including  the  amount   in  default  and  the  unpaid

            principal  balance.    On  October 25,  1979,  Merrill  Lynch

            assigned the mortgage to  HUD, as the terms of  its insurance

            contract required.  On January 17, 1980, after  approving the

            claim, HUD  disbursed to  Merrill  Lynch approximately  $12.1

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                                          5

            million,  representing  the unpaid  principal balance  on the

            mortgage, less certain credits.  

                      In July  of 1982,  defendants were charged  under a

            nine-count   criminal  indictment   based  upon   the  events

            described  above.    The  indictment alleged  that  they  had

            conspired  to  defraud  the  government and  had  made  false

            statements  in support of fraudulent claims.  18 U.S.C.    2,

            152,  371, 1001  (1982).    After  a  30-day  trial,  a  jury

            convicted  defendants  on  all   nine  counts.    Stella  was

            sentenced to 20 years  in prison and placed on  probation for

            an additional  five  years  on  the  condition  that  he  pay

            $686,349 in  restitution;1 Alemany was sentenced  to 10 years

            in  prison and  fined  $10,000.    This court  affirmed  both

            convictions  and both  sentences.   United States  v. Alemany
                                                _____________     _______

            Rivera,  781 F.2d 229, 238 (1st Cir. 1985), cert. denied, 475
            ______                                      ____________

            U.S. 1086 (1986).

                      On  October 25,  1985,  the government  brought the

            instant  civil action  against  defendants, seeking  recovery

            under  the FCA.  An individual is  liable under the FCA if he

            or  she "knowingly presents, or causes to be presented, to an

            officer  or employee  of  the Government  .  . .  a  false or

            fraudulent  claim  for payment  or  approval."   31  U.S.C.  

            3729(1)  (1982).     As  in  the   criminal  indictment,  the

            government alleged  that defendants had  conspired to  divert

                                
            ____________________

            1.   The district court later vacated the restitution order.

                                         -6-
                                          6

            the proceeds of the government-insured  mortgage loan through

            their  control of the two supply corporations and through the

            submission of  inflated requests  for loan  proceeds.   In so

            doing,  the  government asserted,  defendants  caused Merrill

            Lynch to  submit an  inflated "claim"  for payment  under the

            insurance contract after the  hospital defaulted on the loan.

                      The   government   moved   for  summary   judgment.

            Defendants filed  an opposition and  moved to dismiss  on the

            ground the action was  barred by the statute  of limitations.

            Ruling that the  action had been filed within  the applicable

            limitations  period, the  district  court denied  defendants'

            motion.  The court thereupon granted summary judgment for the

            government, holding there were no remaining genuine issues of

            material fact.  The court ruled that the  factual allegations

            in  the civil complaint were  identical to the allegations in

            the prior criminal action.  Accordingly, the  court held that

            defendants were collaterally  estopped from re-litigating any

            of the factual issues,  as these had already  been determined

            at the criminal  trial.   See Emich Motors  Corp. v.  General
                                      ___ ___________________     _______

            Motors Corp., 340 U.S. 558, 568-69 (1951).  The court awarded
            ____________

            damages based on "uncontroverted evidence in the record."

                                         II.

                      Defendants argue on appeal that the district  court

            erred in ruling that this suit  was not barred by the statute

                                         -7-
                                          7

            of limitations.   The  FCA's statute of  limitations provides

            that an  action "must be brought within 6 years from the date

            the violation  is committed."   31 U.S.C.    3731(b) (1982).2

            The elements of a "violation" of the FCA are, as noted above,

            that  an  individual "knowingly  presents,  or  causes to  be

            presented, to an officer or employee of  the Government . . .

            a false or  fraudulent claim  for payment or  approval."   31

            U.S.C.   3729(1) (1982).  

                      The present  case is  complicated by the  fact that

            Alemany's and  Stella's fraud  acted, in the  first instance,

            upon a  private lender,  Merrill Lynch, rather  than directly

            upon the  government.  This  fraud, however, was  followed by

            the hospital's default, resulting in Merrill Lynch's claim to

            HUD  for  reimbursement for  its loss on  the defaulted  loan

            under  the  federal  insurance  that  defendants  had  helped

            procure.   Although,  from Merrill  Lynch's perspective,  the

            claim it presented may not  have been "false or  fraudulent,"

            that claim was inflated by defendants' earlier fraud; and the

            case law allows the United States,  in such circumstances, to

            sue defendants under  the FCA for having "caused"  the filing

            of a "false" claim against the government.

                                
            ____________________

            2.   This  was the  statute as  it stood  when the  events at
            issue in this case occurred.  All parties in this suit appear
            to  agree that  this  earlier version  applies.   The current
            statute,  in   any  event,  contains   essentially  the  same
            language.  See 31 U.S.C.   3731(b)(1) (1988).
                       ___

                                         -8-
                                          8

                      Recognition of  a false  claim action of  this sort

            followed upon  the Supreme Court's decision  in United States
                                                            _____________

            v. McNinch, 356  U.S. 595 (1958).  In McNinch  the Court held
               _______                            _______

            that  a  lending institution's  mere  application for  credit

            insurance, even if fraudulent, did not amount to a "claim" as

            that term is used  in the FCA.  Id.   The concept of  a claim
                                            ___

            against the government, the  Court said, "normally connotes a

            demand  for money or  for some transfer  of public property."

            Id.  The Sixth Circuit found such a demand to exist where, as
            ___

            here, after  fraud was  perpetrated on a  lending institution

            for which the perpetrator of the fraud had secured government

            insurance,  the  lender  presented   its  own  claim  to  the

            government  for  payment  or  insurance.   United  States  v.
                                                       ______________

            Ekelman &  Assoc., 532 F.2d  545, 552  (6th Cir. 1976).   See
            _________________                                         ___

            also United  States v. Veneziale,  268 F.2d  504, 505-06  (3d
            ____ ______________    _________

            Cir.  1959).    The  lender's claim  in effect  completes the

            perpetrator's violation of the FCA, commencing the running of

            the statute of limitations.  The Supreme Court itself has yet

            to  endorse this theory, but  all the parties  in the present

            case accept it, as, for present purposes, do we.

                      We  accordingly  proceed  on the  theory  that  the

            "violation"  here was  "committed," see  31 U.S.C.    3731(b)
                                                ___

            (1982), for statute of limitation purposes,  whenever Merrill

            Lynch can  properly be said  to have presented  its insurance

            claim to the government.  See United States v. Bornstein, 423
                                      ___ _____________    _________

                                         -9-
                                          9

            U.S. 303, 309 (1976) (false claim may be presented through an

            innocent  third party); United States ex rel. Marcus v. Hess,
                                    ____________________________    ____

            317 U.S. 537, 544-45 (1943)  (provisions of the FCA "indicate

            a  purpose  to reach  any  person who  knowingly  assisted in

            causing the government  to pay claims which  were grounded in

            fraud,  without  regard to  whether  that  person had  direct

            contractual relations  with the government").   The claim was

            "false or fraudulent" in that the amount claimed was inflated

            by $686,349,  the amount that defendants pocketed as a result

            of  their  fraudulent scheme.    See Veneziale,  218  F.2d at
                                             ___ _________

            506.3

                      Although  the parties  all  agree that  a false  or

            fraudulent  "claim" under  the FCA  was "presented"  when the

            loan holder, Merrill Lynch, made its claim for payment on the

            insurance  contract,  they   differ  as  to  precisely   when

                                
            ____________________

            3.   In holding that a  lender's claim for mortgage insurance
            benefits is a claim under the FCA, the Third Circuit panel in
            Veneziale wrote:
            _________

                      The  claim  before  us now  is  certainly
                      "grounded in fraud" in that  a fraudulent
                      misrepresentation induced the  government
                      to assume the obligation which it has had
                      to  perform.  We  are satisfied  that the
                      government, having been compelled  to pay
                      an innocent  third person as  a result of
                      the  defendant's  fraud  in inducing  the
                      undertaking,  is  entitled  to  assert  a
                      claim  against  the  defendant under  the
                      False Claims Act.

            Id. at 506.  Similarly, in this case,  defendants' fraudulent
            ___
            statements induced  the government to  assume more  insurance
            obligations than it otherwise would have.

                                         -10-
                                          10

            presentation of the  claim took place.   Alemany argues  that

            the claim was  presented on  June 1, 1979,  after the  30-day

            grace  period following  the  hospital's missed  payment  had

            expired.   Stella took a similar position when arguing in the

            district court, but he now argues that the claim was actually

            presented somewhat later, in July of 1979, when Merrill Lynch

            filled out,  executed and  submitted to HUD  two applications

            for reimbursement  under its insurance contract.   Under both

            Alemany's  and  Stella's  contentions,  the  present suit  is

            untimely, having  been instituted more than  six years later,

            on October 25, 1985.   The district court held,  however, and

            the government  contends, that Merrill Lynch's  claim was not

            presented until October 26, 1979, when Merrill Lynch formally

            assigned  its  mortgage on  the  hospital's  property to  the

            government, thereby complying  with a condition precedent  to

            HUD's  obligation to  pay Merrill  Lynch under  the insurance

            contract.   See  24  C.F.R.     207.258, 207.259(a),  242.260
                        ___

            (1981) (detailing the mortgage insurance payment process).

                      We  quickly dismiss  Alemany's  argument  that  the

            claim  was presented  on  June 1,  1979,  30 days  after  the

            hospital  missed a  payment  on the  loan.4   Alemany  argues

            that,  30 days  after the  missed payment,  defendants' grace

                                
            ____________________

            4.   We review  a district  court's decisions on  motions for
            dismissal and summary judgment  de novo.  See Heno  v. FDIC.,
                                            _______   ___ ____     _____
            20 F.3d 1204, 1205 (1st Cir. 1994); Pagano v. Frank, 983 F.2d
                                                ______    _____
            343, 347 (1st Cir. 1993).

                                         -11-
                                          11

            period had expired  and Merrill  Lynch was  entitled to  seek

            reimbursement  from the  government  under the  terms of  its

            insurance contract.   At  this point, however,  Merrill Lynch

            had  not  yet "presented"  a  "claim" to  the  government for

            payment.   Although  Merrill Lynch  was by  then entitled  to
                                                             ________

            submit a  demand for government  funds, there is  no evidence

            that Merrill Lynch had yet done so.  Indeed, it was possible,

            if  highly  unlikely,  for  Merrill Lynch  to  choose  not to

            present a claim to the government at all  and to have instead

            looked to the mortgage for reimbursement.   See United States
                                                        ___ _____________

            v. Stillwater Community Bank, 645 F. Supp. 18, 19 (W.D. Okla.
               _________________________

            1986); but cf. United  States v. Goldberg, 256 F.  Supp. 540,
                   _______ ______________    ________

            541-42  (D. Mass.  1966).   In any  event,  no claim  was yet

            presented,  and no  "violation" of  the FCA  occurred, on  or

            before June 1,  1979.  See Stella Perez, 839  F. Supp. at 95.
                                   ___ ____________

            The district court did not err in denying Alemany's motion to

            dismiss on this ground.5

                      The harder  question    and the place where we part

            company with the decision below and with the government    is

            whether,  as Stella  now  argues, Merrill  Lynch presented  a

            claim to the government  in July of 1979, when  Merrill Lynch

            submitted formal  documents notifying HUD of  the default and

                                
            ____________________

            5.   Alemany's reference to Jankowitz  v. United States,  533
                                        _________     _____________
            F.2d 538, 547 (Ct.  Cl. 1976) is unavailing, since  the court
            in  that  case  explicitly  refused  to  decide  whether  the
            limitations  period   begins  to  run  at   default  or  upon
            submission of a claim for mortgage insurance.

                                         -12-
                                          12

            applying  for  federal  insurance  benefits relative  to  the

            defaulted mortgage loan.   In its opinion the  district court

            nowhere  discussed  the July  filings  with  HUD as  possible

            "claims"   triggering   the  running   of   the  statute   of

            limitations.   This is  understandable as neither  Stella nor

            anyone  else raised the point below.   Both defendants argued

            to  the district court that the claim and violation should be

            deemed  to have occurred on  June 1, 1979.   Ordinarily, this

            court  will  not  consider  for  the  first  time  on  appeal

            arguments    not    raised    below,   absent    "exceptional

            circumstances."  Desjardins v. Van Buren Community Hosp., 969
                             __________    _________________________

            F.2d 1280, 1282  (1st Cir. 1992); United  States v. Krynicki,
                                              ______________    ________

            689 F.2d 289, 291 (1st Cir. 1982).  But we think that special

            circumstances  warrant our  considering the  point now.   The

            government  has  answered  Stella's  argument on  its  merits

            without  in any  way objecting  to, or  questioning, Stella's

            right  to raise it for the first time on appeal.  We can only

            assume from  the lack of  objection that the  government does

            not  believe  that it  is  now materially  prejudiced  by the

            absence of  consideration  of the  matter  below     or  else

            perhaps,  that  the  government  has some  other  reason  for

            waiving  objection  to our  consideration  of  this argument.

            Whatever  the  reason,  as  the  government  has  offered  no

            objection and has responded on the merits, we are disposed to

            address  Stella's  argument,  especially  because  it  is  so

                                         -13-
                                          13

            germane to the question  that was extensively addressed below

                namely, when the claim was presented and when the statute

            of limitations commenced to  run.  The actions taken  in July

            1979,  were,  moreover,  closely  related  in  character  and

            sequence to the actions in June and October that the district

            court did consider.   See  Knight v. United  States, 37  F.3d
                                  ___  ______    ______________

            769, 772 n.2 (1st Cir. 1994).  

                      We   realize  that  Stella's   argument  relies  on

            material  outside the pleadings,  the July  forms themselves,

            which the district court had before it, making it technically

            a  cross-motion for summary judgment, rather than a motion to

            dismiss.   See Fed. R.  Civ. P.  12(b); 5A  Charles Wright  &
                       ___

            Arthur Miller, Federal Practice  and Procedure   1366 (1990).
                           _______________________________

            On appeal, we are not bound  by the label that defendants and

            the district court have  attached to the motion.   William J.
                                                               __________

            Kelly Co.  v. Reconstruction  Fin. Corp.,  172 F.2d 865,  866
            _________     __________________________

            (1st Cir. 1949);  Wright &  Miller,   1366,  at 497-98  n.20.

            The only  question is whether the government has received, as

            it  is entitled to under Fed. R.  Civ. P. 12(b), a reasonable

            opportunity  to present  relevant opposing  evidence.   While

            aware that Stella's  argument on appeal referred  to the July

            documents, the government has at no time objected to Stella's

            reference to those documents,  nor has it argued that  it has

            been materially prejudiced by the reference.  We take this as

            indicating  that  the government  sees  no  need for  further

                                         -14-
                                          14

            opportunity  to  present  evidence  in response  to  Stella's

            argument.   See Moody v. Town of Weymouth, 805 F.2d 30, 31-32
                        ___ _____    ________________

            (1st Cir. 1986) (adopting a  pragmatic approach to Rule 12(b)

            conversions and holding harmless the district court's failure

            to notify a  party of  such conversion where  the party  "has

            received the affidavit and  materials, has had an opportunity

            to  respond   to  them,   and  has  not   controverted  their

            accuracy");  see also Whiting v. Maiolini, 921 F.2d 5, 6 (1st
                         ___ ____ _______    ________

            Cir.  1990).6  The question  is thus whether  either party is

            entitled to judgment as a matter of law.

                      To  answer  this, we  must  determine when  Merrill

            Lynch's interest  in federal  reimbursement became a  "claim"

            for purposes of the  FCA    recognizing, of course,  that the

            malefactors  were  the  defendants, not  Merrill  Lynch,  the

            latter  being  merely  a  vehicle through  which  defendants'

            earlier fraud ripened  into a cognizable claim under the FCA.

                      The paradigmatic example of a false claim under the

            FCA  is a false invoice or bill  for goods or services.  See,
                                                                     ___

                                
            ____________________

            6.   As we  indicate below, the government  has not suggested
            that it  would submit any additional  evidence supporting its
            arguments on appeal, if given the opportunity to do so.   See
                                                                      ___
            Moody, 805 F.2d  at 31-32 ("Because  plaintiff has not  shown
            _____
            that he  would have done something different had the district
            court taken him by  the hand and told him  defendants' motion
            had been converted  into a  motion for  summary judgment  and
            that this  something would  likely have  defeated defendants'
            motions, we conclude plaintiff has not demonstrated prejudice
            and that therefore there would be no point in remanding.").

                                         -15-
                                          15

            e.g., Bornstein, 423 U.S. at 309.  The term, however, applies
            ____  _________

            more generally to  other demands for government funds.   See,
                                                                     ___

            e.g.,  United  States v.  Neifert-White,  390  U.S. 228,  230
            ____   ______________     _____________

            (1968) (false  application  for  government  loan);  Sell  v.
                                                                 ____

            United States, 336 F.2d 467, 474 (10th Cir. 1964) (fraudulent
            _____________

            claim for federal assistance).  In McNinch, the Supreme Court
                                               _______

            indicated  that  a "claim"  under the  FCA  is a  "demand for

            money"  that induces the  government to disburse  funds or to

            "otherwise suffer  immediate financial detriment."   McNinch,
                                                                 _______

            356  U.S.  at  599.    In Neifert-White,  the  Court  further
                                      _____________

            elaborated,  defining a claim  to be "a  false statement made

            with  the  purpose  and  effect of  inducing  the  Government

            immediately to part with money."  390 U.S. at 230.

                      Enacted during  the Civil  War, the  FCA's specific

            aim  was to  clamp  down on  widespread  fraud by  government

            contractors  who  were   submitting  inflated  invoices   and

            shipping faulty goods to the government.  See S. Rep. No. 99-
                                                      ___

            345, 99th Cong., 2d  Sess. 8, reprinted in 1986  U.S.C.C.A.N.
                                          ____________

            5266,  5273 (briefly summarizing the history of the FCA).  In

            furthering this goal, the  statute attaches liability, not to

            the  underlying fraudulent  activity or  to the  government's

            wrongful  payment, but to the "claim for payment."  Indeed, a

            contractor who submits a false claim for payment may still be

            liable  under the FCA for statutory penalties, even if it did

            not actually induce  the government  to pay out  funds or  to

                                         -16-
                                          16

            suffer  any loss.    See, e.g.,  Rex  Trailer Co.  v.  United
                                 ___  ____   ________________      ______

            States, 350 U.S. 148, 153 & n.5 (1956); United States ex rel.
            ______                                  _____________________

            Hagood v.  Sonoma County  Water Agency,  929 F.2d  1416, 1421
            ______     ___________________________

            (9th Cir. 1991).  This focus on the claim for payment appears

            to reflect a congressional  judgment that fraud by government

            contractors is best prevented  by attacking the activity that

            presents the  risk of  wrongful payment,  and not by  waiting

            until the  public  fisc is  actually damaged.   By  attaching

            liability  to the  claim or  demand for payment,  the statute

            encourages contractors to "turn square corners when they deal

            with the government."  Rock Island, Arkansas & Louisiana R.R.
                                   ______________________________________

            Co.  v. United States, 254 U.S. 141, 143 (1920) (Holmes, J.).
            ___     _____________

            Thus,  in deciding whether a given false statement is a claim

            or demand for payment, a court  should look to see if, within

            the payment  scheme, the statement has  the practical purpose

            and  effect,  and  poses  the  attendant  risk,  of  inducing

            wrongful payment.

                      Applying  this understanding  of the  statute along

            with the  language in McNinch and  Neifert-White, we conclude
                                  _______      _____________

            that the  application  filed by  Merrill  Lynch on  July  17,

            constituted a "claim for payment" against the government.  An

            official  HUD  document titled  "Mortgagee's  Application for

            Partial Settlement," the July  17 form required Merrill Lynch

            to furnish  detailed information about  the loan,  including:

            the  name of  the insured  project, the  project  number, the

                                         -17-
                                          17

            date,  the names of the mortgagee and servicer, the amount of

            payment  in default, the date  of default, the  nature of the

            default,  the  aggregate cash  escrows  on  hand, the  unpaid

            principal  balance,  and the  undisbursed  mortgage proceeds.

            The form also set  forth, in some detail, the  method through

            which  the mortgagee would obtain payment  under the terms of

            the contract  once  the  mortgage was  assigned.    The  form

            required  the  mortgagee  to  send notice  of  assignment  by

            telegram and  specified how payment could  be obtained either

            in cash or through debentures.7   Merrill Lynch completed the

            form and provided the requested answers.

                      The contents of the July 17 application, therefore,

            even  when  viewed  in  the  light  most  favorable  to   the

            government, Rivera  v. Murphy,  979 F.2d  259, 261  (1st Cir.
                        ______     ______

            1992), indicate that it  was a "demand for money"  within the

            meaning of  McNinch.  By submitting  the application, Merrill
                        _______

            Lynch  told HUD that it  was exercising its  rights under the

            insurance   contract.     Moreover,  in   providing  detailed

            financial information  about the mortgage, the completed form

                                
            ____________________

            7.   The form  provides: "On  the date  of the assignment  or
            deed is filed  for record, a telegram is to  be sent to [this
            address], advising the date that  the assignment or deed  was
            filed  for record . . . .   If the mortgage  has been finally
            endorsed for  insurance, partial settlement  of approximately
            90% of the unpaid principal balance will be made upon receipt
            of the telegram above  . . . .  The final settlement  will be
            made after receipt of the fiscal data and title requirements,
            which are to be submitted within 45 days after the assignment
            . . . ."

                                         -18-
                                          18

            specified the amount Merrill  Lynch expected to receive under

            that contract.  In  setting forth both the amount  and method

            of  payment,  the application  resembled,  in  many ways,  an

            invoice, bill, application for loan proceeds, or other demand

            for money from  the government.   The completed  form can  be

            read as essentially saying  to HUD, "We are owed  this amount

            under the terms  of our  insurance contract."   It was  quite

            literally a demand for payment from the government.  The very

            title  of the  form states  that it  is an  "application" for

            government  funds.   Compare Neifert-White,  390 U.S.  at 230
                                 _______ _____________

            (holding  that an  application for  a  government loan  was a

            "claim" under the FCA).  

                      The  contents  of  the   form,  moreover,  had  the

            "purpose and effect" of inducing  the government to part with

            its money.   See Neifert-White,  390 U.S. at  232.   Inflated
                         ___ _____________

            because   of  defendants'  earlier  fraudulent  conduct,  the

            figures in the  form were what the  insured said it was  owed

            and  should  be  paid by  the  government.    The application

            created the risk that the government  would, in reliance upon

            those  figures, be  induced to  pay the  "fraudulent" amount.

            There is no  evidence that Merrill Lynch  submitted any later

            forms that could have been used to fix the amount of payment.

                      The government  asks us  to hold that  the mortgage

            assignment  executed  by Merrill  Lynch  in  October was  the

                                         -19-
                                          19

            "claim" under the  FCA.  But  the mortgage assignment  merely

            transferred the  mortgage  to the  government, in  compliance

            with a condition to payment which  had to be met, as a matter

            of course, in effectuating the July 17 claim.  The assignment

            of the  mortgage contained no figures  constituting a payment

            amount and did  not purport  to demand  money.   The July  17

            form,  per contra,  allowed  for the  possibility that  funds
                   __________

            might  be  disbursed, under  some circumstances,  simply upon

            HUD's receipt of notice of the assignment, further suggesting

            that  the form was intended  to be relied  upon in fixing the

            amount of  payment.   The government has  mentioned no  facts

            contradicting this reading.  Once Merrill Lynch submitted the

            completed form, the government  had an actionable claim under

            the FCA.

                      The government  appears to  argue that the  July 17

            form is more  accurately characterized, not  as a demand  for

            payment, but  as  merely notice  from  Merrill Lynch  of  its

            intention eventually to file a claim.   We take this to be an

            argument that, as a  factual matter, the July 17 form did not

            have  the   purpose  and  effect  of   inducing  payment  and

            accordingly presented no risk of wrongful payment in reliance

            thereof.    If the  form could  in  fact be  characterized as

            merely  notice, we would agree with the government that it is

            not  a "claim," as notice ordinarily  does not put government

                                         -20-
                                          20

            funds  at  risk  or   attempt,  by  itself,  to   induce  the

            disbursement of funds.8  

                      The government has failed, however, to support  the

            above  argument.   No  regulations  have been  called  to our

            attention suggesting that, within  the HUD insurance  scheme,

            the  filing  of the  July 17  form really  had no  purpose or

            effect  of inducing payment and  was instead only  a means to

            notify  HUD of its estimated  liability.  Nor,  as noted, has

            evidence  been  pointed out  that  Merrill  Lynch made  other

            required  filings with  more detailed  financial information.

            These,  had they occurred, might have suggested that the July

            17 form was  understood to be merely  a preliminary estimate,

            not  to be  relied  upon in  fixing  the amount  of  payment.

            However, the government has nowhere pointed or alluded to any

            later  papers  submitted, or  required  to  be submitted,  by

            Merrill  Lynch   which  could  have  formed   the  basis  for

            calculating  the amount of  payment.   The completed  July 17

            form, on its face, fully supports Stella's contention that it

            was a demand for payment from the government.  The government

            has pointed to no facts that would contradict this reading of

            the form and no facts suggesting that the figures on the form

            posed no risk of  wrongful payment, relying instead primarily

                                
            ____________________

            8.   The earlier document submitted  by Merrill Lynch on July
            2  was arguably merely notice,  as it provides  only the most
            basic  information about  the  mortgage loan.    We need  not
            decide  the point,  as the  July  17 application  was clearly
            sufficient to constitute a claim.

                                         -21-
                                          21

            upon the  legal arguments  presented below.   Accordingly, no

            genuine issue  of material  fact remains to  preclude summary

            judgment  for defendants  on  this issue.    See Anderson  v.
                                                         ___ ________

            Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
            ___________________

                      The government's principal argument is a legal one.

            It  relies on the statement in  McNinch that the insufficient
                                            _______

            claim there (the request for government insurance coverage of

            a future loan) did  not, among its other failings,  cause the

            FHA to "suffer immediate  financial detriment."  McNinch, 356
                                                             _______

            U.S. at 599.   The government  contends that, in  determining

            whether a  request for government funds  caused an "immediate

            financial detriment," the  key factor is the  legal effect of
                                                          ____________

            such a request, as specified under the terms of the contract.

            The government points to the terms of the insurance contract,

            under  which  the government's  obligation  to  pay insurance

            benefits arises only upon assignment of the mortgage.  See 24
                                                                   ___

            C.F.R.    207.259(a), 242.260 (1981).  As, under the terms of

            the insurance  contract, submission of the  completed July 17

            form did not give rise to an instant unconditional obligation

            to  pay, the government contends that the form could not have

            been a "claim" under the FCA.  

                      We  think  the  government  reads   too  much  into

            McNinch's   reference  to  immediacy.     Lack  of  immediate
            _______

            financial detriment  is cited in  McNinch as  one of  several
                                              _______

            reasons an  application for  credit insurance falls  short of

                                         -22-
                                          22

            being  a claim.  In Neifert-White,  a later case in which the
                                _____________

            question   was  whether  a   fraudulent  application   for  a

            government  loan constituted  a  "claim" under  the FCA,  the

            Supreme Court  held that the application was  a "claim" under

            the FCA even though it  triggered no instant legal obligation

            to pay  out funds.9   "This remedial  statute reaches  beyond

            'claims' which  might be legally enforced,  to all fraudulent
                                     ________________

            attempts to cause the  Government to pay out sums  of money."

            Neifert-White,   390   U.S.   at  233   (emphasis   added).10
            _____________

            Neifert-White  makes  clear that  the  FCA  reaches not  only
            _____________

            claims that trigger the government's legal obligation to pay,

            but more generally all claims that are "made with the purpose

            and  effect of  inducing the  Government immediately  to part

                                
            ____________________

            9.   The  government   makes  much  of  the   fact  that  the
            assignment of  the mortgage conferred on  the government "all
            rights  and interest  arising under  the mortgage  and credit
            instrument  so  in  default,   and  all  claims  against  the
            mortgagor,   or   others,   arising  out   of   the  mortgage
            transaction," implying  that  the government  could not  have
            sued  (and thus that the statute did  not begin to run) until
            it was  assigned the  mortgage.   This  reveals a  confusion,
            however, between a suit against defendants under the terms of
            the  mortgage and a  suit under the  FCA.  The  fact that the
            former  could  not  be  instituted by  the  government  until
            assignment is irrelevant with respect to whether a suit under
            the FCA could be instituted.

            10.       Compare the  July 17 form to  the paradigmatic case
            under  the FCA:  an invoice  for payment.   The  FCA attaches
            liability  to   an  invoice,  not  because   it  triggers  an
            obligation to pay (though  it may well do so), but because it
            poses  a risk that the  government may, in  reliance upon the
            false statements  contained in  the invoice, wrongly  pay out
            funds.   Claims that trigger a legal obligation to pay merely
            constitute a  special subset of claims  posing a particularly
            high risk of mistaken payment.  

                                         -23-
                                          23

            with  its money." Id.11  The  key inquiry is thus whether the
                              ___

            demand  for payment,  whether  or not  it  gives rise  to  an

            unconditional  legal obligation  to pay  right away,  has the

            practical   effect  of  inducing  the  government  to  suffer

            immediate financial harm.12

                      We hold  that the July  17 form's demand  for funds

            had   the  practical   effect  of   inducing  payment   in  a

            sufficiently "immediate" manner to satisfy the requirement in

            McNinch.    While  the payment  of  funds  was  not literally
            _______

            "immediate," in  that nearly six months  would elapse between

            the  application and the transfer  of the bulk  of the funds,

            this  lag is not by  itself dispositive.   Some similar delay

            might be  expected in the government's payment  of an invoice

            or a loan application, both of which are plainly claims under

            the FCA.   Indeed, most  of the funds  in this case  were not

            disbursed to  Merrill Lynch  until nearly three  months after

            the  mortgage was  assigned.   We do  not read  the immediacy

            language in McNinch as  suggesting that government funds must
                        _______

            be unconditionally available on literally the same day as the

                                
            ____________________

            11.       This reading  of the  term was reemphasized  in the
            1986  amendments to  the FCA,  which defines  a "claim"  as a
            "request or demand" for payment.  31 U.S.C.   3729(c) (1988);
            S. Rep. No. 99-345, 1986 U.S.C.C.A.N. at 5284-85.

            12.       This is not to  rule that the subsequent assignment
            could  never, alone,  be sufficient  to constitute  a "claim"
            under the  FCA.  It is just that we need not reach this issue
            since the "claim  for payment" was clearly submitted  in this
            case several months earlier, on July 17, 1979.

                                         -24-
                                          24

            claim  is made.  In McNinch,  the lack of immediacy was noted
                                _______

            in  the context of an application for mortgage insurance, the

            submission of  which could occur  several years prior  to the

            occurrence of  any liquidated claims for  the disbursement of

            government funds, if, indeed, any claim for disbursement ever

            arose at  all.   McNinch, therefore, presented  the different
                             _______

            situation  of there being as yet no crystallized claim of any

            sort.  In this case, we hold that Merrill Lynch's filing of a

            specific  claim for government  insurance on the government's

            form on July 17, 1979 was a "claim" within the FCA. 

                      As this action was  instituted on October 25, 1985,

            over  six years later, it was  barred by the FCA's statute of

            limitations.  We do not reach the other arguments on appeal.

                      Reversed.
                      ________

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                                          25