Court Opinion

ID: 2659525
Source: CourtListenerOpinion
Date Created: 2014-04-03 02:44:47.140667+00
Date Added: 2024-06-11T09:26:25.994273
License: Public Domain

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                                   UNITED STATES DISTRICT COURT
                                   FOR THE DISTRICT OF COLUMBIA

     UNITED STATES OF AMERICA,
     ex rel. ROBERT R. PURCELL,

                       Plaintiffs,

             v.                                          Civil Action No. 98-2088 (GK)

     MWI CORPORATION,

                       Defendant.

                                          MEMORANDUM OPINION

             This matter comes before the Court for ruling after a jury

     trial.       The jury found Defendant MWI Corporation                      ("Defendant" or

     "MWI") liable for violations of the False Claims Act                              ("FCA"), 31

     U.S.C.       §   3729(a) (1),   (2).

             The      parties      were    ordered     to    submit     supplemental          briefs

     addressing the issue of damages.                    Plaintiff United States                  ("the

     Government")         filed a Motion for Entry of Judgment                       ("U.S. Mot.")

     [Dkt. No. 458]. Defendant MWI Corporation ("Defendant" or "MWI")

     filed     a      Memorandum     of     Points     and     Authorities          Regarding       the

     Calculation           of      Damages      ( "MWI       Mem. ")        [Dkt.     No.         459] .

     Subsequently,           the     Government        filed      a     Response        to        MWI' s

     Memorandum          ("U.S.    Resp. ")    [Dkt.     No.    463],       Relator     Robert       R.

     Purcell          ("Relator"     or     "Purcell")       filed      a    Response        to     the

     Government and MWI' s            Calculation of Damages Regarding Entry of
Judgment       ("Relator          Resp. ")        [Dkt.    No.        464],     and   MWI    filed     a

Response to United States'                    Submissions              ( "MWI Resp. ")      [Dkt.   No.

465] .        After         consideration            of          those         submissions,          the

representations             of     the     parties        at     the     damages      hearing       held

December 19, 2013, and the entire record herein, the Court will

now      address      the        issues     raised        and        determine     the     amount     of

damages.

         A.    Factual Background

         In   1992,     MWI,       a      Florida     corporation,             arranged      to     sell

irrigation pumps and other equipment to seven Nigerian states.

The total sale price was $82.2 million dollars.

         To   finance       these        sales,    MWI     and the          Federal      Republic of

Nigeria       ("Nigeria")          sought     and     received eight              loans     from     the

Export- Import Bank of the United States                               ("Ex- Im") , an agency of

the   United       States         that     finances        and        facilitates        transactions

between U.S. exporters and international buyers. Ex-Im agreed to

finance the deal and loan Nigeria $74.3 million dollars. Nigeria

would pay back the $74.3 million dollars,                                   as well as interest

and   fees,       and   the        individual        Nigerian           states     would     pay     the

remainder of the $82.2 million dollar price.

         Before    Ex-Im          would      approve           the     loans     to     Nigeria,      it

required        MWI     to        submit      a      "Letter           of      Credit      Supplier's

Certificate" for each of the eight loans. On each of those eight

                                                   -2-
Letter of Credit Supplier's Certificates,                     MWI attested that it

had only paid "regular commissions" in connection with the pump

sales.

     After Ex-Im approved the loans, but before it disbursed any

funds,   it    required    MWI     to    submit    a     "Disbursement       Supplier's

Certificate."     MWI     attested        on    fifty    Disbursement        Supplier's

Certificates     that     it   had      paid    only    "regular    commissions"        in

connection with the pump sales. Thus, MWI submitted eight Letter

of   Credit     Supplier's         Certificates         and     fifty      Disbursement

Supplier's Certificates to Ex-Im. 1

     In 1998, Relator Robert Purcell,                   a former employee of MWI,

filed this action against MWI under the FCA                        [Dkt.    No.   1]    He

alleged that MWI paid commissions in excess of 30 percent of the

contract prices for the irrigation pumps and equipment to its

long-time     Nigerian     sales     agent,      Alhaji       Mohammed     Indimi.     Id.

,, 35-37.     Purcell    alleged that          those    commission payments were

"irregular"    and thus should have been disclosed on all of the

Supplier's Certificates that MWI submitted to Ex-Im. Id.

1
   MWI argued for the first time in its Response that the
Complaint    identified   only    48   Disbursement  Supplier's
Certificates and did not       identify any Letter of    Credit
Supplier's Certificates. MWI Resp. at 10. At trial, MWI did not
challenge the Government's evidence or testimony regarding 58
total Supplier's Certificates, and therefore the Court accepts
these figures as correct.
                                          -3-
         In April of 2002,           the United States decided to intervene,

and      filed   a    complaint       which     then       governed     the    proceedings

    ("Complaint")     [Dkt.    No.    18] .    Based    in part       on the     amount    of

commissions paid to Indimi,               which at the time was estimated to

be approximately $28 million dollars, 2 the Complaint alleged two

violations       of   the     FCA    (Counts    I    and    II)   and   two     common    law

claims for unjust enrichment and payment by mistake                             (Counts III

and IV)

        The   case    was     litigated        for     several    years       before    Judge

Ricardo M. Urbina. After Judge Urbina's retirement, the case was

reassigned       to   Judge    Colleen Kollar-Kotelly,                and   then   to    this

Court. After resolving many pre-trial motions, the case went to

trial on November 6, 2013.

        Counts I and II of the Complaint,                   the FCA violations, were

to be decided by the jury. It was instructed that,                             if it found

that MWI had violated the FCA,                  it was to identify the specific

number of false claims and then "assess the amount of damages,

2
  At trial, the Government argued that MWI had paid $25 million
dollars in commissions to Indimi, not $28 million. See, e.g.,
Pls. Opening St., Trial Tr. Nov. 8, 2013, A.M. Session at 25:9-
12 (telling jury it needed "to decide whether MWI knew or should
have known that the $25 million payment to Mr. Indimi was
irregular and that it should have been disclosed"); Pls. Closing
Arg., Trial Tr. Nov. 21, 2013, A.M. Session at 50:20-22 ("$25
million in Ex-Im funds went into the bank account of MWI's
Nigerian agent Alhaji Indimi."); id. at 76:10-12 (suggesting
that amount United States "unknowingly paid to Mr. Indimi," $25
million, be considered as measure of damages) .
                                              -4-
if any,      that the       [G] overnment sustained because of MWI' s acts."

Closing Instructions,              Trial Tr.             Nov.    21,   2013 A.M.          Session at

41:13:18      (quoting        31    U.S.C.          §   3729(a) (1),       which      states      that

defendant is liable for "3 times the amount of damages which the

Government sustains because of the act of that person").

        Iri order to assess the appropriate amount of damages,                                        the

jury was instructed, under United States v. Science Applications

Int'l     Corp.,      626    F.3d       1257,       1278-79        (D.C.     Cir.     2010),      that

damages were "the amount of money the government paid because of

the false claims over and above what it would have paid had MWI

not made the false claims," and that it would need to "set an

award     that   puts       the    [G] overnment           in    the   same     position         as    it

would     have     been     in     if   the     defendant's            claims       had    not    been

false."      Closing        Instructions,               Trial    Tr.   Nov.     21,       2013    A.M.

Session at 41:19-24. 3

        On   November       25,     2013,       the       jury    returned      a     verdict         for

Plaintiffs       on     both       Counts       I       and     II.    The    Government          then

dismissed Counts            III    and IV of             the Complaint,         its common law

claims, with prejudice. Trial Tr. Nov. 25, 2013, A.M. Session at

22:18-20.
3
  The Government did not object to the damages instructions. MWI
objected, arguing that the Court should instruct the jury that
the Government also had to prove proximate causation and actual
reliance. Closing Instructions, Trial Tr. Nov. 20, 2013, P.M.
Session at 121:22-25.    It had no other objections to the
instruction. Id. 122:10-12.
                                                -5-
        B.      Standard of Review

        Under        the        FCA,     "if      [the     jury]        finds     liability,          its

instruction is to return a verdict for actual damages, for which

the     court    alone          then     determines        any multiplier,           just       as    the

court        alone       sets     any    separate        penalty."        Cook    Cty.,        Ill.    v.

United States ex rel. Chandler, 538 U.S. 119, 132                                  (2003)       (citing

31     U.S.C.        §   3729(a)).        Thus,     it     is     now    the     Court's        job    to

calculate       the        "civil penalty of not                less      than $5,000          and not

more than $10,000, plus 3 times the amount of damages which the

Government        sustains             because    of"    MWI' s    actions.        See    31    U.S. C.

§    3729 (a)

        The     "chief purpose of the                    (Act's civil penalties)                was to

provide for restitution to the government of money taken from it

by     fraud,        and    that        the    device      of     [treble]       damages       plus     a

specific sum was chosen to make sure that the government would

be made completely whole." United States v. Bornstein, 423 U.S.

303,     314    (1976)          (citing United States ex rel. ·Marcus v.                            Hess,

317 U.S.        537,       551-52       (1943)).     In order to make the Government

"whole," the Supreme Court has instructed that "the Government's

actual damages are to be                       [trebled]    before any subtractions are

made      for    compensatory              payments        previously           received       by     the

Government from any source." Bornstein, 423 U.S. at 316.

                                                   -6-
     C.      Actual Damages

     First, the jury found that MWI knowingly presented 58 false

or fraudulent claims for payment to the Government, in violation

of 31 U.S.C.        §    3729(a) (1).            Verdict Form,            at 1     [Dkt.      No.       453].

Second,     it   found         that        the    amount       of    damages       the       Government

sustained because of those claims was $7,500,000. Id.

     The     jury       also         found       that    MWI       knowingly       made       58        false

records     and/or           false        statements         that    were        material          to     the

Government's       decision           to     pay    or       approve       false     or      fraudulent

claims     for   payment,            in    violation          of    31    U.S.C.        §   3729(a) (2).

Verdict    Form,        at    2.     It    found    that       the       amount    of       damages       the

Government       sustained                because       of     those         false          records        or

statements was $7,500,000.

     The    Government             concedes        that      the     total       amount      of     actual

damages for both counts is $7,500,000.                               U.S.     Mot.      3 at        1.    The

only party that disagrees is the Relator,                                  who argues that the

jury intended to award $7.5 million in damages for each count,

for a total of $15 million. Relator Resp. at 2-3.

     Relator's          argument           that     the       jury       split     the       amount        of

damages between the two counts is nothing more than speculation.

Relator ignores the important fact that the jury identified the

same 58 Supplier's Certificates for both Counts. At trial,                                                the

Government argued that each of the                             58    Supplier's Certificates

                                                   -7-
constituted        a     false        claim    and/or    a      false     statement.            Pls.'

Closing Arg.,          Trial Tr. Nov. 21,            2013, A.M. Session at 62:12-13

("MWI's certifications on the 58 Supplier's Certificates that it

submitted to           Ex-Im were        false.").      Thus,     it     is   clear that          the

jury determined that the same conduct,                       the submission of the 58

Supplier's       Certificates,           was   a   violation of          both Count          I    and

Count II. To aggregate the two sums would be to punish MWI twice

for the same conduct, which would "amount to a double recovery."

See Kakeh v.           United Planning Org.,             Inc.,      655 F.        Supp.    2d 107,

122    (D.D.C.    2009)        ("It is well-settled that a plaintiff is not

permitted     to       recover        multiple     awards     for      the    same        injury.")

(citing supporting cases) .

       The jury found that the 58 false certifications damaged the

Government       by $7,500, 000          and     therefore       that    is   the      amount         of

actual damages.

       D.     Treble Damages

       An entity found liable for a violation of the FCA is liable

for "3 times the amount of damages which the Government sustains

because of       the     act     of    that person."         31 U.S. C.       §    3 72 9 (a) .   The

parties agree that the first step in calculating treble damages

is to treble the actual damages amount.                         See Bornstein, 423 U.S.

at    316.   Thus,      the    treble     damages       amount      is   $7,500,000         x     3

$22,500,000.

                                               -8-
      E.        Offset for Compensatory Payments Under Bornstein

      The       real     and difficult            issue      in   the   calculation of

total damages is whether, under Bornstein, MWI is entitled to an

offset     of    the   $108    million dollars        that    the   Ex-Im eventually

received from the             federal    Nigerian government as               repayment    of

the loans at issue.

                1.     United States v. Bornstein

      Bornstein        involved      a   Government    contract         for    radio     kits

with a prime contractor,             Model Engineering.           423 U.S.      at 307. A

subcontractor, United, knowingly sold Model Engineering electron

tubes for inclusion in the radio kits that did not conform to

the   specifications            of   the    Government        contract.         After     the

Government        discovered     the     nonconforming       electron     tubes,        Model

Engineering paid the Government the difference in value between

the radio kits as specified in the contract and the radio kits

as supplied with the nonconforming electron tubes. Id.

      Subsequently,        the Government sued United under the FCA and

prevailed. Id. at 308. A key issue before the Supreme Court was

whether the amount of damages owed by United to the Government

should be offset by the amount of Model Engineering's payments

to the Government,            or whether the amount of damages should be

                                            -9-
doubled 4      before       any       subtractions           should     be    made    for     Model

Engineering's             payments.           Id.      at      314.      Significantly,         the

Government          did     not    argue       that         Model     Engineering's        payments

should not be deducted at all -- the question was when to deduct

the payments.             See   id.    at   314      n. 9    (noting that      Government       had

"abandoned"         the     position        that       "any     compensatory         payments    it

received should not be deducted from its statutory damages at

all").

       After evaluating the "language and purpose" of the FCA, the

Supreme Court concluded that,                        "in computing the double damages

authorized by the Act, the Government's actual damages are to be

doubled        before       any       subtractions           are    made     for     compensatory

payments previously received by the Government from any source."

Id. at .316-17.

               2.         Issue Presented

       It is undisputed that Nigeria eventually paid approximately

$108   million to the Ex-Im on the loans at                                issue       the $74.3

million dollar principal and $33.7 million dollars in interest

and    fees.    MWI       argues      that,     under Bornstein,             the    $108    million

that     Nigeria           paid       the      Government           should     be      considered

4
  The FCA was amended in 1986 and now provides for treble, not
double, damages. See Cook Cty., Ill. v. United States ex rel.
Chandler, 538 U.S. 119, 129-30 (2003) (discussing Congressional
modernization of FCA in 1986, including raising the ceiling on
damages from double to treble) .
                                                    -10-
"compensatory         payments      previously         received      by   the     Government

from     any    source"      and   subtracted          from    the    amount      of    treble

damages MWI owes the Government.                   Because the $108 million far

exceeds      the     $22.5   million MWI         owes    the    government        as    treble

damages,       MWI    insists that,       after applying the offset,                   it owes

nothing to the Government in damages.

       MWI     also    argues      that    an    offset       for    these      payments     is

mandatory under Bornstein and that the Court has no discretion

about whether or not to apply it in this case. MWI Mem. at 2-4.

That is incorrect.           Bornstein did not define what constituted a

"compensatory payment," nor did it address the argument raised

by     the     Government     in    this        case    that    certain         compensatory

payments need not be deducted from statutory damages.                                 423 U.S.

at   314     n.9.    Moreover,     the    Bornstein Court            did not      address     a

situation where the compensatory payments to be subtracted are

larger than the          single damages amount,                much less,        as    in this

case, entirely dwarf the treble damages amount.

       Thus, there are several questions raised in this case that

were neither raised nor addressed in Bornstein.                           MWI' s argument

that    Bornstein       resolves     this       issue    without       further         analysis

ignores the complexity of the issue.

                                            -11-
               3.        MWI's Alleged "Influence" of Nigeria's Repayment

       The Government's first argument is that the Nigerian loan

repayments were               not    "compensatory payments"                   because     they were

only made after MWI lobbied Nigeria to repay its loans at the

expense of other loans due the Ex-Im. U.S. Mot. at 3-5. For the

reasons set out below,                  the Court concludes that the Government

failed    to        prove       that        MWI   did      in     fact     lobby     the    Nigerian

government          to     repay      the     MWI     loans       after        learning    that   its

conduct was being investigated. Nor has the Government provided

any evidence that Nigeria would have paid off other loans to the

Ex-Im if it had not paid off the MWI loans.

       The primary evidence the Government                               identifies in support

of its argument is the deposition testimony of Steve Ahaneku, a

Nigerian attorney. Ahaneku did not testify at trial, nor did the

Government          call      him      as     a   witness        at      the     damages    hearing.

Instead, the Government relies on Ahaneku's deposition testimony

that   "someone          at     [MWI]       talked to       [him]        about    talking    to   the

Nigerian officials                  specifically about             repaying       the     EXIM loans

that related to the Eight-State Projects." U.S. Mot. Ex. 2 at 3. 5

       Based on this deposition testimony,                               the Government argues

that after MWI             "became aware of a                   criminal       investigation into

5
  Though the parties did not raise the issue, this testimony
would likely have been inadmissible at trial as hearsay. Fed. R.
Evid. 802.
                                                    -12-
their conduct," MWI paid Ahaneku "to convince Nigerian officials

to pay off the MWI loan while other Exim loans were in default."

U.S.   Mot.    at   3.    The    testimony clearly does                  not   support       this

allegation.

       The    Government's       assertion that Ahaneku was                    having       these

conversations       "right around the time"                    that MWI      discovered the

investigation is incorrect.              Ahaneku identified the time period

when he was asked to speak to Nigerian officials about repaying

the loans as between 1995,               1996,     and 1997.           Id.   at 2. Although

the parties dispute when MWI became aware of the investigation

into its conduct,         the Government does not suggest that MWI was

aware of any investigation prior to December 1998. U.S. Resp. 7

n.3.    That     date    is     well   after       the        period    that       Ahaneku    was

discussing       in his       deposition.    Thus,        Ahaneku' s         testimony about

speaking to Nigerian officials in the mid-1990s does not support

the Government's assertion about what MWI did after it became

aware of the investigation in the late 1990s.

       Second,      Ahaneku's          testimony          does         not     support        the

Plaintiffs' argument that MWI lobbied Nigerian officials to pay

off the MWI loans because MWI feared future liability.                                 Instead,

Ahaneku      testified    that     MWI   sought          to    discuss       the    loans    with

Nigerian officials because "officials come and go." Id. Ex. 2 at

2.   Ahaneku noted that MWI was interested in assuring that the

                                            -13-
loans     were       repaid      because        "it    is     an     obligation,          it's    an

outstanding obligation.                The name is associated with it so they

would like it to be tidied up." Id. at 3. The Government did not

cite to any other portions of Ahaneku's deposition that impeach

the    credibility of           this    witness       or his       testimony,       nor    did     it

cite    to     any   other      testimony       or    evidence       that    contradicts          the

testimony. 6

        Consequently,         the      Government       has    failed       to    persuade        the

Court    that    Ahaneku' s       testimony          stands    for    anything      other        than

the fact that,          before MWI knew about any investigation into its

conduct,       its agent spoke to Nigerian officials in an attempt to

ensure that loans that involved MWI were repaid.

        Other    evidence       marshaled by the              Government         also    fails     to

supports       its   allegations.         The    Government          notes    the       deposition

testimony of         James      Hess,    Ex- Im' s     Chief       Financial      Officer,        who

stated that Nigeria             "singled out"          the MWI       loans       for repayment.

U.S.    Mot.    at 4,     Ex.    3 at 1.        However,      Hess also testified that

there    was     "nothing       improper"        about      Nigeria     choosing          to     make

those payments, and that the Ex-Im would "rather have that money

than not have it." Id. at 2.

        The    Government       emphasizes       that       after MWI        knew about          this

lawsuit,       in 2002,    it retained an American lawyer,                        Warren Glick,
6
  Naturally, there was              an opportunity for               cross-examination at
the deposition.
                                             -14-
to determine Nigeria's indebtedness on the MWI loans. U.S. Mot.

at   4.   The    Government       argues      that     MWI   paid    Glick      to    request

information about the loans from the Ex-Im under the Freedom of

Information Act         ( "FOIA") ,     and     insinuates      that      MWI    took       that

information       and   used      it    to    influence      Nigeria      to     repay       the

remaining       balance.    Id.    at    4-5.       Again,   the    evidence         does    not

support the Government's chain of inferences.

      The record shows that the vast majority of the loans were

repaid well in advance of Glick's FOIA request. 7 Indeed, Ex-Im's

response    to     Glick's     FOIA      request       states      that   the     remaining

balance on the loans was approximately $270,000. U.S. Mot. Ex. 5

at 2. That constitutes less than 1% of the entire amount of the

loans in question.          In addition,        the Government has presented no

evidence that anyone from MWI interacted-with Nigerian officials

about the MWI loans after the FOIA request was made. Thus,                                   the

evidence    cited by the Government                  simply does       not      support      its

allegations.

      In addition,         the Court notes that,             even if the Government

had identified evidence that MWI petitioned Nigeria to pay off
7
  Approximately 42% of the loans were repaid by December 1998,
the earliest date the Government suggests MWI could have known
about an investigation into its conduct. See Def. Exs. 321, 331,
364, 370, 382, 397, 416, 424. The loans were almost entirely
paid off by May 3, 2001, over seven months before MWI received a
copy of the Relator's Complaint and sent its FOIA request to the
Ex-Im. See id.; see also U.S. Mot. Ex. 5 at 2 (Glick's FOIA
request, dated January 16, 2002).
                                             -15-
the MWI loans,        such actions would not have been inappropriate.

The Government cites no law,              regulation, or case precluding MWI

from      lobbying     Nigeria       to    take   particular         actions     within

Nigeria 1 s discretion. 8 See MWI Mem. at Ex. 3 at 6 (Hess testimony

that there was nothing "inappropriate or impropertt about Nigeria

choosing     to     repay    the   MWI     loans) .   The    Government    fails     to

acknowledge the indisputable fact that Nigeria has the right to

pay off its debts in whatever order it chooses.

         The Government tries to avoid this fact by inferring that,

had MWI not petitioned the Nigerian government to pay off the

MWI loans,· Nigeria would have applied those funds to other Ex-Im

loans.      Again,     it    provides       no    evidence      to     support     that

proposition.         Thus,     the        Government 1   S   argument      is      pure

speculation.

         Since the Government has failed to provide a factual basis

for its allegation that Nigeria repaid the loans in question at

MWI, s    behest,    or that Nigeria did so at               the expense of other

loans to the Ex-Im,          the Court rejects the Government,s argument

that Nigeria 1 s repayments were not "compensatory payments. 11

8
  Moreover, the evidence at trial showed that the Ex-Im actually
required MWI to lobby Nigeria to repay other loans it owed to
the Government as a prerequisite to granting the loans in this
case. Test. of William Bucknam, Trial Tr. Nov. 8, 2013 P.M.
Session at 51:7-53:2 (testifying that Ex-Im officials required
MWI to collect unrelated arrearages from Nigeria in order to
make credits operative) .
                                           -16-
             4.     "Compensatory Payments"

      The    next   issue      that    must       be     addressed       is    whether       the

Nigerian     loan    repayments        are    "compensatory              payments''       under

Bornstein. 9 Neither the parties nor the Court have identified any

factually-comparable           case   under        the     False        Claims      Act     that

provides     helpful    guidance      on     this      issue.      In    the     absence      of

specific guidance, the Court looks to Bornstein and its progeny.

      As noted above,          the Government did not argue in Bornstein

that prime contractor Model Engineering's settlement payments to

the   Government       were    not    compensatory         payments,          nor    did     the

Government    argue     that    compensatory payments               should not            offset
9
   MWI claims that the Government is judicially estopped from
                           •
arguing that the Nigerian repayments are not "compensatory." MWI
Resp. at 2-3. A court may invoke judicial estoppel "where a
party assumes a certain position in a legal proceeding, succeeds
in maintaining that position, and then, simply because his
interests have changed, assumes a contrary position." Moses v.
Howard Uni v. Hosp., 606 F. 3d 789, 798 (D.C. Cir. 2010) (internal
quotation marks and citations omitted) . MWI points out that the
Government argued before trial that evidence of Nigerian
repayment should not be presented to the jury specifically
because    the   repayments   were  compensatory   payments   under
Bornstein.     Id.    (citing   United   States'    Mot.    Seeking
Reconsideration of the Court's Damages Rulings, at 4-5 [Dkt. No.
416] )

This Court did not adopt the Government's position that the
Nigerian repayments were "compensatory payments" that would
necessarily offset    any  damages.   See   Order  on Mot.    for
Reconsideration at 8 [Dkt. No. 425] (noting that if the jury
determined the Government suffered damages, "the Court will then
decide" whether MWI is entitled to a reduction based on
Nigeria's repayments) (emphasis added) . Thus, the Government did
not "succeed" in maintaining its position, and judicial estoppel
is inapplicable.
                                           -17-
the FCA liability of the subcontractor.                             The only question was

when the payments should be used to offset liability -- before

or after calculation of treble damages. See 423 U.S. at 314 n.9

(noting        that     Government         "abandoned"        the     position        that       "any

compensatory payments                it    received should not be deducted from

its statutory damages at all").

       The     Supreme       Court        posited    that     the     Government         may     have

abandoned this           position         "for the     reason that           since United is

liable to Model for Model's payment to the United States, United

would in effect be assessed triple damages under such a rule."

Id.    ThGs,    the Court recognized the basic principle that,                                  in a

case     involving           joint        tortfeasors,        the         liability       to      the

Government        is     a   shared        liability        that     must     be     apportioned

accordingly.           See    United        States      ex     rel.        Bunk     v.    Birkart

Globistics, Nos. 1:02-cv-1168, 1:07-cv-1198, 2011 WL 5005313, at

*16    (E.D. Va. Oct. 19, 2012)                 ("It is generally agreed that when

a plaintiff settles with one of several joint tortfeasors,                                        the

non-settling           defendants         are   entitled       to     a     credit       for     that

settlement.")          (citation omitted);             United States ex rel.                   Miller

v.    Bill Harbert Int'l Constr.,                   Inc.,    501 F. Supp.          2d 51,       54-55

(D.D.C. 2007)          (noting that "where there is a settlement between

the plaintiff and one defendant,                     the liability of the remaining

non-settling defendants must be calculated with reference to the

                                                -18-
jury's            allocation           of          the         non-settling                   defendant's

responsibility")                 (internal         quotation               marks        and      citation

omitted).

        That       reasoning        could    be     used       to     distinguish              this     case,

because no evidence was presented nor argument made that Nigeria

should be          jointly or severally liable for MWI' s                                false        claims.

See United States v.                Hawley,        562 F.        Supp.       2d 1017,          1025        (N.D.

Iowa 2008)         (noting that Bornstein does not stand for "the broad

proposition that             a     defendant       in a        FCA case           is    entitled to            a

credit       for     any     amounts       recovered           by    the        United     States          from

anothe~      party,"         but    instead        "stands           for    the        quite    different

proposition          that     a     tortfeasor,           such       as     a    subcontractor,               is

entitled to a credit for compensation that the United States has

recovered from another tortfeasor, such as a prime contractor").

However, the majority of post-Bornstein cases have not made this

distinction.

        Rather,        the        cases     have         applied           the     Supreme            Court's

statement in Bornstein that the offset encompasses "compensatory

payments       previously          received        from        any    source"           literally.           423

U.S.    at     316    (emphasis           added)      In       particular,             this     issue        has

arisen       in      cases        where     individuals              were        found        liable         for

fraudulently procuring federal                      loans,          but the beneficiaries of

those     loans       made        payments     on        the        underlying          loans         to     the

                                                   -19-
Government.         See    United        States      v.     Heck,    No.     08-0875,           1987   WL

49253, at *6          (D.N.J. Mar. 26,             1987)        (holding that defendant was

entitled       to     offset       including         "amounts        recovered            from    other

parties"); United States v. Ekelman & Ass'n, Inc., 531 F.2d 545,

547     (6th   Cir.       1976)     (decided        immediately after               Bornstein and

holding that offset                should include               "any amount        recovered from

the     veteran-mortgagor               by   the     government") ;         United         States      v.

Globe Remodeling Co.,               196 F.         Supp.    652     (D. Vt.      1960)         (finding,

pre-Bornstein,            that    offset      for     "repayments           to     the     government

from the borrowers who defaulted" should be made "after doubling

the original losses").

        Evaluating this line of cases,                          the District Court for the

District of Puerto Rico observed:

        Nothing   in these   cases  holds   or   suggests  that
        Bornstein's recoupment rule turns on the nature or
        sdurce of the particular recoupment. Indeed, Bornstein
        itself forecloses such an interpretation. Bornstein
        twice   emphasized  that   its   holding   applies   to
        subsequent payments received from the government "from
        any source."

United States v.            Irizarry-Colon,               No.    05-1607,     2006 WL 6911517,

at     *11. (D.P.R.       June     9,    2006)      (quoting Bornstein,                  423    U.S.   at

316)

        The Government has brought no case to the attention of this

Court     that      holds        that    third-party            payments      on     a     loan     that

underlies      FCA liability should not be considered "compensatory

                                                 -20-
payments." In the absence of any contrary precedent, this Court

finds        that    Nigeria's             repayments        are     "compensatory             payments

previously          received       from      any     source,"        and    should thus          offset

MWI's liability.

               5.         Limitation on the Amount                   of    Offset     to       "Original
                          Loss"

        The     Government           argues          that,        even      if     Nigeria's          loan

repayments          are    "compensatory payments"                   and     should        offset      the

amount MWI owes in damages, the Court should limit the amount of

the offset to the "original loss" of $7.5 million dollars.

        To    justify its          reasoning,         the Government               argues that         the

Court must          segregate Nigeria's repayment                         into the        "legitimate"

amount       repaid       and    the       amount      it     repaid        on     "the    fraudulent

portion of the loan." U.S. Resp. at 2-3.                                  It insists that to do

otherwise would allow                  "doublecounting,"              because       there       are    two

separate obligations                 -- Nigeria's original obligation to repay

the loans and MWI's new obligation to pay damages. Id.

     The Government has identified no precedent from either the

Supreme Court or our Court of Appeals that has applied such an

analysis.       Its       argument         rests     on     two    cases     in which           district

courts       evaluated       how     to      calculate        a    Bornstein        offset       when    a

Defendant       had       pleaded guilty             and     paid    an     amount        in    criminal

restitution          prior      to     a     civil     FCA        suit.     U.S.     Resp.       at    5-6

                                                   -21-
(discussing United States ex rel. Schaefer v. ContiMed Concepts                                                        1

No.           04-400   1       2010 WL 1485660        (W.D. Ky. Apr. 12                   1   2010)        ("Schaefer

II   11
          )    and United States v.                  Eghbal      1     475 F.         Supp.         2d 1008      (C.D.

Cal.           2007))           These cases are            factually distinguishable and do

not provide sufficient support for the Government s position.                                  1

              Eghbal pleaded guilty to criminal charges of conspiring to

defraud the United States by fraudulently assisting purchasers

to obtain mortgages                        insured by the                  Department              of Housing and

Urban Development in connection with the sale of 62 properties.

Eghbal, 475 F. Supp. 2d at 1011. He paid $1,346,220 in criminal

restitution based on those 62 properties. Amended Judgment and

Commitment Order/                    United States v.                  Eghbal    1    No.          03-cr-465     (C.D.

Cal. Jan. 27               1    2004).

               The     Government          then brought               an    FCA suit               against     Eghbal

based on 27 of the 62 properties.                                    475 F. Supp. 2d at 1011. The

Government                 sought        damages     of     $2.8           million,           trebled       to   $8.4

million/ less $2.1 million it recovered on re-sale and "Eghbal's

restitution payments of $499,387.                           11
                                                                     Id.

              The Government argues                  that        this       case demonstrates                  that    a

district             court        has     discretion        to        apply      only         a     portion      of    a

compensatory                    payment    as   an    offset.              The       Court         disagrees.       The

parties in Eghbal did not dispute that the portion of the $1.3

million           restitution payment                 that           related         to       the     27    loans     at

                                                          -22-
issue in the civil suit was $499,387. Id. This comports with the

facts    underlying        the Government's       civil      suit          the    FCA suit

only related to 27 of the 67 loans at issue in Eghbal's criminal

proceeding. Thus, the district court was not choosing to apply a

portion of Eghbal's compensatory payments -- the court was only

applying the portion of Eghbal's restitution that was,                            in fact,

compensatory, based on the scope of the FCA case.

        Schaefer is similar. Defendant Conti pleaded guilty to one

count of altering a prescription in 2007.                     See United States ex

rel. Schaefer v. ContiMed Concepts, No. 04-400, 2009 WL 5104149,

at *2     (W.D.   Ky.   Dec.    17,   2009)    ("Schaefer I").           Conti then paid

almost     $80,000      in     criminal       restitution     to     the     Center      for

Medicare Services and the State of Kentucky for various schemes

and conspiracies to alter and falsify medical records, including

the     altered    prescription        underlying      his     criminal          liability.

Judgment and Commitment Order,                United States v.           Conti,    No.   06-

cr-152     (W.D. Ky. March 24, 2008); Order, United States v. Conti,

No. 06-cr-152      (W.D. Ky. July 27, 2009).

       The Government brought a civil FCA suit,                     and the District

Court found that,          based on the guilty plea,            Conti was estopped

from     denying     the     elements     of     one   claim        of     falsifying      a

prescription under 31 U.S.C.              §   3729(a) (2).     Schaefer I,         2009 WL

5104149,    at *6.      The court later found that the                   "actual damages

                                          -23-
from that       single    count     [were]     $404.24.      11
                                                                   Schaefer II,              2010 WL

1485660, at *3. It trebled that amount, and found that Conti was

liable for $1212.72,           in addition to a civil penalty of $5,500,

for a total of $6,712.72. Id.

      Conti argued that the approximately $80,000 he had paid in

criminal      restitution      should offset           his        entire       civil        judgment.

Id. The Government argued that "only the compensatory portion of

the   judgment        should   be   offset,    11
                                                     id.,         and    the    Court        agreed,

subtracting only "the compensatory component, $404.24,                                 11
                                                                                            from the

civil judgment. Id. at *4.

      Thus,     the Schaefer and Eghbal courts                          found that only the

portion    of    the     criminal     restitution            payment           related        to   the

factual    conduct       underlying      the        false    claim        at     issue        in   the

subsequent      FCA case       should be offset under Bornstein.                              Because

the excess amounts paid in criminal                     restitution were paid for

unrelated conduct,         the Court refused to apply those amounts as

an offset.

      Here,     the     Government       argued,       and        the     jury    found,           that

Defendant was liable for its certifications on all 58 Supplier's

Certificates related to the eight Nigerian loans.                                 The Nigerian

repayments      were     related    to    those       same        eight     Nigerian           loans.

Thus, Schaefer and Eghbal do not provide guidance in a situation

                                           -24-
such as     this    one,    where        the    entire       amount       paid by Nigeria             is

unquestionably related to the underlying false claims.

       The Government makes a public policy argument that allowing

Nigeria's      repayments      to    offset        the       entirety           of    MWI    liability

will   "severely       undermine         Congress's          intent        to    hold       defendants

accountable     for      defrauding        the    United       States           and    deter    others

from engaging in similar misconduct." U.S.                            Resp.          at 6     (citation

omitted).    However,       neither the language of the statute nor any

prior case provides support fdr this Court                                to divide Nigeria's

repayments      into      compensatory          and     non-compensatory                payments      in

light of the fact          that the jury found liability for all of the

loans in their entirety.             Thus,        in accord with the cases cited,

this   Court    will      subtract       the     full    amount           of    the    compensatory

payments    made     by    Nigeria        from     the       trebled       damage           amount,   as

instructed in Bornstein.             423 U.S.           at    316    (holding that              "actual

damages are to be doubled before any subtractions are made for

compensatory payments previously received by the Government from

any source")       (emphasis added) .

       This result accords with the Supreme Court's declaration in

Bornstein that         "the device of            [treble]       damages plus a                specific

sum was chosen to make sure that                        the government would be made

completely whole."          Id.     at    314.     Despite          the    fraudulent          actions

taken by MWI        to    persuade        the    Government          to        make    these     loans,

                                                -25-
                                                                                                    •·

they were        in fact      paid back       in full       with      interest     and fees.

Indeed,     the Government           received a        total    o"f    approximately $108

million on these loans from Nigeria -- $33.7 million more than

the largest amount            it pursued in damages,                  $74.3 million.         That

$33.7 million alone exceeds the $22.5 million in treble damages

owed    by MWI.       Thus,    the    Government        has    been      "made    completely

whole" because of Nigeria's repayments,                       and,     thus,   granting MWI

an offset for those payments does not conflict with Bornstein.

        The Court also notes that this outcome is in accord with

United States ex rel. Davis v. Dist. of Columbia,                              679 F.3d 832

(D.C.     Cir.    2012).      Davis     sued     the    District         of    Columbia       for

submitting       a    Medicaid        reimbursement         claim       without        adequate

supporting       documentation.         Id.    at    834.      Davis     did     not    allege,

however,    that any medical services that the Government paid for

were not provided. Id. at 840. Thus, because the only defect was

documentary,         the   Court   of Appeals upheld the                 district       court's

conclusion that "[t]he Government got what it paid for and there

are no damages." Id. Although the factual and procedural posture

of   that   case      is   very    different,        Davis      still     stands       for    the

proposition that there are cases where fraud on the Government

has occurred but, because the Government has gotten what it paid

for, the Government's recovery is limited to civil penalties.

                                              -26-
        In short,     the Court concludes that,            in the absence of any

contradictory precedent,          the Court will apply the $108 million

dollars      repaid   by     Nigeria   against       the   $22.5   million    trebled

damage amount. Thus, MWI owes nothing in damages. 10

        F.    Civil Penalties

        The Court now turns to the appropriate amount of statutory

civil penalties which should be imposed. 11 The FCA establishes a

statutory penalty of $5,000 to $10,000 for each false claim or

false    statement.     31    U.S.C.   §   3729(a)     (establishes    that    liable

entity must pay "civil penalty of not less than $5,000 and not

more than $10,000").          The jury identified 58 false claims. 12

10
   If Congress agrees with the Government that this result is
undesirable, it could change either the wording of the treble
damage provision or increase the civil penalties, as it has done
in the past. See, e.g., False Claims Amendments Act of 1986,
Pub. L .. 99-562, § 2 (7), 100 Stat. 3153 (raising the civil fines
and changing the multiplier for damages from double to treble).
11
   MWI did not argue that it was entitled to any offset against
the amount it owes in statutory civil penalties.
12
    MWI    initially agreed with Plaintiffs      that  the  jury's
determination that MWI made 58 false claims provided the
appropriate number of penal ties. However, in its Response, MWI
argued for the first time that the Complaint did not identify
the eight Letter of Credit Supplier's Certificates and only
identified 48 Disbursement Supplier's Certificates, and now
argues that 48 was the appropriate number of false claims for
the Court to use in setting civil penalties. MWI Resp. at 10.
      As noted above, see supra note 1, MWI did not challenge the
Government's testimony or evidence at trial identifying 58 total
Supplier's Certificates issued on the underlying loans at issue
in this case. The jury found each of those documents to be a
false    claim and/ or    false statement.   Thus,  MWI' s belated
challenge to the jury's finding will be denied, and the Court
                                -27-
        The   parties       agree    that    the     appropriate     range    for   the

statutory penalties is $5,000 to $10,000. 13 The determination of

the   appropriate       statutory civil        penalty       is   firmly   within   the

discretion of the district court. Bill Harbert,                     501 F. Supp. 2d

at 56     (citing Cook County,          538 U.S.         at 132) . The parties also

agree     that   the    Court       should   consider       the   "totality    of   the

circumstances"         in     determining          the     appropriate     amount    of

penalties. U.S. Mot. at 7; MWI Mem. at 16. As the district court

observed in Bill Harbert:

        Though there is no defined set of criteria by which to
        assess the proper amount of civil penal ties against
        the defendant,    the Court finds that an approach
        considering   the   totality   of  the   circumstances,
        including such factors as the seriousness of the
        misconduct, the scienter of the defendants, and the
        amount of damages suffered by the United States as a
        result of the misconduct is the most appropriate.

will set civil penalties based on the 58 false claims identified
by the jury.
13
   The Federal Civil Penalties Inflation Adjustment Act of 1990
 ("Adjustment Act"), Pub. L. No. 101-410, § 5, provides for
periodic increases to civil monetary penal ties. In 1996, the
Omnibus Consolidated Rescissions and Appropriations Act of 1996
was passed, and it included the Debt Collection Improvement Act
of 1996 ("Improvement Act"). Pub. L. No. 104-134, § 31001. The
Improvement Act amended the Adjustment Act to require the head
of   each agency to     regularly adjust   civil   penalties for
inflation. Id. § 13001(s) (1) (A). In 1999, the Department of
Justice complied by issuing regulations raising such penalties,
including False Claims Act penalties. 64 Fed. Reg. 47,099,
47,903-04 (Aug. 30, 1999). However, the regulations specified
that the increase was only "effective for violations occurring
on or after September 29, 1999." Id. 47,903. The parties agree
that the conduct at issue here took place before that date, and,
thus, MWI is not subject to the increased penalties.
                               -28-
501 F. Supp. 2d at 56              (citation omitted). Under the totality of

the     circumstances,        including      consideration            of    the     enumerated

factors,    the Court finds that the appropriate penalty is $10,000

per false claim for the following reasons.

        First, the Court finds that the evidence regarding scienter

weighs in favor of a high penalty in this case.                                  Specifically,

the     Court    finds      that    there       was    evidence        that       Mr.     Eller,

President       of   MWI,    had    actual      knowledge       that       the     commissions

should have been disclosed. When repeatedly asked whether or not

Indimi's        commissions         were        disclosed        on        the      Supplier's

Certificates, Eller refused to answer directly.                            Instead, he kept

repeating that MWI "would have never done anything wrong." Test.

of David Eller,         Trial Tr.     Nov.      8,    2013, A.M.       Session at 106:6-

108:17;    111:10-112-1        (the Court asking Eller the question).                         He

insisted he was "just an engineer,"                    id.     at 109:21,         and claimed

that he signed the Supplier's Certificates on the advice of his

attorney,       William      Bucknam,      or    his     Chief        Financial         Officer,

Thomas Roegiers. Id. at 107:6-13; 109:10-21; 111:2-3; 113:12-14.

        However,     MWI     employees       testified         that     Eller       personally

approved        every       commission       MWI       paid,      including             Indimi's

commissions. Test. of Thomas Roegiers,                    Trial Tr. Nov.             19, 2013,

A.M. Session at 20:9-23; Test. of Juan Ponce, Trial Tr. Nov. 13,

2013,     A.M    Session      at     9:22-10:8,        14:14-21.           Moreover,       Eller

                                            -29-
testified      that    MWI     never     paid         any    other      agent     on    any    other

combined project a total commission of more than $5 million, far

less    than some of          the   commissions             Indimi was paid for                single

projects.     Id. at 120:11-22. Thus, despite his protests that MWI

would       never     engage        in   wrongdoing,               Eller       signed      several

Supplier's Certificates declaring that no irregular commissions

had been paid even though he knew that Indimi's commissions were

significantly higher than average commission rates,                                    even within

MWI.

        Second,       the     evidence           of     actual           knowledge        suggests

deliberate        misconduct,       which       goes        to    the     seriousness         of    the

offense. Juan Ponce, MWI's Vice President of International Sales

and    a    credible        witness,     testified,               "we   knew     that     we       were

violating .            the rules. We just hoped that we would never get

caught."     Test.     of    Juan    Ponce,       Trial          Tr.    Nov.    13,    2013,       A.M.

Session at 35:3-4. This evidence that MWI deliberately withheld

information about            Indimi' s   commissions              from Ex-Im in order to

acquire      financing       supports       a     finding          that    "the       conduct       was

deliberate and serious enough to weigh in favor of applying the

maximum civil penalty." Bill Harbert, 501 F. Supp. 2d at 56.

       Third, the Court considers the "amount of damages suffered"

by    the   Government.       The harm to              the       Government      was    more       than

monetary -- it went to the integrity and purposes of the Ex-Im's

                                                -30-
programmatic goals. See Test. of Rita Rodriguez, Nov.                                   14,    2013,

A.M. Session at 20:1-7 (discussing Ex-Im's goals to support U.S.

jobs     and    to    avoid      any    involvement      with    bribery) .        Given        that

approximately a third of the total loan amount went to a single

Nigerian individual, the goal of the Ex-Im to finance loans that

primarily benefit U.S.                 exporters and workers was not achieved.

Test. of David Chavern, Trial Tr. Nov. 12, 2013, A.M. Session at

70:16-21        (noting that         "purpose of the bank's financing                         is not

primarily                   to    finance      commissions;         it's    to    finance        the

export of goods and services"); see also Ab-Tech Const.,                                     Inc. v.

United States,         31     Fed.     Cl.   429,    434-35     (Fed Cl.         1994)        (noting

that     penal ties    are       intended to        "compensate the Government                   for

the     costs    of    corruption,"          which     include      the     "societal          cost"

associated with abuse of a federal program)                           (internal quotation

marks and citation omitted) .

        The Court also notes that the Government expended a massive

amount of resources to pursue this case over the years.                                       In the

damages hearing, Government counsel represented that over 11,000

hours had been spent on the case. This consideration is relevant

to determining the appropriate civil penalty.                              See Morse Diesel

Int'l,    Inc. v. United States,               79 Fed.    Cl. 116, 125-26                (Fed. Cl.

2007)      (considering           that       Government       had     "spent            13     years

investigating         and prosecuting           this    case     to   date"        in    deciding

                                              -31-
maximum          civil      penalties        were     warranted);         United       States      v.

Peters,      927       F.    Supp.    363,    368-69      (D.    Neb.     1996)      (considering

"the costs of detection,                    investigation and prosecution" as part

of    appropriate           civil     penalties);        Ab-Tech,        31   Fed     Cl.     at   435

(determining that maximum civil penalty was "fully justified in

light of the extensive diversion of resources"                                 that uncovering

defendant's fraud necessitated).

       Considering the               totality of         the    circumstances,          the    Court

concludes         that       a     civil    penalty      of     $10,000       per    false     claim

provides appropriate deterrence,                     reflects the seriousness of the

misconduct            and        evidence     of     actual       knowledge,          and      helps

compensate the Government for the incredible amount of resources

invested         in    identifying          and    litigating      this       lengthy       case    to

successful conclusion.

       G.        Conclusion

       The jury found that MWI violated the False Claims Act by

making      58    false          claims    and that      the Government             suffered $7.5

million dollars in damages. Even after the damages are trebled,

the amount            that Nigeria repaid compensated the Government                               for

its   loss.       MWI       is    responsible,      however,       for    $580,000          in civil

penalties.

                                                  -32-
    An Order directing the Clerk to enter judgment accordingly

shall accompany this Memorandum Opinion.

February 10, 2014                     ~~~·
                                     Gla ys Kess er
                                     United States District Judge

Copies to: attorneys on record via ECF

                              -33-