United States District Court, D. Kansas
UNITED STATES OF AMERICA, ex rel. KEVIN THOMAS, and CAROLYN THOMAS, Plaintiff,
BLACK & VEATCH SPECIAL PROJECTS CORP., Defendant.
MEMORANDUM AND ORDER
DANIEL D. CRABTREE, District Judge.
Relator plaintiffs Kevin Thomas and Carolyn Thomas bring this qui tam action alleging violations of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729, et seq., on behalf of the United States against defendant Black & Veatch Special Projects Corporation. Relators assert that defendant knowingly submitted legally false requests for payment to the government and the government paid those requests. This matter comes before the Court on defendant's Motion for Summary Judgment (Doc. 121), relators' Motion for Leave to File Surreply Memorandum in Opposition to Defendant's Motion for Summary Judgment (Doc. 132), and relators' Motion to Reopen Discovery for the Limited Purpose of Taking Deposition of William Van Dyke (Doc. 134). For the reasons explained below, the Court grants defendant's motion (Doc. 121) and denies both of relators' motions (Docs. 132, 134).
I. Procedural Background
Relators filed their Complaint on August 23, 2011 (Doc. 1). Their claims arise from defendant's contract with the United States Agency for International Development ("USAID") in support of the Kandahar Helmand Power Project ("KHPP") in Kandahar, Afghanistan. Relators allege that defendant knowingly sought false payment from the United States for wages and expenses of seven employees for whom defendant fraudulently obtained work visas and permits from the Afghan government. Because defendant's contract with USAID requires defendant to comply with Afghan law, relators contend that defendant has presented false claims.
Consistent with 31 U.S.C. § 3730(b)(2), relators served a copy of the Complaint on and disclosed their material evidence and information to the Attorney General of the United States and the United States Attorney for the District of Kansas. The government declined to intervene under the authority conferred by 31 U.S.C. § 3730(b)(4)(B) (Doc. 8).
Relators amended their Complaint on March 15, 2013 (Doc. 18). The Court subsequently granted them leave to file a Second Amended Complaint on May 20, 2013 (Doc. 48). It alleges that defendant violated the FCA under both the express false certification theory and the implied false certification theory. Defendant moved to dismiss the Second Amended Complaint under Rule 12(b)(6) (Doc. 49). The Court dismissed relators' express false certification claim but declined to dismiss their implied false certification claim (Doc. 56).
II. Uncontroverted Facts
The following facts are uncontroverted or, if controverted, are stated in the light most favorable to relators as the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007).
A. KHPP Contract
Defendant and USAID entered into Contract No. 306-C-00-11-00506-00 on December 9, 2010. The contract's purpose is "to support the Kandahar Power Initiative (KPI), a critical component of the U.S. government's Counterinsurgency (COIN) strategy in Southern Afghanistan." Doc. 122-2 at 4. The contract is part of a larger USAID program designed to increase development of Afghanistan's South-East Power System and connect it with other electrical grids in Afghanistan. Its primary objective aims to increase the supply, quantity, and distribution of electrical power, with particular emphasis on the city of Kandahar. Doc. 122-2 at 8.
The contract designates defendant as the "Contractor" for this project. Section B.2 provides, "[f]or the consideration set forth below, the Contractor shall provide the performance requirements described in Section C and the deliverables or outputs described in Section F." Doc. 122-2 at 4. In turn, Section F.4.A lists six deliverable components, along with thirteen sub-components. All involve constructing, installing, repairing, refurbishing, and renovating electric generation and distribution equipment in and around Kandahar. Doc. 122-2 at 35-39. Section C.4 sets out 14 performance requirements that defendant must satisfy. Those requirements are:
(1) Environmental Assessment; (2) Procurement and Subcontracting; (3) Commodities/Equipment Procurement and Installation; (4) Management and Supervisory Responsibilities; (5) Coordination and Implementation of Work; (6) Quality Control/Quality Assurance; (7) Safety; (8) Contract Performance Support; (9) Cost Control Reporting System; (10) Pre-Construction Conferences; (11) Schedule; (12) Project Completion and Turnover Activities; (13) De-mining; and (14) Measuring and Monitoring. Doc. 122-2 at 20-25.
The contract incorporates by reference 128 federal and USAID acquisition regulations. Doc. 122-2 at 62-65. Among other contractual obligations, these regulations require defendant and its employees to: (1) comply with all applicable United States and host country laws (48 C.F.R. § 52.225-19(d)); (2) secure all "passports, visas, entry permits, and other documents required... to enter and exit the foreign country" (48 C.F.R. § 52.225-19(e)(2)(iii)); and (3) as directed by USAID's Contracting Officer, remove and replace personnel who violate the terms of the contract (48 C.F.R. § 52.225-19(h)).
Defendant also must disclose to USAID's Office of the Inspector General ("OIG") and USAID's Contracting Officer, in writing and in a timely fashion, any evidence that defendant, its employees, or subcontractors have committed "(A) A violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code; or (B) A violation of the civil False Claims Act (31 U.S.C. [§§] 3729-3733)" in connection with the award, performance, or closeout of the contract. Doc. 122-2 at 66-67.
The contract also requires defendant to "provide all engineering, procurement, construction, and other material, equipment and/or services necessary to complete and successfully commission each of the six components in accordance with the requirements of this Contract." Doc. 122-2 at 9. USAID has the right to take possession of and use all or any portion of the work performed by defendant upon "substantial completion." Doc. 122-2 at 32-33. The contract defines "substantial completion" to mean the "stage in the progress of the work as determined and certified by the Contracting Officer in writing to the Contractor, on which the work (or a portion designated by the government) is sufficiently complete and satisfactory." Doc. 122-2 at 32. Taking possession or using the work upon substantial completion does not constitute acceptance. Doc. 122-2 at 33. And all work remains subject to USAID's final inspection and acceptance.
Defendant submits invoices for payment to USAID's Office of Financial Management every two weeks. When defendant submits invoices, it simultaneously submits a copy of each invoice and a voucher listing all products and services provided during each two-week period to USAID's Contracting Officer's Technical Representative ("COTR"). The COTR reviews and approves the vouchers and authorizes payment of a "proper invoice" within 14 days of receiving them. Under 48 C.F.R. § 52.232-16(c), USAID's Contracting Officer may reduce or suspend payment if it finds substantial evidence that defendant failed to comply with any material requirement of the contract.
When defendant completes all work on a deliverable component or subcomponent (excluding any continuing obligations), the contract requires USAID's Contracting Officer to issue a notice of final acceptance. Final payment occurs after all required tests are completed satisfactorily, a final inspection confirms that all known defects were corrected and all work is complete, and defendant submits all completion documentation. Section G.5(c) provides that the government must make any payments due under a voucher "[u]pon compliance by the Contractor with all provisions of this contract, acceptance by the Government of the work and final report, and a satisfactory accounting by the Contractor of all Government-owned property for which the Contractor had custodial responsibility." Doc. 122-2 at 47.
By December 23, 2014, USAID had issued notices of final completion and acceptance on 10 of the contract's 13 deliverable subcomponents. Notices of final completion and acceptance are currently pending on the three remaining subcomponents. In December of 2013, USAID and defendant modified the original contract to include additional work awarded to defendant. The additional work is expected to continue through November of 2015.
B. Requirements To Obtain Afghan Work Permits and USAID Employee Approval
Before working in Afghanistan, all of defendant's non-Afghan employees must obtain work visas and work permits from the Afghan government. The Afghanistan Ministry of Labor, Social Affairs, Martyrs & Disabled and its Ministry of Foreign Affairs (the "Ministries") issue visas and permits to foreign citizens working in Afghanistan. As part of the visa and permit application process, foreign citizens must submit copies of educational diplomas, degrees, certificates, or other credential documents to the issuing Ministries. According to the parties, if an application packet does not include a diploma or degree, clerks at the Ministries sometimes will attempt to solicit bribes before they will process the application. According to defendant, it is defendant's policy not to pay bribes.
The contract requires defendant to obtain USAID approval of all employees who will work on the project outside the United States. Before an employee arrives in Afghanistan, defendant must submit a "Form 1420-Contractor Employee Biographical Data Sheet" to USAID. This form contains a section where defendant lists each employee's diplomas, degrees, work experience, or other qualifications. The Form 1420s submitted by defendant do not reference the forged educational documents discovered by relators.
C. Relators' Discovery of Forged Educational Documents
Relators Kevin Thomas and Carolyn Thomas worked for defendant in Afghanistan from April 18, 2011, until they resigned on July 16, 2011. On June 25, 2011, Mr. Thomas discovered forged educational documents for seven employees working in Afghanistan. Mr. Thomas is one of the seven. Mr. Thomas found the forged documents on a shared network drive accessed via a USAID-owned desktop computer. The computer is identified as "LighteningBug 1A, " and it was located in defendant's human resources office in Kabul. Nearly all of defendant's employees in Afghanistan could access this computer. Immediately after finding these forged documents, Mr. Thomas reported his discovery to defendant's acting "Chief of Party, " Lynn Liikala-Seymore. When Ms. Liikala-Seymore received Mr. Thomas's report, she secured LighteningBug 1A and removed it from service.
Two days later, on June 27, 2011, Mr. Thomas contacted the USAID OIG. He provided the OIG with copies of the forged documents, a spreadsheet containing contact information for each employee named in the forgeries, and a list of all employees who were present on the project site when the documents were discovered.
Two more days later, on June 29, 2011, Ms. Thomas met with representatives from the OIG at the USAID compound in Kabul. She presented the OIG with additional copies of the forged documents and described their discovery. Later, Ms. Thomas described the OIG's reaction to this discovery, saying that they did not appear interested in them. She also said that the OIG told her the documents were an issue between defendant and the Afghan Government, and that USAID was interested in them only if defendant "was using these forgeries to get more money out of USAID." Doc. 122 at 12.
Ms. Liikala-Seymore also met with the USAID OIG on June 29, 2011, to discuss the forged documents. She also provided the OIG with information about defendant's human resources personnel involved in acquiring Afghan visas and work permits. At OIG's request, Ms. Liikala-Seymore forwarded a copy of a memorandum describing an exit interview of former employee, Khalid Afridi. Mr. Afridi, an Afghan national, was a visa expediter who had performed his work primarily on LighteningBug 1A. During his exit interview, Mr. Afridi asserted that another one of defendant's employees, Dr. Manizha Hadi, may have tried to frame him as the person who forged the documents. Defendant provided the USAID OIG with Mr. Afridi's email address so that they could question him about the forged documents.
In July of 2011, Ms. Liikala-Seymore met with USAID COTR, Tom Bauhan. After that meeting, Mr. Braun understood that defendant's personnel in Afghanistan had created forged educational documents for employees and had submitted those documents to the Afghan government to obtain work permits. Defendant also informed USAID's Contracting Officer, Alvera Reichert, that defendant's personnel may have created and submitted forged educational documents to the Afghan government. Despite this knowledge, USAID did not ...