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United States v. Munoz-Escalante

United States District Court, D. South Dakota, Western Division

October 20, 2015




Plaintiff, United States of America, brings this action against defendants, Aurelio Munoz-Escalante and Sergio Munoz-Escalante, seeking damages for money paid to defendants based on defendants’ alleged false and fraudulent statements and claims. Plaintiff alleges in its complaint the following causes of action: violations of the False Claims Act under 31 U.S.C. § 3729, common law fraud, unjust enrichment, and payment by mistake. Defendants have not responded to plaintiff’s complaint. Plaintiff now moves for summary judgment.


The undisputed facts, [1] viewed in the light most favorable to defendants, are as follows:

Defendant Aurelio Munoz-Escalante did business as Black Hills Thinning in Rapid City, South Dakota. Defendant Sergio Munoz-Escalante did business as SM Logging Company in Rapid City, South Dakota. The United States Forest Service awarded both defendants’ businesses service contracts to thin trees in the Black Hills National Forest. Aurelio was awarded six contracts between March 31, 2009, and September 8, 2011. Docket 1-2 at 2. Sergio was awarded ten contracts between July 10, 2007, and September 16, 2011. Docket 1-2 at 7.

Under the terms of the contracts, both companies were required to verify each worker’s employment eligibility, pay workers the prevailing wage, provide employee benefits, and compensate workers for overtime performed. Additionally, neither company could hire undocumented or unauthorized aliens, who were not eligible for employment in the United States.

Despite the prohibitions, Black Hills Thinning and SM Logging Company hired undocumented and unauthorized workers, and defendants knew they were hiring people not allowed to work on the United States Forest Service contracts. Defendants attempted to conceal unauthorized workers by not requiring the completion of eligibility verification forms and by failing to ensure that each worker’s employment documents were genuine. Defendants paid unauthorized workers by issuing checks to the unauthorized alien workers directly, by issuing checks to workers with false or fictitious names, or by making payments to other workers, the proceeds of which were divided among several of the unauthorized alien workers.

Even though defendants did not abide by the terms of the contracts, defendants submitted invoices for payment in full. Some invoices were accompanied by a certification stating, “[T]he amounts requested are only for performance in accordance with the specifications, terms and conditions of the contract.” Docket 15 at 4. Aurelio submitted 47 invoices for work connected with the Forest Service contracts, and Sergio submitted 17 invoices.

On January 31, 2014, both defendants pleaded guilty to Making a False Statement in violation of 18 U.S.C. § 1001. Aurelio admitted to causing “a loss in wages, overtime, and fringe benefits in the amount of $300, 000.00 to former employees pursuant to the described United States Forest Service contracts and federal law.” United States of America v. Aurelio Munoz-Escalante, No. CR 12-50131-05, Docket 417 at 5. Sergio admitted to causing “a loss in, among other things, restitution, wages, overtime, and fringe benefits in the amount of $199, 000, in part to former employees . . . .” United States of America v. Sergio Munoz-Escalante, No. CR 12-50131-07, Docket 407 at 5. Aurelio was ordered to pay $135, 276.88 in restitution and agreed to forfeit an interest in property worth approximately $164, 724.00. Docket 1-3 at 5; Docket 14 at 9 fn 5. Sergio was ordered to pay $198, 652.98 in restitution. Docket 1-3 at 11. The government now seeks damages and penalties in the amount of $1, 482, 000 - $952, 000 from Aurelio and $530, 000 from Sergio.


“One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses[.]” Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp., 477 U.S. at 323 (“[A] party seeking summary judgment always bears the initial responsibility of . . . demonstrat[ing] the absence of a genuine issue of material fact.” (internal quotations omitted)). The moving party must inform the court of the basis for its motion and also identify the portion of the record that shows that there is no genuine issue in dispute. Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir. 1992) (citation omitted).

Once the moving party has met its initial burden, the nonmoving party must establish “that a fact . . . is genuinely disputed” either by “citing to particular parts of materials in the record, ” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute.” Fed.R.Civ.P. 56(c). “The nonmoving party may not ‘rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial.’ ” Mosley v. City of Northwoods, Mo., 415 F.3d 908, 910 (8th Cir. 2005) (quoting Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995)). For purposes of summary judgment, the facts and inferences drawn from those facts are “viewed in the light most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)).


I. False Claims Act

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