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United States v. Thompson

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

August 30, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
SCOTT THOMPSON, Individually, and d/b/a ISOSCELES LLC, Defendant.

          ORDER

          JEFFREY L. VIKEN, CHIEF JUDGE.

         The United States government initiated this action against defendant Scott Thompson. (Docket 1). The government's complaint advances four causes of action: False Claims Act (“FCA”) violations, common law fraud, unjust enrichment and payment by mistake. Id. at pp. 6-8. Defendant, proceeding pro se, filed an answer and counterclaims. (Docket 20). The government filed a motion for summary judgment and a motion to dismiss defendant's counterclaims. (Dockets 12 & 23). Defendant filed several other motions, including motions related to amending an earlier brief, reconsideration of a prior motion, discovery matters and staying the case. (Dockets 27, 30, 31, 33 & 41).

         FACTS

         The following recitation consists of the material facts developed from the government's complaint (Docket 1), defendant's answer (Docket 20), the government's statement of undisputed material facts (Docket 14) and defendant's response. (Docket 22).

         The National Science Foundation (“NSF”) is a United States agency Congress created “to initiate and support basic scientific research and other scientific programs by providing grants, loans[] and other forms of financial assistance to individuals, businesses and academic and nonprofit institutions.” (Docket 14 ¶ 1) (citing 42 U.S.C. § 1862). Individuals can “send grant applications to the NSF, which disburses congressionally appropriated funds” to approved projects. Id. ¶ 2. Dating back to 1996, defendant “submitted many requests for grants from the NSF . . . .” Id. ¶ 3.

         Defendant met South Dakota State University (“SDSU”) Professor Qiquan Qiao and “agreed to take [Dr. Qiao's] project[1] and place it under a limited liability corporation (LLC) . . . named ‘Isosceles LLC.' ” Id. ¶¶ 4-5. Defendant formed Isosceles LLC, which was a Virginia LLC and “whose registered agent was Kelly Holye, [defendant's] sister, ” before the corporation dissolved. Id. “On or about June 23, 2009, NSF awarded [defendant's] LLC, Isosceles LLC, $150, 000 for the project . . . .” Id. ¶ 9. “The award funds were to be paid to Isosceles LLC in two installments: two-thirds at the beginning of the award performance period upon submission of a request for initial payment, and one-third upon completion of the project and NSF's approval of a final project report.” Id.

         After the grant was approved, defendant “submitted a request [to the NSF] via the internet for initial payment [of] the money approved for the project . . . .” Id. ¶ 6. In this initial payment request, defendant claimed to the NSF that Jing Li, an SDSU post-doctorate candidate, was employed as the project's principal investigator. Id. ¶ 7; (Docket 14-1 at p. 2). Defendant claimed Mr. Li's primary employment was with Isosceles LLC, Mr. Li would continue to conduct the research proposed in the initial proposal to the NSF, and Mr. Li was available at that time to perform the proposed work. (Docket 14-1 at p. 2). Relying on defendant's representations, the NSF provided $100, 000 of the grant to Isosceles LLC. (Docket 14 ¶ 10). Based on defendant's conduct in handling the grant, he was indicted and a jury convicted him of making false claims in violation of 18 U.S.C. § 287. (Dockets 14 ¶¶ 17-19 & 14-1 at pp. 2-3). Defendant made these claims to the NSF in documents and on that basis the jury convicted him of submitting false documents to an agency of the United States in violation of 18 U.S.C. § 1001. (Dockets 14 ¶¶ 17-19 & 14-1 at pp. 4-5).

         Defendant submitted the project's final report to the NSF on or about January 14, 2010. (Dockets 14 ¶ 12 & 14-1 at p. 2). In the final report, defendant claimed Mr. Li was employed as the principal investigator for Isosceles LLC and Mr. Li worked more than 160 hours on the project. (Docket 14-1 at p. 3). Based on these claims in the final report, a jury convicted defendant of making false claims in violation of 18 U.S.C. § 287 and submitting false documents to an agency of the United States in violation of 18 U.S.C. § 1001. (Docket 14 ¶¶ 17-19).

         The jury also convicted defendant of two counts of fraud by wire-violations of 18 U.S.C. § 1343-for using the internet when submitting his initial payment request and final report to the NSF. Id.; (Docket 14-1 at pp. 6-7). Defendant's jury trial resulted in an additional conviction for receiving stolen government money, namely the $100, 000 in NSF grant money, which violates 18 U.S.C. § 641. (Dockets 14 ¶¶ 17-19 & 14-1 at p. 7).

         This court sentenced defendant to five years of probation on each count of conviction, the probationary terms to run concurrently. (Docket 1-1 at p. 2). The court ordered defendant to pay $87, 637.89 in restitution-$32, 486.86 to SDSU and $55, 151.03 to the NSF. Id. at p. 4.

         DISCUSSION

         I. SUMMARY JUDGMENT

         The government argues the court should grant summary judgment on its FCA claim pursuant to Federal Rule of Civil Procedure 56(a). (Dockets 12 & 13). Under Fed.R.Civ.P. 56(a), a movant is entitled to summary judgment if the movant can “show 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). Once the moving party meets its burden, the nonmoving party may not rest on the allegations or denials in the pleadings, but rather must produce affirmative evidence setting forth specific facts showing that a genuine issue of material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Only disputes over facts that might affect the outcome of the case under the governing substantive law will properly preclude summary judgment. Id. at p. 248. “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Id. at 247-48 (emphasis in original).

         If a dispute about a material fact is genuine, that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party, then summary judgment is not appropriate. Id. However, the moving party is entitled to judgment as a matter of law if the nonmoving party failed to “make a sufficient showing on an essential element of [his] case with respect to which [he] has the burden of proof.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In such a case, “there can be ‘no genuine issue as to any material fact, ' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Id. at p. 323.

         In determining whether summary judgment should issue, the facts and inferences from those facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). The key inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at pp. 251-52.

         The government bases its first cause of action on the FCA. (Docket 1 at p. 6). The FCA imposes liability on a person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval . . . .” 31 U.S.C. § 3729(a)(1). At § 3731(e) the FCA codifies the principle of collateral estoppel:

Notwithstanding any other provision of law, the Federal Rules of Criminal Procedure, or the Federal Rules of Evidence, a final judgment rendered in favor of the United States in any criminal proceeding charging fraud or false statements, whether upon a verdict after trial or upon a plea of guilty or nolo contendere, shall estop the defendant from denying the essential elements of the offense in any action which involves the same transaction as in the criminal proceeding and which is brought under subsection (a) or (b) of section 3730.

31 U.S.C. § 3731(e). The government brought this case under § 3730(a), which directs the federal government to initiate civil actions for violations of § 3729.

         If defendant's conviction establishes the essential elements of a FCA claim, § 3731(e) precludes him from denying those elements. See United States v. Munoz-Escalante, No. 5:14-CV-05085, 2015 WL 6158021, at *1-3 (D.S.D. Oct. 20, 2015). A prima facie case under § 3729(a)(1) requires the government to prove “that (1) the defendant made a claim against the United States; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent.” United States ex rel. Quirk v. Madonna Towers, Inc., 278 F.3d 765, 767 (8th Cir. 2002). “To act ‘knowingly' under the [FCA], a person must (1) have actual knowledge of the information, (2) act in deliberate ignorance of the truth or falsity of the information, or (3) act in reckless disregard of the truth or falsity of the information.” Munoz-Escalante, 2015 WL 6158021, at *2 (citing 31 U.S.C. § 3729(b)). “No proof of specific intent to defraud the government is required.” Quirk, 278 F.3d at 767 (citing 31 U.S.C. § 3729(b)). “The requisite intent is the knowing presentation of what is known to be false. In short, the claim must be a lie.” Munoz-Escalante, 2015 WL 6158021, at *2 (citing Hindo v. Univ. of Health Sci./Chi. Med. Sch., 65 F.3d 608, 613 (7th Cir. 1995) (internal quotation marks omitted)).

         Convictions for different offenses can estop a party from denying the elements of a FCA claim.[2] In United States v. Aleff, the United States Court of Appeals for the Eighth Circuit affirmed a district court's determination that a conviction for “submitting false applications for loan-deficiency payments in violation of 18 U.S.C. § 286[]” precluded the defendant from denying the essential elements of the FCA claim the government brought following the conviction. United States v. Aleff, 772 F.3d 508, 510-11 (8th Cir. 2014). In United States v. Karron, a jury convicted Ms. Karron of misapplying federal grant funds in violation of 18 U.S.C. § 666. United States v. Karron, 750 F.Supp.2d 480, 484-86 (S.D.N.Y. 2011). The court determined Ms. Karron's “prior criminal conviction precludes her from denying the essential elements” of the government's FCA claim. Id. at 488. The defendants in Munoz-Escalan ...


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