Justia Government Contracts Opinion Summaries

Then-New York Governor Cuomo’s “Buffalo Billion” initiative administered through Fort Schuyler Management Corporation, a nonprofit affiliated with SUNY, aimed to invest $1 billion in upstate development projects. Investigations later uncovered a scheme that involved Cuomo’s associates--a member of Fort Schuyler’s board of directors and a construction company made payments to a lobbyist with ties to the Cuomo administration. Fort Schuyler’s bid process subsequently allowed the construction company to receive major Buffalo Billion contracts.The participants were charged with wire fraud and conspiracy to commit wire fraud 18 U.S.C. 1343, 1349. Under the Second Circuit’s “right to control” theory, wire fraud can be established by showing that the defendant schemed to deprive a victim of potentially valuable economic information necessary to make discretionary economic decisions. The jury instructions defined “property” as including “intangible interests such as the right to control the use of one’s assets,” and “economically valuable information” as “information that affects the victim’s assessment of the benefits or burdens of a transaction, or relates to the quality of goods or services received or the economic risks.” The Second Circuit affirmed the convictions.The Supreme Court reversed. Under Supreme Court precedents the federal fraud statutes criminalize only schemes to deprive people of traditional property interests. The prosecution must prove that wire fraud defendants “engaged in deception,” and also that money or property was “an object of their fraud.” The "fraud statutes do not vest a general power in the federal government to enforce its view of integrity in broad swaths of state and local policymaking.” The right-to-control theory applies to an almost limitless variety of deceptive actions traditionally left to state contract and tort law. The Court declined to affirm Ciminelli’s convictions on the ground that the evidence was sufficient to establish wire fraud under a traditional property-fraud theory. View "Ciminelli v. United States" on Justia Law

The Department of Transportation (DOT) provides funds for state transportation projects. States that receive federal transportation funds must set participation goals for disadvantaged business enterprises (DBEs)--for-profit small businesses “at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged” and “[w]hose management and daily business operations are controlled by one or more of the socially and economically disadvantaged individuals who own it.” States certify businesses as DBEs.The defendants were convicted of conspiracy to commit wire fraud, 18 U.S.C. 1349, and wire fraud, section 1343, arising out of DOT-financed contracts for work in Philadelphia that included DBE requirements. The Defendants' bids committed to working on the projects with Markias, a company that had prequalified as a DBE. During the performance of their contracts, the Defendants submitted false documentation regarding Markias’ role; PennDOT awarded the Defendants DBE credits and paid them based on their asserted compliance with the DBE requirements. Markias did not do any work on the projects or supply any of the materials. The Defendants arranged for the actual suppliers to send their invoices to Markias, which then issued its own invoices, adding a 2.25% fee.The Third Circuit affirmed the convictions but vacated the forfeiture order and loss calculation. The court acknowledged the complex nature of this fraud in this and commended the attempt to determine the amount of loss for sentencing purposes, and the amount to be forfeited. View "United States v. Kousisis" on Justia Law

Klund purports to supply electrical parts. In 1991 and in 1993, he was convicted for fraudulent misrepresentations involving defense contracts. Disqualified from the award of government contracts, from 2011-2019, Klund bid on defense contracts using shell corporations, aliases, and the names of employees and relatives. He certified that one shell company was a woman-owned business, eligible for special consideration. Klund bid on 5,760 defense contracts and was awarded 1,928 contracts worth $7.4 million. Klund satisfactorily performed some of his contracts; the Department paid $2.9 million for these goods. But he knowingly shipped and requested payment for 2,816 nonconforming electrical parts and submitted invoices for parts that he never shipped.Klund pleaded guilty to wire fraud, aggravated identity theft, and money laundering. The PSR calculated the intended loss at $5.7 million and the actual loss at $2.9 million. Since Klund fraudulently obtained contracts intended for woman-owned businesses, the PSR did not apply an offset for the cost of goods actually delivered under those contracts. An 18-level increase in Klund’s offense level applied because the loss was more than $3,500,000 but not more than $9,500,000, U.S.S.G. 2B1.1(b)(1)(J). With an advisory range of 87-108 months, Klund was sentenced to 96 months’ imprisonment with a mandatory consecutive sentence of 24 months for aggravated identity theft. The Seventh Circuit affirmed, upholding the loss calculations. View "United States v. Klund" on Justia Law

Guaranteed was a “reverse distributor,” paid by healthcare providers to return unused or expired pharmaceutical drugs to the drug manufacturers, for refunds for the healthcare-provider clients. Refunds were wired directly to Guaranteed’s general operating account; the company then issued refund checks to the relevant clients, less a service fee. In 2001, the Department of Defense contracted with Guaranteed. The government began investigating Guaranteed after the District of Columbia noticed that it did not receive the full refund on a return of some of its pharmaceuticals. The investigation uncovered a series of schemes that Guaranteed used to defraud its clients.Guaranteed, its CEO, and its CFO, were convicted of multiple counts of wire fraud, mail fraud, conspiracy to launder money, and theft of government property. In addition to prison sentences, the court imposed more than $100 million in restitution and forfeitures. The Third Circuit reversed the money laundering convictions and remanded for resentencing. Viewing the evidence in the light most favorable to the government, there is not sufficient evidence to prove beyond a reasonable doubt that the alleged complex financial transactions—after the initial receipt of “commingled” fraudulent and lawfully obtained funds—were designed for "concealment money laundering." The court otherwise affirmed, rejecting challenges to a search warrant, the sufficiency of the evidence, the jury instructions, and the court’s refusal to permit proposed expert testimony. View "United States v. Fallon" on Justia Law

Lexington solicited bids for relocating its city offices, including one from CRM, a local real estate development firm. Wellman was an executive at CRM. While the committee deliberated on the CRM proposal, two City Council members began receiving campaign contributions from CRM employees. These actions prompted an investigation under 18 U.S.C. 666, which prohibits “federal funds bribery.” Agents suspected a straw contribution scheme arranged by Wellman and funded by CRM. Wellman falsified documents and cajoled his straw contributors to lie. Prosecutors opened a separate grand jury inquiry into potential obstruction charges against Wellman.Wellman was convicted on 11 federal charges, including obstruction of an official proceeding and aiding and abetting numerous associates to make false statements to the FBI, and was sentenced to a year and a day in prison with a $10,000 fine. The district court applied a two-level obstruction of justice enhancement under U.S.S.G. 3C1.1 but ultimately varied downward based on Wellman’s character and service to the community. The Sixth Circuit affirmed, rejecting challenges to the sufficiency of the evidence and Wellman’s argument that, at most, he obstructed an investigation into violations of Kentucky campaign finance laws, not federal bribery. A reasonable jury could conclude that Wellman corruptly obstructed, influenced, or impeded a federal grand jury proceeding. View "United States v. Wellman" on Justia Law

Jarigese was the vice president of Castle Construction and the president of its successor, Tower, when he signed three contracts for public construction projects. Each contract was designated by Markham’s mayor, Webb, as “design-build” projects, not subject to a public bidding process. Webb invited only one company to submit a proposal for a new city hall, a senior living facility, and the renovation and expansion of a park district building. Webb signed each contract on behalf of Markham. Webb solicited bribes, which were paid to KAT Remodeling. Webb later testified that he had formed KAT years earlier and used its bank account as a repository for bribes. KAT never performed work of any kind. Jarigese hand-delivered bribes, by check and by cash. Webb understood that Jarigese had created an invoice from KAT to disguise the nature of the payment. Evidence at trial showed that Webb solicited bribes from others, using the same pattern.The Seventh Circuit affirmed Jarigese’s convictions for nine counts of wire fraud, 18 U.S.C. 1343 and 1346, and one count of bribery, 18 U.S.C. 666(a)(2). Evidence of Webb’s solicitation of other bribes was not evidence of “other bad acts” but rather was directly relevant to proving the charged scheme. The evidence was sufficient to support the convictions and there was no evidence of unwarranted discrepancy with respect to Jarigese’s 41-month sentence. View "United States v. Jarigese" on Justia Law

A jury convicted Sandra, Calvin, and their son Bryan Bailey of conspiring to commit healthcare fraud and other related crimes (18 U.S.C. 371, 1343, 1347; 42 U.S.C. 1320a-7b). The three, working for medical equipment companies, used fraud, forgery, and bribery to sell power wheelchairs and other equipment that was not medically necessary. The district court sentenced Sandra to 120 months’, Calvin to 45 months, and Bryan to 84 months’ imprisonment.The Sixth Circuit affirmed the convictions and the sentence imposed on Bryan. The court rejected challenges to the sufficiency of the evidence and to various evidentiary rulings and upheld the admission of certain out of court statements made in furtherance of the conspiracy. The district court miscalculated Sandra’s Guidelines-range sentence when it erroneously imposed a two-level increase in her offense level for using “mass marketing” in her scheme and incorrectly calculated the loss amount for which Calvin was responsible—and by extension, his Guidelines-range sentence—by holding him responsible for losses beyond those he agreed to jointly undertake. View "United States v. Bailey" on Justia Law

Kozerski owned two construction companies in Detroit. He formed the second one, CA, to bid on Veterans Administration contracts set aside for small businesses owned by service-disabled veterans. Kozerski does not have a service-related disability. He convinced J.R., a service-disabled veteran, to pretend to be the company’s owner. CA handled six contracts. Kozerski forged J.R.’s signature and sent the government emails supposedly from J.R.. For five contracts, Kozerski did not pay J.R. anything, lying to him that CA did not receive any contracts after the first one.The government eventually discovered the scheme and charged Kozerski with wire fraud, 18 U.S.C. 1343. Kozerski pleaded guilty. The PSR recommended a loss amount of $9.5 million to $25 million, calculated by adding the amounts the government paid CA on all six contracts without crediting the value of the work performed on the contracts: $11,891,243.45, resulting in a Guidelines range of 37-46 months. Kozerski argued the loss should be the amount of profit a qualifying veteran-owned business would receive from the contract, yielding a guidelines range of eight-14 months. The district court adopted Kozerski’s formula and sentenced him to a year and a day. The Sixth Circuit affirmed, upholding the district court’s calculation of the loss as the aggregate difference between Kozerski’s bids and the next-lowest bids, about $250,000. View "United States v. Kozerski" on Justia Law

Charte (relator) filed a False Claims Act (FCA), 31 U.S.C. 3729–3733, "qui tam" suit alleging that defendants, including Wegeler, submitted false reimbursement claims to the Department of Education. Relators are entitled to part of the amount recovered. As required to allow the government to make an informed decision as to whether to intervene, Charte cooperated with the government. Her information led to Wegeler’s prosecution. Wegeler entered into a plea agreement and paid $1.5 million in restitution. The government declined to intervene in the FCA action. If the government elects to pursue an “alternate remedy,” the statute provides that the relator retains the same rights she would have had in the FCA action. Charte tried to intervene in the criminal proceeding to secure a share of the restitution. The Third Circuit affirmed the denial of the motion. A criminal proceeding does not constitute an “alternate remedy” to a civil qui tam action, entitling a relator to intervene and recover a share of the proceeds. Allowing intervention would be tantamount to an interest in participating as a co-prosecutor in a criminal case. Even considering only her alleged interest in some of the restitution, nothing in the FCA suggests that a relator may intervene in the government’s alternative-remedy proceeding to assert that interest. The text and legislative history regarding the provision indicate that the court overseeing the FCA suit determines whether and to what extent a relator is entitled to an award. View "United States v. Wegeler" on Justia Law

Medicare pays for doctors’ home visits if a patient is homebound. Mobile Doctors offered physician services to homebound Medicare beneficiaries, hiring doctors who assigned their Medicare billing rights to the company. Upon receipt of payment, Mobile would pay the physician-employee a percentage of what Mobile received from billing Medicare. Many of Mobile’s patients did not actually qualify as homebound. Some doctors signed certifications for additional unneeded treatment from companies that provided at-home nursing or physical therapy services—companies that had referred the patients to Mobile. Mobile submitted Medicare codes for more serious and more expensive diagnoses or procedures than the provider actually diagnosed or performed. Mobile instructed physicians to list at least three diagnoses in the patient file; if the doctors did not list enough, a staff member added more. Mobile only paid the physicians if they checked at least one of the top two billing codes. Doctors who billed for the higher of the top two codes were paid more. Mobile also paid for “standing orders” for testing, although Medicare prohibits testing done under standing orders. Daneshvar joined Mobile as a physician in 2012. After following Mobile’s policies Daneshvar was convicted of conspiracy to commit healthcare fraud but found not guilty of healthcare fraud; he was sentenced to 24 months' imprisonment. The Sixth Circuit affirmed. Daneshvar’s trial was fair; none of the district court’s rulings during that proceeding should be reversed. There was no reversible error with his sentencing. View "United States v. Daneshvar" on Justia Law