MARCIA G. COOKE, District Judge.
This is an action under the federal False Claims Act, 31 U.S.C. §§ 3729-3733 ("FCA"). Plaintiff, the United States of America, alleges Defendants FastTrain II Corp., d/b/a FastTrain College ("FastTrain") and its President, Chief Executive Officer and co-owner, Alejandro Amor,
I have jurisdiction under 28 U.S.C. § 1331 and 31 U.S.C. § 3732(a).
Pending are: (1) the United States' Motion for Summary Judgment (ECF No. 131); and (2) Amor's Cross-Motion for Summary Judgment (ECF No. 141).
This action arises from violations of the FCA and common law by FastTrain and its President, Chief Executive Officer, and co-owner Amor. From at least January 2010 through June 2012, when FastTrain closed, FastTrain and Amor knowingly presented, or caused to be presented, false claims and statements to the DOE and concealed material information in order to participate in the federal student aid programs authorized under Title IV of the Higher Education Act of 1965 ("HEA"), as amended, 20 U.S.C. §§ 1070 et seq. ("Title IV, HEA Programs").
At Amor's direction, FastTrain knowingly submitted and/or caused to be submitted false information relating to the eligibility of students to receive Title IV, HEA Programs funds — through the Federal Pell Grant Program (Pell Grant"), the Federal Family Educational Loan Program ("FFEL"), the Federal Direct Loan Program ("FDL") and the Campus Based Programs — by providing false documentation that certain students had a high school diploma or its recognized equivalent when in fact they did not have such credentials. Also at Amor's direction, FastTrain admissions employees instructed and counseled ineligible prospective students to provide false high school completion attestations and further coached them to lie on their Free Application for Federal Student Aid ("FAFSA"), the document that students file to obtain Title IV, HEA funds. As a result of Amor's fraudulent scheme and false representations of Title IV eligibility, FastTrain received millions of dollars of Title IV financial aid that it otherwise would not have received.
After a twenty-three day trial in United States of America v. Alejandro Amor, Case No. 1:14-cr-20750-JAL(s)-1 (S.D. Fla.) ("Amor Criminal Proceeding"), a jury convicted Amor of one count of conspiracy to steal Government funds, in violation of Title 18, United States Code, Section 371, and twelve counts of theft of Government funds, in violation of Title 18, United States Code, Section 641.
Summary judgment "shall be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Allen v. Tyson Foods, Inc., 121 F.3d 642 (11th Cir. 1997) (quoting Fed. R. Civ. P. 56(c)) (internal quotations omitted); Damon v. Fleming Supermarkets of Florida, Inc., 196 F.3d 1354, 1358 (11th Cir. 1999). Thus, the entry of summary judgment is appropriate "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
"The moving party bears the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). "Only when that burden has been met does the burden shift to the non-moving party to demonstrate that there is indeed a material issue of fact that precludes summary judgment." Id.
Rule 56 "requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial." Celotex, 477 U.S. at 324. Thus, the nonmoving party "may not rest upon the mere allegations or denials of his pleadings, but must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (internal quotation marks omitted).
"A factual dispute is genuine if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Damon, 196 F.3d at 1358. "A mere `scintilla' of evidence supporting the opposing party's position will not suffice; there must be enough of a showing that the jury could reasonably find for that party." Abbes v. Embraer Servs., Inc., 195 F. App'x 898, 899-900 (11th Cir. 2006) (quoting Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990)).
When deciding whether summary judgment is appropriate, "the evidence, and all inferences drawn from the facts, must be viewed in the light most favorable to the non-moving party." Bush v. Houston County Commission, 414 F. App'x 264, 266 (11th Cir. 2011).
The FCA provides that:
31 U.S.C. § 3729(a)(1)(A)-(B); see 28 C.F.R. § 85.3(a)(9) (adjusting penalties for inflation).
As used in the FCA, a "claim"
31 U.S.C. § 3729(b)(2), as amended.
While Congress did not define what makes a claim "false" or "fraudulent," the "phrase `false or fraudulent claim' in the [FCA] should be construed broadly." United States ex rel. Sanchez v. Abuabara, 2012 WL 254764, at *6 (S.D. Fla. 2012) (quoting Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 788 (4th Cir. 1999); see S. Rep. No. 99-345, at 9 (1986). The FCA does not require specific intent to defraud, only knowledge of the false information or deliberate ignorance or reckless disregard of its falsity. 31 U.S.C. § 3729(b)(1).
The FCA further provides that:
31 U.S.C. § 3731(e).
Before I turn to the merits of the parties' Motions, I first address two procedural arguments Amor raises. He asserts: (1) this Court lacks subject matter jurisdiction because the Government is a party to a civil administrative money penalty proceeding involving Amor; and (2) the Second Amended Complaint ("SAC") does not meet the heightened pleading standards of Fed. R. Civ. P. 9(b).
Amor argues that the Court lacks subject matter jurisdiction under 31 U.S.C. § 3730(e)(3) and (4), and lacked jurisdiction over the dismissed Relator's original qui tam complaint, because FastTrain was subject to a 2011 DOE Program Review. The relevant subsections of § 3730(e) provide:
31 U.S.C. § 3730(e)(3)-(4).
Amor's "public disclosure bar" argument fails because he provides no evidence that the DOE's preliminary Program Review Report
As for Armor's arguments under § 3703(e)(3), it is his burden to show that the Government is a party in an administrative civil money penalty proceeding based on the same allegations or transactions at issue in this case. See United States ex rel. Johnson v. Shell Oil Co., 26 F.Supp.2d 923, 928 (E.D. Tex. 1998) (burden lies with defendant). He is correct that the FCA does not define the phrase, "administrative civil money penalty proceeding," and thus leaves it open to interpretation. The fact is, however, that the preliminary Program Review Report contains no demand for payment of a money penalty. Cf. id. (payment demands and audit letters do not bar suit under § 3730(e)(3)). Indeed, the DOE may seek to recover money from an institution only after it issues an FPRD. 34 C.F.R. pt. 668. Again, that never happened here. Amor therefore has not convinced me that the preliminary Program Review Report is an administrative civil money penalty proceeding that would bar this action under § 3730(e)(3), or that it is evidence that such a proceeding was pending.
Simply put, Amor's contention that this Court lacks subject-matter jurisdiction is misguided.
The United States contends Amor waived his argument under Rule 9(b) by failing timely to raise it. But "Rule 9(b)'s pleading standard is not an affirmative defense that is waived by a defendant's failure to raise it" in an initial pleading. See, e.g., Olson v. Fairview Health Servs. of Minnesota, 831 F.3d 1063, 1074 (8
A complaint under the False Claims Act must meet the Rule 9(b) pleading standard. See United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1309-10 (11th Cir. 2002) (noting "it was `well settled' and `self-evident' that the False Claims Act is `a fraud statute' for the purposes of Rule 9(b)") (citation omitted). A False Claims Act complaint satisfies Rule 9(b) if it sets forth "`facts as to time, place, and substance of the defendant's alleged fraud,' specifically `the details of the defendants' allegedly fraudulent acts, when they occurred, and who engaged in them.'" Id. at 1310 (quoting United States ex rel. Cooper v. Blue Cross & Blue Shield of Fla., 19 F.3d 562, 567-68 (11th Cir. 1994)).
The SAC easily satisfies Rule 9(b)'s requirements. It specifies the substance of Amor's fraudulent acts in exacting detail, see generally ECF No. 83, including the approximate time periods and, in some cases, specific dates of fraudulent acts, see, e.g., id. ¶¶ 63, 100, and who engaged in them, see, e.g., id. ¶¶ 86, 100. Amor's argument under Rule 9(b) therefore fails.
I next address the United States' arguments in support of its Motion, as they are case dispositive. The United States contends: (1) Amor's criminal conviction precludes him from denying any of the elements of the fraudulent and/or false claims alleged in this action; (2) Amor's false claims were material to the DOE's payments to FastTrain; (3) the United States is entitled to treble damages; and (4) Amor is liable for civil penalties under
31 U.S.C. § 3729(a). I discuss the effect of Amor's criminal conviction first.
Under the principles of collateral estoppel, the preclusive effect of a criminal conviction on future civil proceedings is well established. See, e.g., Emich Motors Corp. v. Gen. Motors Corp., 340 U.S. 558, 568-69 (1951) ("It is well established that a prior criminal conviction may work an estoppel in favor of the Government in a subsequent civil proceeding."). Under federal common law, for collateral estoppel to apply: "(1) the issue must be identical in the pending case to that decided in the earlier proceeding; (2) the issue must necessarily have been decided in the earlier proceeding; (3) the party to be estopped must have been a party or have been adequately represented by a party in the earlier proceeding; and (4) the issue must actually have been litigated in the first proceeding." Montalbano v. C.I.R., 307 F. App'x. 322 (11th Cir. 2009) (citing In re Raiford, 695 F.2d 521, 523 (11th Cir. 1983)).
For claims arising under the FCA, the principle of collateral estoppel is codified in the FCA at 31 U.S.C. § 3731(e). The statute makes clear that a criminal conviction for a violation of 18 U.S.C. §§ 371 and/or 641 estops a defendant in a FCA case from denying the essential elements of the §§ 3729(a)(1)(A) and (B) offenses when the claims involve the same transaction at issue in the defendant's prior criminal proceeding. See, e.g., United States v. Anghaie, 633 F. App'x. 514, 516 (11th Cir. 2015).
Here, the Second Superseding Indictment against Amor and his co-conspirators alleges, as the United States alleges in this action, inter alia, that the DOE approved FastTrain to receive both Pell Grants and Direct Loans. See Second Amended Complaint, E.C.F. No. 83 ¶¶ 37-68; Amor Criminal Proceeding, Second Superseding Indictment, ECF No. 252 ¶¶ 15-30. Amor signed Program Participation Agreements ("PPAs") in which he agreed that FastTrain would comply with all applicable federal statutes and regulations relating to the Pell Grant and Direct Loan Programs, including, inter alia, the requirement that FastTrain enroll only students with a high school diploma, GED, or other approved credential. Based on those representations, the Government charged Amor with fraud or false statements in the Amor Criminal Proceeding. For example, the Second Superseding Indictment alleges, inter alia:
The SAC in this case contains nearly identical allegations. To highlight just a few examples:
(ECF 83 ¶¶ 7-11) (emphasis added).
Amor argues that estoppel does not apply because the elements of his criminal charges are different than the elements of the civil claims in this case. That argument ignores the FCA's plain language, which specifies that preclusion applies where "the essential elements of the offense [in the civil case] . . . involve[] the same transaction as in the criminal proceeding." 31 U.S.C. § 3731(e) (emphasis added). The court's Order Denying Defendant Amor's Motion for New Trial (ECF No. 410) in the Amor Criminal Proceeding leaves no doubt that the transactions at issue there were the same as those at issue here. It states, in relevant part:
(Id.).
Applying the criteria for estoppel under the FCA, Amor's prior conviction has preclusive effect in the instant case.
As Amor is estopped from contesting the FCA cause of action against him, there are no genuine issues of material fact upon which Amor might craft a defense. Summary Judgment in favor of the United States and against Amor is therefore warranted. Accordingly, the only issue left for me to resolve is the amount of damages and/or civil penalties to which the United States is entitled.
When found to have violated the FCA, a defendant "is liable to the United States Government for . . . [three] times the amount of damages which the Government sustains because of the act of that person," plus civil penalties. 31 U.S.C. § 3729(a). Amor does not appear to dispute that fact. Instead, he challenges the United States' proposed measure of single damages. He argues that in the Amor Criminal Proceeding, the court made a "judicial determination" of the United States' losses when it ordered him to pay restitution totaling $1,900,000. Thus, he contends, that "amount is indeed res judicata" as to damages in this case. (ECF No. 162 at 9). That contention lacks merit.
The Eleventh Circuit has recognized that "[a]n order of restitution is not a judicial determination of damages. Damages measure the amount of compensable loss a victim has suffered. Restitution, by contrast, is an equitable remedy, `subject to the general equitable principle that [it] is granted to the extent and only to the extent that justice between the parties requires.'" United States v. Barnette, 10 F.3d 1553, 1556-57 (11th Cir. 1994) (citation omitted). In Barnette, the Eleventh Circuit declined to limit a damages award in a civil FCA case to the amount of restitution awarded by the district court, noting that the defendant's attempt to equate the sentencing judge's restitution order with a determination of damages was "unpersuasive". Barnette, 10 F.3d at 1556-57. The court held that "[m]ore likely, the sentencing judge decided that the Government had lost at least $7 million and that Barnette could pay that amount, but left final resolution of the Government's damages claim to the ensuing civil case." Id. Although the sentencing court in this case awarded restitution of $1,900,000, Barnette's reasoning nevertheless directs that a restitution finding in a criminal case does not foreclose the United States from seeking a different damages award in a subsequent civil case. See id.
"FCA damages `typically are liberally calculated to ensure that they afford the government complete indemnity for the injuries done it.'" United States ex rel. Doe v. DeGregorio, 510 F.Supp.2d 877, 890 (M.D. Fla. 2007) (quoting United States ex rel. Roby v. Boeing Co., 302 F.3d 637, 646 (6th Cir. 2002)). While there is "no set formula for determining the government's actual damages" for an FCA claim, the Eleventh Circuit has explained that, as a general rule, the "measure is `the difference between what the government actually paid on the fraudulent claim and what it would have paid had'" it known of the false statements. Anghaie, 633 F. App'x at 518 (quoting, United States v. Killough, 848 F.2d 1523, 1532 (11th Cir. 1988)). Where, as here, the United States would have paid out nothing to FastTrain but for its false claims and certifications, the proper measure of damages is the full amount the United States paid out. See id. (citing United States ex rel. Longhi v. United States, 575 F.3d 458, 461-62, 473 (5th Cir. 2009) (affirming award of damages based on full amount of Government grant without offset)).
According to the United States, the DOE paid out approximately $25,200,000 to FastTrain during the 2010-2012 program years. That amount, if supported by the evidence, would therefore be an accurate measure of single damages under the law. Within its discretion, however, the United States requests that I limit the measure of damages to the more modest amount of federal student aid FastTrain actually stole through its false claims and false certifications. Testimony in the Amor Criminal Proceeding pegged that amount at $4,129,765. See, e.g., Amor Criminal Proceeding, ECF No. 543 at 33-34. I find that amount to be a reasonable, if not a conservative, estimate of the United States' loss. See United States ex rel. Doe, 510 F. Supp. at 890 ("The computation of damages does not have to be done with mathematical precision but, rather, may be based upon a reasonable estimate of the loss."). Amor is therefore liable for $4,129,765, trebled, minus any restitution he pays to the Government.
Liability under the FCA also triggers the imposition of civil penalties. 31 U.S.C. § 3729(a) (a person liable under the FCA "is liable to the United States Government for a civil penalty of not less than $[5,500] and not more than $[11,000]"); 28 C.F.R. § 85.3(a)(9) (adjusting penalties for inflation). The civil penalty the Government is entitled to recover is assessed for each false claim. 31 U.S.C. § 3729(a)(2). Thus, the number of violations of the FCA depends on the number of false or fraudulent claims or other requests for payments that defendant caused to be submitted.
Amor signed, certified and submitted four PPAs to the DOE on behalf of FastTrain during the 2010-2012 timeframe. (ECF No. 134-2 ¶ 2; ECF No. 302-1 at 17-20). Those PPAs constituted false claims. Additionally, during the 2010-2012 program years, there were 920 separate draw-downs associated with FastTrain in the DOE's Grants Management System (G-5). (ECF No. 134-1 ¶ 3). Each draw-down falsely certified FastTrain's compliance with DOE regulations. The United States argues that, given the "egregious" nature of Amor's conduct, I should impose the maximum penalty: a $11,000 fine for each of the 924 false claims. (ECF 131 at 19-20). I agree.
The student victims in this case were especially vulnerable. They were young people who, for whatever reasons, had not graduated high school. Realizing there are few jobs one can obtain without a high-school diploma or equivalent degree, they turned to FastTrain, hoping to learn marketable skills to improve their chances of making a decent living. FastTrain aggressively recruited these students, and then used fraud to make the Government think they were eligible for federal aid and loans. FastTrain bilked the Government out of millions of dollars, most of which ended up in Amor's pockets. As for the student victims, many now carry debt that will be enormously difficult to pay off with what they can earn working the low-level jobs for which they are qualified. The effects of Amor's fraudulent acts are thus abhorrent and far-reaching.
In light of the seriousness of Amor's misconduct, I find that the statutory maximum fine of $11,000 for each of the 924 false claims is appropriate. See Cole v. U.S. Dep't of Agric., A.S.C.S., 133 F.3d 803, 807 (11
It is, therefore,
