Filed: Dec. 06, 2012
Latest Update: Mar. 26, 2017
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 11-2180 UNITED STATES OF AMERICA ex rel. MELAN DAVIS; UNITED STATES OF AMERICA ex rel. BRAD DAVIS, Plaintiffs - Appellants, v. U.S. TRAINING CENTER INCORPORATED, f/k/a Blackwater Lodge and Training Center, Incorporated, Defendant – Appellee, and BLACKWATER SECURITY CONSULTING, LLC; BLACKWATER ARMOR AND TARGETS, LLC; BLACKWATER LOGISTICS, LLC; BLACKWATER CANINE; RAVEN DEVELOPMENT GROUP LLC; GREYSTONE LIMITED; THE PRINCE GROUP,
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 11-2180 UNITED STATES OF AMERICA ex rel. MELAN DAVIS; UNITED STATES OF AMERICA ex rel. BRAD DAVIS, Plaintiffs - Appellants, v. U.S. TRAINING CENTER INCORPORATED, f/k/a Blackwater Lodge and Training Center, Incorporated, Defendant – Appellee, and BLACKWATER SECURITY CONSULTING, LLC; BLACKWATER ARMOR AND TARGETS, LLC; BLACKWATER LOGISTICS, LLC; BLACKWATER CANINE; RAVEN DEVELOPMENT GROUP LLC; GREYSTONE LIMITED; THE PRINCE GROUP, L..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-2180
UNITED STATES OF AMERICA ex rel. MELAN DAVIS; UNITED STATES
OF AMERICA ex rel. BRAD DAVIS,
Plaintiffs - Appellants,
v.
U.S. TRAINING CENTER INCORPORATED, f/k/a Blackwater Lodge
and Training Center, Incorporated,
Defendant – Appellee,
and
BLACKWATER SECURITY CONSULTING, LLC; BLACKWATER ARMOR AND
TARGETS, LLC; BLACKWATER LOGISTICS, LLC; BLACKWATER CANINE;
RAVEN DEVELOPMENT GROUP LLC; GREYSTONE LIMITED; THE PRINCE
GROUP, LLC; XE SERVICES LLC, f/k/a EP Investments, LLC,
d/b/a Blackwater Worldwide; ERIK PRINCE; BLACKWATER
AIRSHIPS, LLC,
Defendants.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. T. S. Ellis, III, Senior
District Judge. (1:08-cv-01244-TSE-TRJ)
Argued: October 25, 2012 Decided: December 6, 2012
Before MOTZ and KEENAN, Circuit Judges, and James K. BREDAR,
United States District Judge for the District of Maryland,
sitting by designation.
Affirmed by unpublished opinion. Judge Keenan wrote the
opinion, in which Judge Motz and Judge Bredar joined.
ARGUED: Susan L. Burke, BURKE PLLC, Washington, D.C., for
Appellants. David William O'Brien, Brian T. McLaughlin, CROWELL
& MORING, LLP, Washington, D.C., for Appellee. ON BRIEF: Susan
M. Sajadi, BURKE PLLC, Washington, D.C., for Appellants.
Richard L. Beizer, CROWELL & MORING, LLP, Washington, D.C., for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
BARBARA MILANO KEENAN, Circuit Judge:
Relators Brad Davis and Melan Davis (Relators) brought this
qui tam lawsuit under the False Claims Act, 31 U.S.C. §§ 3729-
3733, against U.S. Training Center, Inc. (USTC), formerly known
as Blackwater Worldwide Lodge and Training Center, Inc.
(Blackwater), 1 and several other defendants (collectively,
Defendants). 2 The Relators, a married couple formerly employed
by USTC, alleged that Defendants overbilled the federal
government and committed other acts of fraud in connection with
two contracts that USTC entered into with the Department of
Homeland Security (DHS), and the Department of State (the State
Department), respectively.
The district court granted summary judgment in favor of
USTC with respect to the contract with DHS, which required USTC
to provide security services in support of DHS’ efforts in 2005
to assist affected areas in the aftermath of Hurricane Katrina
1
We refer to the principal defendant as USTC, although we
note that the company was known as Blackwater during the events
that gave rise to the Relators’ complaint.
2
The other parties named as defendants in the Relators’
second amended complaint were Erik Prince, the founder and CEO
of Blackwater, and several corporate entities affiliated with
Blackwater, including Blackwater Security Consulting, LLC,
Greystone Limited, The Prince Group LLC, and Xe Services LLC.
These parties were dismissed from the lawsuit by the district
court, such that the only defendant relevant to this appeal is
USTC.
3
(the Katrina contract). Relators appeal from the court’s grant
of summary judgment with respect to the Katrina contract.
The district court allowed two of Relators’ claims
concerning the State Department contract, under which USTC
provided security services in Iraq and Afghanistan in connection
with the United States’ military presence in those areas (the
Protective Services contract), to proceed to a jury trial. The
jury rendered a verdict in favor of USTC on the claims
presented. The Relators sought a new trial on the basis that
one of USTC’s trial witnesses allegedly committed perjury. The
district court denied the motion.
On appeal, Relators argue that they are entitled to a new
trial because the district court made certain erroneous
evidentiary rulings, prohibiting Relators from introducing
evidence that would have bolstered their claims and would have
undermined USTC’s defenses. Relators also appeal from the
district court’s denial of their motion for a new trial.
Upon our review, we hold that the district court: (1) did
not err in granting summary judgment in favor of USTC on the
claims relating to the Katrina contract; (2) did not abuse its
discretion in excluding certain categories of evidence that
Relators sought to introduce at trial; and (3) did not abuse its
discretion in denying Relators’ motion for a new trial because
4
Relators failed to establish that USTC’s witness committed
perjury. Accordingly, we affirm the district court’s judgments.
I.
A.
In 2005, the Federal Protective Service division of DHS
selected USTC to provide armed guard services in Louisiana in
support of DHS’ Hurricane Katrina recovery efforts. Under the
parties’ written agreement, USTC was required to provide
fourteen armed guards and four vehicles to protect a temporary
morgue in Baton Rouge, Louisiana. 3 The Katrina contract
specified that the armed security guards provided by USTC were
required to meet certain minimum qualifications, including
United States citizenship, a high school diploma, proficiency in
the English language, current or prior security experience,
“[s]ubstance screening,” firearms training, firearms
qualifications, and valid firearms-related licenses. The
contract further specified that the security guards must undergo
a “NCIC check,” which is a criminal background check conducted
3
The Katrina contract also provided that DHS could direct
USTC to perform additional duties, potentially increasing the
number of personnel required. The contract authorized a maximum
of 4494 “man days,” and described a “man day” as consisting of a
“minimum of 12 productive hours of security service or directly
related work in support of the ongoing security operation.”
5
in conjunction with the Federal Bureau of Investigation’s
National Crime Information Center (NCIC). 4 However, the contract
also provided that DHS, rather than USTC, was responsible for
obtaining these background checks.
Also in 2005, the State Department selected USTC to provide
security services in Iraq and Afghanistan under a “Worldwide
Personal Protective Services” agreement. Under the Protective
Services contract, security personnel provided by USTC would
assist the Bureau of Diplomatic Security of the State Department
(the Bureau) in fulfilling the Bureau’s security goals. 5
The Protective Services contract provided that USTC would
be compensated for its personnel on a fixed “per-person-per-day”
basis, referred to as the “boots on the ground” billing rule.
As required by the contract, USTC used “muster sheets,” which
are computer spreadsheets that require manual input, to “track[]
4
See Federal Bureau of Investigation, National Crime
Information Center, http://www.fbi.gov/about-us/cjis/ncic.
5
The “Statement of Work” in the Protective Services
contract identified the following “specific goals” of the
Bureau: “Prevent[ing] loss of life, injury to personnel, and
damage/destruction of facilities or equipment, worldwide as
specified by individual Task Orders issued under this contract.
Ensur[ing] security and safety of personnel and facilities in
static (fixed) locations and/or in mobile (in transit)
operations. Expedit[ing] the movement of personnel in the
accomplishment of their missions. Secur[ing] the environment to
enable personnel to conduct their business and complete their
missions. Protect[ing] personnel and the organizations they
represent from harm or embarrassment.”
6
the daily duty status for each authorized position at a duty
station.” The State Department used these “muster sheets” for
purposes of validating USTC’s monthly labor invoices.
Essentially, a “muster sheet” functioned as a daily time sheet,
and recorded whether and how many of USTC’s personnel had “boots
on the ground” each day. Additionally, USTC was permitted to
receive reimbursement for certain expenses, such as travel
expenditures, by submitting to the State Department invoices
supported by appropriate documentation such as hotel bills and
flight itineraries.
B.
Relators both were formerly employed by USTC. Brad Davis
(Brad), a former member of the United States Marine Corps, was
hired by USTC in April 2005. Upon being hired, he was sent to
work in Iraq in connection with the Protective Services
contract. Brad worked in Iraq on USTC’s behalf for about three
months in 2005, and later returned to Iraq in 2006 to conduct
additional work for USTC. During the interim period, he was
sent by USTC to provide security services in Louisiana under the
Katrina contract. He worked in Louisiana for one month, first
as an assistant area manager, and later was promoted to the
position of area manager. During his employment in Iraq and in
Louisiana for USTC, Brad allegedly observed fraud and other acts
7
that, in his view, were in violation of USTC’s contractual
responsibilities.
Melan Hebert Davis (Melan) became engaged to Brad shortly
before he was hired by USTC and sent to Iraq. When Brad was
working in Louisiana under the Katrina contract, he learned that
USTC needed personnel to perform record-keeping and billing
responsibilities. Melan applied and was hired to work for USTC
in that capacity. During her employment in Louisiana, she
allegedly observed numerous fraudulent acts, such as overbilling
and submission of false invoices.
Melan alleged that she was discharged from her position
when she raised these concerns to her supervisors. She later
was rehired by USTC to perform work under the Protective
Services contract, serving as a “cost reimbursable” clerk on
USTC’s finance team. In this position, she allegedly discovered
additional fraudulent billing and other acts of fraud committed
by Defendants. Melan eventually was discharged from USTC during
a health-related leave of absence.
C.
On behalf of the United States pursuant to the qui tam
provision of the False Claims Act, Relators filed a complaint
against Defendants in December 2008 in the United States
District Court for the Eastern District of Virginia. Relators
twice amended their complaint, once in April 2010, and again in
8
July 2010 with the filing of the Second Amended Complaint (the
Complaint), which is the set of allegations relevant to this
appeal.
As set forth in the Complaint and the accompanying
disclosure statements, Relators alleged that Defendants engaged
in widespread fraud against the government and otherwise failed
to comply with the duties required by the Katrina contract and
the Protective Services contract. With respect to the Katrina
contract, Relators alleged that Defendants provided “worthless
services” to DHS under the contract because Defendants failed to
manage personnel, failed to monitor the distribution of weapons,
and failed to ensure that weapons were not given to felons or
guards otherwise disqualified 6 from carrying firearms. After
discovery, the district court granted summary judgment in favor
of Defendants on all claims relating to the Katrina contract. 7
Relators appeal from the district court’s summary judgment
award.
6
The Complaint referred to the Lautenberg Act, 18 U.S.C. §
922(g)(9), otherwise known as the Lautenberg Amendment, which
prohibits access to firearms by persons convicted of misdemeanor
crimes of domestic violence.
7
Relators also alleged that Defendants submitted falsified
time cards for employees performing services required by the
contract, and used false accounting records to justify the
“daily rate” paid for employees. Relators do not challenge on
appeal the district court’s dismissal of these additional
allegations.
9
With respect to the Protective Services contract, Relators
alleged that Defendants submitted false “muster sheets,”
resulting in USTC receiving compensation for hours in which USTC
employees were not performing contractual services. The
Relators also alleged that Defendants submitted false travel
records. 8 The case proceeded to trial on the false “muster
sheets” claims and the false travel records claims asserted
against USTC. 9 As described in greater detail later in this
opinion, the district court made certain evidentiary rulings
before and during trial prohibiting the admission of several
categories of evidence offered by Relators.
The jury found in USTC’s favor on both claims presented at
trial. After the trial concluded, Relators filed a motion
seeking a new trial pursuant to Rule 59(a)(1) of the Federal
Rules of Civil Procedure, arguing that Danielle Esposito, USTC’s
8
Relators alleged in the Complaint two additional claims
relating to the Protective Services contract. First, Relators
asserted that Defendants provided “worthless services” to the
State Department under the contract because USTC employees used
steroids, “smuggled” weapons, and engaged in the unjustified use
of excessive force. The district court dismissed this claim
before discovery. Second, Relators alleged that Defendants
falsely billed for expenses incurred by affiliates and submitted
false invoices. The district court granted summary judgment in
favor of Defendants on this claim after discovery. Relators do
not challenge on appeal the district court’s dismissal of those
two claims.
9
The district court granted summary judgment in favor of
all Defendants except USTC on these claims.
10
former Chief Operating Officer, allegedly committed perjury.
During her trial testimony, Esposito stated that she provided to
government auditors a copy of a report prepared by an accounting
firm, which had criticized USTC’s accounting practices and
controls. After the trial, Relators obtained a sworn
declaration prepared by the government representative to whom
Esposito purportedly gave the accounting firm’s report. In that
declaration, the government representative stated that Esposito
did not provide him the report. The district court reviewed the
declaration and concluded, among other things, that Relators
failed to prove that Esposito perjured herself. The court thus
denied the Relators’ Rule 59 motion.
II.
As described above, the Relators’ appeal presents three
issues for our review. First, we address whether the district
court erred in granting summary judgment in USTC’s favor on the
“worthless services” claim relating to the Katrina contract.
Second, we address whether the district court abused its
discretion in excluding from evidence certain categories of
documents and testimony offered by Relators in support of their
claims relating to the Protective Services contract. Third and
finally, we address whether the district court abused its
discretion in denying Relators’ motion for a new trial on the
11
basis of Esposito’s allegedly perjured testimony. We address
each of these issues in turn.
A.
We review de novo the district court’s award of summary
judgment in favor of USTC on the allegations relating to the
Katrina contract. See S.C. Green Party v. S.C. State Election
Comm’n, 612 F.3d 752, 755 (4th Cir. 2010). We view the facts,
and all reasonable inferences that may be drawn from those
facts, in the light most favorable to Relators, the non-moving
parties. See Bonds v. Leavitt,
629 F.3d 369, 380 (4th Cir.
2011). Summary judgment is appropriate only when “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. v. Catrett,
477 U.S. 317, 322 (1986);
Merritt v. Old Dominion Freight Line, Inc.,
601 F.3d 289, 295
(4th Cir. 2010).
The False Claims Act (the Act) provides that a complaint
may be brought against anyone who “knowingly presents” to the
government “a false or fraudulent claim for payment or
approval.” 10 31 U.S.C. § 3729(a)(1)(A). The elements of a claim
under the Act, which are predicated on fraudulent conduct,
10
The Act similarly allows suit against anyone who
“knowingly makes . . . a false record or statement material to a
false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(B).
12
required that Relators establish: (1) that USTC engaged in a
fraudulent course of conduct; (2) that such conduct was carried
out knowingly; (3) that the conduct was material; and (4) that
the conduct caused the government to pay money in return.
United States ex rel. Owens v. First Kuwaiti Gen. Trading &
Contracting Co., 612 F.3d 724, 729 (4th Cir. 2010).
The essence of Relators’ claim relating to the Katrina
contract was that USTC’s performance under the contract was
materially deficient in three respects described below, and that
had the government been aware of these deficiencies, the
government justifiably would have refused to compensate USTC for
the services it provided. Relators alleged in the Complaint
that “[t]he contract required that [USTC] management manage
personnel, monitor the distribution of weapons[,] and ensure
that the company did not give weapons to felons or persons
disqualified from using weapons by the Lautenberg Act, which
prohibits those involved in domestic abuse from obtaining
weapons.” In light of this allegation that comprised the core
of Relators’ “worthless services” claim, 11 we analyze the Katrina
11
As described by the Second Circuit, “[i]n a worthless
services claim, the performance of the service is so deficient
that for all practical purposes it is the equivalent of no
performance at all.” Mikes v. Straus, 274 F.3d 687, 703 (2d
Cir. 2001).
13
contract to determine whether USTC actually was required to
carry out the obligations identified by Relators.
Our review of the Katrina contract requires us to apply
settled principles of contract interpretation. “When the United
States enters into contract relations, [the government’s] rights
and duties therein are governed generally by the law applicable
to contracts between private individuals.” Lynch v. United
States, 292 U.S. 571, 578 (1934); see also In re Peanut Crop
Ins. Litig.,
524 F.3d 458, 470 (4th Cir. 2008); United States v.
Bankers Ins. Co.,
245 F.3d 315, 321 (4th Cir. 2001). Except
when Congress has explicitly adopted a different standard, we
apply “the principles of general contract law, which become
federal common law” in interpreting government contracts. In re
Peanut Crop Ins. Litig., 524 F.3d at 470 (quoting Long Island
Sav. Bank, FSB v. United States,
503 F.3d 1234, 1245 (Fed. Cir.
2007)).
As a primary principle of contract interpretation, we
“begin[] with the language of the written agreement.” NVT
Techs., Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir.
2004). In construing the language of a contract, “the plain and
unambiguous meaning of [the] written agreement controls.” Craft
Mach. Works, Inc. v. United States,
926 F.2d 1110, 1113 (Fed.
Cir. 1991).
14
Applying these principles, we agree with the district
court’s conclusion that the Katrina contract did not require
USTC to manage personnel, to monitor the distribution of
weapons, or to ensure that weapons were not given to felons or
persons disqualified from using them by the Lautenberg Act. We
observe that the Katrina contract, by its plain terms, did not
assign USTC the responsibility for managing personnel or
monitoring the distribution of weapons. We also conclude that
the contract did not require USTC to ensure that felons or
persons ineligible to possess weapons by virtue of the
Lautenberg Act did not receive weapons. As the district court
correctly explained, ensuring that such people do not receive
firearms requires a background check to determine their criminal
history. However, under the Katrina contract, DHS, rather than
USTC, expressly was given the responsibility of performing
criminal background checks for the security guards.
Accordingly, we conclude that the underlying basis for Relators’
remaining claim under the Katrina contract, that USTC rendered
“worthless services” in failing to fulfill its purported
contractual responsibilities, is illusory.
Our conclusions are not altered by Relators’ additional
argument, in which Relators assert that summary judgment was
unwarranted because there remained a factual dispute whether
USTC falsely certified to the government that USTC was providing
15
contractually-conforming services. The district court held that
Relators could not avoid summary judgment on this basis, because
Relators did not allege such a “false certification” claim in
the Complaint. We agree with the district court’s conclusion.
See Owens, 612 F.3d at 731 (plaintiff may not raise new claims
after discovery has begun without first amending the complaint);
Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 617 (4th
Cir. 2009) (same). Accordingly, we affirm the district court’s
award of summary judgment in favor of USTC on the Katrina
contract claim.
B.
We next address Relators’ argument that they are entitled
to a new trial because the district court erred in excluding
certain categories of evidence that Relators sought to introduce
during the trial. In reviewing the district court’s evidentiary
rulings, we observe that the district court has substantial
discretion in making rulings on the admissibility of evidence.
See United States v. Hedgepeth, 418 F.3d 411, 418–19 (4th Cir.
2005). We have stated that “[j]udgments of evidentiary
relevance and prejudice are fundamentally a matter of trial
management, for ‘[t]rial judges are much closer to the pulse of
a trial than we can ever be and broad discretion is necessarily
accorded them.’” United States v. Benkahla,
530 F.3d 300, 309
16
(4th Cir. 2008) (quoting United States v. Simpson, 910 F.2d 154,
157 (4th Cir. 1990)).
For these reasons, we afford the district court
“substantial deference,” and we will not overturn any of the
court’s evidentiary rulings absent an abuse of discretion.
United States v. Medford, 661 F.3d 746, 751 (4th Cir. 2011). A
district court abuses its discretion when the court acts in an
arbitrary manner, when the court fails to consider judicially-
recognized factors limiting its discretion, or when the court
relies on erroneous factual or legal premises. 12 United States
v. Henry,
673 F.3d 285, 291 (4th Cir. 2012).
1.
We first consider the district court’s exclusion of certain
portions of an electronic mail (email) attachment, which
Relators alleged was a genuine itinerary from USTC’s travel
agency containing a handwritten note from one of USTC’s
employees. Relators sought to introduce this evidence as part
of their claim that USTC was overbilling the State Department
for travel reimbursements. The district court granted USTC’s
12
Even if we concluded that the district court’s
evidentiary rulings constitute an abuse of the court’s
discretion, any such errors would not entitle a party to a new
trial unless those errors affected the party’s substantial
rights. Schultz v. Capital Int’l Sec., Inc., 466 F.3d 298, 310
(4th Cir. 2006) (citing Fed. R. Evid. 103(a)).
17
motion to exclude this evidence under the rule prohibiting
hearsay.
On appeal, Relators argue that the email attachment should
have been admitted because it was not being offered for the
truth of the matter asserted, cf. Fed. R. Evid. 801(c), and
because the attachment was admissible under the hearsay
exemption for party admissions, see Fed. R. Evid. 801(d)(2)(D).
Upon our review of the record, we conclude that Relators did not
sufficiently raise these arguments in the district court and,
accordingly, have waived them. 13 See Jimenez v. DaimlerChrysler
Corp., 269 F.3d 439, 453 (4th Cir. 2001) (evidence is properly
excluded when alternative theory of admissibility is not timely
offered); see also Wheatley v. Wicomico Cnty.,
390 F.3d 328, 334
(4th Cir. 2004) (issues raised for the first time on appeal are
generally not considered absent exceptional circumstances).
Because Relators do not otherwise challenge the district court’s
bases for excluding portions of the email attachment, we
conclude that this evidentiary ruling was not an abuse of the
court’s discretion.
13
During trial, Relators argued that the attachment was not
hearsay because they offered it to show that Melan’s supervisor
directed her to fraudulently alter travel invoices. Relators do
not raise this theory on appeal, and instead argue that the
attachment is not hearsay because Relators sought its admission
to prove “notice” to USTC that the travel agency had the ability
to generate accurate travel documentation retroactively.
18
2.
We next address the district court’s exclusion of certain
testimony and exhibits relating to the State Department’s 2007
review of USTC’s operations in Iraq. Relators sought to
introduce this evidence, which they claim suggested that the
reviewers found that USTC was altering billing records and that
a USTC employee issued a “death threat” to one of the reviewers,
to show USTC’s intent to defraud and “hide its bad acts through
intimidation.” The district court excluded this evidence
because the court found that the evidence lacked significant
probative value and was highly prejudicial, and thus was
inadmissible under Federal Rule of Evidence 403. 14
Upon our review of the record, we conclude that the
district court did not abuse its discretion in making these
determinations. In our view, the evidence concerning the
14
Rule 403 of the Federal Rules of Evidence provides that
“[t]he court may exclude relevant evidence if its probative
value is substantially outweighed by a danger of one or more of
the following: unfair prejudice, confusing the issues,
misleading the jury, undue delay, wasting time, or needlessly
presenting cumulative evidence.” The district court also
excluded several exhibits that are part of this category of
evidence on authentication grounds, as well as certain testimony
on hearsay grounds. Relators do not argue on appeal that the
district court erred in reaching those conclusions.
19
alleged “death threat” was inherently sensational, and was only
marginally, if at all, relevant to Relators’ claims. 15
We further agree with the district court that the evidence
concerning the alteration of billing records lacked probative
value and thus was properly excluded from admission, because
there is no evidence that the records alleged to have been
altered were related to USTC’s billing or submission of claims
to the government at issue in this case. Relators conceded at
trial that the reviewer who purportedly observed USTC employees
making alterations did not know whether the alterations were
improper or whether they pertained to billing records to be
submitted to the State Department. Accordingly, we conclude
that the district court did not abuse its discretion in
excluding from evidence testimony and exhibits relating to the
State Department’s 2007 review.
3.
The next category of excluded evidence that we consider
includes testimony and email records allegedly showing that USTC
paid “bribes” to officials in Afghanistan to expedite visa
15
In making its ruling, the district court observed,
accurately in our view, that there is no evidence suggesting
that the “death threat” was related to the reviewers’ search for
billing discrepancies or other falsehoods. As explained by the
district court, the confrontation “could have been clash of
personalities. It could have been anger about something that
happened somewhere else.”
20
renewals for USTC personnel, and that USTC submitted bills to
the State Department to be reimbursed for such bribes. Relators
sought to introduce this evidence to refute USTC’s defense that
any overbillings occurred because of “innocent mistakes,” and
also to bolster Melan’s credibility. The district court
excluded this evidence under Rule 404(b), which prohibits the
use of evidence of crimes, wrongs or other acts as evidence of
character or to show that a party acted in conformance with that
character. The court also cited Rule 403 in support of its
ruling.
Evidence concerning “prior bad acts” is admissible under
Rule 404(b) only if the evidence is: (1) relevant to an issue
other than character, (2) necessary, and (3) reliable. United
States v. Hernandez, 975 F.2d 1035, 1039 (4th Cir. 1992) (citing
United States v. Rawle,
845 F.2d 1244, 1247 (4th Cir. 1988)).
However, even if the evidence satisfies this test, the evidence
still may be excluded under Rule 403. Id. The district court
addressed these factors, finding that the bribery evidence was
not necessary because it was relevant only to the character of
USTC’s employees, implying that the employees were “bad people
willing to pay bribes,” and that the evidence was not reliable
21
because it was “sharply disputed.” 16 Upon our review of the
record and the parties’ arguments, we agree with the district
court’s reasoning, and we conclude that the court acted well
within its discretion in excluding under Rule 404(b) the
evidence concerning alleged bribes to Afghani officials. 17
Our conclusion is not altered by Relators’ additional
argument that the evidence was admissible because the bribes
purportedly were part of the “false billings” at issue in this
case. The district court ruled on summary judgment that the
Complaint “does not allege that [D]efendants billed the
Department of State for bribes paid to Afghani officials.”
Relators did not appeal that aspect of the district court’s
judgment, and thus have waived argument concerning any potential
claims alleging bribes to foreign officials. See Wheatley, 390
F.3d at 334; Jimenez, 269 F.3d at 453.
4.
We next address Relators’ argument that the district court
erred in excluding a draft audit report prepared by David
16
The district court further concluded that whether the
payments were actually bribes was contested and that admission
of this evidence could lead to a “side litigation.”
17
In light of our holding, we need not reach the issue
whether this category of evidence also would have been properly
excluded under Rule 403.
22
Cotton, Chairman of the firm Cotton & Company, 18 and testimony
concerning the report. The district court allowed Mr. Cotton to
testify concerning any matters within his personal knowledge
during his work as an auditor that were relevant to Relators’
claims. However, because Relators did not designate Mr. Cotton
as an expert witness or provide an expert witness disclosure as
mandated by Rule 26 of the Federal Rules of Civil Procedure, the
court prohibited Mr. Cotton from offering any expert opinions.
Accordingly, Mr. Cotton was not permitted to offer any testimony
concerning discrepancies in the bills USTC submitted to the
government, or to provide an analysis of USTC’s bills or billing
procedures.
Relators argue that the district court abused its
discretion in characterizing the prohibited subjects as matters
of expert testimony, rather than as lay testimony. We disagree
with Relators’ argument. Based on our review of the draft audit
report, we easily conclude that the report, and Mr. Cotton’s
potential testimony concerning the report’s conclusions, are
matters of expert testimony. Relators’ unsupported assertion
that lay testimony is appropriate on complicated matters such as
18
Cotton & Company was retained by the government to
conduct an audit of USTC’s performance under the Protective
Services contract.
23
the interpretation of billing practices does not make it so. 19
See United States v. Perkins, 470 F.3d 150, 155 (4th Cir. 2006)
(“Rule 701 forbids the admission of expert testimony dressed in
lay witness clothing.”). Rather, opinions offered on matters
relating to “scientific, technical, or other specialized
knowledge” are considered expert testimony under the Federal
Rules of Evidence, see Fed. R. Evid. 701, and are subject to the
limitations contained in Fed. R. Evid. 702 and the disclosure
requirements contained in Fed. R. Civ. P. 26(a)(2). See United
States v. Johnson,
617 F.3d 286, 292 (4th Cir. 2010) (opinions
not based on witnesses’ own perception but rather on their
experience and training are expert opinions rather than lay
opinions); United States v. White,
492 F.3d 380, 403-04 (6th
Cir. 2007) (concluding that Medicare auditors’ testimony
concerning the Medicare reimbursement process and their
understanding of certain terms constituted expert testimony
subject to Fed. R. Evid. 702). For these reasons, we conclude
19
For instance, the report reflected Cotton & Company’s
conclusions in three categories: “1) Internal Control
Deficiencies; 2) Questioned Costs; and 3) Compliance Issues.”
The report further summarized Cotton & Company’s “audit
objectives,” such as the performance of a “risk assessment,” the
evaluation of USTC’s “internal controls,” and reviewing the
Protective Service contract’s “current cost model.” Relators’
argument that the excluded testimony concerning the report’s
conclusions is fact testimony rather than expert opinion
testimony strains credulity.
24
that the district court did not abuse its discretion in
prohibiting the introduction of the Cotton & Company report and
testimony concerning that report, because Relators did not
designate these matters as expert opinion evidence.
5.
We also conclude that the district court did not abuse its
discretion in excluding evidence relating to the alleged
falsification of a government form by Gary Jackson, USTC’s
former president. 20 The document at issue was a Bureau of
Alcohol, Tobacco, Firearms, and Explosives (ATF) form relating
to a separate matter for which Jackson had been indicted by the
government. The ATF form that Jackson allegedly falsified was
not related to the Protective Services contract, and therefore
was not directly at issue in this case.
Relators sought to ask Jackson about the allegedly
falsified ATF form as part of Relators’ inquiry concerning
“Jackson’s willingness to sign his name to government forms
swearing to the truth of statements and claims that are in fact
false.” Relators intended by such questioning to “provoke”
Jackson to assert his Fifth Amendment rights, thereby allowing
Relators to obtain an instruction advising the jurors that they
20
According to Relators, Jackson certified several of the
USTC invoices billed to the State Department that were at issue
in this case.
25
were permitted to draw an adverse inference from Jackson’s
invocation of his constitutional rights.
The district court granted USTC’s motion in limine
regarding this line of questioning, concluding that it was
inadmissible under Federal Rule of Evidence 404(a) as character
evidence offered for the purpose of proving action in conformity
with that character. 21 We agree with the district court’s
conclusion, because the ATF form was not a form identified in
the complaint as having been falsified, and, as noted above, the
form was unrelated to the Protective Services contract.
Therefore, testimony regarding this form would have related only
to Jackson’s character and his purported propensity to falsify
government forms, 22 bases of inquiry expressly prohibited by Rule
404(a). Accordingly, we hold that the district court did not
21
Rule 404(a) of the Federal Rules of Evidence provides
that “[e]vidence of a person’s character or character trait is
not admissible to prove that on a particular occasion the person
acted in accordance with the character or trait.” The district
court also held that evidence concerning the ATF form was
subject to exclusion under Rule 403.
22
We find no merit in Relators’ conclusory argument that
evidence concerning the ATF form was admissible to prove “intent
and motive.” Even assuming that there was a minimal connection
between the allegedly falsified form and Jackson’s motive and
intent in this case, the substantial deference we afford to the
district court’s evidentiary rulings would require us to reject
Relators’ argument.
26
abuse its discretion in barring Relators from asking Jackson any
questions concerning the allegedly falsified ATF form.
6.
We next address the final category of evidence that
Relators argue was wrongly excluded from admission, namely,
certain testimony from Relators’ expert witness, John Willis, a
forensic accountant. The district court limited Willis’
testimony only to the extent that he was not permitted to state
that he found “fraud indicators” upon reviewing USTC’s
documents. The court allowed Willis to testify concerning
certain travel and “muster sheet” discrepancies, so long as
Willis did not state that such discrepancies were an “indicator
of fraud.” The court prohibited this narrow aspect of Willis’
testimony because, in the court’s view, “[f]raud requires proof
of things that no accountant has,” and thus, testimony
concerning “fraud indicators” was beyond Willis’ expertise.
Although this ruling presents a closer question than the
other evidentiary challenges raised by Relators, we hold that
the district court did not abuse the broad and substantial
discretion that the court is afforded in ruling on evidentiary
matters. 23 See Benkahla, 530 F.3d at 309. The testimony
23
We also observe that Relators did not cite any cases to
the district court supporting their position that an accounting
expert may label certain findings “fraud indicators.” On
(Continued)
27
excluded by the district court was only one discrete aspect of
Willis’ conclusions, and Willis expressly was permitted to
testify about any and all travel and “muster sheet”
discrepancies that he observed during his review of the
documents. Accordingly, for these reasons, we hold that the
district court did not abuse its discretion in making the above
evidentiary rulings challenged in this appeal.
C.
Finally, we address Relators’ argument that the district
court erred in failing to grant a new trial or to order an
evidentiary hearing on the Rule 59 motion involving Relators’
contention that Esposito, the former Chief Operating Officer of
USTC, committed perjury. A new trial is warranted based on a
witness’ perjury when: (1) the trial court is “reasonably well
satisfied” that a material witness gave false testimony; (2) in
the absence of the false testimony, the jury may have reached a
appeal, however, Relators cite United States v. Bollin, 264 F.3d
391 (4th Cir. 2001), in support of their argument. We stated in
Bollin, in the course of holding that the evidence supported the
defendant’s conviction, that “[t]he Government’s expert
testified that there were numerous indicators of fraud” in the
documents he reviewed. Id. at 407. Our decision in Bollin did
not, however, involve a challenge to the admissibility of
testimony concerning “fraud indicators.” Accordingly, Relators’
reliance on Bollin for the proposition that “[t]his Circuit
routinely allows qualified experts to testify about fraud
indicators” is misleading and unavailing.
28
different conclusion; and (3) the party requesting the new trial
was “taken by surprise” when the false testimony was given, and
was unable to address it or was not aware of its falsity until
after the trial. United States v. Wallace, 528 F.2d 863, 866
(4th Cir. 1976); see also Davis v. Jellico Cmty. Hosp., Inc.,
912 F.2d 129, 134 (6th Cir. 1990) (applying this test in civil
context). In reviewing the district court’s denial of Relators’
motion, we observe that “[t]he decision to grant or deny a new
trial is within the sound discretion of the district court, and
we respect that determination absent an abuse of discretion.”
Cine v. Wal-Mart Stores, Inc.,
144 F.3d 294, 301 (4th Cir. 1998)
(citing Atlas Food Sys. & Servs., Inc. v. Crane Nat’l Vendors,
Inc.,
99 F.3d 587, 594 (4th Cir. 1996)).
As noted previously, Esposito testified at trial that she
provided to government auditors a copy of an independent audit
report (the report) that was critical of USTC’s accounting
procedures and controls. 24 Esposito was asked, “[D]id you
provide a copy of [the report] to the [government’s] audit
team?” Esposito replied, “Yes, I did.” Relators’ counsel asked
Esposito, “[W]ho did you provide it to?” Esposito answered,
24
The report, prepared by the accounting firm BDO Seidman,
concluded that USTC managerial practices in Iraq “resulted in a
fair amount of unnecessary or inappropriate expenditures, as
well as waste,” and “created an environment lacking sufficient
accountability and asset security.”
29
“[Robert] Farrell or one of his three reps, but I am pretty sure
it was Mr. Farrell.” 25
Robert Farrell, a Certified Fraud Examiner hired by Cotton
& Company, the government’s auditing firm in this matter,
executed a sworn declaration after the trial that was appended
to Relators’ Rule 59 motion. In his declaration, responding to
Esposito’s claim at trial that she provided him or his employees
a copy of the report, Farrell stated, “Ms. Esposito’s testimony
is incorrect. Ms. Esposito never gave me or any of the other
Cotton & Company representatives a copy of [the report].”
Relators argued in the district court that Farrell’s
declaration established that Esposito committed perjury.
Relators further asserted that they were entitled to a new trial
because if the jury had been made aware of the purported false
testimony, USTC’s defenses of “government knowledge” and “lack
of intent to defraud” would have been undermined.
The district court denied Relators’ Rule 59 motion without
a hearing. Among other reasons, the court concluded that
Relators failed to satisfy their evidentiary burden because the
evidence offered by Relators, namely Farrell’s declaration, did
25
Esposito further testified that there was no document
that memorialized her transmission of the report because she
“hand delivered it to [the government’s audit team].” Esposito
also stated during her testimony that she could not remember the
exact date on which she provided the report.
30
not establish that Esposito’s testimony was false. 26 See
Wallace, 528 F.2d at 866 (movant seeking new trial must
establish to the district court’s satisfaction that “the
testimony given by a material witness is false”) (citation
omitted). According to the district court, “[a]t most, the
record discloses that the witness alleged to have committed
perjury has a different recollection from the witness now
adduced by [Relators], and there simply is no way to determine
which witness has a better memory or remembers the events in
question more accurately.”
We agree with the district court’s conclusion that
Farrell’s declaration does not establish that Esposito’s
testimony was false, but rather, at most, suggests that her
recollection of the events was different than Farrell’s. A mere
discrepancy in the testimony of two witnesses does not establish
perjury. See United States v. Anderson, 509 F.2d 312, 327 (D.C.
Cir. 1974) (holding that the fact that two witnesses gave
26
The district court provided two additional bases for its
denial of the Rule 59 motion. First, the court held that
Relators’ post-trial assertion of perjury by Esposito was
untimely, because Relators had sufficient time to present
Farrell as a witness to the jury. Second, the court held that
even if Esposito’s testimony was false, the jury would not have
reached a different verdict because the contested testimony was
“incidental, rather than central,” to the issues before the
jury. In light of our analysis of the court’s primary basis for
denying Relators’ motion, we need not address these additional
reasons for concluding that a new trial was not warranted.
31
different testimony “is obviously insufficient to establish that
either is a perjurer”). Because this discrepancy is the basis
for Relators’ accusation that Esposito committed perjury, we
hold that the district court did not abuse its discretion in
denying Relators’ Rule 59 motion for a new trial.
Likewise, we find no merit in Relators’ argument that they
were entitled to an evidentiary hearing to develop further their
contention that Esposito perjured herself. As we noted in
United States v. Smith, 62 F.3d 641, 651 (4th Cir. 1995),
“[j]ust as the district court has broad discretion in resolving
a new trial motion, so too does it enjoy discretion whether to
hold an evidentiary hearing on the motion.” (Citation omitted).
This degree of deference is appropriate because “the acumen
gained by a trial judge over the course of the proceedings”
makes the court “well qualified” to rule on a motion for a new
trial without an evidentiary hearing. United States v.
Hamilton,
559 F.2d 1370, 1373–74 (5th Cir. 1977). Upon our
review of the record and the parties’ arguments, we have no
difficulty in concluding that the district court did not abuse
its discretion in resolving Relators’ motion on the pleadings
rather than ordering a post-trial evidentiary hearing.
32
III.
In sum, we hold that the district court correctly concluded
that USTC was entitled to summary judgment on claims arising
under the Katrina contract. We further hold that the district
court did not abuse its discretion in its evidentiary rulings or
in concluding that Relators were not entitled to a new trial on
claims arising under the Protective Services contract.
Accordingly, we affirm the district court’s judgments.
AFFIRMED
33
