# Pencheng Si v. Laogai Research Foundation Foundation

> District Court, District of Columbia · October 14, 2014 · 71 F. Supp. 3d 73

URL: https://www.frixlaw.com/law-library/cases/2742167

## Case

- **Full name:** PENCHENG SI, Plaintiff, v. LAOGAI RESEARCH FOUNDATION, Et Al., Defendants
- **Court:** District Court, District of Columbia
- **Decided:** October 14, 2014
- **Citations:** 71 F. Supp. 3d 73; 2014 U.S. Dist. LEXIS 146079; 2014 WL 5446487
- **Precedential status:** Published
- **Opinion:** Opinion by Jackson
- **Judges:** Judge Ketanji Brown Jackson
- **Nature of suit:** Civil
- **Cited by:** 76 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/2742167

## How later opinions describe it (automated extraction)

- holding that a fraudulent inducement theory “turns on the defendant’s eligibility for payment by the government—had the government known about the fraud in the inducement, it never would have entered the contract, and no payments would have been made”
- explaining in a FCA case that, under the intracorporate conspiracy doctrine, an entity “cannot conspire with its employees, and its employees, when acting within the scope of their employment, cannot conspire among themselves”
- holding that a claim lacked specificity under Rule 9(b) because it was “not at all clear” which of two possible scenarios formed the basis for the claim
- rejecting relator’s argument that defendants’ concealment of their fraudulent activity resulted in reverse false claim liability because “by this logic, just about any traditional false statement or presentment action would give rise to a reverse false claim action; after all,…

## Opinion text

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

)
PENCHENG SI, )
)
Plaintiff, )
)
v. ) Civil Action No. 09-cv-2388 (KBJ)
)
LAOGAI RESEARCH FOUNDATION, )
et al., )
)
Defendants. )
)

MEMORANDUM OPINION

Relator Pencheng Si (“Relator”) is a computer technician who once worked for

Defendants Laogai Research Foundation (“LRF”) and the China Information Center

(“CIC”) in the District of Columbia. Relator brings this action under the False Claims

Act (“FCA”), 31 U.S.C. §§ 3729-3733 (2012), seeking to challenge the business

practices of LRF and CIC (together, “Corporate Defendants”) and their executive

director, Harry Wu (collectively, “Defendants”) with respect to Defendants’ alleged

misuse of federal grant funding. 1 Relator’s central contention is that, during the five

years that he worked for Defendants, he observed them undertaking myriad acts that

Relator believes violate the FCA, including making gross overstatements regarding the

qualifications of Wu and other employees in grant applications, engaging in improper

lobbying activities, and using grant funding for personal expenses. (See Am. Compl.,

ECF No. 43, ¶¶ 126-180.) The complaint also maintains that Defendants terminated

1
The initial complaint was filed under seal as a qui tam action in December of 2009. (Compl., ECF
No. 2.) The government declined to intervene in March of 2012 (U.S.’s Notice of Election to Decline
Intervention, ECF No. 14), after which the Court unsealed the complaint for service. ( See Order, ECF
No. 15.)

1
Relator’s employment in retaliation for his having unearthed and reported the purported

misuse of grant funds. (Id. ¶¶ 181-186.)

Before this Court at present is Defendants’ second motion to dismiss Relator’s

complaint with respect to this matter. (Defs.’ Mot. to Dismiss Pl.’s Am. Compl.

(“Defs.’ Mot.”), ECF No. 49.) This Court previously agreed with Defendants that

Relator’s initial complaint was deficient under Federal Rule of Civil Procedure 9(b) and

permitted Relator to amend his complaint, see Si v. Laogai Research Found., No. 09-

2388, 2013 WL 4478953, at *1-2 (D.D.C. Aug. 21, 2013), which Relator has now done.

In the instant motion, Defendants argue that the amended complaint too must be

dismissed because Relator’s renewed allegations continue to fall short of the

requirements of Rule 9(b) and also fail to state a claim upon which relief can be granted

for the purpose of Rule 12(b)(6). (Defs.’ Mem. in Supp. of Defs.’ Mot. (“Defs.’

Mem.”), ECF No. 50, at 12-23.) 2

On September 30, 2014, this Court issued an order granting in part and denying

in part Defendants’ motion to dismiss, and stating that the Court would release a

subsequent memorandum opinion explaining the Court’s reasoning. (Order (“Sept. 30

Order”), ECF No. 59.) The instant document is that memorandum opinion. In short,

the lynchpin of the Court’s ruling in this case is the fact that, although Relator appears

to have gone back to the proverbial drawing board in crafting the amended complaint

(his amended complaint is nearly double the length of his original pleading and

provides more detail regarding Defendants’ business practices and internal finances),

the amended complaint nevertheless still lacks a sufficient factual basis for any

2
Page numbers throughout this Opinion refer to those that the Court’s electronic filing system assigns.

2
plausible fraud claim under the FCA, and fails even to identify clearly how the alleged

facts support each purported claim for relief. Therefore, Relator has not cured the

deficiencies in the original complaint with respect to the FCA counts (Counts I-IV), and

Defendants’ motion to dismiss must be GRANTED with respect to those counts. As for

Relator’s remaining contention—that the termination of his employment constituted

retaliation for engaging in protected activity in furtherance of the FCA (Count V)—the

amended complaint does contain sufficient allegations to raise a plausible inference that

Relator engaged in activity that the FCA protects and was fired fo r that reason.

Consequently, Defendants’ motion to dismiss is DENIED with respect to the retaliation

count.

I. BACKGROUND

A. The Parties

Defendants LRF and CIC are both non-profit corporations based in the District of

Columbia. (Am. Compl. ¶¶ 9-10.) LRF has the “the purported purpose to educate

Chinese people about the Laogai system” (id. ¶ 15), which, according to the New

Oxford American Dictionary, is “a system of labor camps, many of whose inmates are

political dissidents.” New Oxford Am. Dictionary 952 (2nd ed. 2005); see also id.

(noting that the word “laogai” means “reform through labor” in Chinese). CIC was

created and funded “to promote an independent media outlet for Chinese citizens in

China unaffected by Chinese government influences.” (Am. Compl. ¶ 17.) Both

corporations rely on federal grants from the State Department’s National Endowment

for Democracy (“DOS/NED”) program. (Id. ¶¶ 14-18.)

3
Relator worked for LRF and CIC from May of 2003 until he was fired in June of

2008. (Id. ¶ 7.) Defendants originally hired Relator as a computer technician, but

during his time as an employee of LRF and CIC, Relator acquired new titles—such as

Assistant Director of CIC—and new responsibilities. (Id.) At the same time that

Relator was advancing professionally, he also began learning more about the inner

workings of the organizations and became increasingly concerned about what he viewed

as unlawful conduct. (See id.) Such conduct ranged from alleged minor frauds (e.g.,

Defendant Wu exaggerating his life story) to alleged egregious illegalities (e.g.,

Defendant Wu embezzling Corporate Defendants’ money).

It appears undisputed that Defendant Wu was, for all intents and purposes, the

controlling force behind LRF and CIC when Relator worked for those organizations.

(Id. ¶ 12.) Before arriving in the United States from China in the 1980s, Wu spent

some period of time detained in a Chinese forced labor camp. ( See id. ¶¶ 30-42

(pointing to inconsistencies in Wu’s story but not disputing that he spent some time in a

Chinese prison)). Wu is now President and Executive Director of LRF and the

Publisher of CIC. (Id. ¶ 12.) According to Relator, Wu is also a font of ethical and

financial impropriety.

B. The Amended Complaint

This lawsuit stems primarily from a series of allegedly unlawful acts that Relator

purportedly witnessed in his capacity as an employee of LRF and CIC, as well as facts

relating to the manner in which Relator was fired. Relator’s sprawling amended

complaint contains more than one hundred paragraphs of allegations that, as a general

matter, appear to emphasize six different types of allegedly unlawful behavior on the

4
part of Defendants: (1) Defendant Wu made misrepresentations regarding his personal

story; (2) LRF and CIC engaged in illicit lobbying; (3) Defendants made improper

payments to third parties in violation of their grant obligations; (4) Defendant Wu

submitted fraudulent claims for reimbursement; (5) Defendants made

misrepresentations in grant applications; and (6) Defendants unlawfully terminated

Relator’s employment in retaliation for his having raised concerns about the

aforementioned conduct. (Id. ¶¶ 24-125.) The amended complaint provides myriad

examples of specific acts that relate to each of these categories of conduct, and

according to Relator, these facts raise plausible legal claims that relate to five different

provisions of the FCA. (See id. ¶¶ 126-186 (alleging violations of 31 U.S.C.

§ 3729(a)(1)(A) (Count I), 31 U.S.C. § 3729(a)(1)(B) (Count II), 31 U.S.C.

§ 3729(a)(1)(G) (Count III), 31 U.S.C. § 3729(a)(1)(C) (Count IV), and 31 U.S.C.

§ 3730(h) (Count V)).) The alleged facts and asserted causes of action are summarized

as follows.

1. Allegations Of Fact

a. Defendant Wu Misrepresented His Personal Story

The first type of misconduct Relator alleges in his amended complaint is that

Defendant Wu “aggrandize[d] and embellish[ed] his experiences and background in

China so as to create a persona of the persecuted, victimized intellectual who had to

flee China.” (Id. ¶ 26.) To bolster this claim, Relator points to a number of examples

of Wu providing inconsistent explanations regarding the reasons for his imprisonment

in a forced labor camp and the length of time he spent in that camp. ( Id. ¶¶ 30-37

(pointing to at least four different explanations Wu has given for his own imprisonment:

5
(1) he had criticized the Soviet invasion of Hungary, (2) he had skipped school, (3) he

had stolen money, and (4) he was wealthy and Catholic).) Relator also claims that Wu

has lied about the activities he engaged in after arriving in the United States from China

by falsely claiming to have been a visiting geology professor at the University of

California, for example, and by exaggerating his connection to the Hoover Institution of

Stanford University. (Id. ¶¶ 38-42.)

b. LRF And CIC Engaged In Illicit Lobbying

The amended complaint also catalogues in great detail dozens of examples of

circumstances in which Corporate Defendants allegedly engaged in lobbying in

contravention of an explicit certification that no grant funding would be spent on such

activities. (Id. ¶¶ 50-75.) 3 For example, Corporate Defendants allegedly lobbied a

number of congressmen with the intent that they would support an increase in the

budgets of LRF and CIC. (Id. ¶¶ 52-54, 56, 58, 63.) The amended complaint also

alleges that Defendants “hosted conferences and/or receptions [for] members of

Congress” (id. ¶ 66), wrote letters to and met with members of Congress, advocating for

certain bills and policy positions (id. ¶¶ 59, 61, 65, 67-70), and even contributed

financially to at least one election campaign (id. ¶ 64).

Notably, in addition to providing numerous examples of Corporate Defendants’

allegedly illegal lobbying efforts, the amended complaint also alleges that the

government specifically warned Defendants about their improper lobbying efforts on at

least two occasions. In 2004, government officials overseeing the DOS/NED grant

process purportedly warned Defendants not to lobby with federal funds. (Id. ¶ 71.)

3
Relator maintains that, in order to receive and retain their federal grant money, Corporate Defendants
had to certify that none of the money would be spent on lobbying. (Am. Compl. ¶ 44.)

6
Then in 2006, government officials went even further, sending an email “express[ing]

. . . disappointment with the fact that a significant portion of LRF’s work was

influencing the U.S. Government and inform[ing] Defendant Wu that LRF need[ed] to

shift its efforts to LRF’s ‘goal’ of ending gross human rights violations.” ( Id. ¶ 49.)

c. Defendants Made Improper Payments To Third Parties In Violation of
Their Grant Obligations

Relator also alleges that LRF and CIC—through Defendant Wu—made numerous

fraudulent payments to third parties using federal grant money. Much like the list of

alleged lobbying violations, Relator gives extensive examples of these supposedly

improper payments—e.g., payments to friends of Wu for work that was never

performed, payments to other non-profit corporations, payments to contractors

providing personal services to Wu rather than services to Corporate Defendants , and

payments to Wu himself for personal expenses. (Id. ¶¶ 76-82, 86.)

The amended complaint contains only two instances where Corporate Defendants

are alleged to have made statements to the government regarding payments to third

parties: at one point, Relator alleges that LRF and CIC “submit[ted] falsified

documentation” to the government regarding use of grant funding that was, in fact, used

for personal expenses (id. ¶ 86), and at another point, Relator alleges that Corporate

Defendants falsely reported that no government funds were being spent on an ongoing

lawsuit (id. ¶ 96). No details are provided about the form or nature of these

submissions to the government.

d. Defendant Wu Made Fraudulent Claims For Reimbursement And
Improperly Retained Fees

Relator’s allegations regarding Defendant Wu’s false or fraudulent receipt of

funds for his own personal use appear to come in two varieties. First, Relator alleges
7
that Defendant Wu “often travelled for personal reasons but had [the State Department]

pay for that travel.” (Id. ¶ 88.) According to the amended complaint, in order to

accomplish this, “Wu, with the assistance of his wife, created false timesheets, travel

authorizations, receipts for hotels and other expenses,” and that these false documents

formed the basis of the reimbursement. (Id.) Defendants had apparently certified at

some unspecified prior time that timesheets submitted for reimbursement would be

accurate. (Id. ¶ 89.)

Second, in addition to claiming fraudulent reimbursements for personal travel

expenses, Relator claims that Wu failed to turn over additional speaking and travel fees

to Corporate Defendants. (Id. ¶¶ 87, 94.) By keeping this money as well as the

reimbursement from the government, Wu allegedly obtained “double recovery.” (Id.)

Although Relator does not say so explicitly, the amended complaint suggests that such

double recovery is improper and that Wu had an obligation to disclose these speaking

and travel fees to the government. The amended complaint claims that Wu did not

disclose this double recovery to the government. (Id.)

e. Defendants Made False Representations In Grant Applications

The broad contention that Defendants made false representations in grant

applications is repeated at various times throughout the amended complaint. Relator

begins by alleging that LRF has been receiving grant funding from the State Department

since at least 1992, and that CIC has been receiving grant funding from that same

source since at least 2002. (Id. ¶¶ 15, 17.) Relator also states that CIC’s funding is

renewed annually. (Id. ¶ 17.) Regarding the alleged misrepresentations in those

applications, the amended complaint mostly contains very general contentions. (See,

8
e.g., id. ¶ 2 (“Corporate Defendants, with the assistance of Defendant Wu, knowingly

submitted, caused to be submitted and/or facilitated the submission of false and

fraudulent documents . . . in order to secure payments which were used by Defendants

for prohibited and unauthorized uses.”).)

The complaint provides two examples of allegedly false statements in

Defendants’ grant applications. First, according to Relator, the grant applications

falsely included the exaggerations about Defendant Wu’s life story described above.

(Id. ¶¶ 29, 41-42.) Second, the complaint alleges that Defendants’ grant applications

misrepresented who was on their board of directors. (Id. ¶ 109-11.) For example,

Defendants allegedly listed a Professor Yu Ying-shih as a “Director,” when in fact he

had merely agreed to advise the board. (Id. ¶ 109.)

f. Defendants Unlawfully Terminated Relator Because He Raised
Concerns About Their Unlawful Conduct

The final category of factual allegations in the amended complaint concerns

Relator’s contention that he was terminated in retaliation for engaging in protected

activity under the FCA. (See id. ¶¶ 181-186.) Relator recounts several conversations in

which he allegedly expressed concern about Defendants’ misuse of funds and “the

billing of the DOS/NED Program for monies that Corporate Defendants were not

entitled to receive[.]” (Id. ¶ 113.)

First, Relator alleges that he approached Wu in 2005 to “sp[eak] with him about

the absence of a proper system to account for Corporate Defendant[s’] financial a nd

cash management.” (Id.) According to the amended complaint, Wu responded by

telling Relator to “mind [his] own business,” and then offered to reimburse Relator for

the cost of his personal laptop using company funds. ( Id. (alteration in original).)

9
Relator alleges that he met with Wu again in February of 2006 to discuss Wu’s misuse

of funds for personal expenses (id. ¶ 115), and that he also discussed with Wu the

misuse of funds for a private lawsuit in April of 2007 (id. ¶ 116). Relator next alleges

that he had a conversation with Wu’s wife, Chinglee Chen (Corporate Defendants’

accountant) in January of 2008, in which Relator told Chen that she should come to the

office to work instead of staying home. (Id. ¶ 117.)

Relator also contends that, in March of 2008, he spoke with a member of the

board of both Corporate Defendants, Tienchi Martin, to discuss “possible actions,

internal and external, that could be taken to correct Defendant Wu’s improper,

unethical, and illegal conduct with respect to the inappropriate use of funds” for the

aforementioned private lawsuit. (Id. ¶ 118.) According to Relator, Martin shared the

concerns with other board members, and Wu found out about these conversations. (Id.

¶¶ 118-19.) Three months later, Wu terminated Relator’s employment, allegedly noting

that Relator “kn[ew] too much about what [Wu is] doing” and issuing threats and bribes

to prevent Relator from revealing the alleged fraud. (Id. ¶ 120.) According to Relator,

since his termination, Wu and other employees of the Corporate Defendants have

continued to retaliate against him through slander and intimidation. (See id. ¶¶ 121-

125.)

2. Legal Actions (Counts)

Without specifically linking any of the types of conduct or examples that Relator

details to any particular legal cause of action, Relator’s amended complaint maintains

generally that all of the actions of Defendants described above constitute one or more

violations of the FCA. Citing different provisions of that statute, Relator sets forth five

10
FCA-related counts. Count I is brought under 31 U.S.C. § 3729(a)(1)(A), and maintains

that “Defendant[s] knowingly presented or caused to be presented, false or fraudulent

claims to the United States Government for payment or approval [.]” (Id. ¶ 127.) Count

II is brought under 31 U.S.C. § 3729(a)(1)(B), and maintains that “Defendants

knowingly made, used, or caused to be made or used false records and statements, to

get the false or fraudulent claims paid or approved by the Government [.]” (Id. ¶ 140.)

Count III is brought under 31 U.S.C. § 3729(a)(1)(G), and maintains that “Defendants

knowingly made, used, or caused to be made or used, a false record or statement

material to an obligation to pay or transmit money or property to the Government

and/or knowingly concealed or knowingly and improperly avoided or decreased an

obligation to pay or transmit money or property to the Government[.]” (Id. ¶ 164.)

Count IV is brought under 31 U.S.C. § 3729(a)(1)(C), and maintains that “Defendants

conspired to defraud the Government[.]” (Id. ¶ 179.) Finally, Count V is brought under

31 U.S.C. § 3730(h), and maintains that “Defendant[s] terminated Relator because he

had objected to Defendants fraudulent conduct[.]” (Id. ¶ 184.)

Notably, although each of the counts specifically states that certain paragraphs of

the prior recitation of facts are “re-allege[d] and incorporat[ed] by reference” (id.

¶¶ 126, 139, 152, 166), the same comprehensive set of paragraph citations—all of the

facts previously alleged in the complaint—are listed for each of the complaint’s first

four counts. This means that none of the fraud counts in the amended complaint

specifies which particular set of facts Relator believes support the count. Moreover, the

first four counts themselves contain no meaningful differentiation, since the same ten

paragraphs of broad boilerplate text are recited as the substance of each count,

11
including such generalized statements as “LRF and CIC sought grants and funds from

[the] United States and in order to receive the grants and funds made representations

that were not true and made these misrepresentations intentionally” (id. ¶¶ 128, 141,

153, 167), and “[t]he Defendants not only were awarded grant funds when they should

not have been but they also caused most of the grant funds, if not all of the grant

funds[,] to be misused because they were used primarily for lobbying, which fell

outside the stated purpose of the grant” (id. ¶¶ 135, 148, 160, 174).

C. Procedural History

Relator first filed the instant lawsuit on December 17, 2009 . (See Compl., ECF

No. 2.) After the Government declined to intervene in March of 2012 ( see U.S.’s

Notice of Election to Decline Intervention, ECF No. 14), Relator served the initial

complaint on Defendants in January of 2013. (See Affs. of Service, ECF Nos. 23-26.)

In April of 2013, Defendants moved to dismiss that complaint. (See Defs.’ Mot. to

Dismiss, ECF No. 29.)

On August 21, 2013, this Court ruled on Defendants’ motion to dismiss, ordering

Relator to clarify the complaint. In particular, the Court faulted the recitation of counts

in the complaint for “realleg[ing] and incorporat[ing] by reference all sixty -three

paragraphs of factual background” without providing any “indication of the specific

facts pertaining to each claim.” Si, 2013 WL 4478953, at *1. The Court also found

that, because the complaint did not clearly establish which allegations pertain to which

count, “the Court [was] unable to determine whether Si states a claim for relief under

each count with sufficient specificity.” Id. (citation omitted). The Court also warned

12
Relator that the complaint, as written, failed to plead fraud with particularity as Federal

Rule of Civil Procedure 9(b) requires. See id.

In the wake of this Court’s ruling regarding the deficiency of the init ial

complaint, Relator filed an amended complaint in which he added 104 new paragraphs

containing a barrage of new facts, most of which give color to Defendants’ business

practices and finances, and describe conduct that does not appear to be related to

statements or submissions to the government. 4 Defendants now seek dismissal once

again, arguing that the amended complaint fares no better than its predecessor. ( See

Defs.’ Mot. at 1.) Defendants’ motion to dismiss has been fully briefed, and is now ripe

for the Court’s consideration. 5

II. LEGAL STANDARDS

A. Motions To Dismiss Under Rule 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) provides that a party may move to

dismiss a complaint on the grounds that it “fail[s] to state a claim upon which relief can

be granted.” Fed R. Civ. P. 12(b)(6). To survive a Rule 12(b)(6) motion, a complaint

must comply with Rule 8, which requires “a short and plain statement of the claim

showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a). This requirement is

meant to “give the defendant fair notice of what the . . . claim is and the grounds upon

4
The amended complaint also withdrew claims against Defendant Chinglee Chen, Wu’s wife, who
served as the accountant for Corporate Defendants. ( See Relator’s Mem. in Supp. of his Opp’n to
Defs.’ Mot. (“Relator’s Opp’n”), ECF No. 52, at 2 n.1 (“[I]n an attempt to streamline this litigation,
Relator has dropped the claims against Chinglee Chen.”).)
5
The animosity between Relator and Defendants comes through clearly in the various filings the parties
have submitted in support of, and in opposition to, th e motion to dismiss—Defendants accuse Relator
of slandering them “for his own political purposes and/or in an effort to extort some financial
settlement” (Defs.’ Mem., at 6), while Relator accuses Defendants of “smearing [Relator’s] reputation”
(Relator’s Opp’n at 3). It is not this Court’s role to deal with unsubstantiated accusations not contained
in the pleadings, however; consequently, this Court is only concerned with the viability of the
complaint’s allegations relating to Defendants’ breach of the F CA.

13
which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal

quotation marks and citation omitted).

“Although ‘detailed factual allegations’ are not necessary to withstand a Rule

12(b)(6) motion to dismiss for failure to state a claim, a plaintiff must furnish ‘more

than labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of

action.’” Busby v. Capital One, N.A., 932 F. Supp. 2d 114, 133 (D.D.C. 2013) (quoting

Twombly, 550 U.S. at 555). In other words, the plaintiff must provide “more than an

unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009). “[M]ere conclusory statements” of misconduct are not enough to

make out a cause of action against a defendant. Id. Rather, a complaint must contain

sufficient factual allegations that, if true, “state a claim to relief that is plausible on its

face.” Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff

pleads factual content that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

In deciding whether to grant a motion to dismiss under Rule 12(b)(6), “[t]he

court must view the complaint in [the] light most favorable to the plaintiff and must

accept as true all reasonable factual inferences drawn from well -pleaded factual

allegations.” Busby, 932 F. Supp. 2d at 134. Even so, “the court need not accept

inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in

the complaint.” Kowal v. MCI Commc’ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994).

Nor is the court “bound to accept as true a legal conclusion co uched as a factual

allegation.” Twombly, 550 U.S. at 555 (internal quotation marks and citation omitted).

14
B. Motions To Dismiss Under Rule 9(b)

Federal Rule of Civil Procedure 9(b) applies to FCA fraud actions. See United

States ex rel. Totten v. Bombardier Corp., 286 F.3d 542, 551-52 (D.C. Cir. 2002)

(noting that every circuit to consider the issue has held that Rule 9(b) applies to FCA

complaints). Rule 9(b) provides that “[i]n alleging fraud or mistake, a party must state

with particularity the circumstances constituting fraud or mistake” but “[m]alice, intent,

knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R.

Civ. P. 9(b). Motions to dismiss for failure to plead fraud with sufficient particularity

are evaluated in light of the overall purposes of Rule 9(b), which are: to “ensure that

defendants have adequate notice of the charges against them to prepare a defense,”

United States ex rel. McCready v. Columbia/HCA Healthcare Corp. , 251 F. Supp. 2d

114, 116 (D.D.C. 2003); to discourage “suits brought solely for their nuisance value ,”

United States ex rel. Joseph v. Cannon, 642 F.2d 1373, 1385 (D.C. Cir. 1981); and to

“‘protect reputations of . . . professionals from scurrilous and baseless allegations of

fraud.’” Id. at 1385 n.103 (alteration in original) (quoting Felton v. Walston & Co.,

Inc., 508 F.2d 577, 581 (2d Cir. 1974)).

Rule 9(b) does not abrogate Rule 8, and must be read in light of Rule 8’s

requirement that allegations be simple, concise, and direct, and that the complaint

contain short and plain statements of each claim. Joseph, 642 F.2d at 1386; see also

United States ex rel. Pogue v. Diabetes Treatment Ctrs. of Am., Inc. , 238 F. Supp. 2d

258, 269 (D.D.C. 2002) (“While . . . Rule 9(b) requires more particularity than Rule 8,

. . . Rule 9(b) does not completely vitiate the liberality of Rule 8.”). In an FCA fraud

action, Rule 9(b) requires, at a minimum, that the pleader “state the time, place and

15
content of the false misrepresentations, the fact misrepresented and what was retained

or given up as a consequence of the fraud” and “individuals allegedly involved in the

fraud.” United States ex rel. Williams v. Martin-Baker Aircraft Co., Ltd., 389 F.3d

1251, 1256 (D.C. Cir. 2004) (internal quotations marks and citation omitted). “In sum,

although Rule 9(b) does not require plaintiffs to allege every fact pertaining to every

instance of fraud when a scheme spans several years, defendants must be able to

‘defend against the charge and not just deny that they have done any thing wrong.’” Id.

at 1259 (quoting United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048,

1052 (9th Cir. 2001)); see also McCready, 251 F. Supp. 2d at 116 (noting that a court

“‘should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that

the defendant has been made aware of the particular circumstances for which she will

have to prepare a defense at trial, and (2) that plaintiff has substantial prediscovery

evidence of those facts’” (quoting Harrison v. Westinghouse Savannah River Co., 176

F.3d 776, 784 (4th Cir. 1999)).

C. Fraud And Retaliation Actions Brought Under The FCA

Generally speaking, the FCA “provides a cause of action for private parties,

known as ‘relators,’ to bring suits on behalf of the federal government for false or

fraudulent statements made to the government.” United States ex. rel. Tran v.

Computer Sciences Corp., No. 11-CV-0852 (KBJ), 2014 WL 2989948, at *7 (D.D.C.

July 3, 2014). At the time of the great majority of the conduct giving rise to the instant

litigation, the FCA used slightly different nomenclature and a different numbering

convention than exists in the statute today; it imposed liability on any person who

(1) knowingly presents, or causes to be presented, to an officer
or employee of the United States Government . . . a false or

16
fraudulent claim for payment or approval; [or] (2) knowingly
makes, uses, or causes to be made or used, a false record or
statement to get a false or fraudulent claim paid or approved by
the Government[.]

31 U.S.C. § 3729(a)(1)-(2) (2008). Then, as now, an actionable false “claim” for the

purpose of the FCA was defined broadly to include “any request or demand, whether

under a contract or otherwise, for money or property which is made to a contractor,

grantee, or other recipient if the United States Government provides any portion of the

money or property which is requested or demanded[.]” Id. § 3729(c). In addition, all

plaintiffs bringing private actions under the FCA were, and are, required to allege that

the allegedly false claim was material to the government’s decision to make the

payment at issue. See United States ex rel. Head v. Kane Co., 798 F. Supp. 2d 186, 194

(D.D.C. 2011). “A false statement is ‘material’ under the FCA if it has a natural

tendency to influence agency action or is capable of influencing agency action.” United

States ex rel. Purcell v. MWI Corp., 824 F. Supp. 2d 12, 28 (D.D.C. 2011); see also

United States ex rel. Ervin & Assocs., Inc. v. Hamilton Secs. Grp., Inc. , 370 F. Supp. 2d

18, 46 (D.D.C. 2005) (“For a violation to give rise to false claims liability . . .

compliance with the presented claim must have been so important to the contract that

the government would not have honored the submission for payment on the claim if it

were aware of the violation.”).

On May 20, 2009, Congress amended the FCA by enactin g the Fraud

Enforcement and Recovery Act of 2009 (“FERA”), Pub. L. No. 111 -21, 123 stat. 1617.

The current, post-FERA version of the FCA establishes liability for any person who

(A) knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval; [or] (B) knowingly

17
makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim.

31 U.S.C. § 3729(a)(1)(A)-(B) (2012). With the exception of FCA suits that have been

brought under 31 U.S.C. § 3729(a)(1)(B) and that were pending on June 7, 2008, t he

FERA amendments to the FCA are not retroactive, which means that the pre-FERA

version of the statute applies to conduct that occurs prior to May 20, 2009 —the date on

which the amendments were enacted.

1. Presentment and False Statement Actions

A lawsuit alleging that a defendant made a false claim for payment in violation

of section 3729(a)(1)(A) (or its predecessor section 3729(a)(1)) is commonly known as

a “presentment” action. See Joel M. Androphy, Federal False Claims Act & Qui Tam

Litigation § 4.03[1] (2014); see also Head, 798 F. Supp. 2d at 196. In such actions, the

relator maintains that the defendant made a material “presentment claim”—i.e., an

“explicitly false or fraudulent demand[] for payment[.]” Head, 798 F. Supp. 2d at 196.

A count brought under 31 U.S.C. § 3729(a)(1)(A) has three elements: “‘(1) the

defendant submitted a claim [for payment] to the government, (2) the claim was false,

and (3) the defendant knew the claim was false.’” United States ex rel. Folliard v.

CDW Tech. Servs., Inc., 722 F. Supp. 2d 20, 26 (D.D.C. 2010) (quoting United States ex

rel. Westrick v. Second Chance Body Armor, Inc., 685 F. Supp. 2d 129, 134 (D.D.C.

2010)).

A lawsuit brought under section 3729(a)(1)(B)—referred to herein as a “false

statement action”—is “complementary” to a count brought under section 3729(a)(1)(A),

because subsection (a)(1)(B) is “designed to prevent those who make false records or

statements [in order] to get claims paid or approved from escaping liability solely on

18
the ground that they did not themselves present a claim for payment or approval.”

United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488, 501 (D.C. Cir. 2004)

(emphasis in original). Reflecting this, the elements for a count brought under section

3729(a)(1)(B) are practically identical to the requirements for a count brought under

section 3729(a)(1)(A). See Folliard, 722 F. Supp. 2d at 36. The only notable

difference is that, as the language suggests, section 3729(a)(1)(B) requires evidence that

the defendant made a false statement to the government, as opposed to the submission

of a false claim for payment. Compare 31 U.S.C. § 3729(a)(1)(B) with id.

§ 3729(a)(1)(A).

A number of different legal theories can support a cause of action brought under

either or both of sections 3729(a)(1)(A) and 3729(a)(1)(B). While the “paradigmatic”

presentment action maintains that the defendant made “‘an incorrect description of

goods or services provided or a request for reimbursement for goods or services never

provided[,]’” United States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1266 (D.C.

Cir. 2010) (quoting Mikes v. Straus, 274 F.3d 687, 697 (2d Cir. 2001), this is just the

most common means of establishing a presentment count—not the only means—and is

therefore just one of a number of possible theories that can support liability under

section 3729(a)(1)(A). Indeed, in addition to the classic ‘presentation of a false claim’

or ‘making of a false statement’ scenario, some courts permit a relator to establish a

presentment or false statement count on the basis of (a) a fraudulent inducement theory,

see, e.g., United States ex rel. Bettis v. Odebrecht Contractors of Cal., Inc. , 393 F.3d

1321, 1326 (D.C. Cir. 2005), United States v. Toyobo Co., 811 F. Supp. 2d 37, 46

(D.D.C. 2011), (b) a false certification theory, see, e.g., United States ex rel. Hendow v.

19
Univ. of Phx., 461 F.3d 1166, 1171-73 (9th Cir. 2006); Foglia v. Renal Ventures Mgmt.,

LLC, 830 F. Supp. 2d 8, 17 n.9 (D.N.J. 2011), and/or (c) a worthless service theory, see,

e.g., United States ex rel. Spay v. CVS Caremark Corp. , 913 F. Supp. 2d 125, 158 (E.D.

Pa. 2012). The fraudulent inducement and false certification theories arise in the

context of this case, and thus warrant a brief description.

The fraudulent inducement theory prescribes liability “for each claim submitted

to the Government under a contract which was procured by fraud, even in the absence

of evidence that the claims were fraudulent in themselves.” Bettis, 393 F.3d at 1326;

see also S. Rep. No. 99-345, at 9 (1986) (“[E]ach and every claim submitted under a

contract, loan guarantee, or other agreement which was originally obtained by means of

false statements or other corrupt or fraudulent conduct, or in violation of any statute or

applicable regulation, constitutes a false claim.”). The theory turns on the defendant’s

“eligibility” for payment by the government—“had the government known about the

fraud in the inducement, it never would have entered the contract, and no payments

would have been made.” United States ex rel. Hockett v. Columbia/HCA Healthcare

Corp., 498 F. Supp. 2d 25, 69 n.33 (D.D.C. 2007).

The D.C. Circuit has also long recognized an “implied” false certification theory,

which provides that FCA liability may attach where the relator shows that the defendant

“withheld information about its noncompliance with material contractual requirements”

despite having earlier promised—i.e., certified—that it would comply with those

requirements. Sci. Applications Int’l Corp., 626 F.3d at 1269; see also Head, 798 F.

Supp. 2d at 196. A relator may establish implied false certification by pointing to

“express contractual language linking compliance to eligibi lity for payment[,]” or in

20
other ways, such as by alleging that “both parties to the contract understood that

payment was conditional on compliance with the requirement at issue.” Sci.

Applications Int’l Corp., 626 F.3d at 1269. Importantly, a relator “must prove by a

preponderance of the evidence that compliance with the legal requirement in question is

material to the government’s decision to pay.” Id. at 1271.

2. “Reverse” FCA Actions

Section 3729(a)(1)(G) of Title 31 of the U.S. Code provides a cause of action

where the defendant has made what is commonly known as a “reverse” false claim .

United States ex rel. Landis v. Tailwind Sports Corp., No. 10-cv-00976, 2014 WL

2772907, at *30 (D.D.C. June 19, 2014). A reverse false claim is any fraudulent

conduct that “‘results in no payment to the government when a payment is obligated.’”

Hoyte v. Am. Nat’l Red Cross, 518 F.3d 61, 63 n.1 (D.C. Cir. 2008) (quoting United

States ex rel. Bain v. Ga. Gulf Corp., 386 F.3d 648, 653 (5th Cir. 2004)). Section

3729(a)(1)(G) specifically imposes liability on any person who

knowingly makes, uses, or causes to be made or used, a false
record or statement material to an obligation to pay or
transmit money or property to the Government, or knowingly
conceals, or knowingly and improperly avoids or decreases
an obligation to pay or transmit money or property to the
Government[.]

31 U.S.C. § 3729(a)(1)(G). Whereas a traditional false claim action involves a false or

fraudulent statement made to the government to support a claim for money from the

government, a typical reverse false claim action involves a defendant knowingly

making a false statement in order to avoid having to pay the government when payment

is otherwise due. United States v. Caremark, Inc., 634 F.3d 808, 814-15 (5th Cir.

2011).

21
Notably, the existing “reverse false claim” statutory provision is broader than the

pre-FERA version, which had imposed liability on any person who “knowingly makes,

uses, or causes to be made or used, a false record or statement to conceal, avoid, or

decrease an obligation to pay or transmit money or property to the Government.” 31

U.S.C. § 3729(a)(7) (2006). The amended statute made two major revisions relevant to

reverse false claim actions. First, it expanded the type of conduct underlying a reverse

false claim action to include presentment (i.e., making a claim-related submission) as

well as a material false statement, thereby mirroring sections 3729(a)(1)(A) and

3729(a)(1)(B). See S. Rep. No. 111-10, at 14 (2009) (“[FERA] closes this loophole and

incorporates an analogous provision to 3729(a)(1) for ‘reverse’ false claims liability.”).

Second, it broadened the relevant payment “obligation” to address what Congress saw

as the overly narrow interpretation of the word “obligation” that some courts had

adopted. See S. Rep. No. 111-10, at 13-15 (discussing judicial disagreement over the

definition); see also id. at 15 (recognizing that the new definition extends liability to

situations where a party willfully prevents having to repay the government for sums

mistakenly received). Whereas the pre-FERA version of the FCA did not contain any

definition of obligation, thereby leaving that task to judicial interpretation, current

section 3729(b)(3) defines obligation as “an established duty, whether or not fixed,

arising from an express or implied contractual, grantor-grantee, or licensor-licensee

relationship, from a fee-based or similar relationship, from statute or regulation, or

from the retention of any overpayment[.]” 31 U.S.C. § 3729(b)(3).

As will be described below, the parties here vigorously dispute which definition

of “obligation” is applicable to the circumstances presented in this case.

22
3. Conspiracy

Also relevant here is 31 U.S.C. § 3729(a)(1)(C), which imposes liability for

“conspir[ing] to commit a violation of” the FCA. To state a cause of action for

conspiracy under this statutory provision, the relator must allege (1) that “an agreement

existed to have false or fraudulent claims allowed or paid” to the government, (2) that

each alleged member of the conspiracy “joined that agreement,” and (3) that “one or

more conspirators knowingly committed one or more overt acts in furtherance of the

object of the conspiracy.” United States ex rel. Miller v. Bill Harbert Int’l Constr.,

Inc., 608 F.3d 871, 899 (D.C. Cir. 2010) (citations omitted). General civil conspiracy

principles apply to FCA-based conspiracy actions. Head, 798 F. Supp. 2d at 201

(D.D.C. 2011). For example, following these general civil conspiracy principles, courts

have applied the intra-corporate (or intra-enterprise) conspiracy doctrine in conspiracy

actions brought under the FCA. Id. Under this doctrine, one entity “cannot conspire

with its employees, and its employees, when acting within the scope of their

employment, cannot conspire among themselves.” Id. (internal quotation marks and

citation omitted). Another important civil conspiracy principle is that no conspiracy

can exist without “some underlying tortious act.” Halberstam v. Welch, 705 F.2d 472,

477 (D.C. Cir. 1983). In the context of the FCA, this means that there can be no

liability for conspiracy where there is no underlying violation of the FCA. See United

States ex rel. Amin v. George Washington Univ., 26 F. Supp. 2d 162, 165 (D.D.C. 1998)

(dismissing a conspiracy action because, among other things, the alleged fraudu lent

actions of defendants were “entirely lawful” and did not violate the FCA).

23
4. Retaliation

Finally, the FCA also provides some measure of protection against retaliation for

relators who choose to take action “in furtherance of” the objectives of the FCA. See

31 U.S.C. § 3730(h). The statute that was in effect when Relator’s employment was

terminated specifically provided that

[a]ny employee who is discharged, demoted, suspended,
threatened, harassed, or in any other manner discriminated
against in the terms and conditions of employment by his or
her employer because of lawful acts done by the employee
on behalf of the employee or others in furtherance of an
action under this section, including investigation for,
initiation of, testimony for, or assistance in an action filed or
to be filed under this section, shall be entitled to all relief
necessary to make the employee whole.

31 U.S.C. § 3730(h) (2006). 6 The retaliation provision of the FCA “was designed to

protect persons who assist the discovery and prosecution of fraud and thus to improve

the federal government’s prospects of deterring and redressing crime.” United States ex

rel. Schweizer v. Océ N.V., 677 F.3d 1228, 1237 (D.C. Cir. 2012) (internal quotation

marks and citation omitted). To state a cause of action for retaliation, a relator “must

demonstrate that: (1) he engaged in protected activity, that is, ‘acts done . . . in

furtherance of an action under this section’; and (2) he was discriminated against

‘because of’ that activity.” United States ex rel. Yesudian v. Howard Univ., 153 F.3d

731, 736 (D.C. Cir. 1998) (quoting 31 U.S.C. § 3730(h)).

6
Defendants terminated Relator in June of 2008. (Am. Compl. ¶ 120.) Because that action occurred
prior to the FERA amendments in May of 2009, the pre-FERA statute applies. See Head, 798 F. Supp.
2d at 194 n.10. Although Relator also alleges that Defendants have continued to retaliat e against
Relator after his termination by, inter alia, threatening and harassing him and defaming his name on the
internet and in the Chinese community, the amended complaint makes clear that these actions occurred
after he left his job at Corporate Defendants. (See Am. Compl. ¶¶ 121-122.) Thus, this purportedly-
retaliatory conduct did not affect “the terms and conditions of employment,” which is the only conduct
that the FCA retaliation provision protects. 31 U.S.C. § 3730(h).

24
III. ANALYSIS

In the swirl of facts presented in Relator’s amended complaint, it is exceedingly

difficult to determine which of the specific factual allegations regarding the

Defendants’ conduct are intended to support each count. Indeed, with the exception of

the allegations of fact that relate to Relator’s firing, Relator has not clear ly specified

which alleged facts relate to each count, and to the extent that some of the FCA fraud

actions can be proved by multiple theories, Relator has also failed to indicate which

legal theory underpins each count. For this reason alone, a conclusion that Relator’s

fraud-related FCA counts should be dismissed for failure to state a claim under Rule

12(b)(6)—or at the very least for failure to satisfy Rule 8(a)(2)’s command of a “short

and plain statement of the claim showing that the pleader is entitled to relief” —is

warranted. See Rice v. Dist. of Columbia, 774 F. Supp. 2d 25, 33 (D.D.C. 2011) (“An

individual count must contain a plausible recitation of enough facts to support it.” ).

But even if the nearly impenetrable nature of the complaint is overlooked, it is clear

that Relator’s fraud actions fall short of the applicable pleading standards. As

explained below, this Court has examined the alleged facts and claims from every angle

and has evaluated Defendants’ dismissal arguments based on what Realtor may have

intended with respect to how the facts relate to the causes of action he brings. And

even when the amended complaint is so liberally construed, this Court still can only

discern sufficient allegations to support Relator’s retaliation count. In other words,

because Relator has manifestly failed to craft a pleading that states any fraud action in a

manner that satisfies the standards of Rules 12(b)(6) and 9(b), Counts I–IV of the

amended complaint must be dismissed.

25
A. Relator’s Presentment And Material False Statement Actions (Counts
I-II) Do Not Satisfy The Requirements Of Rules 12(b)(6) Or 9(b)

The first two counts of the amended complaint are for presentment of false or

fraudulent claims for payment under 31 U.S.C. § 3729(a)(1)(A) (Count I), and knowing

use of false records and statements to get false claims paid or approved under 31 U.S.C.

§ 3729(a)(1)(B) (Count II). 7

1. Relator’s Presentment Theory

As stated above, a cause of action under 31 U.S.C. § 3729(a)(1)(A) has three

elements: “(1) the defendant submitted a claim to the government, (2) the claim was

false, and (3) the defendant knew the claim was false.” Folliard, 722 F. Supp. 2d at 26.

Of all the facts alleged in Relator’s amended complaint, the only examples that appear

to qualify as potentially meeting the elements of a presentment action are those

allegations that are related to Defendant Wu being improperly reimbursed for travel

expenses. Relator alleges that Wu fraudulently submitted falsified travel expenses to

the government and was reimbursed for those expenses. (Am. Compl. ¶¶ 87-93.) If

Relator did, in fact, intend for the allegations regarding reimbursement to form the basis

of his presentment action, these facts satisfy the requirements of Rule 12(b)(6) because

Relator sufficiently alleges that Wu deliberately requested money for work-related

expenses even though these expenses were not work -related. (See id.)

However, even though Relator may have stated a presentment theory with respect

to the reimbursement allegations for the purpose of Rule 12(b)(6), that theory

7
Relator’s claims under Counts I and II do not implicate the changes c ontained in the FERA
amendments because, with respect to presentment actions, the thrust of the amendments was to make it
easier to bring an FCA action when the misrepresentation was presented to a contractor or grantee as
opposed to an employee of the government, see S. Rep. No. 111-10, at 11-12, and none of Relator’s
allegations involve false claims made to gover nment contractors or grantees.

26
nevertheless fails to satisfy the heightened pleading standards of Rule 9(b). Rule 9(b)

requires that “a party must state with particularity the circumstances constituting fraud

or mistake[,]” Fed. R. Civ. P. 9(b), but Relator fails to provide basic information about

any submission of a claim for payment or Wu’s receipt of a reimbursement. One

indicia of the lack of clear information about the alleged reimbursements is the fact that

Relator mixes allegations that Wu was improperly paid with grant funds with

allegations that Wu was improperly reimbursed by the government. (See id. ¶ 87

(alleging that Wu received improper payments from the government and then clarifying

that these payments came from Corporate Defendants rather than directly from the

government).) In this regard, Relator maintains that the government “reimbursed

Defendant Wu and his wife based on” “false timesheets, travel authorization, receipts

for hotels and other expenses” (id. ¶ 88), but it is not at all clear whether Relator is

alleging that Wu was directly reimbursed by the government or whether he just

improperly received additional money from Corporate Defendants’ grant funding—a

specificity that matters because one of the main elements of a presentment action is the

submission of a claim to the government. Folliard, 722 F. Supp. 2d at 26. A similar

haze surrounds Relator’s claim that Wu was improperly reimbursed for personal

expenses. Relator alleges that Wu “was paid by the DOS/NED program” (id. ¶ 92), but

fails utterly to explain how the payments were made and whether Wu got paid after

submitting a false claim to the government. In short, because the amended complaint

lacks specificity regarding how the claims for reimbursement were submitted and how

Wu was reimbursed based on these claims, it plainly fails to satisfy Rule 9(b)’s

heightened pleading standard. See Martin v. Arc of D.C., 541 F. Supp. 2d 77, 83

27
(D.D.C. 2008) (“[T]he complaint . . . fails to provide any of the purported details such

as the time, place, and contents of the alleged false representation.”).

Relator argues, with some support, for a relaxed application of Rule 9(b) when

the fraud at issue is relatively complex. See Head, 798 F. Supp. 2d at 203 (“For

fraudulent schemes that are particularly complex or extensive, Rule 9(b)’s pleading

requirements may be further relaxed.”); accord United States ex rel. Bender v. N. Am.

Telecomm., Inc., 686 F. Supp. 2d 46, 52 (D.D.C. 2010); United States ex rel. Harris v.

Bernad, 275 F. Supp. 2d 1, 7-8 (D.D.C. 2003). To the extent that there is complexity to

this case, however, it appears to be complexity of Relator’s own making. As this Court

has emphasized, the examples of Defendants’ behavior that in any way relate to claims

made to the government for payment are actually quite few in number —the deluge of

irrelevant examples of supposed misconduct on the part of Defendants cannot be

permitted to obscure Relator’s failure to plead adequately those allegations that are

within the scope of the FCA.

Relator also points to misconduct other than reimbursement of falsified travel

expenses as potentially giving rise to a presentment action (see Relator’s Mem. in Supp.

of his Opp’n to Defs.’ Mot. (“Relator’s Opp’n”), ECF No. 52, at 20-22), but none of

those instances satisfy the three elements noted above. For example, Relator notes that

Defendants did not fully abide by the terms of their grant funding (id. at 21). This may

be so; however, failure to abide by the terms of a grant does not, in itself, involve

submitting a claim to the government. Relator also argues that the amended complaint

provides details about other circumstances in which employees improperly billed the

government (id.), and he cites two paragraphs that illustrate this improper billing (see

28
Am. Compl. ¶¶ 80, 107). The first paragraph establishes no such thing—it states only

that the employees were paid with grant funds, not that they were d irectly paid by the

government—and the second merely says that incorrect information “was reported” to

the government without any allegation that this report was in any way connected to a

claim for payment. Only Relator’s reimbursement allegation satisfies Rule 12(b)(6) and

even that claim fails to satisfy Rule 9(b).

2. Relator’s Fraudulent Inducement Theory

As explained above, a cause of action can be stated under FCA section

3729(a)(1)(B) when, among other things, a defendant has made a false statement that

fraudulently induced payment or approval by the government. In his opposition brief,

Relator maintains that the alleged factual basis for finding that the FCA was violated

under a “false inducement” theory is the supposed exaggeration of Defendant Wu’s li fe

story and misrepresentations about other “key personnel,” (Relator’s Opp’n at 25-26),

including, presumably, misrepresentations about the directors of Corporate Defendants.

(See Am. Compl. ¶¶ 109-111.) The amended complaint does list several examples of

reportedly false statements or inconsistencies that Wu made in publications, brochures ,

and other media (see, e.g., id. ¶¶ 30-37), and also in a 2007 affidavit to the Department

of Justice’s Executive Office of Immigration review (id. ¶ 38). But, as alleged, these

examples generally bear no relationship to a false statement made to the government in

connection with a requested claim for payment. See United States ex rel. Westrick v.

Second Chance Body Armor, Inc., 685 F. Supp. 2d 129, 136 (D.D.C. 2010) (“[F]raud is

pled if a plaintiff alleges fraud in the inducement for payment.”).

29
Only one example in the complaint satisfies the foundational requirement that

the defendant has made a false statement to the government in connection with a

request for money: the allegation that the exaggerations regarding Wu’s background

were included in Defendants’ grant applications. (See Am. Compl. ¶¶ 29, 41-42.) With

respect to that one potential instance of fraud, however, Relator fails to allege

materiality, even while devoting many paragraphs to describing the manner in which

Wu overstated or misstated his qualifications as a labor camp veteran. That is to say,

although Relator has detailed several statements allegedly made in grant applications

that he maintains are gross mischaracterizations of Wu’s history, Relator has ignored

his obligation to allege facts from which this Court could infer that the State

Department would not have awarded Corporate Defendants funding had they known that

Wu had spent fewer years imprisoned in a Chinese prison labor camp than he reported.

(See id. ¶¶ 28-43.) And the same deficiency applies to Relator’s allegation that

Corporate Defendants falsely listed certain individuals as serving on their board of

directors in their grant applications. (Id. ¶¶ 109, 111) Rule 12(b0(6) is not satisfied

because Relator fails to offer any factual basis, plausible or otherwise, for thinking that

such a misrepresentation was material to the government’s funding decision.

It is also clear that, even if one was to set aside or excuse Relator’s failure to

allege materiality, the amended complaint lacks the specificity Rule 9(b) requires. In

the fraudulent inducement context, a relator must “set out in detail the time, place, and

content of the false representations and identif[y] individuals allegedly involved in the

fraud[.]” Toyobo Co., 811 F. Supp. 2d at 47. But, here, the amended complaint states

only that, “[f]rom as early as 2001,” Defendants “submitted grant applications,

30
proposals, and reports which included this inaccurate background and also inflated Mr.

Wu’s qualifications.” (Am. Compl. ¶ 29.) There are no other details narrowing down

the type of submission, the payment sought, or the timing. Relator has therefore failed

to state with particularity the circumstances surrounding the alleged fraudulent

inducement.

3. Relator’s False Certification Theory

Liability for an FCA violation arises under a false certification theory where (1)

a party certifies that he or she will comply with a particular contractual condition, (2)

that party then fails to comply with that condition, (3) the party misrepresents this

noncompliance, and (4) compliance with the condition is “material to the government's

decision to pay.” Sci. Applications Int’l Corp., 626 F.3d at 1269-71. Relator’s false

certification theory centers on Defendants’ lobbying activities and the fact that

Defendants supposedly certified that grant funds would not be spent on those activities.

(Am. Compl. ¶¶ 22, 44-45.) Allegedly, Defendants not only failed to comply with this

condition, they misrepresented their noncompliance to the government. (Id.) However,

this Court concludes that Relator’s false certification theory satisfies neither Rule 9(b)

nor Rule 12(b)(6) because the amended complaint does not specify the contents of the

certification or the circumstances in which the certification was made, and it fails to

allege adequately that a violation of the certification was material to the government’s

grant funding award.

It is well established that Rule 9(b) requires a relator to plead “the who, what,

when, where, and how with respect to the circumstances of” a fraudulent certification.

Tran, 2014 WL 2989948, at *11. Here, with respect to the fact of certification, Relator

31
merely offers the vague allegation that “the Grant recipients had to certify that n o NED

funds would be used for lobbying or had been used for lobbying[,]” which purportedly

“included certifying the funds could not be used to influence or attempting [sic] to

influence any federal employee or members of Congress or their staff.” ( Id. ¶ 44.)

Relator does not provide any details as to the specific contents of the certification, the

timing of the certification, how many times this certification was made over the course

of his employment or, indeed, who made the certification on Defendants’ behalf. In

other words, although Relator provides numerous examples of allegedly barred

lobbying activity (see id. ¶¶ 52-70); points to a statute that sets forth limitations on use

of grant funding (see id. ¶ 44 (citing 31 U.S.C. § 1352)); and vaguely references—

without any explanation—“Grant Provision 15(f)” (id. ¶ 64), the details of any

certification, whether prohibiting lobbying or requiring compliance with the statutory

conditions of grant funding, are entirely absent. Even apart from the materiality

element, then, Relator’s claim is deficient.

But materiality cannot be set aside as far as FCA fraud claims are concerned.

See Sci. Applications Int’l Corp., 626 F.3d at 1271 (holding that materiality is a central

element in proving false certification, and that its presence must be “rigorously”

enforced). Thus, even if Relator’s conclusory allegations regarding the certification

were sufficient to survive a Rule 9(b) motion, the amended complaint would still fail to

satisfy Rule 12(b)(6). Relator’s amended complaint contains no allegation regarding

the actual materiality of any certification; rather, states only that, if any lobbying

occurred, “the grantee” was required to complete a disclosure form, and apparently in

that context, the grantee had to “note[] that the lobbying certification was ‘a material

32
representation of fact upon which reliance was placed when this transaction was made

or entered into[.]’” (Am. Compl. ¶¶ 22, 44.) Even ignoring the fact that the Court is

left to speculate about the source of this purported quotation, 8 Relator’s attempts to

assert materiality are entirely conclusory—unmoored from any factual allegations—and

thus miss the mark of a satisfactory statement of a false certification count for the

purpose of Rule 12(b)(6). See ASA Accugrade, Inc. v. Am. Numismatic Ass’n, 370 F.

Supp. 2d 213, 215 (D.D.C. 2005) (“To survive a motion to dismiss, the plaintiff must

make factual allegations that are neither vague nor conclusory and that cover all the

elements that comprise the theory for relief.” (internal quotation marks and citation

omitted)).

In sum, this Court concludes that neither the presentment count (Count I) nor the

false statement count (Count II) can survive Defendants ’ motion to dismiss for failure

to comply with the requirements of Rule 9(b) and/or 12(b)(6).

B. Relator’s Reverse FCA Action (Count III) Is Inadequately Pled Even
Under The Post-FERA Legal Standard

In the third count of the amended complaint, Relator asserts that Defendants’

conduct violates the provision of the FCA that prescribes the making of reverse false

claims. As noted, section 3729(a)(1)(G) currently prohibits the making of false claims

or statements for the purpose of avoiding an “obligation” to pay the government, and

Congress intended the relevant triggering “obligation” to be defined broadly in the post-

8
The quote could have come from an exhibit to Relator’s original complaint titled “Grant Provision
18.” (See Grant Provision 18, Exh. 3 to Compl., ECF No. 2-4; compare Compl. ¶ 25 with Am. Compl.
¶ 44.) Alternatively, the language may come from Standard Form LLL: Disclosure of Lobbying
Activities, which is referenced in the amended complaint. ( See Am. Compl. ¶ 44.) This form contains
a disclaimer noting that “disclosure of lobbying activities is a material representation of fact upon
which reliance was placed by the tier above when this transaction was made or entered into.” Standard
Form LLL: Disclosure of Lobbying Activities, available at http://www.whitehouse.gov/sites/default/file
s/omb/grants/sflllin.pdf. However, by Relator’s own account, Defendants never filed this form. (Am.
Compl. ¶¶ 22, 44.)

33
FERA version of the statute, in contrast to the narrow interpretation of that term some

courts adopted before the FERA amendments. With respect to the reverse false

statement count in this case, the parties vigorously dispute which definition of

“obligation” should apply in this context.

Defendants maintain that the alleged conduct underlying Relator’s reverse false

claim action occurred prior to the passage of the FERA amendments and the current,

broad definition of “obligation” is therefore inapplicable. (Defs.’ Mem. at 24-25.)

Further, Defendants take the position that, prior to FERA, an “obligation” only meant

“an existing, concrete obligation to pay, whether through contract, regulation, or

judgment.” (Id. at 25.) Defendants argue that Relator would be unable to prevail under

this definition, because he has not pointed to any specific contractual or statutory duty

to pay that existed at the time of the purported misrepresentations. ( Id. at 25-26.) For

his part, Relator’s consistent citation to section 3729(a)(1)(G) (the new provision)—as

opposed to section 3729(a)(7) (the old provision)—suggests that he believes the broader

post-FERA provisions apply. (See, e.g., Am. Compl. ¶¶ 127, 138). Relator’s opposition

brief suggests that Defendants had a duty to repay certain funds that were spent

improperly, such as the funds spent on lobbying (Relator’s Opp’n at 27), and that such

an “obligation” could trigger a reverse FCA action under the existing post-FERA

definition of that term. See 29 U.S.C. § 3729(b)(3) (defining “obligation” such that it

includes “the retention of any overpayment”); see also United States ex rel. Matheny v.

Medco Health Solutions, Inc., 671 F.3d 1217, 1223 (11th Cir. 2012) (holding that “[a]n

express contractual obligation to remit excess government property is a definite and

clear obligation for FCA purposes”).

34
Notably, the parties’ dispute over the appropriate scope of the relevant

“obligation” was apparently so intriguing that the U.S. government waded into this

matter to present its position on the issue, even though it had declined to intervene with

respect to the prosecution of this FCA case. (See U.S.’s Stmt. of Interest Concerning

Defs.’ Renewed Mot. to Dismiss Qui Tam Compl., ECF No. 56, at 3 -13.) The

government’s “statement of interest” speaks only to the law, and it argues that the pre-

FERA “obligation” definition in section 3729(a)(7) reaches situations where there is

either merely a potential obligation or there is a general “duty to pay money or to

transmit property to the Government[,]” even if the particular amount owed is not fixed.

(Id. at 6.)

Although the government apparently could not resist the temptation to weigh in

on the parties’ “obligation” dispute, this Court finds that there is no reason for the

Court to do so under the present circumstances because Relator’s amended complaint

clearly fails to satisfy the requirements of Rules 9(b) and 12(b)(6) even if the complaint

and the applicable law are construed in the light most favorable to Relator. See Brooks

v. Grundmann, 748 F.3d 1273, 1278 (D.C. Cir. 2014) (“While [plainti ff] urges us to

pass upon the merits of her . . . claim, the inartful and inadequate state of [plaintiff’s]

pleadings prevents us from doing so.”). To be specific, Relator attempts to use the

language of a reverse FCA claim when he alleges that Defendants were “obligated to

not use and/or disgorge grant funds improperly paid to them [.]” (Am. Compl. ¶ 163.)

However, based on what little else the amended complaint says about the circumstances

surrounding the alleged grant funding, Relator has failed to plead with sufficient

specificity the particular monetary obligation that Defendants owed to the government

35
in a manner that would support a finding of any type of actionable obligation in this

case.

Indeed, only three paragraphs in the entire amended complaint reference

anything that could be construed as an obligation to the government. Two of those

paragraphs appear under the recitation of Count III and are simply conclusory

statements disconnected from the rest of the complaint. (See id. (“Defendants were

obligated to not use and/or disgorge grant funds improperly paid to them by virtue of

the fact that they were either prohibited or unallowable costs.”) ; id. ¶ 164. (“Defendants

knowingly made, used, or caused to be made or used, a false record or statement

material to an obligation to pay or transmit money or property to the Government [.]”).)

It is well established that “the Federal Rules do not require courts to credit a

complaint’s conclusory statements without reference to its factual context.” Iqbal, 556

U.S. at 686.

The third relevant paragraph states in part that Defendants’ misrepresentation of

their lobbying activities was “made with the intent to avoid any sort of repayment of

federal funds already spent” (Am. Compl. ¶ 71), which is apparently an attempt to

assert that Defendants’ improper use of government funds triggered some s ort of

repayment obligation, and that, by lying about this improper use, Defendants concealed

this obligation in violation of section 3729(a)(1)(G). (Relator’s Opp’n at 28-29.) But

that assertion is not supported by any specific allegations of fact —all the amended

complaint has to say about any duty to repay is contained in that one paragraph noted

above—and there is certainly nothing in Relator’s amended pleading that comes

anywhere close to establishing the source of any such obligation. See United States ex

36
rel. Tamanaha v. Furukawa Am., Inc., 445 F. App'x 992, 994 (9th Cir. 2011) (holding

that relator must “allege the specific sources of [the defendant’s] preexisting

obligation” in order to satisfy Rules 12(b)(6) and 9(b) ). In addition to failing to provide

any details about the source of the alleged obligation, Relator also fails to specify the

parameters of that obligation, such as what triggers the duty to repay and what sort of

repayment it requires. Because the amended complaint provides none of this

information, it is plainly insufficient under Rule 9(b). See United States ex rel. Dennis

v. Health Mgmt. Associates, Inc., No. 3:09-CV-00484, 2013 WL 146048, at *11 (M.D.

Tenn. Jan. 14, 2013) (holding that the relator fails to satisfy Rule 9(b) because he

“fail[ed] to provide any specific factual allegations about what fraudule nt record or

statement the defendants made that caused them to avoid or decrease an obligation to

pay the government . . . or its contents”); see also Matheny, 671 F.3d at 1223 (finding

that the relator’s complaint satisfied Rule 9(b) because it “contains detailed allegations

relating to the Defendants’ contractual obligation to identify, report, and remit excess

government money in accordance with the” government contract). 9

In his opposition to the present motion, Relator attempts to argue that an

obligation arose out of Defendants’ concealment of their allegedly fraudulent activity.

(Relator’s Opp’n at 27-29.) Under this telling, the concealment (which is alleged in the

complaint) prevented the government from uncovering fraud and requiring repayment of

9
Relator’s lack of specificity regarding the instant Defendants’ alleged duty to pay—i.e., the lack of a
clear answer to the question of what, exactly, was the obligation owed? —highlights the irrelevance of
this Court’s efforts to determine which definition of “obligation” applies in the context of this case.
Although the government’s brief insists that the Court should adopt the broadest definition of
“obligation” as the legal standard even when a complaint’s allegations relate to conduct that occurred
prior to FERA, breadth does not help Relator in this case, where the complaint has not specified any
clear payment duty on the part of Defendants. Put another way, in the absence of a specific allegation
regarding exactly what payment (or repayment) Defendants owed to the government, this Court has no
need to decide which universe of obligation s a complaint concerning pre-FERA conduct implicates.

37
the grant funds that the government had provided. (Id.) But by this logic, just about

any traditional false statement or presentment action would give rise to a reverse false

claim action; after all, presumably any false statement actionable under sections

3729(a)(1)(A) or 3729(a)(1)(B) could theoretically trigger an obligation to repay the

fraudulently obtained money. See United States ex rel. Taylor v. Gabelli, 345 F. Supp.

2d 313, 338 (S.D.N.Y. 2004) (“Close examination of these claims leads to the

inescapable conclusion that they are redundant—two ways of describing the same

transaction. Because [Relator’s] allegations state a claim under sections 3729(a)(1) and

(2), they cannot also form the basis for a claim under subsection (a)(7).”). And of

course, if the conduct that gives rise to a traditional presentment or false statement

action also satisfies the demands of section 3729(a)(1)(G), then there would be nothing

“reverse” about an action brought under that latter section of the FCA.

Finally, it is also apparent that Relator cannot now claim that there is a general

obligation to repay all instances of misuse of grant funds when the amended complaint

does not state as much. Nor can Relator satisfy Rule 12(b)(6) by pointing to examples

of other potential repayment obligations that simply do not appear anywhere in the

amended complaint. In his opposition brief, for example, Relator references a consent

decree (Relator’s Opp’n at 27); an “express repayment duty” (id.); and a

“reconciliation” of claims (id. at 28). 10 Even if this Court were to believe that a duty to

pay the government arose out of any of the sources Relator belatedly highlights, i t is

10
There is often a startling disconnect between what Relator argues his amended complaint says and
what the amended complaint actually says. In addition to the examples discussed here, Relator ’s briefs
also invoke the federal government’s right to disgorge profits (Relator’s Opp’n at 27 -29) and
Defendants’ “contractual obligation to pay any unused portions of grant money back[.]” (Relator’s
Resp. to U.S.’s Stmt. of Interest, ECF No. 58, at 5). Neither of these duties is present in the amended
complaint. Other examples abound and are typical of the way in which Relator consistently attempts to
bolster his arguments with allegations that should have been made in the amended complaint.

38
well established that, “[i]n deciding a motion brought under Rule 12(b)(6), a court does

not consider matters outside the pleadings[.]” Ward v. Dist. of Columbia Dep't of Youth

Rehab. Servs., 768 F. Supp. 2d 117, 119 (D.D.C. 2011). For these reasons, Relator

cannot prevail on his action under section 3729(a)(1)(G).

C. Relator’s Conspiracy Action (Count IV) Must Be Dismissed Under
Rule 12(b)(6)

In the fourth count of the amended complaint, Relator alleges that Wu and the

Corporate Defendants conspired to violate the FCA. (See Am. Compl. ¶¶ 166-180.)

This count can be disposed of in short order for one simple reason: there can be no

conspiracy to commit fraud in violation of the FCA if an underlying false claim has not

been adequately alleged. See Halberstam, 705 F.2d at 477 (noting that “civil

conspiracy depends on performance of some underlying tortious act” and is not

actionable apart from an underlying tort); Amin, 26 F. Supp. 2d at 165 (dismissing a

conspiracy action because, among other reasons, defendants were not liable for any

underlying violation of the FCA). As explained, Relator’s actions under sections

3729(a)(1)(A), 3729(a)(1)(B), and 3729(a)(1)(G) fail, either because the facts in the

amended complaint are insufficient to state a fraud claim as Rule 12(b)(6) requires or

because the amended complaint fails to provide sufficient specificity to satisfy Rule

9(b)’s heightened pleading requirement; consequently, Relator’s action under section

3729(a)(1)(C) also must fail.

This Court need not proceed to address any other problems with Relator’s

conspiracy allegation, but it is worth mentioning that there are additional patently

obvious flaws with this count. For example, while Relator appears to maintain that Wu,

LRF, and CIC conspired to present false claims and false statements to the government,

39
under the intra-corporate conspiracy doctrine, one entity “cannot conspire with its

employees, and its employees, when acting within the scope of their employment,

cannot conspire among themselves.” Head, 798 F. Supp. 2d at 201 (internal quotation

marks and citation omitted). Thus, Wu cannot be said to have conspired with either

LRF or CIC as a matter of law. See id. Furthermore, to the extent that two corporate

entities can conspire with each other, see Estate of Heiser v. Islamic Republic of Iran,

466 F. Supp. 2d 229, 267 (D.D.C. 2006), the complaint makes clear that Wu was the

driving force behind the alleged illegality, and it is devoid of any facts from which this

Court could infer that CIC and LRF each separately agreed to join any conspiracy to

defraud the government. What is more, the amended complaint also specifically alleges

that CIC was a “wholly-controlled affiliate” of LRF (Am. Compl. ¶ 10), and it is well

established that one corporation and a wholly-owned subsidiary cannot conspire with

each other. See Corsi v. Eagle Publ’g, Inc., No. 07-cv-2004, 2008 WL 239581, at *3

n.2 (D.D.C. Jan. 30, 2008) (citing Dickerson v. Alachua Cnty. Comm’n, 200 F.3d 761,

767 (11th Cir. 2000) & Travis v. Gary Cmty. Mental Health Ctr., Inc., 921 F.2d 108,

110 (7th Cir. 1990)); see also Rawlings v. Dist. of Columbia, 820 F. Supp. 2d 92, 103

(D.D.C. 2011) (noting that “there is no conspiracy if the conspiratorial conduct

challenged is essentially a single act by a single corporation” (emphasis added)

(internal quotation marks and citation omitted)). Accordingly, Count III fails as a

matter of law for a variety of reasons, and thus must be dismissed.

D. Relator’s Retaliation Action (Count V) Is Pled Adequately And
Survives The Instant Motion To Dismiss

The amended complaint’s final count alleges that Defendants’ termination of

Relator’s employment violated the FCA’s anti-retaliation provision. (Am. Compl. ¶¶

40
181-186.) As a threshold matter, unlike the FCA fraud allegations in Counts I through

IV, allegations regarding retaliation in violation of the FCA “are ‘unconstrained by the

fraud pleading standard’ and ‘need satisfy only Rule 8’s general pleading

requirements.’” Sharma v. Dist. of Columbia, 881 F. Supp. 2d 138, 142 n.3 (D.D.C.

2012) (quoting Martin-Baker, 389 F.3d at 1259). Moreover, an action brought under

the FCA’s retaliation provision can survive even where the underlying FCA fraud

counts have been dismissed. See, e.g., Martin-Baker, 389 F.3d at 1254 (affirming

dismissal of the relator’s underlying FCA presentment action under Rule 9(b) but

reversing the district court’s 12(b)(6) dismissal of the relator’s whistleblower retaliation

count). As explained below, such is the case here.

1. The Complaint Contains Sufficient Allegations Of “Protected
Activity”

According to the amended complaint, Relator “brought to Defendants’ attention

what he reasonably believed to be improper and fraudulent acts” (Relator’s Opp’n at

38); specifically, he repeatedly complained to Wu about improper billing practices and

misuse of funds, and eventually informed a board member about the purportedly

unlawful conduct, suggesting that the board take action to stop it (Am. Compl. ¶¶ 113-

18). The pre-FERA retaliation provision of the FCA specifically listed “lawful acts”

for which an employee was entitled to protection, and this list “include[d] investigation

for, initiation of, testimony for, or assistance in an action to be filed” under the FCA.

31 U.S.C. § 3730(h) (2008). Explaining the meaning of “investigation” under this

statute, the D.C. Circuit has noted that the statute is meant to “protect employees while

they are collecting information about a possible fraud, before they have put all the

pieces of the puzzle together”; therefore, “it is sufficient that a [relator] be investigating

41
matters that ‘reasonably could lead’ to a viable False Claims Act case [.]” Yesudian, 153

F.3d at 740 (citation omitted). In other words, a plaintiff need not “have developed a

winning qui tam action” to be retaliated against in violation of the FCA. Id. at 739

(citing S. Rep. No. 99-345, at 35).

Of course, not all of a relator’s investigative efforts can necessarily support an

actionable retaliation count: the investigation “must concern ‘false or fraudulent’

claims[,]” rather than mere “non-compliance with federal or state regulations.” Id. at

740 (citations omitted); cf. Hoyte, 518 F.3d at 68-70 (affirming dismissal of the

relator’s FCA retaliation action where the complaint only referenced the defendants’

“mere regulatory noncompliance”—i.e., failure to follow procedures set forth in a

consent decree); see also McKenzie v. BellSouth Telecomms., Inc., 219 F.3d 508, 517

(noting that the relator’s reports of wrongdoing must be directed towards an

investigation into fraud on the government in order to qualify as “protected activity”

under the FCA). Be that as it may, “several courts have said that internal reporting of

false claims is itself an example of a protected activity” that can give rise to an FCA

retaliation action. Yesudian, 153 F.3d at 741 n.9 (collecting cases); see also Hutchins v.

Wilentz, Goldman & Spitzer, 253 F.3d 176, 186-87 (3d Cir. 2001) (noting that internal

reporting may constitute a protected activity). Ultimately, the determination of “what

activities constitute ‘protected activity’ is a fact specific inquiry[,]” Hutchins, 253 F.3d

at 187, and as the D.C. Circuit has noted, “protected activity” was meant to be

interpreted broadly. Yesudian, 153 F.3d at 741.

For example, in United States ex rel. Yesudian v. Howard University, 153 F.3d at

745, the D.C. Circuit considered whether relator’s internal reports and investigation

42
were a sufficient basis to establish that relator had engaged in protected activity for the

purpose of his FCA retaliation action. In that case, the relator worked in the Purchasing

Department at Howard University, which received federal funding and had contracts

with the General Services Administration. Id. at 734-35. The relator contended that his

supervisor retaliated against him after he repeatedly reported to his supervisor’s

superiors that the supervisor had engaged in a number of financial improprieties related

to the University’s receipt of federal funding from the General Services Administration.

Id. At those superiors’ requests, the relator collected evidence from ot her employees to

substantiate his reports, id.; the supervisor terminated the relator’s employment shortly

after learning of the relator’s efforts, id. at 735. The D.C. Circuit affirmed the district

court’s entry of summary judgment in defendant’s favor on all of the underlying false

claims counts, but it found that the relator had alleged and established sufficient facts

for a reasonable jury to find a violation of the FCA’s retaliation provision because the

relator was “investigating matters that reasonably could lead to a viable [FCA] case.”

Id. at 740 (internal quotation marks omitted).

Here, too, the retaliation count survives even as the underlying FCA fraud counts

do not. Unencumbered by the specificity requirement in this context, the amended

complaint can easily be read to allege that Relator engaged in some level of

investigation to determine the scope and frequency of the suspected fraud, given the

allegation that Relator “sought to ascertain other facts to determine how far in sc ope

and how often these irregularities were occurring.” (Am. Compl. ¶ 24.) What is more,

the complaint alleges that Relator brought the information that he had learned during

the course of this investigation to Wu’s attention. Although some of Relator’s reported

43
conversations appear to reflect Wu’s own statements about Corporate Defendants’

internal reimbursement practices and therefore do not relate directly to defrauding the

government (see, e.g., id. ¶ 115 (noting that Wu told Relator that he could debit

Corporate Defendants’ accounts to compensate Relator for personal expenses) ; id. ¶ 117

(noting Chen’s practice of staying home from work while still getting paid)), Relator

does allege that he was investigating suspected fraudulent acts related to grant funding

and other activities, and the amended complaint contains facts that, if true, put Wu on

notice of the possibility that Relator’s investigations may reasonably have led to an

FCA action. In particular, Relator alleges that, in 2005, he met with Wu to discuss “the

billing of the DOS/NED Program for monies that Corporate Defendants were not

entitled to receive[.]” (Id. ¶ 113.) Relator also alleges that, in 2007, he warned that Wu

should “not use federal money to sponsor a lawsuit against Yahoo!” specifically

because “federal monies were only to be spent on DOS/NED program-related

expenses.” (Id. ¶ 116.) Relator further alleges that he raised certain improper spending

concerns with board member Martin and discussed “possible actions, internal and

external, that could be taken to correct” the conduct. ( Id. ¶ 118.) Drawing all

inferences in Relator’s favor and following the D.C. Circuit’s instruction that

“protected activity” should be interpreted broadly, see Yesudian, 153 F.3d at 740, these

allegations create a plausible inference that Relator was engaged in activities “that

reasonably could lead to a viable False Claims Act case.” Id. (internal quotation marks

omitted).

Defendants’ argument that Relator’s investigation into, and reports of, fraud do

not give rise to an actionable RCA retaliation action because they were part of his

44
ordinary job responsibilities (see Defs’ Mem. at 28 (contending that the complaint

“does not raise the inference that Si did anything but perform his job functions and

report to a supervisor”)) is unavailing. It is true that “plaintiffs alleging that

performance of their normal job responsibilities constitutes protected activity must

overcome the presumption that they are merely acting in accordance with their

employment obligations to put their employers on notice” of any protected activity.

Martin-Baker, 389 F.3d at 1261 (internal quotation marks and citation omitted); see

also Schweizer, 677 F.3d at 1239 (noting that the relator’s retaliation action could not

succeed because her “job was to ensure compliance with government contracts”). But

the amended complaint belies Defendants’ argument that this so-called “Martin-Baker

presumption” applies here. Relator has alleged that he worked for Corporate

Defendants as a “computer technician” and later became either “Assistant Director” or

“Computer/office manager.” (Am. Compl. ¶ 7.) The amended complaint specifically

notes that Relator was never “responsible for Defendants’ compliance” but merely had

access to “some billing and accounting information.” (Id.) Taking these allegations of

fact as true, Relator’s alleged investigation into Corporate Defendants’ billing

practices, and also his suggestion to Martin that they take possible external actions to

stop further wrongdoing, was outside the scope of Relator’s job responsibilities, and

thus satisfies the “protected activity” element of an FCA retaliation action.

2. The Complaint Contains Sufficient Facts From Which To Infer
The Requisite Causal Connection

The allegations in the amended complaint also state a plausible claim that Wu

was terminated because of his protected activity. The “causation” element of a

retaliation action requires a relator to show both that “(a) ‘the employer had knowledge

45
the employee was engaged in protected activity’; and (b) ‘the retaliation was motivated,

at least in part, by the employee’s engaging in [that] protected activity.’” Yesudian,

153 F.3d at 736 (alteration in original) (quoting S. Rep. No. 99-345, at 35); Sharma v.

Dist. of Columbia, 791 F. Supp. 2d 207, 218 (D.D.C. 2011) (same); see also Saunders v.

Dist. of Columbia, 958 F. Supp. 2d 222, 228 (D.D.C. 2013) (noting that the relator need

only show that protected FCA activity was a “‘contributing factor’” in the employment

action (quoting Payne v. Dist. of Columbia, 722 F.3d 345, 353 (D.C. Cir. 2013)). The

D.C. Circuit has called the standard for notice “flexible: ‘the kind of knowledge the

defendant must have mirrors the kind of activity in which the plaintiff must be

engaged[,]’” Martin-Baker, 389 F.3d at 1260 (quoting Yesudian, 153 F.3d at 742),

except that “‘the employer [has to be] aware that the employee is investigating fraud’”;

otherwise, “‘the employer could not possess the retaliatory intent necessary to establish

a violation of § 3730(h)[,]’” id. at 1260-61 (quoting Yesudian, 153 F.3d at 744).

Moreover, with respect to causation, courts have noted that the standard a relator must

meet to survive a motion to dismiss is “not onerous; the [relator] merely has to [show]

that the protected activity and the negative employment action are not completely

unrelated.” United States ex rel. George v. Boston Scientific Corp., 864 F. Supp. 2d

597, 609 (S.D. Tex. 2012) (internal quotation marks and citation omitted).

The amended complaint here alleges that Relator expressed his concerns about

Corporate Defendants’ billing practice as it related to the rec eipt of DOS/NED grant

funding directly to Wu, and also that Relator had suggested to a board member that they

take “possible actions” to stop the alleged fraud. (Id. ¶ 118.) These allegations are

46
plainly sufficient at this stage of the litigation to support a plausible contention that

Defendants were on notice of Relator’s protected activity.

Relator also has alleged sufficient facts to support an inference that his

engagement in protected activity was what motivated Defendants to terminate his

employment. In assessing the causal link between protected activity and a relator’s

termination, courts often consider the temporal proximity between the employer’s

notice of the conduct and the relator’s termination. See, e.g., Schweizer, 677 F.3d at

1240 (finding a causal connection where relator was fired two weeks after disclosing

his fraud suspicions to defendants); Martin-Baker, 389 F.3d at 1262 (holding that,

because “his suspension and termination occurred just after he disclosed” the allegedly

fraudulent conduct “to his superior, [the relator] has satisfactorily alleged” causation

(emphasis added)); Pitts v. Howard Univ., No. 13-1398, 2014 WL 69032, at *1, *4

(D.D.C. Jan. 9, 2014) (finding a sufficiently alleged causal connection where plaintiff

was demoted one year after raising concerns about his employer’s tax practices); see

also Strong v. Univ. Healthcare Syst., LLC, 482 F.3d 802, 808 (5th Cir. 2007) (noting

that, while temporal proximity alone may not be enough to prove causation, it can be

sufficient to establish a prima facie case). Applying this factor to the case at bar, the

amended complaint’s allegation that Wu terminated Relator within months of learning

that Relator had reported fraudulent billing practices to a board member (see Am.

Compl. ¶¶ 118-120) is sufficient to give rise to an inference of causation, see

Schweizer, 677 F.3d at 1240; Martin-Baker, 389 F.3d at 1262; Pitts, 2014 WL 69032, at

*3.

47
Defendants attempt to avoid this conclusion by focusing on the three-year gap

between when Relator first reported possible fraud (in 2005) and when he was

eventually terminated (in 2008). (See Defs.’ Mem. at 31 (“It is implausible that

Defendants waited, not three weeks, but three years to terminate Si in supposed

‘retaliation’ for reporting his concerns.”). But the allegations in the amended complaint

involve not an isolated misconduct report but repeated attempts on Relator’s part to

address the situation in a manner that reflects a pattern of escalating concern: after

Relator’s repeated discussions of fraud that were voiced directly to Wu fell on deaf

ears, Relator finally went above Wu’s head and raised his concerns about Defendants’

misuse of grant funds with a member of the board of directors. (Am. Compl. ¶ 118.)

And it was only three months after that event—which included Relator’s articulated

threat of possibly taking external action—that Defendants terminated Wu’s

employment. Given these facts, it is entirely plausible to infer that Defendants decided

to terminate Relator when Relator took his concerns to the board and threatened to act

on them.

3. Relator Can Maintain This Action Against Wu In His Individual
Capacity

Finally, despite Defendants’ protest, this Court finds that the complaint contains

enough allegations of fact regarding the relationship between Defendant Wu and the

Corporate Defendants that, at least for now, the retaliation count in the amended

complaint can be maintained not only against LRF and CIC but also against Defendant

Wu in his individual capacity. Unlike other provisions of the FCA, which impose

liability on “any person” who violates the statute, see, e.g., 31 U.S.C. § 3729(a)(1), (3)

(emphasis added), pre-FERA section 3730(h) only imposes liability on an “employer.”

48
Although “the word ‘employer’ does not normally apply to a supervisor in his

individual capacity[,]” Yesudian ex rel. United States v. Howard Univ., 270 F.3d 969,

972 (D.C. Cir. 2001) (emphasis added), there is an exception to this rule: as the

district court explained in United States ex rel. Siewick v. Jamieson Science and

Engineering, Inc., 191 F. Supp. 2d 17, 20-21 (D.D.C. 2002), an individual supervisor

can be held liable as an employer under section 3730(h) when the supervisor “can be

considered to be an alter ego of the company, and therefore an ‘employer’” based on the
11
familiar principle of piercing the corporate veil.

In this circuit, a two-pronged test is used to determine whether to pierce the

corporate veil: “(1) is there such a unity of interest and ownership that the separate

personalities of the corporation and the individual no longer exist?; and (2) if the acts

are treated as those of the corporation alone, will an inequitable result follow?”

Siewick, 191 F. Supp. 2d. at 21 (quoting Labadie Coal Co. v. Black, 672 F.2d 92, 96

(D.C. Cir. 1982)). With respect to this test, courts consider such factors as “domination

of the organization by a single individual” and failure to maintain corporate formalities,

including “diversion of the corporation’s funds or assets to non -corporate uses such as

personal use by the . . . dominant, controlling person.” United States v. Emor, 850 F.

Supp. 2d 176, 207 (D.D.C. 2012). And not all factors need to be present to justify

piercing; rather, the court’s analysis “depends more on the facts than on any sharply

defined underlying legal standard[.]” United States v. Pena, 731 F.2d 8, 13 (D.C. Cir.

1984).

11
Courts can pierce the corporate veil of non-profit corporations just the same as their for -profit
counterparts. See United States v. Emor, 850 F. Supp. 2d 176, 206 (D.D.C. 2012).

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Relator’s amended complaint alleges in no uncertain terms that Relator was an

employee of LRF and CIC, and that Wu was working “on behalf of Corporate

Defendants” when he terminated Relator. (Am. Compl. ¶ 183; see also ¶ 4.) 12 The

complaint also includes ample allegations of fact that raise a plausible inference that

Wu and the Corporate Defendants shared a common identity such that piercing the

corporate veil may be appropriate. For example, Relator explicitly alleges that Wu had

“de facto control” over both organizations. (Am. Compl. ¶ 12). The amended

complaint thus alleges that Wu is the dominant, controlling force behind both Corporate

Defendants, which weighs in favor of piercing the corporate veil. See Emor, 850 F.

Supp. 2d at 207. Furthermore, the amended complaint repeatedly alleges that Wu

regularly used corporate funds for personal expenses (see, e.g., id. ¶¶ 82, 95), which, if

true, provides further justification for piercing the corporate veil, see Emor, 850 F.

Supp. 2d at 207 (citation omitted).

It may well turn out that, after the record is fully developed during discovery, the

facts of Wu’s relationship with the Corporate Defendants is other than Relator

represents and thus that veil-piercing is not appropriate. For example, further

information on the control exercised by the board of directors of LRF and CIC will

likely play an important role in deciding the extent to which Wu dominates those

organizations. But at this stage of the litigation, Relator has alleged sufficient facts to

raise a plausible inference that Wu is the alter ego of LRF and CIC, and thus this Court

12
While Relator argues in his opposition that he “allege[s] that he was jointly employed by Defendan ts
CIC, LRF, and Wu” (Relator’s Opp’n at 35), this allegation appears n owhere in the amended complaint;
rather, it is set forth in a state-court complaint attached as an exhibit to Defendants’ motion to dismiss
the original complaint in this action. ( See State Court Compl., Ex. A to Defs.’ Mem., ECF No. 30 -1.)

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rejects without prejudice Defendants’ argument that Relator cannot maintain his FCA

retaliation action against Defendant Wu in his individual capacity.

IV. CONCLUSION

For the reasons explained above, Relator has not satisfied the pleading standards

of Rule 9(b) regarding his actions against Defendants for the presentation of false

claims, the making of material false statements, concealment to reduce repayment

obligations, or conspiracy to violate the FCA (Counts I–IV), so those counts must be

dismissed. With respect to Relator’s retaliation action (Count V), the pleading

standards have been satisfied, and Relator has also provided sufficient factual

allegations to support an action against Wu in his individual capacity. It may well be

that, once discovery proceeds in this case, Relator will be unable to establish that there

is a factual basis for his retaliation action, perhaps because Relator did not actually

raise concerns about false claims, or because Wu did not, in fact, learn of Relator’s

report of fraud and suggestion of taking outside action to a board member , or otherwise.

But based on the facts alleged in the amended complaint, Relator has stated a plausible

retaliation action, even as he fails to state sufficiently any claim that fraud occurred in

violation of the FCA. Consequently, this Court has issued an order that GRANTS IN

PART and DENIES IN PART Defendants’ motion to dismiss. (See Sept. 30 Order.)

DATE: October 14, 2014 Ketanji Brown Jackson
KETANJI BROWN JACKSON
United States District Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2742167. Public record. Not legal advice.