DARRELL JOHNSON v. DISTRICT OF COLUMBIA

District of Columbia

Court of Appeals

No. 15-CV-59

AUG 11 2016

DARRELL JOHNSON, et al.,

Appellants,

v. CAB-4227-13

DISTRICT OF COLUMBIA,

Appellee.

On Appeal from the Superior Court of the District of Columbia

Civil Division

BEFORE: FISHER and BECKWITH, Associate Judges; and FERREN, Senior Judge.

JUDGMENT

This case came to be heard on the transcript of record and the briefs filed,

and was argued by counsel. On consideration whereof, and as set forth in the opinion

filed this date, it is now hereby

ORDERED and ADJUDGED that the summary judgment for appellee‟s

claim as to appellants‟ liability under the False Claims Act is affirmed, but the case is

remanded for further findings and a legal ruling to determine the appropriate amount of

treble damages consistent with this opinion. The trial court‟s order as to unjust

enrichment is vacated.

For the Court:

Dated: August 11, 2016.

Opinion by Senior Judge John M. Ferren.

Notice: This opinion is subject to formal revision before publication in the

Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the

Court of any formal errors so that corrections may be made before the bound

volumes go to press.

DISTRICT OF COLUMBIA COURT OF APPEALS

No. 15-CV-59

8/11/16

DARRELL JOHNSON, et al., APPELLANTS,

V.

DISTRICT OF COLUMBIA, APPELLEE.

Appeal from the Superior Court

of the District of Columbia

(CAB-4227-13)

(Hon. Maurice A. Ross, Trial Judge)

(Argued February 17, 2016 Decided August 11, 2016)

Juan C. Estevez, of the bar of the State of Virginia, pro hac vice, by special

leave of court, with whom Kyle L. Epting was on the brief, for appellants.

Carl J. Schifferle, Assistant Attorney General, with whom Karl A. Racine,

Attorney General for the District of Columbia, Todd S. Kim, Solicitor General, and

Loren L. AliKhan, Deputy Solicitor General, were on the brief, for appellee.

Before FISHER and BECKWITH, Associate Judges, and FERREN, Senior Judge.

FERREN, Senior Judge: On June 21, 2013, the District of Columbia filed a

“false claims” action against the Washington East of the River Academy of

Entrepreneurship, Arts, Life Skills, Technology and Health for “Youth on the

Rise” (WEALTHY), a nonprofit corporation. Also named as defendants were

2

WEALTHY‟s principals, Diana Robinson, Darrell Johnson, and Johnson‟s

company, National Tax Pro, LLC (National Tax Pro). The complaint claimed (1)

violations of the District of Columbia False Claims Act, D.C. Code § 2-381.02

(a)(2) (2013), and (2) unjust enrichment – both derived from allegedly paying

excess compensation to Robinson and Johnson (including his company) from a

$400,000 grant by the District to WEALTHY for provision of youth services

during fiscal year 2009.

The District moved for summary judgment, which was granted on June 30,

2014, against, Robinson, Johnson, and National Tax Pro, followed by a final

judgment entered on August 12. Without elaboration, the trial court held them

liable, jointly and severally, for treble damages of $931,200 for violations of the

False Claims Act. The court also found Robinson liable for $91,100, and Johnson

and National Tax Pro liable for $31,973, for unjust enrichment. The District then

moved for a default judgment against WEALTHY, which was granted on

December 18, 2014, holding WEALTHY liable, jointly and severally with the

other defendants, for $931,200 under the False Claims Act while adding that “the

District may collect no more than a total of $931,200 from all the Defendants in

this action.”

3

Only Johnson and National Tax Pro have filed an appeal. We affirm the

False Claims Act judgment but remand the case for recalculation of treble

damages. We vacate the duplicative judgment for unjust enrichment.

I. The Grant Agreement

Diana Robinson was the executive director of WEALTHY and the president

of its three-member board of directors. Darrell Johnson served as the treasurer and

a non-voting member of the board. Johnson was also WEALTHY‟s accountant,

doing business as National Tax Pro.1 WEALTHY‟s “Work Plan” provided the

following description of the summer youth program to be administered under the

grant:

“[WEALTHY] is a Rites of Passage program of

substance abuse prevention, teen pregnancy prevention,

juvenile crime prevention and HIV/AIDS prevention

education. This program of prevention and education

will concentrate on Ward Eight youth between the ages

of 14 and 18 [sic: 21], using evidence-based best

practices of a developed curriculum by which this

1

Hereafter, because Johnson and National Tax Pro are alter egos on this

record, we simplify by referring to both most of the time as “Johnson,” although

occasionally to “Johnson and his company” or “Johnson‟s company.”

4

population will be recruited and trained in a continuum of

care that reduces the number of Ward Eight youth and

adolescents entering into the juvenile justice system.

Activities included in the program include a 200 voice

mass choir, a 50 member marching percussion band, a 50

member step team, a 50 member dance troupe, a drama

ensemble, classes in martial arts, computer technology,

visual, graphic and media arts, a Parenting Academy,

and, a Young Executive Leadership Institute.”

The Council‟s $400,000 grant was actually given to the Children and Youth

Investment Trust Corporation (the Trust), a non-profit organization governed by a

board appointed by the Mayor and the Council,2 for distribution to WEALTHY. In

order to obtain the grant, WEALTHY was required to submit to the Trust a

detailed budget setting forth how the funds would be spent. Johnson and Robinson

created a budget and “budget narrative,” which the Trust approved, for $388,000.

(The Trust withheld 3% or $12,000 of the $400,000 grant for administrative costs.)

The budget and its narrative envisioned compensation for personnel (with fringe

benefits) totaling $289,764 for twelve salaried individuals plus a financial

“consultant,” collectively amounting to six working full time, plus additional

“consultants” to direct children‟s activities. For all these positions, the following

2

See Children and Youth Initiative Establishment Act of 1999, D.C. Law

13-38, § 2404(2)(A), 46 D.C. Reg. 6373, 6408 (1999), D.C. Code § 2-1553 (2015).

5

amounts were budgeted for “Salaries & Wages” and “Consultants & Professional

Fees”:

Salaries & Wages

Management $90,400

1) Project director: 60% time for 12 mos. @ $84,000 = $50,400

2) Project manager: 100% time for 12 mos. @ $40,000 = $40,000

Teacher/Instructors $50,000

3 & 4) Two educators 50% time for 12 mos. @ $25,000 each

Professionals $25,000

5 & 6) Two instructor/counselors 50% time for 12 mos. @ $12,500 each

Aides/Assistants $25,000

7, 8, 9 & 10) Four aides 25% time for 12 mos. @ $6,250 each

Clerical $15,000

11 & 12) Two administrative aides 50% time for 12 mos. @ $7,500

SUBTOTAL $205,400

Fringe Benefits @ 16% of total salaries $32,864

Consultants & Professional Fees

Services to children: choral, music, dance instruction $10,000

Services to children: life skills, intervention lectures/activities $17,500

6

Financial Mgmt, payroll services and reporting @ $3,000 per mo.3 $24,000

SUBTOTAL $51,500

TOTAL $289,764

The grant agreement between the Trust and WEALTHY, entered on

November 19, 2008, covered the twelve-month period from October 1, 2008, to

September 30, 2009.4 Pursuant to that agreement, WEALTHY was to provide

specified programming. Any modification of the resulting Work Plan required

submission to the Trust, and its approval. Moreover, WEALTHY could “only use

the Grant Amount as described in the budget approved by the Trust. . . . Any

deviation from budget line-items in excess of 10% or $2,000, whichever is

greater,” had to be “submitted in writing to the Trust for approval.” The agreement

further required WEALTHY to submit monthly expenditure reports on a specified

3

The budget does not estimate the percentage of a consultant‟s time for

Financial Management, etc. After review of the record, we conclude that a

reasonable assumption is 40% time for eight months for appellant Johnson

(including National Tax Pro).

4

The agreement was amended on May 8, 2009, without substantive changes

relevant here, to substitute Training Grounds, Inc., for Parklands Community

Center as WEALTHY‟s fiscal agent to receive the grant funds because

WEALTHY was not a tax exempt organization under § 501 (c) of the Internal

Revenue Code.

7

form listing “all expenditures for the calendar month,” including costs incurred

even if WEALTHY had not yet made payment.

II. The Issue

The question presented is whether appellants violated the District‟s False

Claims Act by knowingly making or using false and material records or statements

(WEALTHY‟s monthly expenditure reports) to claim and take excessive

compensation from WEALTHY, a grantee of District funds intended to benefit

District youth and adolescents.

III. The False Claims Act

We begin with the statute. The District of Columbia False Claims Act

imposes liability “for 3 times the amount of damages which the District sustains

because of the act of [a] person” who “[k]nowingly makes, uses, or causes to be

made or used, a false record or statement material to a false or fraudulent claim.” 5

5

D.C. Code § 2-381.02 (a)(2) (2016 Supp.).

8

A “claim” is “[a]ny request or demand, whether under a contract or

otherwise, for money or property . . . that . . . [i]s presented to . . . the District[] or

[i]s made to a contractor, grantee, or other recipient, if the money or property is to

be spent or used on the District‟s behalf or to advance a District program or

interest, and if the District . . . has provided any portion of the money or property

requested or demanded.”6 As elaborated below, under the case law a claim can be

“factually false” or “impliedly false.”7

The word “knowingly” in the statute means that the person “[h]as actual

knowledge of the information; [a]cts in deliberate ignorance of the truth or falsity

of the information; or [a]cts in reckless disregard of the truth or falsity of the

information.”8 Thus, “knowingly” does “not require proof of specific intent to

defraud.”9 Finally, a false record or statement is “material” if it has “a natural

6

D.C. Code § 2-381.01 (1)(A).

7

See Part VI. A. below.

8

D.C. Code § 2-381.01 (7)(A).

9

D.C. Code § 2-381.01 (7)(B).

9

tendency to influence, or [is] capable of influencing, the payment or receipt of

money or property,”10 an issue commonly of determinative importance.

IV. Standard of Review

“The question whether summary judgment was properly granted is one of

law, and we review de novo. For a party to be entitled to summary judgment, that

party must demonstrate that there is no genuine issue of material fact and that it is

entitled to judgment as a matter of law. Independently assessing the record, we

view it in the light most favorable to the party opposing the motion.”11 “Once the

moving party makes the requisite initial showing, the burden shifts to the non-

moving party to come forward with specific evidence showing, to the contrary, that

genuine issues of material fact do exist.”12 The non-moving party “may not rest

10

D.C. Code § 2-381.01 (8). According to a footnote in the District‟s brief,

“[t]he version of the Act in effect at the time of the false claims alleged did not

have an express materiality requirement, see D.C. Code § 2-381.02 (2011 Repl.),

but the District will assume for purposes of this appeal that materiality was

required.”

11

William J. Davis, Inc. v. The Tuxedo LLC, 124 A.3d 612, 617 (D.C. 2015)

(citations and internal quotation marks omitted).

(continued . . .)

10

upon the mere allegations or denials of [its] pleading,” but must submit, by

affidavits or other evidence, “specific facts showing that there is a genuine issue

for trial.”13 “While [the court] examine[s] the evidence in the light most favorable

to the party opposing the motion, conclusory allegations by the nonmoving party

are insufficient to establish a genuine issue of material fact or to defeat the entry of

summary judgment.”14

V. The Grant Agreement As Administered

A. Distortion of the Work Plan

It would appear from the grant agreement that WEALTHY itself was to

develop and administer the Work Plan. It did not do so. Appellants do not dispute

the District‟s “Statement of Material Undisputed Facts,” ¶ 127-28, which stresses

________________________________

(. . . continued)

12

Wallace v. Eckert, Seamans, Cherin & Mellott, LLC, 57 A.3d 943, 949

(D.C. 2012) (citation and internal quotation marks omitted).

13

Super. Ct. Civ. R. 56 (e).

14

Hamilton v. Howard Univ., 960 A.2d 308, 313 (D.C. 2008) (citation and

internal quotation marks omitted).

11

that “WEALTHY‟s actual activities were limited to an 8-week summer program in

2009[,] . . . assisting in summer camps offered by three other non-profit

organizations: HICKS [Helping Inner City Kids Succeed], Wingate Towers &

Garden [Apartments], . . . and Training Grounds,” plus, according to Robinson on

deposition, “maybe a little bit of money in something else.” When asked on

deposition whether all three organizations were financed for the purpose of

assisting with the D.C. Department of Education‟s Summer Youth Employment

Program (SYEP) – a program not included in the Work Plan – Robinson replied,

“That‟s exactly right.” And Johnson confirmed that Training Grounds, for

example, had received $25,000 from WEALTHY for use, according to Robinson,

in a basketball and computer program for “older youth” – an activity not included

in the Work Plan. HICKS received another $15,000, presumably for SYEP and for

funding portions of the HICKS‟ summer camp. At Wingate, rather than pay a

lump sum, WEALTHY paid directly for classes in cooking, jewelry-making, and

music and art instruction, as well as bus transportation for field trips – all for

children aged 6-12 (younger than the children and youth, aged 14-21, to be served

in the Work Plan).

Robinson confirmed during her deposition that WEALTHY never modified

the Work Plan as the grant agreement required for deviations. Johnson‟s

12

deposition does show, however, that although he “might have requested” a

modification of WEALTHY‟s budget, the July 2009 deadline had passed and the

Trust in any event had refused. Accordingly, WEALTHY functioned in fiscal

2009 with a disconnect: an informally modified Work Plan financed by the

original, unmodified budget – a disconnect that, as we shall see, facilitated the

false claims alleged here.

B. The Monthly Reports

We begin by noting that the alleged falsity is derived from (1) WEALTHY‟s

monthly expenditure reports to the Trust and (2) WEALTHY‟s corresponding

year-to-date compilations of monthly invoices submitted to the Trust, when

compared with (3) WEALTHY‟s General Ledger and (4) payroll checks, both

detailing the actual payments made. The first two sets of documents report

monthly, and cumulatively, the expenses charged against line items in the various

categories of WEALTHY‟s budget. The second two sets identify the individual

payees of funds expended under the budget line items.

The District argues that Johnson had sole responsibility for creating and

maintaining WEALTHY‟s financial records, and that he prepared monthly

13

expenditure reports which falsely claimed authorized compensation for Robinson

and himself. He allegedly did so by underreporting compensations in the monthly

line-items for “Management” and “Professional Services” (“Accounting” and

“Audit”)15 – understood, without dispute, to cover Robinson and Johnson,

respectively – while hiding the excess in each instance as another type of

expenditure, thereby understating their total compensations while overstating other

expenditures in WEALTHY‟s budget.

Appellants, on the other hand, allege a flaw in the government‟s premise

that Robinson and Johnson were compensated (excessively so) only for

management and accounting. To the contrary, say appellants, amounts that the

government calls excessive compensation were properly chargeable to accounts for

other areas of WEALTHY‟s operations, because Robinson and Johnson worked in

diverse activities for WEALTHY, not just in the management and accounting roles

identified by the government.

15

“Professional Services” in the monthly reports are taken from the

“Accounting” and “Audit” line items (plus one $2,000 line item for “Other”) in

WEALTHY‟s General Ledger. Hereafter, all references to budget “categories” or

“line items” for personnel can be checked by inspecting the budget chart above in

Part I.

14

We address this controversy, first, by showing the line items of the monthly

reports at issue: “Management” for Robinson and “Professional Services” for

Johnson, as well as the actual payments each received month by month.

Month Robinson Reported for Johnson Reported for

(actual "Management" (actual payments) “Professional

payments) Services”

Oct-08 $0 $7,000 $2,000 $0

Nov-08 $0 $7,000 $0 $0

Dec-08 $30,000 $7,000 $11,000 $0

Jan-09 $0 $7,000 $0 $0

Feb-09 $0 $4,100 $0 $1,500

Mar-09 $0 $4,100 $0 $3,725

Apr-09 $0 $0 $0 $0

May-09 $30,000 $30,000 $9,000 $17,000

Jun-09 $0 $10,000 $5,000 $11,000

Jul-09 $0 $8,000 $10,150 $0

Aug-09 $61,500 $6,200 $7,548 $0

Sep-09 $20,000 (no report) $3,000 (no report)

Oct-09 (no report) $2,500 (no report)

Jan-10 (no report) $10,000 (no report)

May-10 (no report) $1,000 (no report)

Jul-10 (no report) $4,000 (no report)

16 17

TOTAL $141,500 $90,400 $65,198 $33,225

Johnson submitted eleven monthly reports with twenty-two entries from

October 2008 through August 2009, detailing WEALTHY‟s expenditures to

16

Actual payments are taken from WEALTHY‟s “General Ledger.”

17

Actual payments are reflected in fourteen checks of record and in

WEALTHY‟s “General Ledger.”

15

implement the Work Plan. Each report reflecting compensation for Robinson

listed her payments under “Management” (a line item in the report under “Salaries

& Wages”). Each report reflecting compensation for Johnson (National Tax Pro)

listed payments under “Professional Services” (a line item of the report under

“Consultants/Professional fees”). Each of these entries for Johnson and his

company, however, was derived from subordinate line items, representing

narrower financial categories, in WEALTHY‟s General Ledger. These line items

were for “Professional Fees” of three kinds: “Accounting,”18 “Audit,” and a single,

unspecified entry of $2,000 for “Other.” In sum, all funds (except $2,000 reported

monthly for Johnson) were allocable solely to financial work.

As demonstrated in the table above, WEALTHY‟s actual payments to

Robinson and Johnson – as taken from WEALTHY‟s General Ledger (and, as to

Johnson, confirmed by copies of paychecks) – were different from the payments

reported in seventeen of the twenty-two entries in the monthly reports (the boxes in

gray indicate the five consistent statements). Because of accrual accounting,

18

See supra note 15. The memo lines in the General Ledger call these

entries “Financial Mgmt and IT Services,” as well as “tax returns” and

“[Department of Employment Services] forms.” These memo entries more

accurately reflect the line item language in WEALTHY‟s budget – “Financial

Mgmt, Payroll Services and Reporting” – under “Consultants & Professional

Fees.” See the budget categories in Part I. above.

16

however – including, perhaps, “advance payments” authorized by the grant

agreement – these differences are not necessarily meaningful. But whatever

numbers (including “0”) may be accurate, general accounting theory does not

excuse the filing of a report altogether, and the table here shows that one payment

was made to Robinson and five were made to Johnson without the required reports

(a failure, as we shall see, that adds heft to the District‟s argument).

Neither the monthly reports nor WEALTHY‟s year-to-date compilations of

monthly invoices indicate particular activities underlying Robinson‟s and

Johnson‟s compensation ($141,500 and $65,198, respectively), but those reports

and compilations can be expected to make clear all distinctive budgetary categories

for that compensation (management, financial, teaching, clerical, etc.). Appellants

argue that not all the sources of Robinson‟s and Johnson‟s compensation must be

discernible from the line items reported each month because, they stress, the “[l]ine

items in the Budget reflect amounts allocated for types of services rather than [for]

specific individuals or entities,” and that Robinson and Johnson legitimately

performed services outside the line items for management and accounting

admittedly allocable to them. As we shall see, the record does not support

appellants‟ contention.

17

C. Robinson

As to Robinson, WEALTHY‟s monthly reports over the period from

October 2008 through August 2009 indicated that exactly $90,400, the correct

amount budgeted for 1.6 full-time jobs, had been reported for “Management,” a

budget line item obviously intended for Robinson.19 In August 2009, however,

Robinson actually received $61,500 – $55,300 more than the $6,200 reported for

that month. And in September, the last month of fiscal 2009, she received another

$20,000 unsupported by any monthly report, for a grand total of $141,500 –

$51,100 more than the $90,400 budgeted and reported for “Management.”

As the source for Robinson‟s additional income, Johnson, in response to

plaintiff‟s interrogatories, cited “Teacher/Instructors,” a line item of the budget

under “Salaries & Wages” (calling for two half-time employees). That entry

would add $50,000 to her “Management” salary of $90,400 and bring her close to

19

The budget line item for “Management” specifies two employees: a

“Project director” working part-time (60%) for $50,400, and a “Project manager”

working full-time for $40,000. The District implies, without expressly arguing,

that Robinson therefore took too much “management” compensation for one

person. Perhaps so, but because the monthly reports disclosed that Robinson took

the full $90,400 budgeted for “Management,” no false claim can be attributed to

her taking that amount.

18

the $141,500 she received. In the General Ledger, however, “Teacher/Instructor”

shows nothing for Robinson; her entire $141,000 (including her “Management”

salary) can be found in the nondescript category “Compensation − Other.”20 The

record makes clear, moreover, that Robinson‟s contribution to WEALTHY was

almost exclusively managerial; it was no more than de minimis educational. Her

teaching did not extend beyond a one-time, half-day class in kite-making at

Wingate. Robinson‟s overall compensation, therefore – $141,500 – equaled

slightly more than the budget for 2.6 full-time jobs, without the required

evidentiary support.

D. Johnson

We turn to Johnson. For the period October 2008 through May 2009, the

monthly reports show $22,225 for “Professional Services,” traceable in the General

Ledger to “Professional Fees” for “Accounting” and “Audit,”21 with actual

payments totaling $22,000 to Johnson (including National Tax Pro). By the end of

20

The General Ledger shows a “management” category which is blank.

The year-to-date compilation of monthly invoices, however, attributes the

accumulation of Robinson‟s payments to “management.”

21

See supra note 15 and text accompanying supra note 18.

19

June 2009, however, Johnson had exceeded the overage allowed for the $24,000

budget for “Financial Management” fees (the greater of 10% or $2,000); he had

cumulatively received $27,000 in actual payments based on monthly reports

showing that he had received even more: $33,225 (see table above). Two months

later, by the end of August 2009, he had received an additional $17,698 without the

backing of monthly reports, and at the end of July 2010, Johnson had received for

fiscal 2009 a total of $65,198 without further documentation by monthly reports.22

Johnson‟s claimed sources of $41,198 in compensation beyond $24,000 are

obscure. First, appellants allege “some evidence” that Johnson and his company

undertook compensable services in addition to accounting, citing “computer-

related services,” “tax return preparation,” “audit support,” and maintenance of

WEALTHY‟s “financial records,” as well as Johnson‟s service “as WEALTHY‟s

treasurer and non-voting member of [its] [B]oard of [D]irectors.” Other than

service as an officer and board member, however, for which no time commitment

or dollar value has been proffered, these activities are unquestionably embraced by,

and thus limited to, the $24,000 budget category for “Financial Management,” as

22

Appellants do not dispute that Johnson‟s payments over the period

October through July 2010 are attributable to fiscal 2009.

20

the General Ledger confirms.23 We see no sound basis for concluding that, in the

absence of a budget modification, Johnson and his company were entitled to

additional compensation for these financial activities.

Second, appellants argue more vigorously that Johnson and his company

were not limited to compensation for financial work, because the budget contains

“a whole host of other categories” from which their compensation could have been

drawn, “including „Clerical‟ and „Aides/Assistants‟” and, presumably,

“Professionals”24 – all budget subcategories under “Salaries & Wages” (not under

“Consultants & Professionals,” which covers Johnson‟s “Financial Mgmt” role).

This argument is unconvincing. When put together with the first argument,

appellants are either saying that (1) if their financial work beyond “accounting”

was not covered by the $24,000 budget for Financial Management, that financial

work could have been compensated from funds for other, non-financial budget

23

See supra note 17.

24

As a source of funds for Johnson and National Tax Pro, appellants did not

include “Professionals” when referring in their brief to “Aides/Assistants” and

“Clerical,” perhaps because “Professionals” in this line item are expressly limited

to “instructor/counselors,” which does not in any way describe the role of Johnson,

who testified on deposition that he “had no direct involvement with the actual

activities that WEALTHY was putting on for youth.” Nonetheless, because

appellants used the word “including,” we give them the benefit of the doubt and

count “Professionals” among the ”whole host” of line items claimed to cover

Johnson and his company.

21

categories; or they are arguing – contrary to the first contention − that (2) Johnson

actually was doing compensable non-financial work worth $41,198 beyond the

$24,000 financial service he provided.

The first contention is plainly wrong; according to the grant agreement,

funds budgeted for one function cannot (aside from the $2,000 or 10% overage

factor) be applied to another function, absent Work Plan and budget modifications.

The second contention, abandoning appellants‟ first factual premise, presupposes

some kind of reliable documentation that Johnson and his company actually were

involved in program activities – contrary to Johnson‟s deposition testimony that he

“had no direct involvement”25 in WEALTHY‟s youth activities.

The contention that Johnson may have been engaged in compensable non-

financial program activities is conclusively refuted by the General Ledger entries

documenting that, but for a $2,000 budget item designated “Other,” all of

Johnson‟s (and National Tax Pro‟s) $65,198 compensation was for financial

services: “Accounting” and “Audit,” two subcategories of “Professional Fees.”26

25

See supra note 24.

26

See supra note 18 and accompanying text.

22

More specifically, WEALTHY‟s General Ledger shows no compensation in fiscal

2009 for Johnson or his company in any of the non-financial line items

corresponding to appellants‟ proffers: “Aides, assistants, and interns,” or “Clerical

and Other Stipends,” or “Other Professionals.”27 Nor have we been able to find

Johnson‟s additional compensation in any other non-financial line item in the

General Ledger. Accordingly, Johnson‟s financial work was his only contribution

to WEALTHY (aside from responsibilities as a Board member).

If Johnson‟s financial work required more than the $24,000 budgeted for it,

we expect that Johnson would have timely sought a budget modification, as

required under the grant agreement. Not having done so, however, Johnson is left

to argue (as noted above) that his additional $41,198 came from the $65,000

budgeted for “Aides/Assistants” ($25,000), “Clerical” ($15,000), and

27

Appellants do not argue that Johnson or his company received

compensation from the line items under Consultants & Professional Fees for

“services to children,” namely, “choral, music, dance instruction” and “life skills,

intervention lectures/activities.” Clearly, these items were budgeted for children‟s

activities in which Johnson eschewed participation.

For the first time on appeal, however, in the reply brief, appellants argue that

other budget categories “could have been” (not “were”) used for paying Johnson

(including National Tax Pro), such as those for “Telecommunications” and

“Computer Equipment.” If so, these categories were clearly outside the scope of

the funds budgeted for personnel. In any event, WEALTHY‟s General Ledger

reveals no payments to Johnson or National Tax Pro from these categories.

23

“Professionals” ($25,000).28 Depending on the sources for the $41,198, this means

that Johnson himself would have handled his own part-time (40%) financial work

for $24,000, and also taken funds otherwise required to pay four to six part-time

workers employed to cover as many as two full-time positions ($25,000 plus

$15,000) – with total compensation equal to 2.4 full-time staff members.

In sum, when Johnson‟s compensation of $65,198 is added to Robinson‟s

$141,500, representing 2.4 and 2.6 full time staff members, respectively, we find

that these two individuals have taken compensation allocable to five of the six full-

time budgeted staff positions, leaving open no more than two or four part-time

employee positions (depending on how Johnson‟s $41,198 was allocated between

“Professionals” and “Aides/Assistants”).29

28

See budget categories in Part I. above. The corresponding categories in

the monthly reports are: “Aides, assistants, interns,” “Clerical and other staff,” and

“Other education and service professionals.”

29

If, alternatively, some of Johnson‟s overage had come from the $27,500

line item for “services to children,” see supra note 27, rather than from

“Professionals” or “Aides/Assistants,” that would have freed up funds for two or

four part-time employees but would have decimated the budget for “Consultants.”

Because Johnson proffered the names of 14 individuals hired as employees,

contractors, or consultants for WEALTHY, and further because Johnson himself

did not interact with children, see supra note 24, it is highly unlikely that funds for

“services to children” were used to compensate Johnson.

(continued . . .)

24

E. Demise of the Budgeted Work Plan

Self-evidently, appellants‟ proffered explanation of Robinson‟s and

Johnson‟s total compensation distorted any promise that the Work Plan could have

been accomplished as intended. Indeed, the record reveals the virtual demise of

WEALTHY‟s Work Plan, which specified ten activities with hundreds of

participants. As acknowledged by Johnson on deposition, the plan presupposed

that activities would occur simultaneously at different locations, and thus would

require several categories of personnel working at the same time – without doubt

more than Robinson and Johnson could have provided with a substantially reduced

________________________________

(. . . continued)

As a postscript on allocation of Robinson‟s $51,100 and Johnson‟s $41,198

in excess compensation (totaling $92,298), we have assumed Robinson‟s proffer of

“Teacher/Instructors” ($50,000) and Johnson‟s proffers of “Aides/Assistants”

($25,000), “Clerical” ($15,000), and “Professionals” ($25,000) as the sources of

these excess amounts. The final compilation of WEALTHY‟s monthly invoices

shows that the total of these proffered amounts ($115,000) was spent in fiscal 2009

in the amount each category was budgeted – except for two: $38,897 was spent

(under budget) for “Teacher/Instructors” and $36,103 (over budget) for

“Professionals,” equaling the budgeted total amount of $75,000 for the two. These

final expenditures do not alter our analysis; they would only require fine-tuning of

the amounts from each category which Robinson and Johnson had taken for their

respective excess draws.

25

cadre of part-time employees and consultants.30 This evidence, therefore –

substitution of enhanced compensation for Robinson and Johnson in lieu of hiring

personnel essential to the Work Plan – substantially demonstrates why, for the

2009 fiscal year, Robinson and Johnson funded three other non-profit

organizations rather than attempt to implement fully the Work Plan prescribed by

the grant agreement that WEALTHY had submitted to the Trust.

Still other evidence demonstrates that neither Robinson nor Johnson

implemented the youth programs described in WEALTHY‟s Work Plan. While it

is true that Robinson had minor involvement with the non-profit organizations

WEALTHY funded in lieu of the intended plan, Robinson‟s deposition reveals that

she “did not personally . . . teach” any class for youth at HICKS; she was “like a

program manager” at Training Grounds and Wingate; and although she taught a

one-time half-day Kites for Peace class at Wingate, she only observed the art and

music classes there. Thus, her visits to Wingate, described by its Director of

Resident Services as “roughly three times each week” for “a few minutes to four

hours,” were in a managerial, not educational, capacity. For his part, Johnson

30

There is no record evidence that WEALTHY had program funds during

fiscal 2009 other than those provided by the District under the grant agreement at

issue here. Moreover, during his deposition, Johnson testified that WEALTHY

had no “grant funding source” after September 30, 2009, the end of the fiscal year

at issue here.

26

testified on deposition: “generally speaking I don‟t get involved – I‟m not a part of

the organizations that I operate as an accountant.”

Based on all the evidence, therefore, we confront the question whether

Robinson and Johnson, in lieu of implementing WEALTHY‟s Work Plan as

required under the grant agreement, submitted “false claims” in violation of

District law, in order to take for themselves substantial funds which had been

earmarked for achieving that plan to benefit District children and youth.

VI. The False Claims Act As Applied

A. False or Fraudulent Claim

The District‟s False Claims Act was derived from California‟s statute, which

in turn was based on the federal False Claims Act. 31 We have said, accordingly,

that “it is appropriate to turn to both California and federal cases for guidance.”32

Federal decisions, however, have not been uniform over the years and offer a

31

Grayson v. AT&T Corp., 980 A.2d 1137, 1146 n.25 (D.C. 2009), vacated

en banc, 989 A.2d 709 (D.C. 2010).

32

Id.

27

variety of approaches to discerning what a “false claim” is. A claim has been

called “factually” false when a contractor has sought reimbursement without

providing the product or service agreed upon.33 When, however, a contractor

provided the required product or service but failed to comply with a condition of

payment imposed by statute, regulation, or contract, the courts have called the

claim “legally” or “impliedly” false.34 Moreover, two species of impliedly false

claims have been identified: those in which the contract “expressly” required the

contractor to certify such compliance as a condition of payment,35 and others in

which the contract merely “implied” the obligation to satisfy compliance.36

33

See United States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1266

(D.C. Cir. 2010) (a claim is factually false when it “„involves an incorrect

description of goods or services provided or a request for reimbursement for goods

or services never provided‟” (quoting United States ex rel. Mikes v. Straus, 274

F.3d 687, 697 (2d Cir. 2001) (Mikes); accord, United States ex rel. Lemmon v.

Envirocare of Utah, Inc., 614 F.3d 1163, 1168 (10th Cir. 2010) (same); see also

United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 305 (3d

Cir. 2011) (Wilkins) (“A claim is factually false when the claimant misrepresents

what goods or services that it provided to the Government.”).

34

See Sci. Applications Int’l Corp., 626 F.3d at 1266 (claim for payment is

false “when it rests on a false representation of compliance with an applicable

federal statute, federal regulation, or contractual term”); see also Wilkins, 659 F.3d

at 306 (“[A] majority of [courts of appeal] . . . have recognized that there can be

implied false certification liability under the FCA.”).

35

Wilkins at 307; Mikes, 274 F.3d at 700.

(continued . . .)

28

In this case, the question whether the District has alleged a “factually” or

“impliedly” false claim – a distinction the District never discusses – has become

irrelevant because the District has covered both bases. In its complaint, the District

claimed that “WEALTHY falsely reported that the grant funds were being spent in

accordance with [its] earmark budget,” and thereby “wrongfully obtained a total of

$310,400 in grant funds that the Trust paid in reliance on the [false] reports.”

This is both a “factually” false claim, alleging that appellants took money “for

goods or services never provided,”37 and an “impliedly” false claim, alleging

appellants‟ “false representation of compliance with an applicable . . . contractual

term,”38 WEALTHY‟s “earmark budget.” Whatever the preferred characterization

(if any) may be, the distinction would have no meaning here, for two reasons.

First, a false claim of one kind or another has unquestionably been alleged with

proffered evidentiary support. Second, as we shall see, the distinction would not

affect the result after application of the other statutory criteria, namely, that any

________________________________

(. . . continued)

36

Sci. Applications Int’l Corp., 626 F.3d at 1268-69; United States ex rel.

Ebeid, M.D. v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010).

37

Sci. Applications Int’l Corp., 626 F.3d at 1266.

38

Id.

29

allegedly “false record or statement” must be “knowingly” made and “material to

[the] false or fraudulent claim.”39 We therefore turn to these other criteria.

B. False Record or Statement

As noted earlier, the respective amounts reported and paid in any month will

not necessarily be the same either because of accrual accounting or WEALTHY‟s

authority under the grant agreement to make “advance payments” of various sorts.

Thus, we do not necessarily find falsity in the mere fact that the amount reported

for a month differed from the amount paid. As of the end of the fiscal year, of

course, the total of the reported amounts and total expenditures corresponding to

those reports should be equal.

The compilation of WEALTHY‟s monthly invoices as of the end of the year

accomplished that equalization here; the total “allocation” of grant funds and the

total of the amounts reflected in the monthly reports equaled $388,000. Thus, any

assuredly actionable “false record or statement”40 will have occurred, if at all,

39

D.C. Code § 2-381.02 (a)(2).

40

D.C. Code § 2-381.02 (a)(2).

30

starting when the actual payments began, irretrievably, to diverge from the

monthly reports and the budget allocations, clearly showing excess compensation:

in August 2009 for Robinson, June 2009 for Johnson.

Ordinarily, the trial court grants summary judgment only after making its

own detailed findings of fact and conclusions of law. The court did not do so here,

ruling summarily instead. We need not remand for trial court findings and

conclusions, however, because, in reviewing a summary judgment, this court, like

the trial court, assesses only a written record uninfluenced by subjective

impressions gained from witnesses at a trial.41 Accordingly, after completing our

de novo review, we are satisfied by the foregoing analysis of WEALTHY‟s grant,

as administered, that the District, as plaintiff, has made the required initial showing

that there is no genuine issue of material fact, and that appellants have not carried

their burden of coming forward with evidence sufficient to show that factual issues

exist.42 Our conclusions of law are derived from the following findings of fact

from the record – either admitted or ineluctably established:

41

Kotsch v. District of Columbia, 924 A.2d 1040, 1044 (D.C. 2007) (when

reviewing summary judgment, court of appeals conducts independent review of

record).

42

See our standard of review above in Part IV.

31

First, WEALTHY‟s summer program was substantially different from the

Work Plan envisioned under the grant agreement. Robinson and Johnson

essentially subcontracted WEALTHY‟s activities to three other non-profit

organizations for youth, permitting WEALTHY to hire fewer staff members. This

reduction of staff freed up funds for additional compensation to Robinson and

Johnson – funds that otherwise would have been required to hire other employees

and consultants to cover summer activities in several locations, simultaneously,

under the intended Work Plan.

Second, as evidence in support of the first finding, the line item in

WEALTHY‟s budget for “Management,” granting Robinson compensation for 1.6

full time management jobs, was $90,400. That left an additional $51,100 which

was paid to her, according to appellants, from the $50,000 budgeted for two half-

time “Teacher/Instructors.” This line item represents a full-time endeavor that

Robinson did not undertake; the General Ledger and year-to-date compilation of

monthly invoices show that all of Robinson‟s compensation was attributable to

“management” (see supra note 20 and accompanying text). Through this diversion

of funds from teaching, Robinson was compensated altogether for 2.6 full-time

jobs.

32

Third, Johnson‟s contribution was exclusively financial management,

namely, accounting and related services; he expressly acknowledged no

participation in WEALTHY‟s program activities. Nonetheless, the addition of

$41,198 for compensation beyond the $24,000 budgeted for “Financial

Management” (an estimated 40% part time job) brought his total compensation to

$65,198. To justify this total, Johnson proffered receipt of payments equivalent to

more than two full-time jobs ($25,000 from the line item either for “Professionals”

or for “Aides/Assistants” and $15,000 from “Clerical”) without a corresponding

proffer of service to WEALTHY outside his financial responsibilities (aside from

Board membership). The General Ledger confirms that Johnson thus diverted to

his financial work over $40,000 in funds budgeted for program activities,

achieving compensation for 2.4 full-time jobs.

Fourth, Johnson (a) provided eleven monthly financial reports “signed and

encrypted” by Robinson; (b) omitted a required report for the last month

(September) of fiscal 2009 in which Robinson received $20,000 and Johnson

received $3,000; and (c) omitted reports for compensation to Johnson (and his

company), allocable to fiscal 2009, totaling an additional $17,500 between October

2009 and July 2010.

33

Fifth, given appellants‟ failure to document Robinson‟s receipt of $50,000 as

a “Teacher/Instructor,” as proffered, we find that the payments Robinson received

during the last two months of fiscal 2009 – $61,500 in August and $20,000 in

September, were accounted for only to the extent of $30,400 (the amount, when

coupled with $60,000 paid earlier, that achieved her budgeted $90,400).

Sixth, the $81,500 that Robinson received in August and September 2009

(see Fifth finding), was assembled from $61,500 based on an August monthly

report of only $6,200, and the other $20,000 was based on no monthly report at all.

These two payments cannot be reconciled with accrual accounting beyond $30,400

paid in August. Therefore, the additional $51,100 remains unaccounted for.

Seventh, the $20,500 in compensation that Johnson received during

September 2009 through July 2010 (see Fourth finding) is not documented in

required reports and thus is unaccounted for.

34

Eighth, Robinson and Johnson together took as compensation $206,698

(exclusive of fringe benefits), amounting to 80.5% of WEALTHY‟s $256,900

personnel budget (exclusive of fringe benefits) or 53.3% of WEALTHY‟s entire

$388,000 budget for fiscal 2009, all of which was spent, as reflected in

WEALTHY‟s compilation of monthly invoices for fiscal year 2009. As a result,

Robinson and Johnson took funds for themselves budgeted for the work of five of

the six full-time staff positions (see Second and Third findings) – positions

intended to be filled not only by Robinson ($90,400) and Johnson ($24,000) but

also by six to eight of the ten budgeted part-time employees (about $90,000)

working simultaneously, in several locations, under the Work Plan.

Ninth, by taking compensation otherwise budgeted for six to eight part-time

employees, Robinson and Johnson prevented WEALTHY from carrying out the

Work Plan, as written, and took funds that should have been retained by

WEALTHY unless the Work Plan and budget were properly modified pursuant to

the grant agreement (which they were not).

Tenth, Robinson‟s and Johnson‟s failure to seek modification of the Work

Plan and budget to justify WEALTHY‟s grants to the three non-profit

organizations is indirect but probative evidence of an intention not to conserve

35

WEALTHY‟s funds when the Work Plan as such, for whatever reason, would not

be implemented, and thus to take additional, unbudgeted compensation of $92,298

for themselves.

At the heart of this case, therefore, are four basic, unassailable conclusions

of law:

(1) WEALTHY, directed by Robinson and Johnson, entered into an

agreement to receive funding from the District of Columbia through WEALTHY

and the Trust, in order to perform services for the District‟s youth according to a

specific Work Plan and related budget.

(2) Based on the evidence presented, WEALTHY, and thus Robinson and

Johnson, failed to carry out these agreed-upon services, instead using over half the

expended $388,000 in grant funds ($206,698 or 53.3%) to compensate Robinson

and Johnson for a substantial measure of Work Plan activities which they assuredly

did not undertake.

(3) Absent a modification of WEALTHY‟s Work Plan and budget, Robinson

and Johnson were not entitled to compensation above the $90,400 and $24,000

36

allocable to them, respectively, under the budget for “Management” and “Financial

Mgmt, payroll services and reporting” in the grant agreement. Accordingly, they

took $92,298 from WEALTHY in excess compensation ($206,698 minus $114,400

equals $92,298).

(4) The monthly reports prepared by Johnson and “signed and encrypted” by

Robinson omitted the required report for the last month (September) of fiscal 2009

in which Robinson received $20,000 and Johnson received $3,000. They also

omitted required reports of compensation paid to Johnson, allocable to fiscal 2009,

totaling $17,500 between October 2009 and July 2010. As a result, the

compilation of required monthly reports for which Johnson and Robinson were

responsible – and which they defaulted, in part, in preparing – falsely stated the

total compensation that Robinson and Johnson each received: $90,400 for

Robinson instead of $141,500 and $33,225 for Johnson instead of $65,198. The

result, as noted in conclusion (3), was a “false or fraudulent claim” of $92,298 in

compensation over budget, underreported by $83,073.43

43

Unlike the cumulative monthly reports that limited Robinson‟s

compensation to the budgeted $90,400, the reports acknowledged payment of

$33,225 to Johnson, which was $9,225 over the $24,000 budgeted. Thus, the

(continued . . .)

37

C. Knowingly

As noted earlier, the District‟s False Claims Act imposes liability on anyone

who “[k]nowingly makes, uses, or causes to be made or used, a false record or

statement material to a false or fraudulent claim.”44 The Act defines “knowingly”

as having “actual knowledge of the information; [a]ct[ing] in deliberate ignorance

of the truth or falsity of the information; or [a]ct[ing] in reckless disregard of the

truth or falsity of the information.”45

Appellants do not dispute the total amounts paid to Johnson and Robinson,

instead insisting that because those amounts were legitimately paid for additional

work done, and because line item deviations from the budget were permitted under

the grant agreement, “any additional money allocated,” if outside the permitted

deviations, “would be more accurately characterized as an unintentional breach of

contract rather than intentional statutory fraud.” According to appellants, the

________________________________

(. . . continued)

underreporting of Robinson‟s and Johnson‟s compensation was $9,225 less than

the $92,298 in excess compensation over budget.

44

D.C. Code § 2-381.02 (a)(2).

45

D.C. Code § 2-381.01 (7)(A).

38

element of “knowingly” cannot be met here “[b]ecause there exists a reasonable

dispute as to whether costs were simply allocated incorrectly.” Based on our

detailed analysis of the record, however, it is clear that costs were not merely

allocated incorrectly. Information provided by appellants significantly

underreported – and at times did not report at all – the amounts paid to Robinson

and Johnson.

Johnson was a trained and experienced accountant with sole responsibility

for WEALTHY‟s financial records. By his own admission, Johnson, in

consultation with Robinson, prepared WEALTHY‟s budget and budget narrative

for use of the grant funds, without assistance from anyone else. Johnson also

prepared the written monthly reports submitted to the Trust. Indeed, as

WEALTHY‟s consultant in charge of financial management, Johnson had the

entire universe of WEALTHY‟s financial transactions – from postage to

compensation – under his control. Without doubt, therefore, Johnson had

knowledge of WEALTHY‟s payments to his company (National Tax Pro) and to

Robinson. He knew the allocations in the budget; he had access to every

expenditure; and he prepared the monthly reports presumably based on invoices

and ledger entries. Johnson also acknowledged on deposition that he was aware of

39

provisions in the grant agreement allowing the Trust to terminate the agreement for

use of funds for an unauthorized purpose.

Based on Johnson‟s responsibilities and access to WEALTHY‟s finances,

therefore, we are compelled to conclude that Johnson had statutory knowledge

(“actual,” “deliberate ignorance,” or “reckless disregard”) of the falsity of

WEALTHY‟s compilation of monthly reports (“statements”) as explained in our

fourth conclusion of law, underreporting by $83,073 the compensation that

Robinson and Johnson withdrew for themselves, overall totaling a false or

fraudulent claim of $92,298.

D. Material

The District‟s False Claims Act defines “materiality” as “having a natural

tendency to influence, or be capable of influencing, the payment or receipt of

money or property.”46 Until recently, however, federal court decisions interpreting

the federal statute with the same language have been inconsistent in their

interpretations of “materiality.” The United States Court of Appeals for the Eighth

46

D.C. Code § 2-381.01 (8).

40

Circuit adopted what could be called an outcome materiality test, holding that there

can be no false claim if the government would have made payments “regardless of

the [plaintiff‟s] actions”47 and thus was not affected by the falsity. The Fourth

Circuit adopted a less stringent “natural tendency” test, which “focuses on the

potential effect of the false statement when it is made, not on the actual effect of

the false statement when it is discovered.”48 Thereafter, six other federal circuit

courts adopted the latter, less burdensome test for materiality or its equivalent49 (as

has California).50

47

Rabushka ex rel. United States v. Crane Co., 122 F.3d 559, 563 (8th Cir.

1997).

48

United States ex rel. Harrison v. Westinghouse Savannah River Co., 352

F.3d 908, 916-17 (4th Cir. 2003) (Harrison).

49

United States ex rel. Loughren v. Unum Grp., 613 F.3d 300, 309 (1st Cir.

2010); United States ex rel. Longhi v. Lithium Power Techs., 575 F.3d 458, 468-69

(5th Cir. 2009) (Longhi); United States v. Bourseau, 531 F.3d 1159, 1171 (9th Cir.

2008); United States ex rel. A+Homecare, Inc. v. Medshares Mgmt. Grp., Inc., 400

F.3d 428, 445 (6th Cir. 2005) (A+ Homecare); see also United States ex rel.

Feldman v. van Gorp, 697 F.3d 78, 95 (2d Cir. 2012) (Feldman) (adopting

“objective” test for materiality that does not require evidence that falsehoods were

relied upon); United States v. Rogan, 517 F.3d 449, 452 (7th Cir. 2008) (Rogan)

(holding unnecessary any evidence that federal employment would have resulted in

enforcement of statute because such evidence is not a component of materiality).

50

San Francisco Unified Sch. Dist. ex rel. Contreras v. First Student, Inc.,

224 Cal. App. 4th 627, 642-43 (2014), reh’g denied (Apr. 9, 2014), review denied

(June 25, 2014).

41

Late last year, however, the Supreme Court granted certiorari in a First

Circuit case, Universal Health Servs., Inc.,51 to resolve the threshold question

whether the implied certification theory is viable under the federal False Claims

Act and, if so, whether only the “express” species of impliedly false claims are

viable, or whether a claim can be legally “false” under either species, “express” or

“implied.”52 In a unanimous opinion, the Court held that “the implied false

certification theory can be a basis for liability,” and that the contracting

defendant‟s “liability for failing to disclose violations of [statutory, regulatory, or

contractual] requirements,” when claiming payment under the contract, “does not

turn upon whether those requirements were expressly designated as conditions of

payment.”53 In doing so, the Court announced a new approach to materiality closer

to the outcome test than to the less stringent one followed by a majority of the

federal circuits.

51

United States ex rel. Escobar v. Universal Health Servs., Inc., 780 F.3d

504 (1st Cir. 2015), cert granted, 136 S. Ct. 582 (2015).

52

Petition for Writ of Certiorari, Universal Health Servs., Inc. v. United

States & Massachusetts ex rel. Julio Escobar & Carmen Correa, 136 S. Ct. 1989

(2016) (No. 15-7), 2015 WL 4035937; see text accompanying supra notes 35 &

36.

53

Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct.

1989, 1995-96, 2001 (2016) (Universal Health Servs., Inc.).

42

Rather than focus on whether a statutory, regulatory, or contractual

condition of payment is “express” in the contract or “implied,” the Court held that

“[w]hat matters is not the label the Government attaches to a requirement, but

whether the defendant knowingly violated a requirement that the defendant knows

is material to the Government‟s payment decision.”54 The Court stressed that

“[t]he materiality standard is demanding.”55

A misrepresentation cannot be deemed material merely

because the Government designates compliance with a

particular statutory, regulatory, or contractual

requirement as a condition of payment. Nor is it

sufficient for a finding of materiality that the

Government would have the option to decline to pay if it

knew of the defendant‟s noncompliance. Materiality, in

addition, cannot be found where noncompliance is minor

or insubstantial.56

The statutory test for “materiality,” therefore, as “having a natural tendency to

influence, or be capable of influencing, the payment or receipt of money or

54

Id. at 1996.

55

Id. at 2003.

56

Id.

43

property,”57 appears to be “the effect on the likely or actual behavior of the

recipient of the alleged misrepresentation”58 upon learning about it, not on its mere

potential to affect the recipient‟s decision. The Court expressly rejected the

government‟s argument, in support of the First Circuit‟s view, that “any statutory,

regulatory, or contractual violation is material so long as the defendant knows that

the Government would be entitled to refuse payment were it aware of the

violation.”59 Consistent with our reliance on case law interpreting the federal

statute, we find no difficulty in applying the Supreme Court‟s “materiality” test

when interpreting the District‟s statute here.

57

D.C. Code § 2-381.01 (8).

58

Universal Health Servs., Inc., 136 S. Ct. at 2002 (quoting 26 RICHARD A.

LORD, WILLISTON ON CONTRACTS § 69:12, at 549 (4th ed. 2003)) (emphasis

added). The Court also cites RESTATEMENT authority stating that a “matter is

material” if a reasonable person would “attach importance” to it in determining his

or her “choice of action in the transaction,” or if a defendant “had reason to know

that the recipient of the representation” would attach importance to it “even though

a reasonable person would not.” Id. at 2002-03. We do not understand the Court,

in determining materiality by reference to “the likely or actual behavior of the

recipient of the alleged misrepresentation” upon learning about it, to have

incorporated, further, that the defendant must have anticipated the recipient‟s likely

response.

59

Id. at 2004.

44

Appellants maintain that neither Johnson and his company nor any of the

other principals violated any condition of the grant agreement. They are wrong.

According to a key provision:

The Trust may terminate this Grant Agreement or reduce

the Grant Amount if the Grantee fails to achieve the

projected outcomes of the Work Plan, to take corrective

actions as stipulated by the Trust[,] or to meet its

reporting requirements under this Grant Agreement as

determined by the Trust‟s sole discretion [or] . . . upon

the occurrence of any material breach of the terms and

conditions of this Grant Agreement by the Grantee,

including, but not limited to, using grant funds for an

unauthorized purpose.

The grant agreement, therefore, obliged the grantee to honor the Work Plan, meet

all reporting requirements, and use grant funds only for authorized purposes.

Appellants failed in all these three respects, manifestly creating false records,

resulting in false statements, to deter detection of Robinson‟s and Johnson‟s excess

compensation. These false records and statements – knowingly intended to

conceal the misallocation of funds and the consequent failure by WEALTHY to

achieve the proposed Work Plan – were undoubtedly “material to a false or

45

fraudulent claim.”60 Had the District or its agent, the Trust, been apprised of

appellants‟ misrepresentations, more than likely the grant would have been

terminated and appropriate recovery sought, a result justified by the Supreme

Court‟s recent decision in Universal Health Servs., Inc.61

E. Conclusion

Based on our independent review of the record, we conclude that the District

has demonstrated, without sustainable evidence to the contrary proffered by

appellants, that there is no genuine issue of material fact.62 Moreover, on the basis

of the facts of record, we agree with the District that appellants have knowingly

used false statements and records material to influencing the payment of false or

fraudulent claims for compensation under the District‟s grant, through the Trust, to

60

D.C. Code § 2-381.02 (a)(2).

61

We premise our decision on characterization of the District‟s claim as

impliedly false, governed by the reasoning in Universal Health Servs., Inc.,

although, as we have noted, the complaint could just as easily have been

characterized as a factually false claim. We mention this only because the Supreme

Court‟s test for “materiality” was addressed to an impliedly false claim,

theoretically leaving open the possibility – which we believe is remote – that

another, less stringent interpretation of materiality could apply in the factually false

context. That possibility, of course, would not affect the result here, where the

Universal Health Servs., Inc. “materiality” test is met.

62

See text accompanying note 13.

46

WEALTHY. Accordingly, we affirm summary judgment as to appellants‟ liability

under the District of Columbia False Claims Act.

VII. Damages

A. Treble Damages

The trial judge awarded the District treble damages in the amount of

$931,200. This amount presupposed that of the $388,000 grant to WEALTHY (net

of the $12,000 administrative fee paid to the Trust), WEALTHY had received only

$310,400 to which the District‟s claim could be addressed, because WEALTHY

had received $77,600 before filing any monthly report (i.e., an allegedly false

statement). Counsel for the District acknowledged at oral argument that the

District does not seek damages for the $77,600 advance payment to WEALTHY.

District Counsel also clarified at oral argument that included in the $310,400 figure

is $43,909.47 withheld by the various fiscal agents from the final amount

distributed to WEALTHY. (Appellants do not question inclusion of the

$43,909.47.) According to the District, therefore, WEALTHY‟s treble damages of

$931,200 were correctly calculated based on $310,400. That total is not a

certainty, however, without analysis that did not take place in the trial court.

47

According to the U.S. Court of Appeals for the D.C. Circuit, in calculating

damages under the federal statute, “the fact-finder seeks to set an award that puts

the government in the same position as it would have been if the defendant‟s

claims had not been false.”63 Generally, therefore, under this “benefit-of-the

bargain” framework,64 “the proper measure of damages is the difference between

the value of the goods or services actually provided by the contractor and the value

the goods or services would have had to the government had they been delivered as

promised.”65 But what if, as in this case, “the defendant fraudulently sought

payments for participating in [government] programs designed to benefit third-

parties rather than the government itself”?66 In that situation, the government will

63

United States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1278 (D.C.

Cir. 2010) (remanding federal False Claims Act case for reconsideration of liability

and damages for alleged breach of contract for technical assistance to Nuclear

Regulatory Commission) (dictum).

64

Id. at 1279.

65

Id. at 1278.

66

United States ex rel. Feldman v. van Gorp, 697 F.3d 78, 87-88 (2d Cir.

2012) (citation and quotation marks omitted) (false claims action to recover treble

(continued . . .)

48

have contracted for the intangible benefit of subsidizing a public service, but not

for a direct, tangible benefit to the government itself (as in contracting, for

example, for military hardware). Accordingly, as at least four federal circuits have

observed: “[W]here there is no tangible benefit to the government and the

intangible benefit is impossible to calculate, it is appropriate to value damages in

the [full] amount the government actually paid to the Defendants.”67 “In other

words, when a third-party successfully uses a false claim regarding how a grant

will be used in order to obtain the grant, the government has entirely lost its

opportunity to award the grant money to a recipient who would have used the

________________________________

(. . . continued)

damages for payments to grantees of National Institutes of Health based on

misrepresentations of grant activities and personnel).

67

United States ex rel. Longhi v. United States, 575 F.3d 458, 473 (5th Cir.

2009) (false claims action to recover treble damages for payments to grantees of

Department of Defense under federal Small Business Innovative Research

program); accord, Feldman, 697 F.3d at 88 (government “receives nothing of

measurable value” when third-party grantee uses benefits of government grant for

unapproved activities); Sci. Applications Int’l Corp., 626 F.3d at 1279 (when

contractor participates in program “to benefit third-parties rather than the

government itself,” government may establish in false claims action “that it

received nothing of value” and thus “that all payments” to contractor are

“recoverable as damages”); United States v. Rogan, 517 F.3d 449, 453 (7th Cir.

2008) (government entitled to recover treble damages based on full value of

fraudulent claims for reimbursement under Medicare and Medicaid programs

without regard to value received by third-party patients).

49

money as the government intended”68 – in which case the government cannot be

said to have received any offsetting, tangible benefit.

While these cases appear to support a treble damages award based on the full

amount of the District‟s grant to WEALTHY, this court has never addressed the

calculation of damages in a False Claims Act case involving third-party

beneficiaries of a government grant. We are satisfied, however, that this prevailing

federal analysis is persuasive and should apply under the District‟s statute. We

adopt it here. The District as plaintiff, of course, bears the burden of proving

damages69 and has done so prima facie in the amount of $310,400, as the trial court

ruled. But appellants must have the opportunity to present evidence (if any) under

prevailing case law that the District, to some extent, received a tangible, not merely

intangible, benefit from appellants‟ use of the grant funds in operating

WEALTHY.70

68

Feldman, 697 F.3d at 88; accord, Longhi, 575 F.3d at 473; Rogan, 517

F.3d at 453.

69

Sci. Applications Int’l Corp., 626 F.3d at 1280.

70

See id.

50

Neither party, however, has briefed the damages issue. Nor has the trial

court fully come to grips with the appropriate measure of damages in light of all

the facts of record and relevant decisional law. Accordingly, we do not resolve the

amount of damages on appeal; rather, we remand the case to the trial court for a

full examination of, and ruling on, the damages awardable to the District.

B. Unjust Enrichment

The District concedes that its claim for unjust enrichment is an alternative

theory of liability, and that “this Court would need to address the unjust

enrichment claim only if the judgment under the False Claims Act is vacated.”

Accordingly, in affirming summary judgment for the District for damages that

would appear, assuredly, to exceed the $31,973 awarded for unjust enrichment, we

vacate the duplicative judgment under that theory.

VIII. Conclusion

To summarize: we affirm summary judgment for the District‟s claim as to

appellants‟ liability under the False Claims Act, but remand the case for further

findings and a legal ruling to determine the appropriate amount of treble damages

51

consistent with this opinion. We vacate the trial court‟s order as to unjust

enrichment.

So ordered.