RESPONDENT’S MOTION TO DISMISS AS A SANCTION

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GRANTED IN PART: August 18, 2026

CBCA 7915, 8303

VENERGY GROUP, LLC,

Appellant,

DEPARTMENT OF VETERANS AFFAIRS,

Respondent.

John M. Manfredonia of Manfredonia Law Offices, LLC, Cresskill, NJ, counsel for

Appellant.

Jennifer L. Hedge, Office of General Counsel, Department of Veterans Affairs,

Pittsburgh, PA; and Jared M. Levin, Office of General Counsel, Department of Veterans

Affairs, Brockton, MA, counsel for Respondent.

Before Board Judges BEARDSLEY, LESTER, and ZISCHKAU.

LESTER, Board Judge.

On April 28, 2026, respondent, the Department of Veterans Affairs (VA), filed a

motion requesting that the Board dismiss these consolidated appeals as a sanction for what

the VA alleges is willful and fraudulent misconduct in which it believes one or more

CBCA 7915, 8303

corporate representatives of appellant, Venergy Group, LLC (Venergy), engaged during the

discovery process.1

In these appeals, Venergy is challenging two contracting officer’s decisions on three

separate matters: (1) the contracting officer’s termination of Venergy’s contract for default;

(2) Venergy’s request for an equitable adjustment of just over $4 million and a time

extension for performance of its contract; and (3) the VA’s demand for payment of

approximately $1.8 million. As confirmed during an evidentiary hearing on the VA’s motion

for sanctions, audited financial statements that Venergy produced in electronic form during

discovery were manipulated through the insertion of white boxes in a manner that hid the

existence of financial information about Venergy’s overhead costs. In addition, dollar

figures and commentary throughout the financial statements were substantially modified.

Through those manipulations and modifications, Venergy, had its misconduct not been

uncovered, would have been better able to support an increase in its general conditions and

home office overhead claims of over $1 million. Metadata in the electronic documents

purportedly identify the first name of the individual who added the white boxes, which

matches the first name of Venergy’s Chief Executive Officer (CEO). It is not clear who

within Venergy manipulated data and then passed it off as authentic, whether it was the CEO

(who, at the hearing, denied responsibility for the changes) or someone else using the CEO’s

Adobe Acrobat account—Venergy’s lack of interest and effort to conduct any kind of

internal investigation to identify the malfeasant actor or to determine whether document

manipulation efforts extend beyond the manipulated documents that the VA was able to

uncover is somewhat shocking—but the intent and purpose of the manipulations is clear: to

increase in a significant manner the amount of damages that Venergy could be awarded in

these appeals. The actions by Venergy about which the VA complains constitute bad faith

and are an affront to the integrity of the Board’s processes, which we cannot ignore.

Venergy’s argument that we lack jurisdiction under the Contract Disputes Act (CDA),

41 U.S.C. § 7101-7109 (2024), to sanction the type of willful misconduct at issue lacks merit.

The misconduct here occurred during the discovery process in the proceedings before the

Board, not during the procurement or performance phases of the contract, and we have

inherent authority to sanction misconduct in proceedings before us. The VA has referred this

In its motion to dismiss, the VA also asked the Board to amend the

then-existing protective order in these appeals to allow it to release protected documents to

the VA’s Office of Inspector General and potentially other agencies for investigation. By

order dated May 7, 2026, we granted the VA’s motion to amend the protective order, see

Venergy Group, LLC v. Department of Veterans Affairs, CBCA 7915, et al., 26-1 BCA

¶ 39,068, at 190,309, leaving only the VA’s motion to dismiss open for resolution.

CBCA 7915, 8303

matter to its Office of Inspector General (OIG), but Venergy elected to participate in an

evidentiary hearing now rather than to await the results of the OIG’s investigation. Given

the egregious and intentional nature of the discovery misconduct, coupled with Venergy’s

failure to engage in any effort to investigate the circumstances under which one of its

employees engaged in obviously intentional document falsification, we grant the VA’s

request to dismiss Venergy’s affirmative monetary claim as a sanction.

That being said, the documentation that was electronically manipulated and effectively

falsified was needed to allow the VA to develop its defenses to Venergy’s affirmative

monetary claim. It was unnecessary to the VA’s default termination decision or the VA’s

own affirmative monetary claim. Because case precedent requires that sanctionable

misconduct in the discovery process be tied to the particular claim for which the discovery

was sought, we have no basis on the existing record to apply any sanction for the alleged

discovery misconduct to Venergy’s default termination challenge or to the VA’s monetary

request. Accordingly, we must deny the VA’s request for dismissal of Venergy’s challenges

to the VA’s default termination and to the VA’s monetary claim. Nevertheless, if, as this

case proceeds, the VA uncovers manipulations to documents relevant to the default

termination or the VA’s monetary claim, the VA is not precluded from seeking additional

sanctions.

Background

On September 30, 2019, the VA awarded a contract to Venergy for the design and

construction of major renovations to Research Building No. 2 at the James A. Haley VA

Medical Center in Tampa, Florida. On July 28, 2023, long after Venergy was originally

supposed to have completed contract performance, the VA contracting officer issued a

decision terminating Venergy’s contract for default, finding that “Venergy has failed to

diligently pursue the remaining work on the contract in order to insure completion.” Appeal

File, Exhibit 191, at 2396.2

Venergy filed a notice of appeal of that termination decision with the Board on

October 23, 2023, which the Clerk of the Board docketed as CBCA 7915. Early in the

litigation, the parties made the Board aware that Venergy was planning to submit an

affirmative monetary claim under the contract to the VA contracting officer. Nevertheless,

the parties agreed to commence discovery on the default termination matter, with the

understanding that, if the contracting officer denied Venergy’s monetary claim, the parties

All exhibits referenced in this decision are contained in the appeal file unless

otherwise noted.

CBCA 7915, 8303

might require additional discovery following Venergy’s appeal of that denial, which could

affect the timing of the resolution of the parties’ dispute on the default termination. See

Conference Memorandum and Scheduling Order (Mar. 6, 2024) at 2 (discussing the parties’

representations during a status conference).

On July 30, 2024, Venergy submitted a claim to the VA contracting officer under the

CDA, seeking delay damages totaling $4,237,151.53 and a time extension for the completion

of contract performance through October 31, 2023. Exhibit 293 at 3107. In its claim,

Venergy alleged that the VA had caused and was responsible for 989 days of excusable

delays on the project because of suspensions of work, cardinal changes, breaches of the

contract, withholding of superior knowledge, defective specifications, and breaches of the

implied duty not to hinder performance. Id. at 3065, 3085-102. It sought 989 days of direct

general conditions costs of $1358.51 per day, totaling $1,343,455.39 (id. at 3103); an

overhead markup on its general conditions costs of 41%, totaling $550,862.22 (id. at 3107);

989 days of unabsorbed home office overhead, calculated using the formula set forth in

Eichleay Corp., ASBCA 5183, 60-2 BCA ¶ 2688, totaling $2,170,657.20 (id. at 3104-07);

and a profit markup of 10% on the Eichleay calculation, totaling $217,065.72. Id. at 3107.

In the Eichleay calculation in its claim, Venergy identified total contract billings as

$18,099.484.15 and total company billings as $74,787,132.74. Id. at 3106. In total, Venergy

sought payment of $4,237,151.53 from the VA through its claim, “[p]lus, attorney fees,

consultant fees, expert fees, CDA interest and other costs as allowed under the Equal Access

to Justice Act.” Id. at 3107.

Soon thereafter, by motion dated August 9, 2024, the parties jointly requested that the

Board stay proceedings in CBCA 7915 pending the contracting officer’s issuance of a

decision on Venergy’s July 30 claim. By order dated August 12, 2024, the Board granted

that motion. Subsequently, in a final decision dated December 13, 2024, the contracting

officer denied Venergy’s delay claim and, at the same time, asserted an affirmative

government claim seeking payment to the Government of $1,842,960.31 “because of

Venergy’s failure to complete the Project by the agreed-upon Contract completion date.”

Notice of Appeal (CBCA 8303), Attachment 2 at 1. Venergy appealed that decision to the

Board on December 26, 2024, and the Clerk of the Board docketed that appeal as

CBCA 8303.

At the parties’ joint request, by order dated January 7, 2025, the Board consolidated

CBCA 7915 and 8303. The Board issued an order adopting, with slight modifications, the

parties’ proposed schedule for discovery and pre-hearing activities. See Consolidation and

Scheduling Order in CBCA 7915, 8303 (Jan. 7, 2025) at 4; see also Scheduling Order in

CBCA 7915 (Nov. 22, 2024) at 1-2. The parties then resumed discovery efforts in both

appeals.

CBCA 7915, 8303

On March 5, 2025, Venergy requested, without opposition from the VA, that the

Board issue a protective order through which it could limit the distribution of confidential

and/or proprietary documents, information, and tangible items in these appeals. The Board

granted that unopposed request by order dated March 18, 2025, defining the types of

information that Venergy could designate as “protected” in these appeals as follows:

The term “protected material” as used in this protective order shall mean

documents, information, or other tangible items that (a) constitute or contain

confidential research, confidential financial information and commercially

sensitive information, proprietary commercial information, and/or trade

secrets, the disclosure of which might, with reasonable probability, adversely

affect a party’s or non-party’s competitive business position and/or affect a

party’s or non-party’s legally protected rights and (b) are designated protected

material by the procedures set forth in this order.

Corrected Protective Order (Mar. 19, 2025) ¶ 1. Nevertheless, the Board directed in the

protective order that “[n]othing in this protective order shall be construed to prohibit the

disclosure by any federal agency party of materials covered by the protective order to other

appropriate persons within the federal government, for those persons’ official use.” Id. ¶ 13.

As discovery continued, the VA, on July 11, 2025, filed a motion to compel Venergy

to provide complete responses to outstanding document production requests and

interrogatories. On July 25, 2025, soon after the VA filed its motion, Venergy produced

what appeared to be its 2020, 2022, and 2023 audited financial statements to the VA, but

briefing on the VA’s motion to compel continued. As described in the VA’s motion to

compel, to allow it to respond to Venergy’s claims for general conditions costs, overhead,

unabsorbed home office overhead under the Eichleay formula, and profit, the VA was

seeking to obtain financial and cost information for the contract, including, but not limited

to, labor reports, payroll records, unabsorbed home office overhead rates, equipment rates,

and subcontractor costs. The VA also specifically requested (in production request no. 35)

production of all audited and/or unaudited financial statements prepared by or for Venergy

for the period from 2017 to 2024, as follows:

For the period from 2017 to 2024, please produce all audited and/or unaudited

financial statements prepared for or by Venergy. Financial statements include

balance sheets, cash flow statements, income statements, profit and loss

statements, earnings statements, “contract schedules,” and similar documents,

including all notes and supporting schedules to the financial statements.

Financial statements also include any forms or financial condition reports

provided to lenders or investors to obtain or attempt to obtain financing.

CBCA 7915, 8303

Exhibit 2 to Respondent’s Motion to Compel (July 11, 2025) ¶ 35. In its response to the

VA’s motion to compel, Venergy offered monitored access to its electronic accounting

system and stated that “[i]n response to this motion to compel, Appellant has provided

complete copies of [its] annual reports” for the years 2019 through 2023 (but not for 2017,

2018, or 2024). Appellant’s Response to Motion to Compel (Aug. 5, 2025) at 3, 9. In

response to another VA request (no. 40) for “all company financial forecasts and budgets

prepared by or for Venergy from 2017 to 2024,” Venergy represented that it “has provided

Venergy’s financial forecast report for 1/20/2020 to 7/28/2023,” a period somewhat shorter

than the VA was requesting. Id. at 9. It filed the financial statements that it had produced

to the VA for 2020 (which encompasses both 2019 and 2020), 2022 (which encompasses

both 2021 and 2022), and 2023 as Exhibits 17, 18, and 19 to its response.

In an order dated September 11, 2025, the Board granted the VA’s motion in part.

Although the VA believed that Venergy should have been required to search its electronic

files for all documents responsive to the VA’s production requests, the Board ultimately

agreed that Venergy’s approach—allowing monitored access to Venergy’s accounting system

through which the VA could conduct searches for responsive information—was consistent

with the Federal Rules of Civil Procedure (FRCP). See Venergy Group, LLC v. Department

of Veterans Affairs, CBCA 7195, et al., 25-1 BCA ¶ 38,910, at 189,396. The Board also

agreed with Venergy that the VA had not shown the necessity of producing documents from

2017, 2018, or 2024. Id. Nevertheless, the Board required that “[i]n response to request nos.

35 and 40, to the extent that Venergy has previously produced redacted copies of financial

audit reports and related information, it . . . again produce those documents but without

redactions.” Id.

Following several requests for extensions of time from the parties, discovery closed

on February 13, 2026. See Scheduling Order (Dec. 16, 2025) at 2. The parties then

requested that the Chair of the Board assign a neutral to assist them in mediation, and the

Board temporarily suspended proceedings in these appeals while the parties attempted to

resolve their disputes amicably through mediation.

On April 28, 2026, the VA reported that it had withdrawn from mediation and filed

what it titled “Respondent’s Motion for Sanctions and Request to Release Protected

Documents for Investigation.” The VA tells us that, after the Board issued its September 11,

2025, order on the VA’s motion to compel, Venergy “produced documents purporting to

comply with the Board’s order (see [Appellant’s Response to Respondent’s Motion to

Compel,] Exhibits 17-20)” and that the “VA continued working through discovery.”

Respondent’s Motion for Sanctions at 4. Nevertheless, the VA was having difficulty

correlating information that it was being provided with information that it already had.

Consistent with the Board’s order on the motion to compel, Venergy provided the VA access

CBCA 7915, 8303

to its electronic Foundation® construction accounting software system, limited to the

contract at issue, but much of the information that the VA’s construction damages expert was

finding was inconsistent with the 2020, 2022, and 2023 audited financial statements that

Venergy had produced to the VA on July 25, 2025.

At a certain point, the VA reports, it discovered an allegedly intentional masking

effort that altered the financial information that the VA could see in the produced documents:

VA’s expert spent significant time trying to reconcile the documents produced

against other information VA received. He could not. Exhibits 17-19 [to

Appellant’s Response to Respondent’s Motion to Compel] did not tally to the

same amount listed in [Venergy’s] financial system. Then VA discovered, in

Exhibit 17, that someone [identified as the author in an Adobe Acrobat

comments box with a name that matched the first name of a corporate officer

at Venergy] had changed the document by placing white boxes over sections

[using Adobe Acrobat’s Rectangle tool] so that they could not be seen.

Respondent’s Motion for Sanctions at 4 (footnotes omitted). As the VA explains it, when

it opened the version of Venergy’s 2020 financial statement that Venergy originally produced

(Exhibit 17), “it found that [white] rectangles had been manually placed over financial data”

(eliminating the statement’s schedule of earnings from contracts, schedule of contracts in

progress, and schedule of completed contracts) and that this act had been performed “by a

user” identified only by his first name, which is the same first name of Venergy’s CEO.

Respondent’s Sanctions Reply Brief (June 9, 2026) at 3. “When [the white boxes were]

removed,” the VA reports, “additional pages became visible.” Id. By removing the

electronic white box redactions, a thirteen-page financial report that Venergy produced to the

VA became an eighteen-page financial report, reflecting schedules of earnings from

contracts, schedules of contracts in progress, and schedules of completed contracts that the

VA was unaware existed before it removed the electronic white boxes. Respondent’s Motion

for Sanctions at 4-6; Appellant’s Response to Respondent’s Motion to Compel, Exhibit 17;

Respondent’s Motion for Sanctions, Exhibit I.3 In addition, the table of contents to the

financial statement contained similar white rectangular electronic redactions covering over

The complete 2020 financial statement that Venergy eventually produced to

the VA was nineteen, not eighteen, pages and contained a table of contents that had a page

number that differed from that contained in the originally produced (redacted) 2020 financial

statement. Compare Appellant’s Response to Respondent’s Motion to Compel, Exhibit 17

with Respondent’s Motion for Sanctions, Exhibit I. The record contains no explanation of

the change to the page number in the financial statement.

CBCA 7915, 8303

any reference to the existence of the redacted schedules, ensuring that the reader would not

realize that schedules were supposed to be a part of the statement. Respondent’s Motion for

Sanctions at 4-6; Respondent’s Sanctions Reply Brief at 5.

The same white-box redactions were found in Venergy’s 2022 and 2023 financial

statements, and the VA also eventually discovered that affirmative alterations to dollar

figures and/or commentary changes had been made on every single page of the 2020, 2022,

and 2023 financial statements that Venergy originally produced to the VA, creating what

looked like inexplicable mathematical errors. Compare Appellant’s Response to

Respondent’s Motion to Compel, Exhibits 18, 19 with Respondent’s Motion for Sanctions,

Exhibits J, K. The VA alleged that “Venergy actively concealed the fact that it had stripped

critical data (and changed amounts) from the produced documents—data that was directly

and materially relevant to Venergy’s claim for damages.” Respondent’s Motion for

Sanctions at 17. In addition to requesting dismissal as a sanction, the VA asked for

permission to release documents subject to the March 19, 2025, protective order to the OIG

and potentially other federal agencies.

We asked Venergy to respond in a short time frame to the VA’s request for permission

to release information to the OIG, and, on May 7, 2026, following Venergy’s response, we

issued an order amending the existing protective order to permit that release. Venergy

Group, LLC, v. Department of Veterans Affairs, CBCA 7915, et al., 26-1 BCA ¶ 39,068, at

190,309. We asked Venergy to respond to the merits of the VA’s motion to dismiss by

May 28, 2026, which it did. In its response, Venergy first argued that the Board lacks

jurisdiction to entertain the VA’s motion because it alleges fraud, which the CDA does not

permit the Board to decide. Alternatively, it argued, among other things, that: (1) the facts

as alleged by the VA are inaccurate; (2) the VA did not notify counsel for Venergy that the

financial statements were missing supplementary schedules before depositions were

conducted and that, with timely notice, Venergy’s counsel could have obtained complete

unredacted statements; and (3) the VA improperly did not negotiate with Venergy regarding

missing discovery before filing its motion for sanctions. In a declaration from Venergy’s

CEO that accompanied the response brief, the CEO represented, under penalty of perjury

pursuant to 28 U.S.C. § 1746, that “the initial versions of these [financial] statements,” when

produced to the VA in July 2025, “inadvertently omitted information . . . and contained

revisions to the table of contents that excluded reference to those schedules,” Venergy CEO

Declaration (May 28, 2026) ¶ 5, which Venergy argued was not the type of intentional

misconduct for which a sanction of dismissal could be imposed. Venergy also reported that,

on February 16 and 17, 2026, after learning that the VA had uncovered white-out redactions

and other alterations in Venergy’s financial statements, Venergy provided the VA with clean

unredacted copies of the statements, see Venergy CEO Declaration ¶ 10, which, Venergy

CBCA 7915, 8303

argues, eliminates any prejudice from the original defects and renders the motion for

sanctions moot.

After receiving the VA’s reply brief on June 6, 2026, the Board elected to schedule

a fact-finding evidentiary hearing limited to the discovery misconduct alleged in the VA’s

motion for sanctions. Although the Board offered Venergy the opportunity to delay that

hearing until the OIG had indicated whether it intended to investigate this matter, Venergy

declined to delay proceedings. At the parties’ request, the Board scheduled the hearing for

July 29, 2026.

During the hearing, the VA’s expert witness presented Adobe Acrobat “Rectangle

Properties” metadata from one of the altered financial statements, which showed that

white-box redactions to that document, effectively removing (1) the four schedules at the end

of the financial statement reflecting company contract billings information and (2) the

accompanying portions of the statement’s table of contents identifying the existence of the

last four pages, were inserted between 5:08 p.m. and 5:10 p.m. on July 24, 2025, the day

before the July 25, 2025, production of the financial statements to the VA. Schambach

Demonstrative 7. The expert testified that the “most impactful change” to the financial

statements, from a damages standpoint, was the change to each year’s total company billings,

which, because of the manner in which that figure is used in the Eichleay calculation,

increased Venergy’s home office overhead claim by approximately $1.1 million above that

which the original audited statements would otherwise have supported. Schambach

Demonstrative 19. Another significant impact of the changes was to Venergy’s general

conditions overhead claim, which, because of alterations to the identified costs of revenue

earned, increased Venergy’s overhead rate from what it should have been—11.3%—to

21.37% (although Venergy, in its certified claim, had requested 41%), increasing Venergy’s

claim by more than $100,000. Schambach Demonstratives 20, 21.

Venergy’s CEO and its outside Certified Public Accountant (CPA) both testified at

the hearing. Even though the CEO had declared, on May 28, 2026, that Venergy had

“inadvertently omitted information” from the financial statements when first producing them,

Venergy CEO Declaration ¶ 5, he disclaimed any knowledge at the hearing of how the

financial statements that were produced in July 2025 were altered from their original form

and knew only that he had not personally altered them. The CPA, who also disclaimed any

involvement in the alterations, testified that the financial statements which Venergy produced

to the VA on July 25, 2025, were not the statements that she had issued. In addition to places

where white boxes were inserted to remove information in the table of contents and

effectively delete all company contract revenue information, every single page of each

financial statement had been altered to insert different information and dollar figures than the

original audited financial statements. Schambach Demonstratives 6, 7, 8, 9, 10, 11, 12, 13,

CBCA 7915, 8303

14, 15, 16; 2020, 2022, and 2023 Financial Statement (FS) Comparison Demonstratives

(filed July 24, 2026).

Although both the CEO and the CPA testified that they did not alter the financial

statements, the CEO indicated that a now-former employee who was assisting with the

production and who was a proponent of using Grok, an artificial intelligence tool (AI), would

have had access to the CEO’s Adobe Acrobat account but does not know if that employee

manipulated them. Nevertheless, Venergy has not contacted that former employee for

information or undertaken any other kind of internal investigation to attempt to uncover the

original source of the alterations or to determine whether those document alteration efforts

extended beyond the manipulated documents that the VA was able to identify. Unable to

explain how the redactions and alterations to the financial statements occurred, Venergy’s

main argument against sanctions is that the VA did not suffer prejudice from the original

production of manipulated financial statements because, after the manipulations and

alterations were discovered and reported, Venergy provided complete copies of the original

financial statements to the VA (although one of them is still missing a page identifying the

total contract billings for 2021).

Discussion

Venergy’s Request to Seal Misconduct Allegations

When it filed its motion to dismiss on April 28, 2026, the VA provided the Board with

both a protected version of the motion, which was subject to the protective order that the

Board had previously issued, and a redacted version that could be made publicly available.

In its redacted public version, the VA blacked out financial information that the VA had

pulled from documents that Venergy had marked as protected. Three days after the VA filed

its motion to dismiss, Venergy filed its own motion seeking to add redactions to the VA’s

public version of the motion to dismiss. Venergy’s proposed redactions would remove from

the public version the VA’s description of what Venergy allegedly did to manipulate its

electronic records (allegedly to hide information) and the names of the individuals on

Venergy’s side who allegedly may have been involved in manipulating the electronic

financial records that Venergy produced to the VA. The Board denied Venergy’s request in

an order dated May 7, 2026. To the extent that Venergy wants the Board to redact such

information from its decision here as well, that request is similarly denied.

The United States Court of Appeals for the Federal Circuit has “consistently

recognized that the public has a ‘highly significant’ and ‘longstanding’ right of access to

‘inspect and copy public records and documents, including judicial records and documents.’”

Global K9 Protection Group, LLC v. United States, 175 F.4th 1348, 1356 (Fed. Cir. 2026)

CBCA 7915, 8303

(quoting DePuy Synthes Products, Inc. v. Veterinary Orthopedic Implants, Inc., 990 F.3d

1364, 1369 (Fed. Cir. 2021) (quoting Nixon v. Warner Communication, Inc., 435 U.S. 589,

597 (1978))); see Ace-Federal Reporters, Inc. v. General Services Administration, GSBCA

13298-REM, et al., 02-2 BCA ¶ 31,912, at 157,644 (“It is well settled that accessibility of

judicial documents and proceedings to the public is a centuries-old component of our legal

system.”). “[W]hile public access to court records and proceedings is not absolute, there has

been a longstanding presumption in its favor.” Ace-Federal Reporters, 02-2 BCA at

157,644; see Global K9 Protection, 175 F.4th at 1356. “[T]his strong presumption of public

access to judicial records applies with equal force to records of the boards of contract

appeals.” Ace-Federal Reporters, 02-2 BCA at 157,644 (citing AT&T Communications v.

General Services Administration, GSBCA 14732, 2001 WL 37165511 (Oct. 11, 2001)).

Nevertheless, “[t]he presumption for access is to be balanced against the countervailing

interest of commercial confidentiality.” Id. at 157,645. The Board “must consider whether

the proposed redactions involve commercially sensitive information such that disclosure

would cause more harm to the firms’ competitive positions than non-disclosure would add

benefit to the public’s access interest.” Id. “Tribunals are required to ‘skeptically review

sealing requests to insure that there really is an extraordinary circumstance or compelling

need.’” Id. (quoting Encyclopedia Brown Productions v. Home Box Office, 26 F. Supp. 2d

606, 611 (S.D.N.Y. 1998)).

“Those seeking to maintain the confidentiality of judicial records have a heavy burden

and must show a compelling interest.” Ace-Federal Reporters, 02-2 BCA at 157,645. “Only

a ‘strong justification’ shown by a party wanting to restrict access may overcome the

presumption of access.” Global K9 Protection, 175 F.4th at 1356 (quoting DePuy Synthes,

990 F.3d at 1369). In its request for additional redactions, Venergy did not make any attempt

to explain why protection of the material that it wanted redacted was necessary or justified.

Even if we were to attempt to find a basis for protection on Venergy’s behalf, we cannot

identify any part of the definition of “protected material” in the protective order that could

encompass the information that Venergy wanted redacted from public view. Paragraph 1 of

the protective order defines the types of information that can be designated as “protected”

in these appeals as “confidential research, confidential financial information and

commercially sensitive information, proprietary commercial information, and/or trade

secrets, the disclosure of which might, with reasonable probability, adversely affect a party’s

or non-party’s competitive business position and/or affect a party’s or non-party’s legally

protected rights.” Corrected Protective Order ¶ 1. The material that Venergy wanted

redacted is plainly not confidential research, confidential financial information, proprietary

commercial information, or a trade secret. The only part of the “protected material”

definition that remains is “commercially sensitive information.” Even if Venergy could

establish that a public description of its alleged misconduct and the fact that the matter has

been referred to the VA OIG might “adversely affect [its] competitive business position

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and/or . . . legally protected rights,” it cannot show that the information is “commercially

sensitive information.”

By definition, “[t]rade secret or commercially sensitive information must be

‘important proprietary information.’” Lodestar Anstalt v. Route 66 Junkyard Brewery, No.

CV 17-0062 JCH/JHR, 2019 WL 1795535, at *6 (D.N.M. Apr. 24, 2019) (quoting Zoobuh,

Inc. v. Rainbow International Corp., No. 2:14-cv-00477-DN, 2015 WL 2093292, at *3

(D. Utah May 5, 2015)). “Proprietary information” is “[i]nformation in which the owner has

a protectable interest,” which, like a “TRADE SECRET,” “is kept confidential to maintain

an advantage over competitors.” Black’s Law Dictionary 1414, 1724 (10th ed. 2014); see

Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/proprietary (last

visited Aug. 18, 2026) (defining “proprietary” as “of, relating to, or characteristic of an

owner or title holder” or “used, made, or marketed by one having the exclusive legal right”).

Under FRCP 26(c)(1)(G), to which we may look under the Board’s Rules, “a [tribunal] may,

for good cause, issue a protective order (or permit a party to avail itself of an already issued

protective order) to require that ‘a trade secret or other confidential research, development,

or commercial information not be revealed or be revealed only in a specified way.’”

Lodestar Anstalt, 2019 WL 1795535, at *6 (quoting Coll v. Stryker Corp., No. CV 14-1089

KG/SMV, 2017 WL 3190658, at *2 (D.N.M. May 24, 2017)). “When a party seeks such a

protective order, it ‘must first establish that the information sought is a trade secret [or

important proprietary information] and then demonstrate that its disclosure might be

harmful.’” In re Cooper Tire & Rubber Co., 568 F.3d 1180, 1190 (10th Cir. 2009) (quoting

Centurion Industries, Inc. v. Warren Steurer & Associates, 665 F.2d 323, 325 (10th Cir.

1981)). “It is within the sound discretion of the trial court to decide whether trade secrets

[and proprietary information] are relevant and whether the need outweighs the harm of

disclosure.” Centurion Industries, 665 F.2d at 326.

Here, the information that Venergy wanted us to withhold from public view is not

“important proprietary information.” It instead is information that Venergy might find

embarrassing, which is an insufficient basis for non-disclosure. See, e.g., Publicker

Industries, Inc. v. Cohen, 733 F.2d 1059, 1074 (3d Cir. 1984) (“The presumption of openness

. . . [is] not overcome by . . . the interest of upper-level management in escaping

embarrassment.”); Culinary Foods, Inc. v. Raychem Corp., 151 F.R.D. 297, 301 (N.D. Ill.

1993) (“A claim that public disclosure of information will be harmful to a defendant’s

reputation is not ‘good cause’ for a protective order.”). Venergy does not truly “own”

information alleging discovery fraud, as required under the definition of “proprietary”

information, since the VA OIG could publicly announce an investigation at any time.

Accordingly, Venergy cannot viably assert that information regarding an OIG investigation

is proprietary to Venergy. We are unable to find any part of the protective order’s definition

of “protected material” to which Venergy’s proposed redactions could attach.

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The Federal Circuit has recently chastised lower tribunals for failing to take seriously

their obligations to ensure that information is designated as and considered to be protected

only when appropriate. See Global K9 Protection, 174 F.4th at 1356. It has held that “[t]he

public interest in understanding the course of government-contract litigation is compelling”

and that tribunals considering government contract matters “ha[ve] an obligation to ensure

that the public right of access is vindicated.” Id. As a result, we have no basis to keep the

VA’s decision to refer Venergy’s alleged misconduct to the VA OIG’s office and the basis

of its misconduct allegations private and shielded from public view.

II.

The Board’s Authority to Dismiss as a Sanction for Discovery Misconduct

“Inherent in the statutory mandate” of the CDA “is a board’s authority to control

proceedings before it, including discovery, and to interpret and enforce its own rules.”

Duckels Construction, Inc., AGBCA 89-218-1, 90-3 BCA ¶ 22,955, at 115,239. Pursuant

to Board Rule 35(b) (48 CFR 6101.35(b) (published in eCFR)), the Board may impose

appropriate sanctions “[i]f a party . . . fails to comply with any direction or order of the Board

(including an order to provide or permit discovery) or engages in misconduct affecting the

Board, its process, or its proceedings.” Permissible sanctions “may include . . . [d]ismissing

the case or any part thereof.” Id. 6101.35(b)(6).

The Board’s authority to dismiss an appeal as a sanction in an appropriate case is

well-established. See, e.g., Griffin & Dickson v. United States, 16 Cl. Ct. 347, 351 (1989);

Metadure Corp. v. United States, 6 Cl. Ct. 61, 67 (1984). “[T]he case management authority

of the [boards of contract appeals] is no different from that of federal trial courts which, by

virtue of their case management authority, are given broad discretion to manage the litigation

on their dockets.” Avant Assessment, LLC v. Secretary of the Army, 752 F. App’x 1000,

1003 (Fed. Cir. 2018) (quoting Metadure Corp., 6 Cl. Ct. at 67); see Suffolk Construction Co.

v. General Services Administration, CBCA 2953, et al., 17-1 BCA ¶ 36,717, at 178,797-78.

Like federal courts, “the Board has available to it, and has used, a variety of sanctions

designed to enforce compliance with our Rules and orders and secure the just and expeditious

resolution of the disputes before us,” Environmental Safety Consultants, Inc., ASBCA 58343,

14-1 BCA ¶ 35,786, at 175,050 (citation omitted), including forbidding a party to challenge

the accuracy of evidence, refusing to allow a party to support or oppose designated claims

or defenses, drawing evidentiary inferences against a party, and, when appropriate, dismissal.

Rule 35(b)(2), (3), (6), (8); see Medtek, Inc. v. Department of Veterans Affairs, CBCA 1544,

09-2 BCA ¶ 34,285, at 169,368.

Nevertheless, the sanction of dismissal is viewed as “a harsh remedy, which should

be reserved for only the most severe abuses of the discovery process.” Hendler v. United

States, 952 F.2d 1364, 1382 (Fed. Cir. 1991). Normally, before authorizing dismissal, the

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tribunal must “find that the responsible party acted or failed to act with a degree of

culpability that exceeds simple inadvertence or mistake before it may choose dismissal as a

sanction for discovery violations. Any sanctions . . . must be premised on a finding that the

culpable party willfully abused the judicial process or otherwise conducted the litigation in

bad faith.” Ramirez v. T&H Lemont, Inc., 845 F.3d 772, 776 (7th Cir. 2016); see Archibeque

v. Atchison, Topeka, & Santa Fe Railway Co., 70 F.3d 1172, 1174 (10th Cir. 1995)

(“Because of the harshness of dismissal . . . , due process requires that the discovery violation

be predicated upon ‘willfulness, bad faith, or [some] fault of petitioner’ rather than inability

to comply.” (quoting National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S.

639, 640 (1976) (quoting Societe Internationale v. Rogers, 357 U.S. 197, 212 (1958))));

Searock v. Stripling, 736 F.2d 650, 653 (11th Cir. 1984) (“A finding of such extreme

circumstances necessary to support the sanction of dismissal must, at a minimum, be based

on evidence of the sanctioned party’s willfulness, bad faith or fault in failing to comply with

a discovery order.”).

That being said, “it is well-settled that fabricating and submitting knowingly false

evidence amounts to willful and bad faith conduct.” American Rena International Corp. v.

Sis-Joyce International Co., No. CV 12–6972 FMO (JEMx), 2015 WL 12732433, at *23

(C.D. Cal. Dec. 14, 2015). The intentional manipulation or falsification of evidentiary

documents that are then produced in discovery is a particularly egregious abuse of process

that “undermines the most basic foundations of our judicial system.” Secrease v. Western

& Southern Life Insurance Co., 800 F.3d 397, 402 (7th Cir. 2015); see Litton Systems, Inc.

v. American Telephone & Telegraph Co., 91 F.R.D. 574, 576 (S.D.N.Y. 1981) (“Destruction

or concealment by a party of relevant documents in its files threatens the viability and public

acceptance of the system.”). “Our adversarial system of civil justice rests upon access of all

parties to all evidence bearing on the controversy between them, including that in the control

of adverse parties. This, of course, requires the absolute honesty of each party in answering

discovery requests and complying with discovery orders.” Litton Systems, 91 F.R.D. at 576.

“Imperative to the proper functioning of our system of justice is ‘complete and accurate

responses to discovery’ requests.” In re Tutu Wells Contamination Litigation, 162 F.R.D.

46, 71 (D.V.I. 1995) (quoting Averbach v. Rival Manufacturing Co., 879 F.2d 1196, 1201

(3d Cir. 1989)). “Our system of civil litigation cannot function if parties . . . suppress

information called for upon discovery.” Rozier v. Ford Motor Co., 573 F.2d 1332, 1345 (5th

Cir. 1978).

The harm caused by the receiving party’s receipt (and discovery) of a falsified or

manipulated document goes beyond concerns about the falsified document itself. It also

sows doubt about the veracity of other documents that were produced by the falsifying party,

even if the receiving party cannot readily establish manipulation of those documents, which

in turn undermines perceptions about the integrity of the Board’s processes, and it imposes

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additional costs on the receiving party as that party tries to verify the other documents’ true

content:

The submission of falsified evidence substantially prejudices an opposing

party by casting doubt on the veracity of all of the culpable party’s submissions

throughout litigation. The prejudiced party is forced either to attempt

independent corroboration of each submission, at substantial expense of time

and money, or to accept the real possibility that those discovery documents

submitted by the opposing party are inaccurate. Nor is the exclusion of the

fabricated evidence always enough to deter discovery misconduct. “Litigants

would infer that they have everything to gain, and nothing to lose, if

manufactured evidence merely is excluded while their lawsuit continues.”

Garcia v. Berkshire Life Insurance Co., 569 F.3d 1174, 1180 (10th Cir. 2009) (quoting Pope

v. Federal Express Corp., 138 F.R.D. 675, 683 (W.D. Mo. 1990), aff’d in part, vacated in

part on other grounds, 974 F.2d 982 (8th Cir. 1992)); see Slate v. American Broadcasting

Cos., 941 F. Supp. 2d 27, 48-49 (D.D.C. 2013).

“To permit the fabrication of spurious corroborating evidence without the imposition

of a harsh responsive sanction would constitute an open invitation to abuse of the judicial

system of the most egregious kind.” Asia Pacific Agricultural & Forestry Co. v. Sester

Farms, No. 3:12-CV-00936-PK, 2013 WL 4742934, at *11 (D. Ore. Sept. 3, 2013); see New

York Credit & Financial Management Group v. Parson Center Pharmacy, Inc., 432 F. App’x

25 (2d Cir. 2011) (“Falsifying evidence is sanctionable conduct,” and “[s]ubmitting falsified

evidence is also properly sanctionable.”). “[O]nce culpable conduct is found, the [tribunal]

is required to impose such sanctions that are just, both ‘to penalize’ the wrongful conduct and

‘to deter those who might be tempted to such conduct in the absence of a deterrent.’” Tutu

Wells Contamination, 162 F.R.D. at 63 (quoting National Hockey League, 427 U.S. at 643).

“The [tribunal’s] obligation is to protect not only litigants who may suffer from abusive

litigation practices of their adversaries, but also to promote the proper function of a fair and

effective judicial system which, while it is adversarial, need not also be callous, uncivil,

sneaky or booby-trapped. When it becomes so, the courts must act decisively.” Derzack v.

County of Allegheny, Pa., 173 F.R.D. 400, 411 (W.D. Pa. 1996).

Courts considering misconduct claims involving the manipulation, falsification, or

manufacturing of relevant evidence by a plaintiff or appellant have often found that dismissal

is an appropriate sanction. In Amfosakyi v. Frito Lay, Inc., 496 F. App’x 218 (3d Cir. 2012),

the United States Court of Appeals for the Third Circuit considered whether dismissal as a

sanction was appropriate after a plaintiff was caught falsifying a material document as part

of the discovery process. The court referred to a prior court decision, Poulis v. State Farm

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Fire & Casualty Co., 747 F.2d 863 (3d Cir. 1984), to identify six factors that it believed a

tribunal should weigh in deciding whether the sanction of dismissal was appropriate:

Those six factors include: (1) the extent of the party’s personal responsibility;

(2) the prejudice to the adversary caused by the conduct at issue; (3) a history

of dilatoriness; (4) whether the conduct of the party was willful or in bad faith;

(5) the effectiveness of sanctions other than dismissal, which entails an

analysis of alternative sanctions; and (6) the meritoriousness of the claim or

defense.

Amfosakyi, 496 F. App’x at 225. “Not every factor must weigh in favor of dismissal,” it

recognized, “so long as most do.” Id. It then discussed the likelihood that an intentional

effort by a party to falsify documents in the discovery process that are material to its case,

in and of itself, would provide a basis for dismissal as a sanction:

We agree with the District Court that the record conclusively establishes that

[plaintiff] falsified a document produced in discovery that was material to his

claim of discrimination, and then testified falsely in his deposition regarding

that document. Simply put, a litigant who provides false documentation and/or

untruthful testimony during the course of discovery in an improper attempt to

influence the outcome of the civil action may be prohibited by the District

Court, pursuant to Poulis and Rule 37 [of the Federal Rules of Civil

Procedure], from proceeding with the civil action. The record establishes that

[plaintiff] had a full and fair opportunity to respond to [defendant’s] motion

for sanctions, and that the Magistrate Judge’s findings and recommendations

were the result of sound legal analysis and not personal bias. Accordingly, the

District Court did not abuse its discretion in granting [defendant’s] motion for

sanctions.

Id. (citation omitted); see Ingalls Shipbuilding Co. v. United States, 857 F.2d 1448, 1451

(Fed. Cir. 1988) (“The harsh remedy of de facto dismissal is appropriate where the failure

to comply with a pretrial discovery order is due to ‘willfulness, bad faith, or . . . fault’ on the

part of a litigant.” (quoting Societe Internationale, 357 U.S. at 212)); Oniha v. Delta Airlines,

Inc., No. 1:19-CV-05272-LMM, 2021 WL 4930127, at *8 (N.D. Ga. Sept. 13, 2021)

(“Simply acting as if Plaintiff had not fabricated a key piece of evidence and then perjured

himself at deposition would not adequately address his abuses of the judicial process. Only

dismissal would do so.”), aff’d, No. 21-13532, 2022 WL 580933 (11th Cir. Feb. 25, 2022);

Young v. Office of Senate Sergeant at Arms, 217 F.R.D. 61, 70 (D.D.C. 2003) (“[D]ismissal

is the appropriate sanction where a party manufactures evidence which purports to

corroborate its substantive claims.” (quoting Vargas v. Peltz, 901 F. Supp. 1572, 1580-81

CBCA 7915, 8303

(S.D. Fla. 1995))); Pacific Far East Line, Inc. v. R.J. Reynolds Industries, Inc., No. C

76-2312 AJZ, 1981 WL 2517, at *12 (N.D. Cal. Sept. 14, 1981) (“[W]here deliberate

falsehood in the discovery process has been established, the courts have granted the sanction

of dismissal.”), aff’d sub. nom. Wyle v. Reynolds Industries, Inc., 709 F.2d 585 (9th Cir.

1983).

In fact, because of the egregiousness of intentional document manipulation in

discovery and its impact on the integrity of the judicial process, some courts have found that

consideration of a lesser sanction than dismissal is not “necessary in a case in which the

plaintiff’s fraud is criminal in character and would if undetected destroy a legitimate and

dispositive defense.” Oliver v. Gramley, 200 F.3d 465, 466 (7th Cir. 1999); see Aoude v.

Mobil Oil Corp., 892 F.2d 1115, 1119 (1st Cir. 1989) (“[A] federal district judge can order

dismissal or default where a litigant has stooped to the level of fraud on the court.”); Omran

v. Bleezarde, No. 1:15-cv-00190-DBH, 2016 WL 5401018, at *9 (D.N.H. Aug. 26, 2016)

(“[D]ismissal is appropriate when a party commits a fraud on the court” by manufacturing

evidence.), recommendation adopted, 2016 WL 5394692 (D.N.H. Sept. 27, 2016), aff’d, No.

16-1638, et al., 2018 WL 1840194 (1st Cir. Jan. 8, 2018). It is unclear to the Board,

however, if the Federal Circuit would adopt that reasoning. In Micron Technology, Inc. v.

Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011), in which the Court considered a situation

involving bad faith spoliation of evidence rather than intentional manipulation and

modification of documents, the Court recognized that “[d]ismissal is a ‘harsh sanction,’ to

be imposed only in particularly egregious situations where ‘a party has engaged deliberately

in deceptive practices that undermine the integrity of judicial proceedings.’” Id. at 1328

(quoting Leon v. IDX Systems Corp., 464 F.3d 951, 958 (9th Cir. 2006)). It provided that,

before dismissing a case as a sanction (at least where the misconduct involves spoliation),

something more than bad faith and prejudice to the opposing party is necessary:

[T]he presence of bad faith and prejudice, without more, do not justify the

imposition of dispositive sanctions. In gauging the propriety of the sanction,

the district court must take into account “(1) the degree of fault of the party

who altered or destroyed the evidence; (2) the degree of prejudice suffered by

the opposing party; and (3) whether there is a lesser sanction that will avoid

substantial unfairness to the opposing party and, where the offending party is

seriously at fault, will serve to deter such conduct by others in the future.”

Schmid [v. Milwaukee Electric Tool Corp.], 13 F.3d [76,] 79 [(3d Cir. 1994)]

(emphases added). See also Leon, 464 F.3d at 958 (noting that the district

court must consider “(1) the public’s interest in expeditious resolution of

litigation; (2) the court’s need to manage its dockets; (3) the risk of prejudice

to the party seeking sanctions; (4) the public policy favoring disposition of

cases on their merits; and (5) the availability of less drastic sanction[s]”). The

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sanction ultimately imposed must be commensurate with the analysis of these

factors.

Micron Technology, 645 F.3d at 1329. Accordingly, to the extent that we find that Venergy

has engaged in sanctionable conduct, we will conduct “a careful weighing of [the]

appropriateness” of dismissal as a sanction and consider “the suitability of lesser sanctions.”

Dodson v. Runyon, 86 F.3d 37, 39 (2d Cir. 1996); see Micron Technology, 645 F.3d at 1329.

III.

Whether Venergy Engaged in Sanctionable Conduct

The Standard of Proof Necessary to Permit Dismissal as a Sanction

In other circuits, the standard of proof necessary to establish a factual basis for

dismissal as a sanction appears somewhat unsettled. Some courts have held that “[a]ny

‘fundamentally penal’ sanctions—‘dismissals and default judgments, as well as contempt

orders . . .’—require proof by clear and convincing evidence.” Compton v. Alpha Kappa

Alpha Sorority Inc., 938 F. Supp. 2d 103, 106 (D.D.C. 2013) (quoting Shepherd v. American

Broadcasting Cos., 62 F.3d 1469, 1478 (D.C. Cir. 1995)); see Anderson v. Beatrice Foods

Co., 900 F.2d 388, 394 (1st Cir. 1990); Asia Pacific Agricultural, 2013 WL 4742934, at *11.4

Under that view, “[a tribunal] may [dismiss an appeal as a] sanction ‘only if it finds, first,

that there is clear and convincing evidence that the fraudulent or bad faith misconduct

occurred.’” Compton, 38 F. Supp. 2d at 106 (quoting Young, 217 F.R.D. at 66). More

recently, though, courts have increasingly been holding that dismissals as a sanction should

require proof by only a preponderance of the evidence, finding no reason to veer from the

normal presumptive standard of proof in federal civil cases. See, e.g., Grogan v. Garner, 498

U.S. 279, 286-90 (1991) (discussing how the preponderance standard typically applies to

proof of fraud absent statutory requirements for a higher standard of proof); Hoffer v.

Tellone, 128 F.4th 433, 439-40 (2d Cir. 2025) (explaining reasons that it decided to apply a

preponderance rather than a clear and convincing standard); Ramirez, 845 F.3d at 776-81

(overruling prior precedent to establish that dismissals as a sanction require proof by only a

preponderance of the evidence); In re Vaxart, Inc. Securities Litigation, No.

20-cv-05949-VC, 2025 WL 1865848, at *6 (N.D. Cal. July 7, 2025) (adopting a

preponderance of the evidence standard); Hernandez v. Franco American Baking Co., No.

3:20-cv-00628-LRH-WGC, 2021 WL 6064008, at *3 (D. Nev. Dec. 21, 2021) (same).

By contrast, “[s]o-called ‘issue-related sanctions’—those that are

‘fundamentally remedial rather than punitive and do not preclude a trial on the

merits’—[only] require proof by a preponderance of the evidence.” Compton, 938 F. Supp.

2d at 106 (quoting Shepherd, 62 F.3d at 1478).

CBCA 7915, 8303

The Federal Circuit, however, has routinely applied the “clear and convincing

evidence” standard to dismissals as a sanction, at least for those resulting from spoliation of

evidence, requiring clear and convincing evidence of both bad faith and prejudice to the

opposing party. Micron Technology, 645 F.3d at 1328-29; see Jones v. United States, No.

2024-2053, 2026 WL 1113469, at *4 (Fed. Cir. Apr. 24, 2026) (applying Micron

Technology); Loesch v. United States, 645 F.2d 905, 921 (Ct. Cl. 1981) (Fraud, a “conscious

wrongdoing with an intention to cheat or be dishonest[,] . . . must be substantiated by clear

and convincing proof rebutting every presumption of honesty and fair dealing,” and “[t]he

degree of proof necessary to establish fraud demands more than a preponderance of the

evidence, it demands ‘clear and convincing’ evidence.”). In light of the Federal Circuit’s

guidance in Micron Technology, we will apply a “clear and convincing” standard of proof

in the circumstances here.

The Necessity of a Fact-Finding Hearing

In some cases, “[w]here the question of fabrication is disputed, it may be appropriate

to resolve the dispute on the basis of factual findings following an evidentiary hearing.” Asia

Pacific Agricultural, 2013 WL 4742934, at *11 (citing Professional Seminar Consultants v.

Sino American Technology Exchange Council, Inc., 727 F.2d 1470, 1472 (9th Cir. 1984)).

Nevertheless, “a motion for sanctions does not automatically require an evidentiary hearing.”

Rossbach v. Montefiore Medical Center, 81 F.4th 124, 138 (2d Cir. 2023) (citing Schlaifer

Nance & Co. v. Estate of Andy Warhol, 194 F.3d 323, 335 (2d Cir. 1999)); see Aoude, 892

F.2d at 1120. In this case, without deciding on its necessity, we elected to provide Venergy

an opportunity to defend against the VA’s allegations at a fact-finding evidentiary hearing

to allow for a more thoroughly developed record.

Venergy’s Misconduct

It is clear that, before Venergy produced to the VA electronic versions of its audited

financial statements for the years 2020, 2022, and 2023, someone manipulated the documents

to hide the last four pages of financial information from each of those statements, to remove

or hide correlating sections of the financial statements’ table of contents so that the reader

would not be placed on notice that the last four pages were missing, and to edit other

information (including through changes to other dollar figures and columns) on every single

page of each of those statements. Initially, in response to the VA’s motion for sanctions,

Venergy provided a declaration from its CEO in which he represented that, in producing the

financial statements to the VA, the company “inadvertently omitted information (schedules

of earnings from contracts, schedules of contracts in progress, and schedules of completed

contracts)” from financial statements that “contained revisions to the tables of contents that

excluded reference to those schedules,” which resulted from “the voluminous nature of the

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discovery requests and the technical challenges associated with exporting and merging large

accounting files from [Venergy’s] accountant’s system.” Venergy CEO Declaration

(May 28, 2026) ¶ 5. That explanation is inconsistent with the redactions and changes

actually made to the financial statements before they were produced.

Given the effect of the changes, it is impossible that those changes were inadvertent.

As the VA’s damages expert testified, the changes to the financial statements—particularly

the elimination of the portion of the statements’ corporate contract billings schedules, along

with the targeted deletion of the table of contents’ correlating references to the existence of

those schedules—allowed Venergy to support an Eichleay claim for unabsorbed home office

overhead that was $1.1 million higher than the true documents would allow. See Schambach

Demonstratives 17, 18, 19. Under the Eichleay formula, if entitlement to unabsorbed home

office overhead is established, quantum is calculated through use of the following formula:

Contract billings/Total billings for contract period x Total overhead for

contract period = Overhead allocable to the contract.

Allocable overhead/Days of performance = Daily contract overhead[.]

Daily contract overhead x No. days delay = Amount claimed.

Eichleay, 60-2 BCA at 13,568. The input for “[t]otal billings for contract period” refers to

total company billings on all of the company’s contracts for the period defined by the

commencement and completion dates of the contract work. See Wickham Contracting Co.

v. General Services Administration, GSBCA 8675, 92-3 BCA ¶ 25,040, at 124,818 (“[A]n

essential part of the Eichleay calculation compares the total billings under the delayed

contract to the total billings under all contracts.”), aff’d, 12 F.3d 1574 (Fed. Cir. 1994);

G.S.&L. Mechanical & Construction, Inc., DOT CAB 1640, 86-3 BCA ¶ 19,026, at 96,097-3

(“What does this formula do? Essentially, it requires one to ascertain the total billings of a

contractor for all projects during a period.”); Defense Contract Audit Agency (DCAA)

Contract Audit Manual, DCAAM 7640.1 (DCAA Audit Manual), ¶ 12-805.1 (Feb. 2026)

(available at https://www.dcaa.mil/Portals/88/Documents/Guidance/CAM/

CAM_Chapter_12_20260223.pdf?ver=y0RhGRsRGJO67Rbtjv0YBw%3D%3D (last visited

Aug. 18, 2026)) (“The audit of Eichleay formula components consists of examining . . .

contract billings [on the delayed contract for which compensation is sought] and total

contract (company) billings.”). “Divid[ing] the total contract billings . . . for the delayed

contract’s actual performance period by the total company billings for all contracts performed

during the delayed contract performance period” results in an “allocation ratio,” which is

then multiplied “by the company’s total fixed overhead . . . for the delayed contract’s actual

performance period” to create a daily overhead rate. DCAA Audit Manual ¶ 12-804.1. That

daily overhead rate is then multiplied by the number of days of delay to establish the

company’s total unabsorbed home office overhead damage amount. Id.

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In its certified claim, Venergy identified its total company contract billings for the

period of performance here as $74,787,133, Exhibit 293 at 3106, as supported by the

manipulated financial statements. Placing that figure into the Eichleay formula results in an

allocation ratio of 24% and a total calculable home office overhead claim amount (inclusive

of a 10% profit markup) of $2,387,723. Id. at 3107; Schambach Demonstrative 19. Yet, the

contract schedules that were effectively deleted from the manipulated financial statements

produced to the VA showed that Venergy’s actual total company contract billings for the

period were almost twice as much as Venergy had indicated. Inputting the corrected figures

into the Eichleay formula generates an allocation ratio of only 13%, which reduces Venergy’s

total home office overhead claim to $1,283,786, a reduction of more than $1.1 million.

Schambach Demonstrative 19.

Another effect of the manipulations was to allow Venergy to increase the amount of

its general conditions overhead claim, which is separate and apart from Venergy’s home

office overhead claim. Although Venergy originally claimed a 41% overhead rate in its

certified claim, it had reduced that figure to 21.37% by the time that it responded to the VA’s

motion to compel. Appellant’s Response to Motion to Compel (Aug. 5, 2025) at 4. In

generating that revised percentage, Venergy identified what it said were its total indirect

costs, which it had divided by what it identified as its total direct costs for all contracts. See

id. at 5. The schedules that were effectively deleted from the financial statements before

production to the VA, along with other manipulations to the statements, allowed Venergy to

avoid disclosing its true costs. The original financial statements would have shown that

Venergy’s total direct costs for all contracts were almost twice as much as what Venergy

reported in its motion to compel response, which, dividing indirect costs from direct costs,

would have reduced Venergy’s general conditions overhead markup to 11.3% (from 21.37%)

and the total supportable general conditions overhead claim to $151,823, far less than the

$287,120 figure that Venergy calculated with the 21.37% markup. Schambach

Demonstratives 20, 21.

Although, in a declaration submitted in response to the VA’s motion for sanctions,

Venergy’s CEO represented that “[a]t no time did Venergy intend to withhold, alter, or

misrepresent any financial data,” Venergy CEO Declaration ¶ 11, the CEO had no

explanation at the fact-finding hearing as to how these deletions and manipulations, which

clearly favored Venergy and served to support higher-than-permissible cost claims, could

innocently have happened. The only possible explanation that the CEO provided, which was

speculation on his part, was that a now-former employee who helped with the production had

access to the CEO’s Adobe Acrobat account and was a proponent of using Grok, an AI tool.

We infer from that comment during the hearing that, if the employee had used an AI tool on

Venergy’s financial statements prior to production, that might have been the cause of the

changes to the documents in Venergy’s favor. Whether true or not, it would not absolve

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Venergy from responsibility for the intentional modifications. A corporation is responsible,

“under a theory of respondeat superior,” for the intentional misconduct of an employee

“acting within the scope of employment,” at least where “those acts [are] motivated—at least

in part—by an intent to benefit the corporation.” United States v. Cincotta, 689 F.2d 238,

241-42 (1st Cir. 1982); see Meyer v. Holley, 537 U.S. 280, 285 (2003) (“It is well established

that traditional vicarious liability rules ordinarily make principals or employers vicariously

liable for acts of their agents or employees in the scope of their authority or employment.”);

United States v. Automated Medical Laboratories, Inc., 770 F.2d 399, 406-07 (4th Cir. 1985)

(applying respondeat superior to corporation in criminal context). “The term ‘scope of

employment’ has been broadly defined to include acts on the corporation’s behalf in

performance of the agent’s general line of work.” Automated Medical, 770 F.2d at 407.

Venergy cannot evade or disclaim responsibility for an employee’s intentional illicit conduct

in the circumstances here, where the changes to the financial statements clearly were

intended to benefit and support Venergy’s increased damages claims.

For purposes of determining whether the VA has established by clear and convincing

evidence Venergy’s responsibility for the intentional manipulation of these documents, we

recognize that neither we nor the VA can definitively establish who within Venergy

manipulated and modified Venergy’s financial statements the night before they were

produced to the VA. That does not mean that the VA has not established that Venergy itself,

as a corporate entity, engaged in intentional discovery misconduct. “‘Clear and convincing’

evidence has been described as evidence which produces in the mind of the trier of fact an

abiding conviction that the truth of a factual contention is ‘highly probable.’” Price v.

Symsek, 988 F.2d 1187, 1191 (Fed. Cir. 1993) (quoting Buildex, Inc. v. Kason Industries,

Inc., 849 F.2d 1461, 1463 (Fed. Cir. 1988)). In light of the manner in which these redactions

and modifications were made, they had to be intentional. We cannot dispute the VA’s belief

that “[a] file merge error does not rewrite a table of contents.” Respondent’s Sanction Reply

Brief at 4. Given that the manipulations were made on the Venergy CEO’s Adobe Acrobat

account, that those modifications were made the night before production to the VA, and that

the modifications were in Venergy’s favor, purporting to support Venergy’s request for

payment of more than $1 million in Venergy’s claim beyond what the original financial

statements would support, we must find, even under a clear and convincing evidentiary

standard, that the changes were intentional and made by an employee of Venergy who was

authorized access to its systems and was assisting in the production effort. That is enough

to impose responsibility on Venergy for intentional discovery misconduct. See Meyer, 537

U.S. at 285; Cincotta, 689 F.2d at 241-42.

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IV.

Venergy’s Defenses to the VA’s Discovery Misconduct Claim

The Board’s Lack of Jurisdiction to Consider Fraud

Venergy argues that the Board lacks jurisdiction to consider the VA’s sanctions

request. “The gravamen of Respondent’s motion for sanctions is based on alleged fraud,”

Venergy asserts, but, “[u]nder the [CDA], the Board lacks jurisdiction to decide whether a

contractor engaged in fraud.” Appellant’s Sanctions Response Brief (June 3, 2026) at 4-5.

Quoting from a decision of one of our predecessor boards, Venergy asserts that “Congress

did not wish the Contract Appeals Boards to exercise any jurisdiction over the issue of the

existence of fraud in any form.” Id. at 4 (quoting Warren Beaves, DOT BCA 1324,

83-1 BCA ¶ 16,232, at 80,648). It argues that, “[b]ecause the Board lacks jurisdiction to

decide fraud even in the context of sanctions, Respondent’s request for sanctions should be

dismissed for lack of jurisdiction.” Id. at 5.

As the Federal Circuit has held, “Congress did not intend fraud claims by the

government to be included in the dispute resolution process [that commences with the

submission of a contractor claim and a final decision by a contracting officer] outlined by

section [7103(a) of the CDA]” or “to include claims [challenging fraud by contractors]

brought under section [7103(c)(2)] to be within the agency dispute resolution process.”

Martin J. Simko Construction, Inc. v. United States, 852 F.2d 540, 545 (Fed. Cir. 1988). By

extension, because the scope of the Board’s CDA jurisdiction is tied to and confined by the

contracting officer’s decision on review, and because contracting officers’ decisions cannot

encompass or resolve fraud, the Board similarly lacks jurisdiction to entertain fraud claims.

MLU Services, Inc. v. Department of Homeland Security, CBCA 8002, 24-1 BCA ¶ 38,655,

at 187,917. Outside the context of our CDA jurisdiction, “the Board is barred ‘from handling

fraud qua fraud claims’” because they sound in tort, over which the Board also lacks

jurisdiction. Safe Haven Enterprises, LLC v. Department of State, CBCA 3871, et al.,

15-1 BCA ¶ 35,928, at 175,606 (quoting Rockwell International Corp., EBCA C-9509187,

et al., 97-2 BCA ¶ 29,322, at 145,794); see L’Enfant Plaza Properties, Inc. v. United States,

645 F.2d 886, 892 (Ct. Cl. 1981) (fraud, independent of a contract, is a tort over which

tribunals lacks jurisdiction); Environmental Safety Consultants, Inc., ASBCA 53485,

02-2 BCA ¶ 31,904, at 157,613 (“The Board does not have jurisdiction over criminal or civil

fraud and would not have jurisdiction over a claim of fraud.”).

The type of misconduct alleged here does not fall into any of those categories. The

alleged document manipulation did not occur during the procurement or contract

performance periods. Instead, it is alleged to have occurred during the discovery process

while these appeals were pending before the Board. To dismiss an appeal as a sanction for

willful misconduct in the discovery process, we do not have to find fraud. We have to find

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only (1) that an appellant willfully and secretly altered evidence during the discovery process

in a manner that undermines the integrity of the Board’s dispute resolution process and

(2) that lesser sanctions are inappropriate. See, e.g., Amfosakyi, 496 F. App’x at 225. Even

if the actions that the VA claims Venergy undertook could provide a basis for a fraud action

in a district court, that does not mean that we have to find fraud to sanction those actions.

“[T]he fact that the same occurrences and findings may be relevant to two matters, one of

which is within this Board’s jurisdiction”—that is, the Board’s inherent authority to monitor

and enforce integrity in its proceedings—“and the other is not”—that is, pure fraud claims

that might be prosecuted under the False Claims Act (FCA), 31 U.S.C. § 3729, or other

criminal or civil statutes—“does not serve to oust this Board of jurisdiction over those

matters properly before it.” Fidelity Construction Co., DOT CAB 1113, et al., 82-1 BCA

¶ 15,633, at 77,216, aff’d on other grounds, 700 F.2d 1379 (Fed. Cir. 1983); see

Environmental Systems, Inc., ASBCA 53283, 03-1 BCA ¶ 32,167, at 159,053 (finding

jurisdiction “to determine whether appellant submitted falsified progress payment requests,

in violation of the standard payment clauses,” without regard to whether those falsifications,

if intentional, might also violate the False Claims Act, 31 U.S.C. § 3729 (2000)).

Under Venergy’s theory, the Board’s power to sanction a party would be limited to

lesser misconduct—for example, if the Board were to create an adverse inference where a

party recklessly allowed documents to be destroyed after notice that the documents were

relevant. See Litton Systems, Inc., ASBCA 49787, 00-2 BCA ¶ 30,969, at 152,837. If

misconduct was willful and intentional to the point that it could be construed as fraud,

however, the Board would, in Venergy’s view, be powerless to address it. We cannot accept

that the Board’s control over proceedings before it can be subdivided in that way. Tribunals

like the Board “cannot lack the power to defend their integrity against unscrupulous

marauders; if that were so, it would place at risk the very fundament of the judicial system.”

Aoude, 892 F.2d at 1119; see Suffolk Construction, 17-1 BCA at 178,797. We can find no

authority that would strip the Board of its inherent authority to monitor and control

proceedings simply because, in a particular situation, misconduct before the Board could be

characterized as fraudulent.

The Absence of a Prior Board Order Warning About Sanctions

Venergy asserts that, “[a]s to procedure, before dismissing a contractor’s claim as a

sanction, the Board typically issues an order establishing the commencement of sanctions.”

Appellant’s Sanctions Response Brief at 9. As support, Venergy cites the Board’s decision

in United Facility Services Corp. v. General Services Administration, CBCA 5272, 22-1

BCA ¶ 38,055, in which we stated that, before imposing sanctions under FRCP 37(d) against

a party that provided deficient responses to discovery requests, the Board “might have to

issue an order compelling corrections” and provide the party an opportunity to correct the

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deficiencies. Id. at 184,784. Venergy asserts that, because “no such order was issued” in

these appeals, “nor could there be since complete and unredacted copies of Appellant’s

financial statements were provided before Respondent filed a motion for sanctions,”

sanctions are inappropriate here. Appellant’s Sanction Response Brief at 9-10.

We note that, on September 11, 2025, we issued an order granting the VA’s motion

to compel and directed Venergy, no later than September 30, 2025, to produce unredacted

copies of its financial audit reports and related information to the VA. See Venergy Group,

25-1 BCA at 189,396. Venergy did not comply with that order. Although it eventually (after

the VA discovered document manipulations) provided the VA with authentic unredacted

copies of the financial statements, it did not do so until February 2026, after depositions were

completed. In accordance with FRCP 37(b)(2)(A)(v), the Board may impose sanctions for

failure to comply with an order compelling production. We do not understand why Venergy

believes that another warning order was needed.

In any event, contrary to Venergy’s position, “an explicit warning that dismissal would

be a likely sanction for fabricating evidence . . . is not a prerequisite to the imposition of

dismissal sanctions” for intentional misconduct. Garcia, 569 F.3d at 1180; see Archibeque

v. Atchison, Topeka & Santa Fe Railway Co., 70 F.3d 1172, 1175 (10th Cir. 1995); Allen v.

Gurevich, No. 09-CV-01533-WYD-MJW, 2010 WL 1963203, at *6 (D. Colo. Apr. 1, 2010),

recommendation adopted, 2010 WL 1957207 (D. Colo. May 14, 2010). Where a party is

engaged in creating false information, “additional warnings are ‘superfluous at best.’”

Garcia, 569 F.3d at 1180 (quoting Chavez v. City of Albuquerque, 402 F.3d 1039, 1045 (10th

Cir. 2005)). We reject Venergy’s argument that we cannot sanction a party for fabricating

or manipulating evidentiary documents unless we first issue an order explicitly directing the

party not to do that.

Whether the VA’s Motion for Sanctions is Moot

Venergy argues that, because it provided the VA with unredacted complete copies of

its financial statements in February 2026, the VA’s motion for sanctions was moot when it

was filed and should therefore be denied. Appellant’s Sanctions Response Brief at 9.5 Yet,

the type of fraudulent or willful misconduct that occurred here is not necessarily rendered

moot by subsequent disclosure after the misconduct is uncovered—the damage to the

The VA disputes that it has complete copies of all three financial statements,

as, at the hearing, one of the financial statements is still missing a page. For purposes of this

decision, we will assume, without deciding, that Venergy has provided the VA with complete

copies of all three documents.

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integrity of the Board’s proceedings remains in place. Salmeron v. Enterprise Recovery

Systems, Inc., 579 F.3d 787, 797 (7th Cir. 2009); see also Yates-Desbuild Joint Venture v.

Department of State, CBCA 3350-R, et al., 18-1 BCA ¶ 36,959, at 180,088 (2017)

(discussing how a fraudulent actor cannot “cure” misconduct in various circumstances).

Other courts have dismissed or affirmed dismissal of an action as a sanction for intentional

discovery misconduct despite a wrongdoing party’s late disclosure of documents after its

misconduct was detected. See, e.g., Wyle v. R.J. Reynolds Industries, Inc., 709 F.2d 585, 591

(9th Cir. 1983) (Even if, after “deliberate deception” in discovery is discovered, “a party has

come forward with the information sought to be discovered, . . . a partial last-minute tender

of documents or information” does not cure the prior deception); G-K Properties v.

Redevelopment Agency of City of San Jose, 577 F.2d 645, 647 (9th Cir. 1978) (“[T]he

appellants’ last-minute tender of relevant documents could not cure the problem they had

previously created.”); Colella v. Republic of Argentina, No. 04-CV-2710 (LAP), et al., 2020

WL 4700930, at *4 (S.D.N.Y. Aug. 13, 2020) (“Where a party acts in bad faith, ‘the actual

effect of the [falsified evidence] on the litigation is not relevant to whether the conduct is

sanctionable.’” (quoting Amerisource Corp. v. Rx USA International Inc., No. 02-CV-2514

(JMA), 2010 WL 2730748, at *7 (E.D.N.Y. July 6, 2010), aff’d sub nom. New York Credit

& Financial Management Group v. Parson Center Pharmacy, Inc., 432 F. App’x 25 (2d Cir.

2011))), aff’d, No. 20-3031-CV, et al., 2021 WL 5895783 (2d Cir. 2021); Tutor-Saliba Corp.

v. United States, No. 92-581C, et al., 1995 WL 17974477, at *4 (Fed. Cl. May 5, 1995)

(“[M]ere compliance, however late, does not absolve [the producing party] of wrongdoing.”).

That is because the wrongdoing party’s late production, after its intentional deceptive

misconduct has been discovered, does not restore trust in the integrity of the Board’s

proceedings and processes caused by the original document discovery fraud. The loss of

trust in the integrity of those processes is a real damage that the Board must be able to

address. See Aoude, 892 F.2d at 1119; Garcia, 569 F.3d at 1180; Slate, 941 F. Supp. 2d at

48-49; Pope, 138 F.R.D. at 683. The manipulated financial statements “clearly had the

capacity to influence the adjudication and to hinder [the VA’s] presentation of its case.”

Aoude, 892 F.2d at 1120. “The failure of a party’s corrupt plan does not,” and should not,

“immunize the defrauder from the consequences of his misconduct.” Id. The Board must

be able to provide a remedy to the innocent party whose trust in the Board’s processes has

been disturbed and to create, as best it can, a strong disincentive from doing so to others who

might be willing to engage in the same type of discovery fraud that occurred here. See

National Hockey League, 427 U.S. at 643; Derzack, 173 F.R.D. at 411; Tutu Wells

Contamination, 162 F.R.D. at 63.

Further, the VA has been required to expend a significant amount of money

attempting to ferret out and address Venergy’s document discovery fraud. The VA

established at the hearing that, since the discovery of the document redactions and

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manipulations, it has had to pay a consulting firm that is assisting it in document discovery

approximately $125,000 in labor hours on damages-related issues. Schambach

Demonstrative 22. Its damages expert witness, who is involved in that discovery process,

indicated that, conservatively, he believes that 60% of those labor hours were incurred

specifically to investigate or document the effect of the document manipulations. Id. That

is a tangible financial damage to the VA resulting from Venergy’s deceptive discovery

misconduct. Venergy responds that the VA’s investigation costs are irrelevant and not a

consideration on a sanctions motion because “[t]his was Respondent’s choice” to incur them.

Appellant’s Sanctions Response Brief at 10. While that might be true, it was not the VA’s

“choice” to be given falsified documents in the course of discovery that could have increased

Venergy’s claimed damages by more than $1 million. The choice to engage in discovery

misconduct was Venergy’s. It does not get to blame the victim of its discovery fraud for

taking action to protect itself. See Minneapolis, St. Paul & Sault Sainte Marie Railway Co.

v. Moquin, 283 U.S. 520, 521-22 (1931) (A litigant who engages in misconduct “will not be

permitted the benefit of calculation, which can be little better than speculation, as to the

extent of the wrong inflicted upon his opponent”). The “extra trouble and expense” that the

VA had to incur provide it with “a legitimate claim to dismissal” as a sanction. Aoude, 892

F.2d at 1122.

Even now, we do not know whether Venergy’s document manipulation extended to

documents beyond the 2020, 2022, and 2023 financial statements. Those are the

falsifications that the VA was able to identify. Yet, at the hearing, it became clear that

Venergy has made no effort to determine how the manipulation of the financial statements

occurred or who did it, even though there were only a few people involved in the document

collection and production process—it has undertaken no internal investigation and seems to

have no real concern about ensuring its document fraud was not more widespread than what

the VA, through its own diligent efforts, has been able to uncover. As noted above, “[t]he

submission of falsified evidence substantially prejudices an opposing party by casting doubt

on the veracity of all of the culpable party’s submissions throughout litigation.” Garcia, 569

F.2d at 1180.

The VA’s request for sanctions is not moot.

Whether the VA Was Prejudiced by Document Manipulation

Related to its position that the VA’s request for sanctions is moot, Venergy tells us

that the VA was not prejudiced by any information that was allegedly concealed or

manipulated because it was not critical or even relevant to its damages claim. Appellant’s

Sanctions Response Brief at 7. As an initial matter, we note that some tribunals have found

that they are not required “to measure the impact on the litigation of a wrongdoer’s willful

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misconduct before it issues a dismissal sanction.” Salmeron, 579 F.3d at 797. A tribunal’s

“inherent power to sanction for violations of the judicial process is permissibly exercised not

merely to remedy prejudice to a party, but also to reprimand the offender and ‘to deter future

parties from trampling upon the integrity of the [tribunal].’” Id. (quoting Dotson v. Bravo,

321 F.3d 663, 668 (7th Cir. 2003)). That being said, to the extent that Federal Circuit

precedent requires a finding of prejudice, there is ample evidence of it here.

At the fact-finding hearing on the VA’s motion, the VA more than established the

harm that Venergy’s shenanigans inflicted on it. Venergy’s assertion that the VA “makes no

attempt to establish a nexus between [the information allegedly redacted] and [Venergy’s]

calculation of damages,” Appellant’s Sanctions Response Brief at 8, is wholly unfounded.

The VA’s damages expert laid out the manner in which the changes that Venergy made to

its financial statements allowed it to support an overstatement of its unabsorbed home office

overhead claim by more than $1.1 million and of its general conditions overhead claim by

more than an additional $100,000. Had the VA not detected the manipulations and

redactions to the financial statements, it would unfairly and unknowingly have to defend

itself against overinflated claims without the benefit of evidence showing the true state of

affairs.

Venergy attempted in its response to the VA’s motion for sanctions to show a lack of

prejudice to the VA by disclosing, for the first time, the alleged reasons that it did not include

all company contract billings in the Eichleay formula in its claim. In Venergy’s response

brief, in an accompanying declaration from Venergy’s CEO, and in testimony from both the

CEO and Venergy’s CPA at the fact-finding hearing, the Board was informed that, at some

point before submitting its certified claim, Venergy decided that, for the “total company

contract billings” portion of the Eichleay formula, it should not have to include

COVID-related sales contract revenues, apparently under the belief that Venergy’s home

office did not contribute to or support those contracts, and that the only company contract

billings that it needed to identify for Eichleay purposes were its construction-related

contracts.6 That, Venergy represents, is why it used $74,787,132.74 as its total company

We are aware of no case law or regulatory support for Venergy’s position.

“Total [contract] billings [for use in the Eichleay formula] are revenues for all contracts

(including Government and commercial) recognized for the period of actual contract

performance including the delay/suspension and extended performance periods and any

previous modifications to the completion date.” DCAA Audit Manual ¶ 12-804.2(a)

(emphasis added). Nevertheless, we need not resolve the viability of Venergy’s Eichleay

argument here. It is enough that it did not disclose to the VA that the total company contract

billings identified in its claim did not, in fact, include all company contract billings and then

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contract billings in its Eichleay calculation rather than its actual total company contract

billings (inclusive of COVID-related contracts), which were almost double that figure. See

Appellant’s Sanctions Response Brief at 7-8 (“Only revenues from construction-related

projects were included in the Eichleay calculation because the COVID sales were

non-relevant costs.”); Venergy CEO Declaration ¶ 7.7 Alas, Venergy never disclosed to the

VA that it had excluded any company contract billings in creating its Eichleay calculation.8

Instead of doing that, which would have allowed the issue to be raised so that it could be

presented to the Board for resolution, someone manipulated Venergy’s financial statements

to hide the “total company contracts billing” reduction and to make it look like Venergy’s

$74,787,132.74 total company contract billings figure was the actual total for all company

contracts. Venergy’s new disclosure about how it developed inputs for its Eichleay claim

does not establish that the VA was not prejudiced by its discovery fraud.

Venergy also says that its intentional document manipulation ultimately did not matter

because, as a result of the Board’s decision on the VA’s motion to compel, the VA later

obtained “unrestricted online access” to Venergy’s Foundation® construction accounting

software system from which it could locate accurate information about Venergy’s costs, even

if those costs had been either misstated or removed from Venergy’s doctored financial

statements. Appellant’s Sanctions Response Brief at 2. Yet, at the hearing, it became clear

that the VA was never provided “unrestricted” access to all of Venergy’s accounting

information but instead was provided more limited access tied to the costs of the specific

contract at issue in these appeals. See Hearing Exhibit 1. Full information about billings on

other Venergy contracts, which is necessary to calculate the total company contract billings

for purposes of the Eichleay formula, was not provided. Id. Even today, there is financial

manipulated its financial statements before they were produced to support the lower total

billings figure that it had used.

At the hearing, the VA disputed that the reduction of Venergy’s total company

contract billings figure to $74,787,132.74 could have been the result of excluding

COVID-related contracts and attempted to show, from what evidence it could gather, that

Venergy could not have had sufficient COVID-related contracts to account for the

approximately $70 million reduction in the total company contract billings figure. We need

not here resolve the veracity of Venergy’s new disclosure.

Although Venergy asserts that the issue of whether COVID-related contracts

should be included in the total company contract billings number should be an issue at a

merits hearing, see Appellant’s Sanctions Response Brief at 7-8, it is unclear to the Board

how that would have become an issue when Venergy never disclosed to the VA or the Board

what it had done.

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information relevant to overhead calculations that the VA does not have and must attempt

to fill in through sampling and estimates.

Nevertheless, even if Venergy had provided full Foundation® access to the VA, it

would not excuse Venergy’s deceptive conduct or eliminate the prejudice to the VA and to

the integrity of the Board’s process, which necessarily leaves the VA questioning the

fulsomeness and authenticity of all documents that Venergy has (or should have) produced.

Further, as previously discussed, the VA has been required to expend significant monies

attempting to ferret out and address Venergy’s document discovery fraud, Schambach

Demonstrative 22, which is a tangible and prejudicial injury to the VA. Even now, it cannot

know whether other documents that Venergy produced were manipulated in ways of which

the VA is currently unaware. The damage to the integrity of the Board’s processes and

proceedings is a form of prejudice that justifies sanctions. See Secrease, 800 F.3d at 401;

Litton Systems, 91 F.R.D. at 576.

Whether Dismissal is the Appropriate Sanction

Dismissal of Venergy’s Affirmative Monetary Claim

Taking the factors that the court in Amfosakyi identified as a guide for evaluating

whether dismissal is appropriate, which include but expand on the factors that the Federal

Circuit identified in Micron Technologies, three of the six factors discussed in Amfosakyi that

favor dismissal are easily satisfied here and need no further discussion: (1) Venergy’s

personal responsibility for the falsified financial statements; (2) the prejudice to the VA

caused by the falsified financial statements; and (3) the willful nature of the misconduct. See

Amfosakyi, 496 F. App’x at 225.9

Beyond that, two more of the Amfosakyi factors are met here: (1) Venergy’s

dilatoriness in taking seriously and addressing its discovery fraud; and (2) the lack of

effectiveness of sanctions other than dismissal. Venergy would argue that, as soon as the VA

informed it of the document manipulations during depositions of Venergy’s CEO and CPA

in February 2026, it swiftly produced unredacted and authentic copies of its financial

statements for 2020, 2022, and 2023—that is, it responded without delay once the VA

notified it of its errors. That may well be true, but Venergy has repeatedly attempted to place

To the extent that someone at Venergy ran the financial statements through

some kind of AI platform before producing them so that they would better support Venergy’s

claim amounts, as Venergy’s CEO speculated at the hearing, it would be no less intentional

and sanctionable than any other kind of document manipulation in the discovery process.

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on the VA the responsibility for Venergy’s document fraud. It was the VA, not Venergy, that

had to expend the energy and resources to uncover and ferret out Venergy’s discovery

misconduct. Since then, it appears that Venergy has done nothing to find out what happened,

how it happened, and who did it. Venergy is not a large corporation, and only a few of its

employees—all known to the CEO—were involved in the production of the financial

statements. Yet, the CEO apparently has questioned none of them. No one has been

admonished or had his or her employment terminated, although one employee left on his own

volition for reasons unrelated to these appeals. Venergy also has taken no steps to determine

whether any other documents that it produced to the VA were manipulated in the same way

as the financial statements. Apparently, it views such an effort as one that the VA should pay

to undertake if and to the extent that it wants to gain any kind of confidence that Venergy’s

other document productions are not infected by Venergy’s prior deceptive misconduct. To

the Board, that inaction reflects a lack of seriousness or concern by Venergy about the

discovery misconduct in which it engaged.

We are also concerned by the lack of care that Venergy’s CEO has taken in making

statements under oath to the Board. Venergy submitted a declaration to the Board on

May 28, 2026, in which the CEO declared that Venergy’s financial statement disclosures in

July 2025 “inadvertently omitted information.” Venergy CEO Declaration ¶ 5. At the

hearing, however, the CEO testified that he had no idea how the documents came to be

manipulated and that all he knew was that he did not do it. In addition to the fact that the

manipulations and redactions to the financial statements were obviously intentional, we do

not understand how the CEO could declare on May 28 that the manipulations were

inadvertent when he has no idea how they happened. That is, when he made his declaration

on May 28, he could not have known that the manipulations were inadvertent and, therefore,

should not have provided a declaration under penalty of perjury to that effect. Even today,

as the CEO testified at the hearing on the VA’s sanctions motion, he does not know how they

happened, and, assuming that he is being honest with the Board, he likely will never know

because he is taking no action to investigate what happened and its scope or to make sure that

it does not happen again.

Venergy’s complete lack of interest in conducting any kind of internal investigation

to reveal the cause of and malfeasant actor(s) in the discovery fraud here, coupled with the

obvious intentional nature of the document manipulations at issue and the benefit that those

manipulations were clearly intended to provide Venergy, leads us to believe that no sanction

less than dismissal of Venergy’s monetary claim would be effective. We obviously could

and will preclude Venergy from relying on the falsified financial statements, but we do not

see how that would deter future discovery misconduct. We could not exclude the real

financial statements because, if the VA had to defend against Venergy’s monetary claim in

litigation, it would need to use them on summary judgment or at a merits hearing to cut more

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than $1.1 million out of Venergy’s home office overhead claim and more than $100,000 out

of its general conditions overhead claim. “Litigants would infer that they have everything

to gain, and nothing to lose, if manufactured evidence merely is excluded while their lawsuit

continues.” Garcia, 569 F.3d at 1180 (quoting Pope, 138 F.R.D. at 683).

To the extent that part of the damage here is the costs that the VA had to incur to

discover and ferret out Venergy’s discovery fraud, we are not aware of any statutory

authority that would allow us to require Venergy to compensate the VA for those costs or

otherwise to sanction Venergy monetarily. Accordingly, money sanctions are not a way to

ameliorate the damage caused by Venergy’s discovery fraud.

Importantly, we have no idea whether other documents that Venergy has produced in

this litigation, beyond the three financial statements, were manipulated. It is unfair to place

on the VA the obligation to expend additional attorney time and resources and to require it

to pay additional money to consultants to attempt to determine whether more documents are

questionable. See Garcia, 569 F.3d at 1180. Venergy has taken no action to investigate what

happened or to find a way to reassure the VA and the Board that all other documents

Venergy has produced are authentic and have not been manipulated. If we were to require

the VA to continue to defend against Venergy’s claim, both the VA and the Board would

likely have to continue to question every document that Venergy has produced and wonder

if it is authentic. Even if we were to designate some facts as uncontested, the idea that we

will then have to resolve other factual disputes on a record with questionably unreliable

documents is unfair to both the Board and the VA.

At the fact-finding hearing on the motion for sanctions, Venergy’s counsel called the

VA’s focus on sanctions a “red herring” and a “side show,” a sentiment that matches

Venergy’s continuing failure to take its own willful misconduct seriously or to take

affirmative steps through a thorough investigation to identify its causes and ensure that no

other documents have been manipulated. In light of Venergy’s failure to try to reestablish

the integrity of these proceedings, as best possible in the circumstances, we cannot require

the VA to continue having to defend against Venergy’s monetary claim.

The Extent to Which Sanctions Can Apply Beyond Venergy’s Monetary Claim

There are three separate matters at issue in these appeals: (1) Venergy’s challenge to

the VA contracting officer’s termination of the contract for default; (2) Venergy’s monetary

claim seeking payment of just over $4 million from the VA; and (3) the VA’s monetary

claim, set forth in the contracting officer’s decision denying Venergy’s claim, seeking

payment to the VA of $1,842,960.31. In its July 2025 motion to compel seeking production

of Venergy’s financial statements and financial forecasts, the VA represented that it needed

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that information “to analyze and validate Venergy’s unabsorbed home office overhead claims

(calculated using the Eichleay formula),” particularly as it related to Venergy’s general and

administrative (G&A) costs. Respondent’s Motion to Compel at 3; see Respondent’s Motion

for Sanctions at 17 (indicating that the VA needed information in Venergy’s financial

statements “to support [Venergy’s] calculations”). That is, the documents that were

electronically manipulated are, in the VA’s view, necessary to support and tied to Venergy’s

money claim.

The VA has identified no such tie between the manipulated financial statements and

Venergy’s challenges to the VA’s default termination or the VA’s $1.8 million claim against

Venergy. “A [tribunal’s] use of sanctions is limited by two standards: (1) any sanction must

be just; and (2) it must specifically relate to the particular claim at issue in the discovery

order.” Professional Seminar Consultants, 747 F.2d at 1474; see Insurance Corp. of Ireland,

Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707 (1982) (citing FRCP 37(b)(2));

Alaska Pulp Corp. v. United States, 41 Fed. Cl. 611, 614 (1998). With regard to the second

requirement, the scope of proper discovery, and, by extension, the scope of the sanctions that

the tribunal can impose for misconduct in that discovery, turns on whether the material that

was requested is tied to a particular claim or defense. See, e.g., United States ex rel. Wiltec

Guam, Inc. v. Kahaluu Construction Co., 857 F.2d 600, 602 (9th Cir. 1988) (The defendant’s

“failure to provide discovery relating to [its] counterclaim was appropriately sanctioned by

dismissal of the counterclaim,” but “that failure cannot justify any additional sanction

involving [plaintiff’s] claim, because [of] due process considerations.”); Maxey v. State Farm

Fire & Casualty Co., No. 1:07-cv-158, 2008 WL 11352587, at *1 (S.D. Ohio Aug. 11, 2008)

(limiting discovery violation to relevant claim).

Absent some relationship between Venergy’s discovery misconduct and either the

default termination claim or the VA’s demand for a $1.8 million payment, we have no basis

for dismissing Venergy’s challenges to them—basically, entering a default judgment in the

VA’s favor on those claims—as a sanction. At the hearing, the VA acknowledged that,

although the financial statements at issue provide an evidentiary basis necessary for

analyzing Venergy’s affirmative monetary claims, they are not relevant to the default

termination or the Government’s affirmative monetary claim. The VA asserted that, because

of the discovery misconduct relating to Venergy’s money claim, the VA will now have to

question all documents that it receives from Venergy and cannot trust Venergy, which

suggests that it should be provided what in effect would be default judgments against

Venergy on the Government’s affirmative claims. Although we are sympathetic to the VA’s

concerns about the integrity of future proceedings, and although the misconduct that occurred

here may provide a heightened basis for the Board to question the integrity of Venergy

witness testimony in future proceedings, it seems an insufficient basis to impose default

judgments against Venergy that would allow the VA, without proving its own costs, to

CBCA 7915, 8303

recover $1.8 million from Venergy. Venergy’s alleged discovery misconduct tied to its claim

for monetary relief does not alleviate the VA’s obligation to defend its default termination

decision or to support its own $1.8 million monetary claim.

Decision

For the foregoing reasons, we GRANT the VA’s motion for sanctions to the extent

that it seeks dismissal of Venergy’s affirmative monetary claim as a sanction for Venergy’s

discovery misconduct. We DENY the VA’s motion for sanctions to the extent that it seeks

dismissal of or a default judgment in favor of the VA on Venergy’s challenges to the default

termination decision and the VA’s claim for a monetary award. If, in the course of

continuing its review of previously produced discovery, the VA identifies additional

manipulated documents that are relevant to the default termination or the VA’s monetary

claim, the VA is not precluded from seeking additional sanctions for that misconduct. The

Board will schedule further proceedings on the two claims that remain before the Board by

separate order.

Harold D. Lester, Jr.

HAROLD D. LESTER, JR.

Board Judge

We concur:

Erica S. Beardsley

ERICA S. BEARDSLEY

Board Judge

Jonathan D. Zischkau

JONATHAN D. ZISCHKAU

Board Judge

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.