Amicus Curiae Brief — United States, ex rel. Jesse Polansky, M.D., M.P.H., Petitioner v. Executive Health Resources, Inc., et al.

No. 21-1052

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In The

Supreme Court of the United States

---------------------------------♦--------------------------------UNITED STATES OF AMERICA, ex rel.

JESS POLANSKY, M.D., M.P.H.,

Petitioner,

v.

EXECUTIVE HEALTH RESOURCES, INC., et al.,

Respondents.

---------------------------------♦--------------------------------On Writ Of Certiorari To The

United States Court Of Appeals

For The Third Circuit

---------------------------------♦--------------------------------BRIEF OF AMICUS CURIAE

BRUTUS TRADING, LLC

IN SUPPORT OF PETITIONER

---------------------------------♦--------------------------------ROBERT J. CYNKAR

MCSWEENEY, CYNKAR &

KACHOUROFF PLLC

10506 Milkweed Drive

Great Falls, VA 22066

(703) 621-3300

rcynkar@mck-lawyers.com

PATRICK M. MCSWEENEY

Counsel of Record

MCSWEENEY, CYNKAR &

KACHOUROFF PLLC

3358 John Tree Hill Road

Powhatan, VA 23139

(804) 937-0895

patrick@mck-lawyers.com

Counsel for Amicus Curiae

================================================================================================================

COCKLE LEGAL BRIEFS (800) 225-6964

WWW.COCKLELEGALBRIEFS.COM

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TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE ......................

1

STATEMENT .......................................................

1

A.

Background ................................................

1

B.

Procedural History ....................................

7

SUMMARY OF ARGUMENT .............................. 11

ARGUMENT ........................................................ 12

I.

In Brutus Trading, the District Court

Gave No Scrutiny to the Government’s

Justification for Dismissal, Utterly Ignoring

the Relator’s Competing Evidence .............. 15

II.

In Brutus Trading, the District Court

Abandoned Basic Procedural and Evidentiary Norms ................................................ 19

CONCLUSION..................................................... 22

ii

TABLE OF AUTHORITIES

Page

CASES

Brutus Trading, LLC. v. Standard Chartered

Bank, et al., Case No. 20-2578 (2d Cir.) .......... passim

Greene v. McElroy, 360 U.S. 474 (1959)......................20

Hamdi v. Rumsfeld, 542 U.S. 507 (2004) ...................20

Swift v. United States, 318 F.3d 250 (D.C. Cir.

2003) ........................................................................13

United States ex rel. Sequoia Orange Co. v.

Baird-Neece Packing Co., 151 F.3d 1139 (9th

Cir. 1998) .................................................................13

United States v. Benson, 961 F.2d 707 (8th Cir.

1992) ........................................................................21

United States v. Bynum, 19-cr-255, Dkt. No. 24

(E.D.N.Y. Feb. 10, 2020) ..........................................21

United States v. Shulaya, 17-cr-350, Dkt. No. 819

(S.D.N.Y. June 11, 2018)..........................................21

Vermont Agency of Nat. Res. v. United States, 529

U.S. 765 (2000) ........................................................13

STATUTES

18 U.S.C. §981(a)(1)(C) .................................................2

18 U.S.C. §981(f ) ...........................................................2

31 U.S.C. §3729(a) .......................................................14

31 U.S.C. §3729(a)(1)(G) ...............................................3

31 U.S.C. §3729(b)(3) ....................................................3

iii

TABLE OF AUTHORITIES – Continued

Page

31 U.S.C. §3730(b)(4) ..................................................13

31 U.S.C. §3730(c) .......................................................12

31 U.S.C. §3730(c)(2)(A) ........................ 8, 14, 20, 22, 23

RULES

Sup. Ct. R. 37.6 .............................................................1

FED.R.CIV.P. 62.1 .................................................. 11, 21

S.Rep. 99-345, 26, reprinted in 1986

U.S.C.C.A.N. 5266....................................................14

OTHER AUTHORITIES

Jason Leopold et al., The FinCEN Files: Dirty

Money Pours into the World’s Most Powerful

Banks; Thousands of secret suspicious activity

reports offer a never-before-seen picture of

corruption and complicity – and how the government lets it flourish, BUZZFEED NEWS (September 20, 2020), https://www.buzzfeed.com/

article/jasonleopold/fincen-files-financial-scandalcriminal-networks ................................................10

Scheiber & Flitter, Banks Suspected Illegal Activity, But Processed $2 Trillion Anyway, N.Y.

TIMES (September 21, 2020) ....................................10

Standard Chartered’s Iran Problems Didn’t

Go Away, BUZZFEED NEWS (September 25,

2020), https://www.buzzfeednews.com/article/

richholmes/standard-chartered-bank-moneyiran-fbi .....................................................................10

iv

TABLE OF AUTHORITIES – Continued

Page

Yang, Surane & Onaran, Banks Slide With $2

Trillion of Suspect Flows Under Scrutiny,

BLOOMBERG NEWS (September 21, 2020) ................10

1

INTEREST OF AMICUS CURIAE1

Amicus Brutus Trading, LLC, is the relator in a

False Claims Act (“FCA”) case pending in the Second

Circuit Court of Appeals. See Brutus Trading, LLC. v.

Standard Chartered Bank, et al., Case No. 20-2578 (2d

Cir.). The government declined to intervene in the case,

and its subsequent motion to dismiss was granted by

the district court without any hearing, notwithstanding a sharply conflicting evidentiary record challenging the government’s purported justifications for the

dismissal. The Second Circuit proceedings adjudicating the lawfulness of that dismissal will be directly and

significantly affected by the Court’s resolution of this

case.

---------------------------------♦---------------------------------

STATEMENT

A. Background

1. In Brutus Trading, Amicus alleges that Standard Chartered Bank (“SCB”), a major global trade finance bank, concealed its violations of U.S. sanctions

1

Petitioner has lodged a blanket letter of consent to the filing

of amicus curiae briefs. Respondent Executive Health Resources,

Inc. has consented to the filing of this brief by electronic mail from

counsel dated August 24, 2022. Respondent United States has

consented to the filing of this brief by letter from the Solicitor

General dated August 24, 2022. Pursuant to Rule 37.6, Amicus

affirms that no counsel for a party authored this brief in whole or

in part and no person other than Amicus or its counsel have made

any monetary contributions intended to fund the preparation or

submission of this brief.

2

against Iran by continuing to convert Iranian rials into

U.S. dollars. JA 58-81.2 SCB made billions in profits in

a sophisticated scheme that provided an essential avenue by which Iran funded its bloody terrorism around

the globe. JA 451-52. American and Allied troops were

the direct victims of this barbarism facilitated by

SCB’s maneuvers. Id. The callousness of SCB cannot

be overstated. As the New York Department of Financial Services (“NYDFS”) put it: “Motivated by greed,

[Standard Chartered Bank] acted . . . without any regard for the legal, reputational, and national security

consequences of its flagrantly deceptive action. Led by

its senior management, SCB designed and implemented an elaborate scheme by which to use its New

York branch as a front for prohibited dealings with

Iran – dealings that indisputably helped sustain a

global threat to peace and stability.” JA 61-62, quoting

from JA 693 (NYDFS Order In re Standard Chartered

Bank at 22, 8/6/2012).

A key penalty for the violation of the Iran sanctions is forfeiture of its proceeds. 18 U.S.C. §981(a)(1)(C).

And, to the chagrin of SCB and its ilk, Congress was

not fooling around, providing that “[a]ll right, title,

and interest in [those proceeds] shall vest in the

United States upon commission of the act giving rise

to forfeiture.” 18 U.S.C. §981(f). Thus, the money SCB

thought it was making serving as the banker for

2

There are five volumes of the joint appendix. Citation to the

first three is by “JA.” Citation to the final two, which were filed

after a motion for indicative ruling was dismissed by the district

court and the appeal was resumed, is by “SA.”

3

terrorists became the property of the United States at

the very moment SCB violated the law, and, under the

FCA, was converted into an “obligation to pay” the

United States. 31 U.S.C. §3729(b)(3). Concealment of

that obligation to pay is actionable under the FCA as a

“reverse false claim.” 31 U.S.C. §3729(a)(1)(G). Brutus

Trading is a reverse false claims action against SCB,

alleging that the bank owes the United States $56.75

billion. JA 75, 473-74.

2. The conversion of a foreign currency into U.S.

dollars, called “dollar clearing,” involves global network messaging systems linking foreign exchanges to

transmit, reconcile, and confirm transactions that are

to be processed using the U.S. dollar. JA 506. Settling

an obligation denominated in dollars requires clearing

by the Federal Reserve Bank in New York through the

Fedwire clearing system, which allows federal regulators to monitor these transactions worldwide. JA 48586; JA 506. It is this system of electronic currency exchange that became the chokepoint by which transactions involving persons connected to Iranian interests

could be blocked. JA 479. Those who wished to evade

those sanctions, such as SCB, created a variety of

methods to defeat the ability of these electronic systems to recognize the true identity of parties to any

currency exchange. JA 487-88, 492.

The U.S. Department of Justice and the U.S. Department of the Treasury initiated an investigation of

SCB in 2003, ultimately joined by the Federal Reserve

Board, the Office of the Attorney General of New York,

the NYDFS, and New York City agencies, to determine

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whether SCB had violated the Iran sanctions. JA 117.

In September 2012, NYDFS entered a Consent Order

with SCB concerning sanctions valued at approximately $250 billion during the period 2001-2007, for

which SCB agreed to pay a $340 million penalty. JA

693. In December 2012, SCB entered into a deferred

prosecution agreement with federal authorities under

which it paid $132 million for the same violations. JA

101.

The problem with these 2012 settlements was that

SCB had buffaloed the government regulators and had

concealed its far broader scheme to violate the Iran

sanctions. JA 480-81.

3. The NYDFS 2012 settlement with SCB

spurred the principals of Amicus to action. Both are

sophisticated professionals in international currency

exchange and finance – Julian Knight, having served

as SCB’s Global Head of Transaction Banking Exchange Sales from October 2009 to October 2011, JA

63, 478, and Robert Marcellus, an experienced currency trader, including direct dealings with SCB. JA

63-64, 446-47. Knight and Marcellus recognized that

the NYDFS settlement was based only on the crudest

of the techniques SCB used to evade the sanctions –

wire stripping, by which the identity of an Iran-linked

counterparty was simply removed from a wire payment message. JA 490.

Knight and Marcellus knew that top SCB executives, through “Project Green,” had devised various

strategies to defeat the sanctions regime that never

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saw the light of day in the NYDFS settlement. For example, Project Green spawned the OLT3 system, which

allowed Iranian clients to enter SCB’s computer system on their own, conduct illegal foreign exchange

transactions, and leave no record of the transaction. JA

480, 487-88. Under another stratagem, SCB personnel

would change some small part of the client’s name,

such as dropping a word or changing a letter, and the

executed transaction would go into a “sundry account,”

which was used to book a transaction in which the

counterparty had not been properly identified. JA 45455. The transaction would then be reconciled with the

true counterparty’s account, but that transaction could

never be discovered during a computer search by the

New York Federal Reserve Bank using a sundry account rather than the real name of that counterparty.

SCB also employed hidden cells in its electronic records to conceal the true parties to illegal transactions.

JA 482, 682. SCB introduced deliberate “flaws” to defeat its own systems purportedly intended to detect

illegal transactions. JA 466-67. And Knight and Marcellus knew that all this had continued after 2007, the

end date for the NYDFS settlement. The amount of

U.S. dollars involved in trades that employed the Project Green scheme is alleged to be approximately

$56.75 billion. JA 75, 473-74.

Marcellus approached both the U.S. Treasury Department and NYDFS with this information in September 2012. JA 453-59. The federal authorities

were not interested in pursuing the matter and in December 2012 proceeded with their deferred prosecution

6

agreement with SCB. JA 101. However, the NYDFS, especially then-General Counsel Daniel Alter, reopened

their investigation to investigate the broader scheme

of Project Green. JA 467, 483; SA 84.

Upon learning of the reopening of the NYDFS investigation, the Justice Department arranged a meeting with Marcellus and Knight in New York City on

January 16, 2013, with representatives of the other

federal, state, and local agencies that had been participating in the SCB investigation. JA 464-65. Hostility

from some participants toward Marcellus and Knight,

generated by embarrassment for missing so much information, was evident. One interrupted Knight, stating, “We have been investigating this bank heavily for

the past three years and you are telling us that we

have missed millions of dollars of Iran trades and the

bank is still trading with Iran? You know you’re under

oath.” Later, he said: “I don’t believe this. You must be

wrong.” JA 466; SA 83.

4. Notwithstanding that hostility, federal investigators, led by the FBI, asked Marcellus and Knight

to cooperate with their reopened investigation. JA 467.

A whistleblower, Anshuman Chandra, then employed

by SCB in its Dubai branch, contacted Knight and

offered to assist in the investigation. JA 483; SA 29.

The FBI encouraged Marcellus and Knight, assisted

by Chandra, to secure more SCB records. JA 469, 471.

In September 2013 alone, they provided 20,000 records

of SCB transactions, identified sanctioned counterparties, and supplied the names of witnesses to interview. JA 460-62, 483-85. Brutus’s counsel gave the

7

government step-by-step instructions on how to open

the hidden cells in SCB’s spreadsheets. JA 466-67. Unfortunately, the FBI did not tell Brutus Trading that

it had “wrapped up” the investigation in August 2013.

JA 95. Chandra continued to provide the FBI with information about SCB’s dealings with Iranian customers through December 2016. JA 500.

In September 2013 also, Marcellus, Knight and

Chandra told both the federal and state authorities

that SCB’s consultant, Promontory Financial Group,

LLC, had been observed deleting and altering records

in the Dubai branch. JA 484. NYDFS pursued the matter, resulting in a report regarding Promontory’s illicit

activities. JA 423-38. NYDFS also fined SCB $300

million in August 2014 for its failure to comply with

the terms of the 2012 agreement and to block U.S.

dollar transactions by its Iran-linked customers. JA

701-12. Federal authorities accepted Promontory’s report to SCB concluding that SCB had not violated

sanctions without questioning the report’s credibility.

JA 546-93.

B. Procedural History

Marcellus and Knight formed Brutus Trading,

LLC to be the relator in a False Claims Act case

against SCB they filed on December 17, 2012. Over the

course of the following years, the case went through

various procedural twists not relevant here.

The government declined to intervene in the case

in March 2019. On April 8, 2019, the government

8

entered into another deferred prosecution agreement

with SCB concerning approximately 9,500 illegal

clearing transactions, including companies owned by

Mahmoud Reza Elyassi, about which Brutus had informed the government in 2012. JA 76. Among other

remedies, SCB forfeited $240 million to the government. Id. The government refused to share the recovery with Brutus. JA 76-78.

On November 21, 2019, the government moved to

dismiss Brutus Trading on various legal and factual

grounds, relying on eight supporting declarations. Brutus responded with its own detailed declarations, but

the district court denied its request to offer the testimony of former NYDFS General Counsel Alter, either

at a deposition or a hearing, in order to rebut the

claims of the government’s declarants. JA 388. Notwithstanding the express requirement of 31 U.S.C.

§3730(c)(2)(A) for a hearing, and the clear factual disputes between the parties, the district court held no

hearing, and on July 2, 2020 dismissed the case. JA 772.

Just as the district court refused to hear testimony

from Mr. Alter or allow cross examination of the government’s declarants, so too in its opinion the district

court utterly ignored the competing factual claims of

Brutus’s declarants. The district court concluded that

the government had proffered a “valid government

purpose” for dismissal because the government’s declarations established that the information presented

by Brutus was worthless. JA 777. The court unquestioningly credited the government’s portrayal of its

investigation without even adverting to the contrary

9

testimony of Brutus’s witnesses that show that government could not have performed the examination of the

mass of documents supplied by Brutus that it claims it

did. Id. Worse, the court ignored the government’s admission that it never looked at the SCB information in

the hidden cells, notwithstanding Brutus’s directions

on how to access them. Without the slightest examination of the facts and evidence adduced by Brutus’s declarants, the court dismissed the competing factual

claims advanced by Brutus as nothing more than a

“subjective disagreement.” JA 779. In an exercise of circular reasoning, the district court went on to endorse

the government’s contention that it would be a waste

of resources to pursue the “meritless” allegations of

Brutus. JA 778.

While the case was on appeal to the Second Circuit, BUZZFEED NEWS, an online publication, posted a

series of articles in September 2020 based on more

than 2,000 suspicious activity reports (“SARs”) that

had been submitted to the Department of the Treasury,

claiming that SCB, among other international financial institutions, had evaded U.S. sanctions, and that

SCB had processed hundreds of millions of dollars for

customers that SCB suspected were evading U.S. sanctions until 2017, if not beyond that year. SA 107. At

least 31 illegal transactions reported in those SARs

had previously been identified in documents provided

to the authorities by Brutus Trading. Id. As BUZZFEED

explained:

The bank itself, confidential records show,

later reported to the U.S. Treasury that it had

10

suspicions about at least 31 companies contained in the data the whistleblowers had

handed over. . . . [T]he whistleblowers’ accounts and the banks’ Treasury reports show

the depth of the money laundering problems

at Standard Chartered and the extent to

which the US government gives big banks a

pass when they break the rules. . . . Some of

the 35 SARs mentioning customers in the

whistleblowers’ documents discussed possible

links to Iran.

Standard Chartered’s Iran Problems Didn’t Go Away,

BUZZFEED NEWS (September 25, 2020), https://www.

buzzfeednews.com/article/richholmes/standard-charteredbank-money-iran-fbi. See also Jason Leopold et al., The

FinCEN Files: Dirty Money Pours into the World’s Most

Powerful Banks; Thousands of secret suspicious activity reports offer a never-before-seen picture of corruption and complicity – and how the government lets

it flourish, BUZZFEED NEWS (September 20, 2020),

https://www.buzzfeed.com/article/jasonleopold/fincenfiles-financial-scandal-criminal-networks (“The FinCEN files documents show Standard Chartered processed hundreds of millions of dollars for companies it

suspected were circumventing sanctions against Iran

until at least 2017.”); Scheiber & Flitter, Banks Suspected Illegal Activity, But Processed $2 Trillion Anyway, N.Y. TIMES (September 21, 2020) at B8; Yang,

Surane & Onaran, Banks Slide With $2 Trillion of Suspect Flows Under Scrutiny, BLOOMBERG NEWS (September 21, 2020).

11

Since the BuzzFeed articles and the SARs contradicted the notion that Brutus’s information was meritless, Brutus secured a stay of the Second Circuit

proceedings and, pursuant to FED.R.CIV.P. 62.1, moved

in the district court for an indicative ruling that the

district court would withdraw its dismissal and reconsider the case if the Second Circuit remanded the case.

On October 31, 2021 the district court denied the Rule

62.1 motion on the ground that the BuzzFeed articles

and the SARs were inadmissible hearsay, JA 111-12, a

position at odds with its opinion dismissing the case

which wholly relied on the government’s hearsay declarations. JA 777.

Proceedings in the Second Circuit have resumed.

Briefing is completed and the parties await oral argument.

---------------------------------♦---------------------------------

SUMMARY OF ARGUMENT

Lower courts have failed to comply with the clear

text of the FCA governing the government’s authority

to dismiss a qui tam case in two ways: (1) they have

allowed the government to move to dismiss a relator’s

case after the government has declined to prosecute

the case; and (2) they have failed to give the government’s effort to dismiss a relator’s case the threshold

scrutiny normally required in a judicial hearing – even

where the record contains evidence disputing the government’s purported justification for the dismissal – to

12

ensure the government is not acting arbitrarily or irrationally.

By failing to adhere to Congress’s design for the

FCA, courts below have created a regime that fails to

provide reasonable accountability for the government’s

move to dismiss a qui tam case. In practice, this means

that the government can use dismissal to cover up bureaucratic incompetence or laziness, or even corruption. It also means that the self-interest of government

institutions can pre-empt the taxpayers’ interest in

recovering massive sums from fraudsters – in Brutus

Trading alleged to amount to over $56 billion – due to

the supposed “burdens” of FCA litigation. And the contrivance that allows this to take place is a warped procedure which brushes aside the traditional contours of

a judicial hearing, or even the hearing itself, even when

critical facts are in dispute, to breezily accept the government’s justifications to terminate an FCA case.

The experience of Amicus, perhaps even more

acutely than that of Dr. Polansky, illustrates these corruptions which so commonly arise when courts fail to

conform to the statutory regime for the FCA as written

by Congress, crippling the effectiveness of that regime

for taxpayers and impairing basic notions of due process for relators.

---------------------------------♦---------------------------------

ARGUMENT

Petitioner has ably made the case that in 31 U.S.C.

§3730(c) Congress set out a straightforward textual

13

scheme governing the “rights of the parties” in qui tam

actions that does not contain any authority for the

government to dismiss a qui tam case after the government has declined to intervene. Once the lower courts’

interpretations of the FCA disengaged from that text

and opened the Pandora’s Box of post-declination government dismissals, they entered a landscape not

charted by the statute or the intentions of Congress. As

the briefing on the petition for certiorari illustrated,

lower courts have struggled to fashion meaningful

standards to cabin the dismissal authority Congress

had not provided but they had unleashed. Though the

lower courts came up with formulations ranging from

unfettered government discretion to dismiss, see, e.g.,

Swift v. United States, 318 F.3d 250 (D.C. Cir. 2003), to

discretion that simply could not be fraudulent, arbitrary or capricious, or illegal, see, e.g., United States ex

rel. Sequoia Orange Co. v. Baird-Neece Packing Co., 151

F.3d 1139 (9th Cir. 1998), all have been animated in

some sense of deference to the government’s view of

whether a qui tam case should proceed.

That deference is nowhere to be found in the FCA.

Once the government has declined to intervene and

proceed with or dismiss a qui tam case as the FCA provides, deference to the government’s wishes concerning

the future of a qui tam case is not just logically out of

place, it is in conflict with the statute, which at that

point gives the relator the exclusive right to conduct

the action. 31 U.S.C. §3730(b)(4); Vermont Agency of

Nat. Res. v. United States, 529 U.S. 765, 769 (2000).

14

Judicial deference to the government’s desire to

dismiss a qui tam case reflects an instinct that all FCA

litigation is somehow the government’s preserve. That

is not the law. As Petitioner explains, a qui tam relator

has been assigned part of an FCA claim and has a distinct property interest in that claim. Brief of Petitioner,

37-38. Indeed, a relator “act[s] as a check that the

Government does not neglect evidence, cause unduly

[sic] delay, or drop the false claims case without legitimate reason.” S.Rep. 99-345, 26, reprinted in 1986

U.S.C.C.A.N. 5266, 5291. The government does not inherently occupy a position superior to that of the relator concerning the relator’s claim, much less after the

government has declined to intervene.

To the contrary, the FCA imposes on the government the duty to investigate violations diligently, 31

U.S.C. §3729(a), which suggests a heightened government duty to faithfully and fully explore a relator’s allegations of FCA violations. The government is held

accountable for this duty via the hearing required by

31 U.S.C. §3730(c)(2)(A). That provision, and the requirements of due process, leave no doubt that a court

must carefully scrutinize the justifications for a government motion to dismiss, including giving a relator

a hearing, governed by traditional rules of procedure

and evidence, to challenge the government’s evidence

supporting those justifications.

Brutus Trading illustrates how far removed from

the essential elements of the FCA’s textual scheme adjudication of government motions to dismiss qui tam

cases truly are.

15

I.

In Brutus Trading, the District Court Gave

No Scrutiny to the Government’s Justification for Dismissal, Utterly Ignoring the Relator’s Competing Evidence.

A relator is entitled to have its evidence submitted

to the government considered by a district court and to

an evidentiary hearing when the relator has presented

evidence that contradicts the government’s justification for dismissal. In dismissing the Brutus Trading

complaint, the district court relied exclusively on declarations submitted by the government, while utterly

ignoring the declarations and other evidence submitted by the relator that contradicted the government’s

declarants. The district court’s brushing aside of the

facts offered by the relator as merely a “subjective disagreement” is shocking in the face of even a cursory

review of the record that was before the court.

1. For example, FBI Special Agent Matthew

Komar and OFAC’s Alexandre Manfull alleged:

Komar: “Relator never claimed that SCB had

Dubai-based clients that were fronts for Iranian businesses, which is what the Government uncovered in its investigation that led to

the 2019 settlements.” JA 659.

Manfull: “Relator never identified these (or

any other non-Iranian) entities to the U.S.

government.” SA 22.

These statements are directly contradicted by information provided by relator to the government from

relator’s earliest contacts with the government. JA

16

452-60. Relator made an offer of proof that NYDFS’s

former General Counsel, as Mr. Alter, would confirm

this fact. SA 58-59. See also JA 753. Relator’s complaint explicitly alleged the involvement of Dubaibased entities in sanctions violations:

OLT3, by design, did not possess end counterparties to trades, leaving counterparties in

Iran Group transactions and Dubai-based

Iranian backed SME’s labeled simply as SCB

Dubai. JA 17-18, ¶ 17.

[D]efendants knowingly engaged in U.S. dollar clearing and other transactions with and

for the benefit [of ] Iranian government entities and Iranian SDNs in at least 2008 and

2009 and as late as 2012 through the client

franchise based in SCB Dubai, conducting

transactions for Dubai-based, Iranian backed

SME [small and medium sized entity] clients.

JA 22, ¶ 27.

Relator provided the identities of numerous entities that were front companies for Iranian entities, JA

681-82; SA 44, including particularly those highlighted

by relator’s principal, Julian Knight. JA 480. Those

front companies included Mapna International FZE,

Amesco FZE, Bright Crescent FZE, and Al Zarooni Exchange FZE. JA 482, 485; SA 81-82. Mr. Chandra, an

SCB Dubai employee at the time, who assisted relator

and agreed to provide SCB records to the FBI, submitted a declaration stating that in those records were

“many SCB Dubai customers located outside of Iran

[that] were involved in U.S. dollar transactions and

17

were either Iranian or closely linked to Iran.” JA 496.

A listing of some of those entities with descriptions of

connection to Iran is in a document that Mr. Chandra

produced to the FBI in September 2013. JA 757-67. Relator’s counsel specifically reminded the government in

a January 9, 2019 letter that relator had submitted evidence of the involvement of SCB’s Dubai-based entities in sanctions violations. JA 753.

2. The government dismissed relator’s criticism

of its investigation as merely griping at steps not taken

that relator preferred. But relator offered a detailed

and substantial analysis to show the government’s investigation was inadequate and arbitrary. Relator

pointed out that: (1) the government’s conclusions are

based on not more than a fraction of the evidence provided by relator, JA 75, 446-501, 510-42, 594-607, 73171; (2) it relied on a report by SCB’s consultant without

considering whether the report was fundamentally unreliable because of the consultant’s deletion of information at SCB Dubai, JA 469, 492; SA 58; (3) it had

already decided to “wrap up” the investigation before

receiving and considering SCB records that it had requested Mr. Chandra to produce, JA 95; (4) it never investigated relator’s claims of sanctions violations by

SCB’s Dubai-based customers because it claimed that

relator never alleged such violations, SA 22; (5) it made

no genuine effort to corroborate relator’s claims, JA

482, 488-91, 548; (6) it proffered erroneous interpretations of sanctions rules to justify its conclusions, JA 94,

677; (7) it falsely asserted that relator had not identified a company called Tanootas Taban as a target or

18

alerted it to “hidden cells” in SCB spreadsheets, JA

718, 753; and (8) it misrepresented Project Green,

which was designed by SCB to enable its customers to

evade sanctions, JA 480, as “the internal name that

SCB had given to the matter that ultimately led to the

2012 DPA and related settlements,” JA 95, despite the

fact that there was evidence that SCB continued to

implement Project Green after 2012. JA 485, 492; SA

43, 84.

3. The government’s declarations were replete

with conclusory and inaccurate statements of law and

fact. Relator established that some of the government’s

legal propositions and interpretations of regulations

were at odds with previous interpretations of officials

of the Treasury Department. Compare JA 718-19 with

JA 677. The governments’ declarants were in disagreement about the appropriate construction of regulations. JA 94.

4. The government contended that it could not

corroborate relator’s allegations. JA 94. That was not

because it was unable to do so but because it failed to

attempt corroboration. For example, relator requested

that the government obtain records from SCB that

would confirm SCB’s representations and the government’s conclusions about transactions in currencies

other than the U.S. dollar, JA 489-90, but the government declined to do so. The government misrepresented to the district court that relator never advised

the government about sanctions violations involving

Tanootas Taban despite that information having been

provided by relator and Mr. Chandra, as well as a

19

pointed reminder of relator’s earlier production in a

January 9, 2019, letter from relator’s counsel to the

government. JA 753.

5. Not only did the district court fail to

acknowledge and apparently evaluate the evidence

submitted to the government by relator, but it also

denied the relator an opportunity to submit other evidence from former NYDFS General Counsel Alter, a

key participant in the joint investigation of the Brutus

Trading allegations against SCB. Nevertheless, the

court relied on the declaration of Elizabeth Nochlin, an

employee of NYDFS who, unlike Mr. Alter, had no active role in the joint investigation. JA 686.

The district court’s refusal to hold an evidentiary

hearing in the face of such a record shows what a travesty judicial review of government efforts to dismiss a

qui tam case has become. As a practical matter, the

government does have unfettered discretion to dismiss

a qui tam case. That, however, is not what the FCA provides, and this Court must restore the integrity of the

statute.

II.

In Brutus Trading, the District Court

Abandoned Basic Procedural and Evidentiary Norms.

The Brutus Trading litigation illustrates the

abuses that can occur in adjudication under the FCA

when a district court operates in a jurisprudence unconstrained by the text of the statute. The experience

of Brutus Trading demonstrates the need for the Court

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to correct that jurisprudence and construe 31 U.S.C.

§3730(c)(2)(A) to require an evidentiary hearing when

a court is confronted by a conflicting evidentiary record

in adjudicating a government motion to dismiss a qui

tam case. The requirements of the Due Process Clause

dictate such a construction. The language, history and

purpose of the statute also mandate that construction.

The district court based its decision to dismiss the

Brutus Trading complaint on nothing more than the

untested declarations of the government’s declarants.

JA 777. Those declarations constitute hearsay in its

most obvious form. Such self-serving testimony must

be subjected to cross-examination to satisfy due process requirements. A hearing at which the relator has

an opportunity to offer evidence that challenges the

government’s justification and to examine the credibility of the government’s declarants is a mandate that is

compelled by 31 U.S.C. §3730(c)(2)(A). Any other construction of that statutory language that does not require those minimal opportunities would render the

term “hearing” hollow and virtually meaningless.

“Hearing” has traditionally been understood to describe a meaningful adversarial testing of an opposing

party’s evidence. Such testing entails “notice of the factual basis” for the opponent’s position and “a fair opportunity to rebut the Government’s factual assertions

before a neutral decisionmaker.” Hamdi v. Rumsfeld,

542 U.S. 507, 533 (2004); see also Greene v. McElroy,

360 U.S. 474, 496 (1959) (A party must have an “opportunity to show that the [opponent’s] evidence is untrue.”).

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In dismissing the Brutus motion for an indicative

ruling pursuant to FED.R.CIV.P.62.1, the district court

again apparently relied on hearsay, this time in the

form of statements of FBI agents in Form 302. SA 103.

Indeed, FBI 302s and similar memoranda of law enforcement interviews with witnesses are not just hearsay, they are double hearsay, or hearsay within

hearsay. United States v. Benson, 961 F.2d 707, 709

(8th Cir. 1992). Such reports consist of out-of-court

statements made by government investigators who

conducted the interviews (hearsay #1) about statements purportedly made by the persons being interviewed (hearsay #2). The government itself has

recognized that “because such reports of a meeting or

an interview with a witness are not verbatim transcripts and suffer from other shortcomings that may

impact reliability, including the agent’s subjective decision to include certain information over other information, these reports ‘are therefore classic hearsay

without – in and of themselves – requisite indicia of

reliability.’ ” Memorandum of Law in Support of the

Government’s Motions in Limine, United States v.

Bynum, 19-cr-255, Dkt. No. 24, at 10 (E.D.N.Y. Feb.

10, 2020) (internal citation omitted). See also United

States v. Shulaya, 17-cr-350, Dkt. No. 819, at 5

(S.D.N.Y. June 11, 2018) (“Issues that may impact reliability include the fact that different agents have different practices regarding how much detail they

choose to include in a 302, and whether to include facts

learned elsewhere as part of the investigation or editorial content that were not actually stated during the

interview. . . . [A]gents with less background in an

22

investigation may also make errors in their note taking.”). That the Justice Department itself would so

cavalierly introduce 302s into the Brutus Trading proceedings underscores how corroded basic norms of evidence and due process have become in adjudication of

government motions to dismiss qui tam cases.

Even more striking is the posture of the district

court exclusively relying on untested government declarations in the face of credible evidence contradicting

them, allowing the record to be padded with FBI 302s,

but rejecting the SARs disclosed by BuzzFeed as improper hearsay. SA 111-12.

All of what has gone on in Brutus Trading, actions

by the government approved by the district court, illustrate abuses that ultimately spring from the failure

of the courts to take the text of the FCA governing the

rights of parties to qui tam actions seriously and apply

it as written. With the ill-considered dismissal of qui

tam cases we have seen, billions of dollars owed to the

taxpayers have been lost and the norms of our judicial

procedures corrupted. This Court can now step in and

return the FCA to the fraud-fighting engine Congress

designed.

---------------------------------♦---------------------------------

CONCLUSION

The Court should reverse the judgment of the

Third Circuit and hold that the government does not

have the authority to dismiss an FCA suit under 31

U.S.C. §3730(c)(2)(A) after initially declining to proceed

23

with the action. If the Court concludes that the government does have that authority, the Court should hold

that the hearing provided in Section 3730(c)(2)(A) requires a thorough examination of the government’s

justification for dismissal to determine if the government is acting rationally and in good faith, including

evidentiary proceedings to resolve a conflicting evidentiary record.

Respectfully submitted,

PATRICK M. MCSWEENEY

Counsel of Record

MCSWEENEY, CYNKAR &

KACHOUROFF PLLC

3358 John Tree Hill Road

Powhatan, VA 23139

(804) 937-0895

patrick@mck-lawyers.com

ROBERT J. CYNKAR

MCSWEENEY, CYNKAR &

KACHOUROFF PLLC

10506 Milkweed Drive

Great Falls, VA 22066

(703) 621-3300

rcynkar@mck-lawyers.com

Counsel for Amicus Curiae