Petition for Writ of Certiorari — United States ex rel. Costner v. URS Consultants, Inc.

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Oe 65 JUL 8 2003

In Gye OF THE CLERK

Supreme Court of the Gnited States

UNITED STATES, ex rel., PAT COSTNER,

SHARON GOLGAN, CAROLYN LANCE,

DEBRA LITCHFIELD, BECKY SUMMERS,

KENNY BROWN, EDWARD CAMPBELL, DON DANIEL,

JEFFREY FOOT, DAVID HERMANSON, ARKANSAS

PEACE CENTER, AND VIETNAM VETERANS OF

AMERICA, ARKANSAS STATE COUNCIL, INC.,

Petitioners,

URS CONSULTANTS, INC., MORRISON KNUDSEN

CORPORATION, MRK INCINERATION, INC.,

AND VERTAC SITE CONTRACTORS,

Respondents.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Eighth Circuit

PETITION FOR WRIT OF CERTIORARI

RICHARD E. CONDIT, ESQ.

5505 Connecticut Ave., NW, #283

Washington, D.C. 20015-2601

(202) 829-2444

E-mail: rlcondit1@earthlink.net

Counsel of Record

MICK G. HARRISON, Esq.

426 River Mill Road Ext.

Jersey Shore, PA 17740

(859) 321-1586

GREGORY FERGUSON, Esq.

600 W. 4th Street

North Little Rock, AR 72114

(501) 374-3535

Attorneys for Petitioners

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

I. QUESTIONS PRESENTED

Whether the United States Court of Appeals for the

Eighth Circuit Applied An Incorrect Legal Standard in

Affirming the District Court’s Dismissal of Most of Plain-

tiffs’ Qui Tam Claims When It Decided that the Federal

False Claims Act, Which Act Makes No Specific Reference

to Materiality and Has No Common Law History of Such a

Requirement, Implicitly Requires a Showing of Materiality

In Order for the Government or a Qui Tam Plaintiff to

Recover Funds for the Federal Treasury from a Govern-

ment Contractor Who Has Received Millions of Dollars in

Federal Funds Based on False Claims.

Whether the United States Court of Appeals for the

Eighth Circuit Applied An Incorrect Legal Standard in

Affirming the District Court’s Dismissal of Most of Plain-

tiffs’ Qui Tam Claims under the Federal False Claims Act,

Which Act Was Amended in 1986 to Remove Government

Knowledge as a Defense, When It Decided that Plaintiffs’

Showing that a Government Contractor Had the Required

Intent or Scienter (i.e., Knowingly Submitting False

Claims) Could Be Negated by the Defendant Showing that

a Government Official Had Knowledge of the False

Ciaims.

Whether the United States Court of Appeals for the

Eighth Circuit Applied An Incorrect Legal Standard in

Dismissing Plaintiffs’ Qui Tam Action under the Federal

False Claims Act When It Decided that Plaintiffs Had a

Burden of Pleading “Fraud” with Particularity Under Fed.

R. Civ. P. 9(b), and Decided that Although Plaintiffs

Specifically Pled the Dates and Amounts of the False

Claims Submitted by Defendants and Pled Substantial

QUESTIONS PRESENTED - Continued

Details of Why These Claims Were False (Including Who

Was Involved in What Type of Dishonest Conduct), the

Plaintiffs Must Also, in Order to Meet their Burden Under

the Federal Rules, Know and Allege the Exact Dates and

Times of Each Underlying Improper Act of Defendants

(Such as the Dates Defendants Tampered with Monitoring

Equipment on Their Hazardous Waste Incinerator) Even

Where Defendants Chose Not to Record Those Dates To

Avoid Incriminating Themselves.

Whether the United States Court of Appeals for the

Eighth Circuit Applied An Incorrect Legal Standard In

Affirming the District Court’s Denial As Moot, Based on

the District Court’s Finding that Government Knowledge

Negated Defendants’ Intent and Demonstrated a Lack of

Materiality, Plaintiffs’ Motion For Partial Summary

Judgment On Plaintiffs’ Claims That Defendants Fraudu-

lently Induced EPA And URS To Enter Into Contracts

With The Defendants For Incineration Of Superfund Site

Waste By Concealing and Failing to Disclose Material

Facts Regarding Previous Malfunctions of the Defendants’

Incineration Equipment and Resulting Releases of Highly

Toxic Chemicals Into the Workplace and the Surrounding

Community and Environment.

ATO CE Ah digit MEA ABER CA EPEAT. OW eam

Il. CORPORATE DISCLOSURE STATEMENT

The Appellants in this case who are non-governmental

corporate entities are:

(1) The Arkansas Peace Center, and (2) The

Vietnam Veterans of America, Arkansas State

Council, Inc. There are no parent corporation(s)

of the Arkansas Peace Center. There is a na-

tional organization that is, in some sense, @ pat-

ent corporation of the Vietnam Veterans of

America, Arkansas State Council, Inc.: the Viet-

nam Veterans of America, Inc., whose main office

is located in Silver Spring, Maryland. There are

no publicly held companies that own 10% or

more of either of these parties’ stock. Both of

these parties are not-for-profit corporations and

neither party has issued stock.

ITI.

Ill. TABLE OF CONTENTS

Page

QUESTIONS PRESENTED..............2:++e+2s00000 i

DISCLOSURE STATEMENT..........:::2+eeeeeeee0* ii

TABLE OF CONTENTS. .........ccceeeceeeeeeeeneeeeees iv

TABLE OF AUTHORITIES ...........s2ceeceeeeeeeees Vv

CITATIONS OF OPINIONS AND ORDERS

ENTERED ............:::cceceeseeersceeeeenneeesnreneesenenees 1

STATEMENT OF JURISDICTION ..............++ 1

CITATIONS OF STATUTORY PROVISIONS... 1

STATEMENT OF THE CASE ..........::0eeseeeeeee+ 2

ARGUMENT ON REASONS FOR ALLOW-

ANCE OF THE WRIT.........--::sccccseseeeeeseeeeennees 11

A. A UNITED STATES COURT OF AP-

PEALS HAS DECIDED AN IMPORTANT

QUESTION OF FEDERAL LAW IN A

WAY THAT CONFLICTS WITH RELE-

VANT DECISIONS OF THIS COURT....... 11

B. A UNITED STATES COURT OF AP-

PEALS HAS DECIDED AN IMPORTANT

QUESTION OF FEDERAL LAW THAT

HAS NOT BEEN, BUT SHOULD BE,

SETTLED BY THIS COURT..........-:+:+0++++ 19

C. A UNITED STATES COURT OF AP-

PEALS HAS ENTERED A DECISION IN

CONFLICT WITH THE DECISION OF

ANOTHER UNITED STATES COURT OF

APPEALS ON THE SAME IMPORTANT

Iv. TABLE OF AUTHORITIES

Page

CASES:

Bly-Magee v. California, 236 F.3d 1014 (9th Cir.

QOO1)...ccrcccccrescccvecccesessvesseescvecccocsesscosesscensseessocssoecsoessaesee 26

Community for Creative Non-Violence v. Reid, 490

U.S. 730, 109 S.Ct. 2166, 104 L. Ed. 2d 811

(1989).......ccccsccssccssssscscscsssesseeecenssssscesssssesenssennsensssssnesnsees 13

Costner v. URS Consultants, 153 F.3d 667 (8th Cir.

1998).....cccecccoccsccscscssscsscscsessecesosssosssensesssssccsnessssnssonssonses 3

Harrison v. Westinghouse Savannah River Co., 176

F.3d 776 (4th Cir. 1999)........cccccccecesseeeeeeseeees 17, 18, 26, 27

Kay v. United States, 303 U.S. 1, 58 S.Ct. 468, 82

L.. Ed. 607 (1938) ..........:ssssssscsccccsececeessesnseeeeesesscceneeneanees 14

Kungys v. United States, 485 U.S. 759, 108 S.Ct.

1537, 99 L. Ed. 2d 839 (1988) ........:sesesesseeerereeeees 13, 14

Luckey v. Baxter Health Care Corp., 183 F.3d 730

(7th Cir. 1999) ......scscesssssescesseeresseesssessessenssessnnsssesnrensens 15

Neder v. United States, 527 U.S. 1, 144 L. Ed. 2d

35, 119 S.Ct. 1827 (1999) ........eersseererereeeeererrenserens passim

North Star Steel Co. v. Thomas, 515 U.S. 29, 115

S.Ct. 1927, 132 L. Ed. 2d 27 (1995) .......sscesserreereereeereees 14

Shaw v. AAA Engineering & Drafting, Inc., 213

F.3d 519 (10th Cir. 2000)............ccccsssseeesssrsereeeeeeereeeessnes 25

United States v. American Trucking Ass’ns, Inc.,

310 U.S. 534, 60 S.Ct. 1059, 84 L.Ed. 1345

CP iiinrcssmns TARTRATE ASTOR mR Ne 14

United States v. Basin Elec. Power Coop., 248 F.3d

781 (Sth Cir. 2001) ........cessccesesessressteeeeseserseenessnnsenenesess 11

United States ex rel. Berge v. Bd. of Trs. of the Univ.

of Ala., 104 F.3d 1453 (4th Cir. 1997) ..........sssesssseeeeerees 1b

TABLE OF AUTHORITIES - Continued

Page

United States v. Burns, 162 F.3d 840 (5th Cir. 1998)........ 11

United States ex rel. Cantekin v. University of

Pittsburgh, 192 F.3d 402 (3d Cir. 1999).............0+ passim

United States ex rel Costner v. United States, 317

F.3d 883 (8th Cir. 2008)................ccccceseseeeeeeeeeeeeees 1, 19, 28

United States v. Ehrlich, 643 F.2d 634 (9th Cir.

2GB1) .cvcccssascrccncsvesosesesesesocenscsbsosesnenebensenenssautebonavesssnenenies 25

United States v. Gaudin, 515 U.S. 506 (1995)..........ceceeee 13

United States v. Goberman, 458 F.2d 226 (C.A.3

DFE) iniscinvsscensatensavecensennbieantgnatanntassaancianinsan cisiiaiiseniabiaiie 14

United States v. Intervest Corp., 67 F. Supp. 2d 637

(S.D. Miss. 1999) .......ccccsccsssssscocscsesveecvcvscssesscescsesssnsosenes 15

United States ex rel. Oliver v. The Parsons Co., 195

F.3d 457 (Oth Cir. 1999).............cssscceceesssrsreeeeesssssereeeseees 11

United States Of America ex rel. Roby v. The Boeing

Company, 184 F.R.D. 107 (S.D. Ohio 1998).............+++++ 16

United States ex rel. Schwartz v. Coastal Health-

care Group, Inc., 232 F.3d 902 (10th Cir. 2000)............. 26

United States v. Sonoma County Water Agency, 929

F.2d 1416 (Oth Cir. 1991)..............sccccccccccccccceeceneessesssseees 24

United States of America v. Southland Management

Corporation, 288 F.3d 665 (5th Cir. 2002), va-

cated and decided on other grounds, 326 F.3d 669

(5th Cir. 20038) (er Dannrc)...........ccccccerereeeseeereeeeseeeeees passim

United States ex rel. Thompson v. Columbia/HCA

Healthcare Corp., 125 F.3d 899 (5th Cir. 1997)....... 15, 26

TABLE OF AUTHORITIES - Continued

Page

United States ex rel. Weinberger v. Equifax, Inc.,

557 F.2d 456 (Sth Cir. 1977)...........ccsccscssserrseseeereesenees 15

United States v. Wells, 519 U.S. 482, 117 S.Ct. 921,

137 L. Ed. 2d 107 (1997) ........scscssecsssereeeeseeeneeeeeesPASSIM

STATUTES AND RULES:

BB U.S.C. Section LRBA....cccccccccccccccssssecccccsscvcccsvcscovscsvenesseess 1

BB U.B.C. Bectiom 1SS1........cwccccrerccescressscrcoscsveveevesosecescvsconses 2

81 U.S.C. Section 3729(8) ........ssssssssssssssessssseseeeee 1, 2, 24, 25

A ETT, Tee Bri iccinceccsissvcctcverssececcencsnrcccecenssrensssevens 3

Oh Si a salinities 1,2

Oe We BN CT Ls conesesnneeasnnteininstaenveunssnsonsnnnens 1,2

SD UGG. Beene BTS) cccesncccecscssccsccccvessensscecesstesseneosees 1,2

Fed. R. Civ. P., Rule 9(b) ..........cccceeeeeeeeeneees 5, 21, 26, 27, 28

V. CITATIONS OF THE OPINIONS AND ORDERS

ENTERED IN THE CASE

The primary decision by the United States Court of

Appeals for the Eighth Circuit entered below is reported at

United States ex rel. Costner v. United States, 317 F.3d 883

(8th Cir. 2003). App. 1-11. The Court of Appeals denied

rehearing. App. 36. United States ex rel. Costner v. United

States, No. 01-3764 (8th Cir. 04/09/2003), unofficially re-

ported at 2003.C08.0000436 <http://www.versuslaw.com>.

VI. STATEMENT OF JURISDICTION

The United States Court of Appeals for the Eighth

Circuit issued its opinion affirming the District Court on

January 28, 2003, and denied rehearing on April 9, 2003.

The Petitioners filed this Petition within 90 days of the

denial of rehearing.

28 U.S.C. § 1254 is the statutory provision which

confers on this Court jurisdiction to review on a Writ of

Certiorari the judgment and orders of the United States

Court of Appeals for the Eighth Circuit in question in this

case.

No special notifications pursuant to Rule 29.4(b) or (c)

are required in this case.

VII. CITATIONS OF STATUTORY PROVISIONS

The provisions of the Federal False Claims Act in-

volved in this case are 31 U.S.C. §§ 3729-3732. These

provisions are lengthy and the text of same is set out in

the appendix, at App. 37.

VIII. STATEMENT OF THE CASE

This is a qui tam action brought on behalf of the

United States by the Plaintiffs as relators pursuant to the

False Claims Act (FCA), 31 U.S.C. §§ 3729-3732. The

complaint alleges that URS Consultants, Inc. (URS),

Morrison Knudsen Corporation (MK), MRK Incineration,

Inc. (MRK), and Vertac Site Contractors (VSC) submitted

false claims for payment under a federal government

contract for the treatment and disposal of hazardous waste

at the Vertac Chemical Plant site in Jacksonville, Arkan- ~

sas. The District Court had subject matter jurisdiction

over this action pursuant to the False Claims Act, 31

U.S.C. § 3732(a) and via 28 U.S.C. § 1331.

The plaintiffs filed this False Claims Act suit in 1995.

The suit arises out of the Defendants’ contract with the

Environmental Protection Agency (EPA) to clean up a

contaminated industrial site known as the Vertac site.

From 1948 to 1987, the Vertac site was home to chemical,

herbicide, and pesticide production facilities. The site

became extremely contaminated with dioxin and other

highly toxic chemicals as a result of years of improper

hazardous waste disposal. The United States EPA placed

the site on the Superfund National Priorities List. Vertac

Chemical Company abandoned the site. The EPA initiated

an emergency removal action. The State negotiated a

contract for on-site incineration of the waste with MRK

Incineration, Inc., which subsequently assigned the

- contract to Vertac Site Contractors (VSC), a joint venture

composed of MRK and MK Environmental Services, a

division of Morrison Knudsen Corp.

The State contract provided for incineration of the |

drummed hazardous waste. The incineration project was

hier SIS Dao

funded by a settlement of the EPA and State litigation

against the polluter. The EPA remained involved in the

incineration project by monitoring air quality, handling

and transporting the drums of waste to be incinerated by

the contractors, and disposing of incinerator ash. In 1992,

when the settlement trust fund was soon to be exhausted,

the EPA assumed primary responsibility for the site and

approved a federal removal action using federal funds.

When the State administered trust fund was depleted, the

State terminated its contract with VSC. EPA then issued a

contract to URS Consultants, Inc. (URS) for continued

incineration and URS then entered into a contract with

VSC to conduct the remaining incineration activities. The

EPA assumed responsibility for the project on June 8,

1993. In 1995, after allegations of wrongdoing by the

contractors were brought forward by the Plaintiffs, the

EPA transported the remaining containers of the most

toxic waste (the 2,4,5-T dioxin contaminated waste drums)

to a site in Kansas for incineration.

The Plaintiffs allege that before and during the course

of the contract the Defendants actively concealed serious

operational problems and numerous regulatory violations

from the EPA, including threats to public health, worker

safety and the environment; committed fraud in the

inducement of EPA to enter the contract; and subse-

quently submitted false claims for payment of millions of

dollars for work certified as if it were in compliance with

the contract when, in fact, the work was actually in

violation of contract provisions intended to protect worker

safety, public health and the environment.

Defendants filed a first round of motions to dismiss

which were denied by the District Court leading to a prior

appeal decided by an Eighth Circuit panel. See, Costner v.

URS Consultants, 153 F.3d 667 (8th Cir. 1998). After

remand, Defendants filed another round of motions to

dismiss and for summary judgment interspersed during

active discovery depositions and document exchange and

prior to the motions deadline. The District Court set

deadlines of December 18, 2000 for motions, January 8,

2001 for responses, and January 15, 2001 for replies. On

December 15, 2000, the District Court heard argument on

Defendants’ early motions. On December 18, 2001, Plain-

tiffs filed their Motion for Partial Summary Judgment. On

December 21, 2000, the District Court sent a letter to

Counsel for all parties indicating that the District Court

intended to issue an Order granting in large part Defen-

dants’ early filed Motion to Dismiss or For Summary

Judgment. Court of Appeals Appendix (CA App.) at 1215.

Docket, CA App. 1-20. Plaintiffs filed their Rule 56(f)

Motion to hold the decision on Defendants’ motions in

abeyance pending completion and evaluation of discovery

on January 8, 2001. CA App. 1217. On January 18, 2001

the District Court issued its Order denying Plaintiffs’

Motion for Relief under Rule 56(f), Fed. R. Civ. P. CA App.

at 1344. -

On January 31, 2001 the District Court granted in

large part Defendants’ Motion to Dismiss or for Summary

Judgment, CA App. at 1347, declaring Plaintiffs’ Motion

for Partial Summary Judgment moot. In this decision the

District Court dismissed all of Plaintiffs’ claims, except the

claims regarding intentional tampering with the incinera-

tion monitoring instruments, on the basis that some

government officials knew of those non-tampering false

claims and consequently, in the District Court’s view,

those false claims would not have been “material.” The

District Court also ruled that consequent to the govern-

ment’s knowledge, the Defendants would not have had the

requisite intent or knowing state of mind regarding the

PO eee ee ee ee ee ee

5 : ei

submission of false claims. The District Court in this same

decision also dismissed all the tampering related claims,

except for two dates (which Plaintiffs identified specifically

as dates on which tampering occurred) on the basis of a

failure to plead with sufficient particularity under Fed. R.

Civ. P., Rule 9(b).

On March 6, 2001, the District Court denied Plaintiffs’

Motion for Reconsideration. CA App. at 1943. In April,

2001, a two week trial was conducted on the remaining

tampering claims. On October 22, 2001, the Judgment and

Order of the District Court was issued, holding for Defen-

dants and dismissing Plaintiffs’ Complaint. App. 12, 39.

CA App. rt 1922-42 and 1921. Plaintiffs appealed, and the

Eighth Circuit affirmed the District Court decision. App.

Defendants operated a hazardous waste incinerator

for the Vertac Superfund site waste under EPA contract

which required, inter alia, compliance with environmental

and worker safety laws. Plaintiffs’ Motion for Partial

Summary Judgment (P.S.J.), Docket 220, Exhibit 1, CA

App. 892; Plaintiffs’ Trial Exhibits 174, CA App. 1967; P.

Tr. Ex. 186, CA App. 1980. EPA would not have approved

continued payments under a contract with Defendants or

entered into a contract with the Defendants had it known

the Defendants had knowingly concealed material infor-

mation from EPA, knowingly violated the contract or

knowingly allowed a danger to the public or workers.

EPA’s Caban’s Deposition, CA App. 1272, 1286; EPA’s

Ehrhart’s Deposition, P.S.J. Exhibit 29, CA App. 1003;

P.S.J. Ex. 40, CA App. 1099; EPA’s Luthans’ Deposition

P.S.J. 39, CA App. 1091; EPA’s Luthans’ Letter to Adair

P.S.J. Exhibit 20, CA App. 966.

——

The undisputed material facts which are referenced to

a “P.S.J.” Exhibit were presented to the District Court in

support of Plaintiffs’ Motion for Partial Summary Judg-

ment (P.S.J.), which the District Court denied as moot

(although timely filed within the motions deadline).

Defendants VSC, MRK and MK failed to disclose material

information to U.S. EPA during negotiations regarding the

June, 1993 and subsequent contracts and work assign-

ments, and during negotiations of subcontracts between

URS and VSC, MK and MRK, see, Transcript, April 23,

2001, Fowler at 1231; April 20, 2001, Apa at 1014-1016,

but attempted to mislead the District Court into believing

otherwise. Transcript April 20, 2001, Apa at 991-993

compared to Id. at 1014-1016 and Transcript April 23,

2001, Fowler at 1231. The material information concealed

dealt with the Defendant’s measurement of high levels of

dioxin, a very toxic chemical that was the focus of the

Vertac Superfund site cleanup, in the on-site air to which

workers were exposed without respiratory protection. Id.

These high levels of dioxin in the air were detected by VSC

on-site air monitors repeatedly in 1992 and early 1993

during the contract negotiations. See, P.S.J. Exhibit 7, CA

App. 915.

These high dioxin levels detected in VSC air monitors

exceeded the VSC safety plan standard for worker respira-

tory protection many times over. See, 5.5 pg/m3 standard

in the VSC Safety Plan, P.S.J. Exhibit 3, CA App. 904, and

Ex. 6, 913, compared to the numerous levels reported in

P.S.J. Exhibit 7, CA App. 915, above that standard (see,

e.g., 18 pg/m3 and 194 pg/m3). These levels of dioxin are

also considered dangerous based on the scientific litera-

ture. P.S.J. Exhibit 36, CA App. 1028.

The URS Contract, and the VSC Subcontract under

Attachment B, Minimum Design Requirements at 2.3, p.

C-B2, require Defendants to develop a Health and Safety

Plan to be approved by EPA prior to the initiation of work

at the site, which plan had to include a respiratory protec-

tion program. P.S.J. Exhibit 1, CA App. 892 (EPA Inspec-

tor General’s review of Contract); Plaintiffs’ Trial Exhibits

174, CA App. 1967; P.Tr. Ex. 186, CA App. 1980. The URS

Contract, and the VSC Subcontract under Attachment B,

“Minimum Design Requirements” at 2.3, p. C-B2, require

Defendants to develop a Health and Safety Plan to be

approved by EPA prior to the initiation of work at the site,

which plan was required to include hazards analysis and

designation of action levels. Id.

The VSC safety plan was mandatory under the federal

contracts, and the standard of 5.5 pg/m3 was not only the

standard adopted by VSC for protection of workers but is

also the identical standard recommended by federal

agencies and adopted by EPA itself for its own perimeter

air monitors operated by URS for protection of public

health. See, P.S.J. Exhibits 2, CA App. 902 (contract

required safety plan); P.S.J. Exhibit 3, CA App. 903, 904-

05; P.S.J. Exhibit 4, 907, 908 (URS safety plan required

respiratory protection); P.S.J. Exhibit 5, 909 (U.S. Health

and Human Services Department, Agency for Toxic

Substances and Disease Registry (ATSDR) recommended

the 3.0 pg/m3 level for respiratory protection of humans

not provided respiratory protection for short term expo-

sures and the 5.5 pg/m3 was considered an exposure level

equivalent to the tolerable daily dose set by ATSDR for

humans based on animal studies for non-cancer effects for

short term exposures). .

Defendant VSC determined through analysis of

company operational records that the dangerously high

dioxin air level exceedances were due to operational

problems with the Vertac incinerator, specifically includ-

ing kiln puffs and | ‘a seal leaks of partially burned agent

orange waste. See,: *.J. Exhibit 7, CA App. 915, 920, 922.

Defendant VSC failed to disclose this material information

to EPA, both the high dioxin levels that exceeded worker

safety standards, and the cause of the high dioxin levels

(kiln puffs and kiln leaks) during the 1992 and early 1993

time period which coincided with EPA contract negotia-

tions. EPA entered into the contracts with URS and

approved the subcontracts between URS and VSC on the

faise impression that dangerous dioxin air level ex-

ceedances of worker safety standards had not occurred and

in ignorance that the cause of such violations had been

determined to be kiln puffs and kiln seal ieaks of agent -

orange waste. See, P.S.J. Exhibit 26, CA App. 983 (EPA

FOIA response indicating that EPA as of June, 1994 did

not possess any VSC on-site air monitoring data for

periods prior to June of 1993); P.S.J. Exhibit 9, CA App.

927 Deposition of Defendants’ Industrial Hygienist Fred

Fowler (high levels of dioxin measured in air in kiln puff

by Defendant VSC not reported to EPA during February

1992 meeting at EPA offices).

EPA was committed to protecting worker safety

during the Vertac incineration project and would have

shut down the incinerator and stopped payments to

Defendants had it known that the kiln puffs and kiln seal

leaks that continued to occur throughout the EPA contract

were endangering worker safety and health. See, EPA’s

Ehrhart’s Deposition P.S.J. Exhibits 29, CA App. 1003, Ex.

40, CA App. 1099; EPA’s Luthans’ Deposition P.S.J.

Exhibit 39, CA App. 1091; EPA’s Luthans’ Letter to Adair,

3rd page P.S.J. Exhibit 20, CA App. 966 (EPA would have

suspended operations if it had reason to believe that

operations were causing an unreasonable risk, URS’ air

monitors were not located to protect workers and EPA’s

Luthans believed [erroneously] that VSC workers were

wearing respirators on their face on the job). P.S.J. Exhib-

its 39, CA App. 1091; Ex. 20, CA App. 966; Def. Trial

Exhibit 147; Transcript, April 20, 2001, Apa at 995-97.

EPA’s Contract with URS required compliance with

OSHA and protection of workers generally and URS’

subcontract with VSC required the same. See, e.g., P.S.J.

Exhibit 1, CA App. 892, 897-8; Plaintiffs’ Trial Exhibits

174, CA App. 1967; P.Tr. Ex. 186, CA App. 1980; EPA's

Caban’s Deposition, CA App. 1272, 1287-88, 1292-94.

OSHA requires a safe workplace to be maintained by the

employer free from recognized hazards under the general

duty clause. OSHA regulations at 29 CFR § 1910.120

require employers to provide workers adequate respiratory

protection. ;

VSC’s Health and Safety Plan required VSC to main-

tain worker respiratory exposures to dioxin below 5.5

picograms/meter cubed on an 8 hour average for either

2,3,7,8-TCDD or dioxin toxic equivalents. P.S.J. Exhibits

3, CA App. 903 and Ex. 6, CA App. 913. VSC’s industrial

hygienist, Dr. Charles “Fred” Fowler, recognized that

federal agencies recommended respiratory exposure to

dioxin was a “not to exceed” level of 5.5 picograms/meter

cubed. Fowler Deposition, P.S.J. Exhibit 9, CA App. 927,

931. EPA personnel in control of the Vertac project ac-

knowledged their contract with URS required protection of

workers’ health and safety as well as of public health and

the environment. EPA’s Caban’s Deposition, CA App.

1272, 1287-89, 1292-94; EPA’s Ehrhart’s deposition, P.S.J.

Exhibits 25, CA App. 1003; Ex. 40, CA App. 1099. EPA set

an action level for dioxin in the air at the URS operated

perimeter monitors of 5.5 picograms/meter cubed for any

three day sample and 3.0 picograms/meter cubed for a

twenty-one day average. P.S.J. Exhibit 2, CA App. 902.

During the several month period of EPA negotiation

with URS and VSC regarding the contemplated future

incineration of agent orange waste at the Vertac site by

VSC and URS under an EPA contract (which had been

proceeding under a State contract), VSC additionally

failed to disclose their correlation and analysis of data

indicating the cause of the high dioxin levels in the air was

due to incinerator kiln seal leaks and kiln puffs. The VSC

and URS continued to conceal this critical information

even when EPA attempted later, after the EPA/URS and

URS/VSC contracts began in June, 1993 (see, P.S.J.

Exhibit 28, CA App. 998, letter contract), to determine the

cause of an elevated dioxin reading on one of the URS

perimeter monitors, and URS determined that the reading

might have been caused by one specific kiln puff. P.S.J.

Exhibit 22, CA App. 971.

During the month of February, 1992, Dr. Charles

“Fred” Fowler attended a meeting with #PA representa-

tives to discuss a recent inspection and evaluation of the

Vertac incinerator by EPA consultants. P.S.J. Exhibit 9,

CA App. 927. VSC had in their possession at that time

data showing measured high levels of dioxin in the air

onsite curing a kiln puff. Jd. This data showed more than

30 picograms/meter cubed of dioxin was present in the air

onsite because of the kiln puff, which level was more than

five times higher than EPA’s action level and VSC’s own

worker safety standard. Jd. This information was not

disclosed to either EPA or the incineration inspectors at

the meeting, P.S.J. Exhibit 9, CA App. 927, nor was it

revealed to the EPA at any time prior to the initiation of

the EPA contract with URS in June, 1993. P.S.J. Exhibit

26, CA App. 983 (EPA Freedom of Information Act Re-

sponse); Transcript, April 20, 2001 Apa at 1014-1016.

Ix. ARGUMENT ON REASONS FOR ALLOWANCE

OF THE WRIT

A. A UNITED STATES COURT OF APPEALS

HAS DECIDED AN IMPORTANT QUES-

TION OF FEDERAL LAW IN A WAY THAT

CONFLICTS WITH RELEVANT DECI-

SIONS OF THIS COURT

The False Claims Act provides for the government or

a private plaintiff to bring suit to recover funds for the

federal treasury which were improperly taken by a gov-

ernment contractor via submission of false claims for

payment. 31 U.S.C. §§ 3729-3732. Three elements are

explicitly required to be shown for a plaintiff to recover

under the Act:

(1) the Defendants made a claim against HUD;

(2) the claim was false or fraudulent; and (3) the

Defendants knew the claim was false or fraudu-

lent. See, e.g., United States v. Basin Elec. Power

Coop., 248 F.3d 781, 803 (8th Cir. 2001); United

States ex rel. Oliver v. The Parsons Co., 195 F.3d

457, 461 (9th Cir. 1999); United States v. Burns,

162 F.3d 840, 850 (5th Cir. 1998).

United States of America v. Southland Management

Corporation, 288 F.3d 665 (5th Cir. 2002), vacated and

decided on other grounds, 326 F.3d 669 (5th Cir. 2003) (en

banc). A number of the courts of appeals, including the

Eighth Circuit in the instant case, have held that in order

for the government or a qui tam plaintiff-relator to recover

under the Act there must be, in addition to a showing that

the three explicit statutorily defined elements have been

met, also a showing of materiality, i.e., that the false

claims were material to the government’s decisions. The

Act does not reference the term “materiality” explicitly nor

does the Act explicitly reference the concept of materiality

as a requirement. As explained in section IX.C. infra, the

courts of appeals who have imposed a materiality re-

quirement are split on what exactly the legal standard is

for showing materiality, e.g., whether an actual impact on

- the agency’s contract or payment decisions must be shown

or whether mere relevance of the false claim to such

agency decisions must be established. However, within the

last six years the Supreme Court twice has issued opinions

in closely related statutory fraud cases which make clear

that there is no implied materiality requirement for claims

brought under a federal statute that sanctions false

statements as distinguished from fraudulent statements.

The Government argues that because Congress

has provided express materiality requirements in

other statutes prohibiting fraudulent conduct,

the absence of such an express reference in the

fraud statutes at issue “‘speaks volumes.’” Brief

for United States 35 (citing 21 U-S.C.

§ 843(a)(4A)) (prohibiting the furnishing of “false

or fraudulent material information” in docu-

ments required under federal drug laws); 26

U.S.C. § 6700(a)(2)A) (criminalizing the making

of a statement regarding investment tax benefits

that an individual “knows or has reason to

kno[w] is false or fraudulent as to any material

matter”). These later enacted statutes, however,

differ from the fraud statutes here in that they

prohibit both “false” and “fraudulent” statements

or information. Because the term “false

statement” does not imply a materiality re-

quirement, United States v. Wells, 519 U.S.

482, 491, 117 S.Ct. 921, 1387 L.Ed.2d 107

(1997), the word “material” limits the statutes’

scope to material falsehoods. Moreover, these

statutes cannot rebut the presumption that Con-

gress intended to incorporate the common-law

meaning of the term “fraud” in the mail fraud,

wire fraud, and bank fraud statutes. That rebut-

tal can only come from the text or structure of

the fraud statutes themselves. See Nationwide

Mut. Ins., 503 U.S., at 322, 112 S.Ct. 1344.

Neder v. United States, 527 U.S. 1, 144 L. Ed. 2d 35,

S.Ct. 1827, 1840 note 7 (1999) (emphasis added).

We accordingly consider whether materiality of

falsehood is an element under § 1014, under-

standing the term in question to mean “ha[ving]

a natural tendency to influence, or [being] capa-

ble of influencing, the decision of the decision-

making body to which it was addressed,” Kungys

v. United States, 485 U.S. 759, 770, 108 S.Cz.

1537, 1546, 99 L.Ed.2d 839 (1988) (internal quo-

tation marks *490 omitted); see also, United

States v. Gaudin, 515 U.S., at 509, 115 S.Ct., at

2313. [FN7] We begin with the text. See Commu-

nity for Creative Non-Violence v. Reid, 490 U.S.

730, 739, 109 S.Ct. 2166, 2172, 104 L.Ed.2d 811

(1989). Section 1014 criminalizes “knowingly

mak[ing] any false statement or report ... for

the purpose of influencing in any way the action”

of a Federal Deposit Insurance Corporation

(**927 FDIC) insured bank “upon any applica-

tion, advance, ... commitment, or loan.” 18

U.S.C. § 1014. Nowhere does it further say that a

material fact must be the subject of the false

statement or so much as mention materiality.

[footnote omitted] To the contrary, its terms

cover “any” false statement that meets the other

requirements in the statute, and the term “false

statement” carries no general suggestion of in-

fluential significance, see Kungys v. United

States, supra, at 781, 108 S.Ct., at 1552; cf. Kay

v. United States, 303 U.S. 1, 5-6, 58 S.Ct. 468,

471, 82 L.Ed. 607 (1938). Thus, under the first

criterion in the interpretive hierarchy, a natural

reading of the full text, see United States uv.

American Trucking Ass’ns, Inc., 310 U.S. 534,

542-543, 60 S.Ct. 1059, 1063-1064, 84 L.Ed. 1345

(1940), materiality would not be an element of

§ 1014.... Nor have respondents come close to

showing that at common law the term “false

statement” acquired any implication of material-

ity that came with it into §1014.... 458 USS.

279, 288, 102 S.Ct. 3088, 3093-3094, 73 L.Ed.2d

767 (1982). The most likely inference in these

circumstances is that Congress deliberately

dropped the term “materiality” without intending

materiality to be an element of §1014.... Al-

though some courts have read Kay as holding

only that there is no need for the Government to

prove that false statements actually influenced

the decision-maker, see, e.g., United States v.

Goberman, 458 F.2d 226, 229 (C.A.3 1972), the

opinion speaks of the importance of the state-

ments as well as their efficacy, and no one read-

ing Kay could reasonably have assumed that

criminal falsity presupposed materiality. Since

we presume that Congress expects its statutes to

be read in conformity with this Court’s prece-

dents, see, e.g., North Star Steel Co. v. Thomas,

515 U.S. 29, 34, 115 S.Ct. 1927, 1930, 132

L.Ed.2d 27 (1995), and since the relevant lan-

guage of the statute in Kay was substantially

like that in § 1014, Kay stands in the way of any

assumption that Congress might have under-

stood an express materiality provision to be re-

dundant.

United States v. Wells, 519 U.S. 482, 117 S.Ct. 921, 1387

L. Ed. 2d 107 (1997).

At least two Circuits have recently recognized that the

Supreme Court decisions in Neder and Wells establish a

rule that likely precludes any further imposition by the

courts of appeals of an implied materiality requirement in

cases under the False Claims Act although the facts of

those cases were such that those courts of appeals were

not yet forced to squarely decide the issue. United States of

America v. Southland Management Corporation, 288 F.3d

665 (5th Cir. 2002), vacated and decided on other grounds,

326 F.3d 669 (5th Cir. 2003) (en banc) (citing Neder v.

United States, 527 U.S. 1, 119 S.Ct. 1827, 1840 note 7

(1999)); United States ex rel. Cantekin v. University of

Pittsburgh, 192 F.3d 402 (3d Cir. 1999). _~

Although the statute contains no express

reference to materiality, many courts, including

this’ court, have found that there is a fourth, “ma-

teriality” element required to maintain a cause of

action under the Act. See United States ex rel.

Thompson v. Columbia/HCA Healthcare Corp.,

125 F.3d 899, 902 (5th Cir. 1997) (“The FCA

‘interdicts material misrepresentations made to

qualify for government privileges or services.’”)

(quoting United States ex rel. Weinberger v. Equi-

fax, Inc., 557 F.2d 456, 461 (5th Cir. 1977)); see

also, Luckey v. Baxter Health Care Corp., 183

F.3d 730, 732 (7th Cir. 1999); United States ex

rel. Berge v. Bd. of Trs. of the Univ. of Ala., 104

F.3d 14538, 1459 (4th Cir. 1997); United States v.

Intervest Corp., 67 F. Supp. 2d 637, 646 (S.D.

Miss. 1999). But see United States ex rel.

Cantekin v. Univ. of Pittsburgh, 192 F.3d 402,

415 (3d Cir. 1999) (noting in dicta that “perhaps”

there is no materiality requirement under the

FCA); United States ex rel. Roby v. The Boeing

Co., 184 F.R.D. 107, 112 (S.D. Ohio 1998) (find-

ing that materiality is not a required element of

proof in actions under the FCA). ...

On appeal, the Government contends that

the civil False Claims Act does not contain the

type of “outcome materiality” element espoused

by the District Court, requiring a plaintiff to

demonstrate that the misstatement influenced

the government’s (i.e., HUD’s) ultimate decision

whether to remit funds to a defendant. The Gov-

ernment argues that the Supreme Court’s recent

decisions in Wells and Neder v. United States,

527 U.S. 1, 144 L. Ed. 2d 35, 119 S. Ct. 1827

(1999), counsel against the existence of such a

materiality requirement. n15. instead, the Gov-

ernment maintains that proving a “false claim”

under the Act requires the Government to dem-

onstrate only that the alleged falsehood was

relevant to the Defendants’ claim of right or enti-

tlement. [footnote omitted]

nl15 While we do not reach this issue today,

we note that if a future panel of this court is

faced squarely with the question whether mate-

riality is an element of the civil FCA, this court

will need to assess whether and to what extent

Wells and Neder might undermine our prece-

dents interpreting the civil FCA to contain an

implicit materiality requirement.

United States of America v. Southland Management

Corporation, 288 F.3d 665 (5th Cir. 2002), vacated and

decided on other grounds, 326 F.3d 669 (5th Cir. 2003) (en

banc). The Third Circuit in dicta likewise noted that the

Supreme Court decision in Neder v. United States, 527

U.S. 1, 119 S.Ct. 1827, 1840 note 7 (1999) stands for the

proposition that there is no materiality requirement in a

false claims case. United States ex rel. Cantekin v. Univer-

sity of Pittsburgh, 192 F.3d 402 (3d Cir. 1999).

Thus, Hopper does not stand for the proposition

that before a court allows a suit to proceed under

the False Claims Act, it must weigh how serious

it thinks a particular knowing falsehood was in a

claim submitted to the government. Although we

reject the District Court’s reading of Hopper, the

Court’s remark about “technical violations” sug-

gests two slightly different objections: Blue-

stone’s omissions were not material, and even if

they were, they did not cause any damages to the

government. We will consider first the material-

ity objection. Courts have held that claims under

the False Claims Act are subject to a judicially

imposed materiality requirement. See, e.g., Har-

rison v. Westinghouse Savannah River Co., 176-

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

Court recently held in Neder v. United States, __

U.S. __, 119 S.Ct. 1827 (1999) that there is a

materiality requirement under the federal mail-

fraud, wire-fraud, and bank-fraud statutes. In a

footnote, the Supreme Court indicated, however,

that the term “false statement,” unlike “fraudu-

lent statement,” does not imply a materiality re-

quirement. Neder, 119 S.Ct. at 1840 n.7. Given

that the False Claims Act prohibits merely mak-

ing a knowingly false claim and does not require

a specific intent to defraud, perhaps Neder ar-

gues against a materiality requirement.

Id. The Plaintiffs-Petitioners brought these Supreme

Court and courts of appeals’ decisions to the attention of

the Eighth Circuit panel during briefing and oral argu-

ment. The Eighth Circuit panel in its decision in the

instant case cited to the two recent decisions on the issue

from the other courts of appeals but failed to address or

reference the Supreme Court decisions in Neder and Wells

or the Court of Appeals’ obligation to comply with the rule

established in those Supreme Court decisions.

In addition, several courts have required

that the falsehood in the claim must be material

to the payment decision. The District Court dis-

missed all but two of the Plaintiffs’ claims for

failure to present affirmative evidence raising a

genuine issue of material fact regarding the ma-

teriality of the Defendants’ alleged misstate-

ments and omissions. The existence of and

appropriate standard for a materiality element is

a matter of some disagreement in the courts. See,

e.g., United States, ex rel. Cantekin v. Univ. of

Pittsburgh, 192 F.3d 402, 415-16 (3d Cir. 1999)

(declining to decide whether such an element ex-

ists because the claims at issue would easily

qualify); United States uv. Southland Mgmt.

Corp., 288 F.3d 665, 674-78 (5th Cir.) (question-

ing existence of materiality element, but finding

that false certification of compliance with condi-

tion required for payment satisfied even strict

outcome materiality standard), reh’g en banc

granted, 307 F.3d 352 (5th Cir. 2002); Harrison

v. Westinghouse Savannah River Co., 176 F.3d

776, 785 (4th Cir. 1999) (applying materiality re-

quirement that depends on “whether the false

statement has a natural tendency to influence

agency action”).

United States ex rel. Costner v. United States, 317 F.3d 883

(8th Cir. 2003). The decision of the Eighth Circuit in the

instant case and the other circuits who have held in prior

cases that there is a materiality element implied in the

False Claims Act are in direct conflict with the rule of law

established in the decisions of this Court in Neder and

Wells, notwithstanding that the Neder and Wells decisions-

did not involve False Claims Act cases per se. For this

reason, and given the importance of consistent law in false

claims litigation which involves recovery of literally

billions of dollars for the federal treasury and likely

prevents even greater losses to the federal treasury via

deterrent effects, it would be appropriate and in the public

interest for this Court to grant the instant Petition for a

Writ of Certiorart.

B. A UNITED STATES COURT OF APPEALS

HAS DECIDED AN IMPORTANT QUES-

TION OF FEDERAL LAW THAT HAS NOT

BEEN, BUT SHOULD BE, SETTLED BY

THIS COURT

It is not clear why the Eighth Circuit Panel in this

case felt free to ignore this Court’s decisions in United

States v. Wells, 519 U.S. 482, 491 (1997) and Neder v.

United States, 527 U.S. 1 note 7 (1999). Both decisions

were very clear in their analysis and holdings to the effect

that federal statutes that impose liability for making false

statements, as distinguished from making fraudulent

statements or engaging in fraudulent conduct, do not

contain by implication any materiality requirement. For

such a materiality requirement to be imposed regarding

false statements there would have to be explicit statutory

language mandating a materiality requirement. The

federal False Claims Act on its face states no such explicit

materiality requirement, while clearly imposing liability

for submitting claims and making statements in support of

claims that are merely false, not necessarily fraudulent.

Many of the courts of appeals will continue to wrongly

apply a materiality requirement in false claims cases until

this Court states clearly in the context of an actual False

Claims Act case that the Neder and Wells rule applies in

False Claims Act cases, as the Third Circuit in United

States ex rel. Cantekin v. University of Pittsburgh, 192

F.3d 402 (3d Cir. 1999) and the Fifth Circuit in United

States of America v. Southland Management Corporation,

288 F.3d 665 (5th Cir. 2002), vacated and decided on other

grounds, 326 F.3d 669 (5th Cir. 2003) (en banc) have

suggested it likely does.

Whether or not the False Claims Act imposes a

materiality requirement is an important question of

federal law on which the circuits are conflicted that should

be settled by this Court. The ultimate answer to this

question will make the difference in many cases whether

the government or qui tam plaintiff recovers money for the

federal treasury that was paid out on a false claim. This

will be particularly true in cases where: 1) a government

official who has worked closely with a contractor or may be

a co-conspirator attempts to cover for the defendant who

has submitted the false claims by asserting that the

underlying misconduct and contract non-compliance was

of no concern to the agency contracting for the work, and

2) where time has passed and records or memories lost or

witnesses have died or become unavailable.

If such a “but for” causation requirement existed

in [the “procured by” language] it is most

unlikely that a materiality requirement would

have been added as well — requiring, in addition

to distortion of a decision, a natural tendency to

distort the decision. Moreover, the difficulty of

establishing “but for” causality ... many years

after the fact, is so great that we cannot conceive

that Congress intended such a burden to be met

before a material misrepresentation could be

sanctioned.

485 U.S. at 776-77 (opinion of Scalia, J., joined

by Rehnquist, C.J., and Brennan, J.). This analy-

sis suggests that “materiality” and “but-for cau-

sation” are distinct (and, indeed, inconsistent)

requirements.

Finally, as the above passage indicates, where

are problems of proof that arise when the gov-

ernment is required to demonstrate that a claim-

ant’s misrepresentation actually motivated its

decision to approve a claim. Imposing such an

evidentiary burden risks excessively constraining

the government’s ability to sanction claimants

who make false representations to the govern-

ment. As we share Justice Scalia’s concerns in

this regard, we reject the dissent’s suggestion

that “but-for causation” is the appropriate test of

materiality in the instant case.

United States of America v. Southland Management

Corporation, 288 F.3d 665, vacated and decided on other

grounds, 326 F.3d 669 (5th Cir. 2003) (en banc).

The same is true on the issue of the nature of the

pleading with particularity requirements imposed on false

claims plaintiffs, government or private, pursuant to Fed.

R. Civ. P., Rule 9(b). This is likewise an important ques-

tion of federal law that should be settled by this Court.

The Eighth Circuit panel here adopted the District Court's

erroneous interpretation of the particularity requirement,

App. 1-11 (Eighth Circuit decision), App. 12-34 (District

Court decision), requiring Plaintiffs to specify not just the

false claims in detail, which Plaintiffs did, but also to

specify the Defendants’ underlying misconduct by date,

time and precision when such evidence remained in the

control of the Defendants. Plaintiffs pled with particular-

ity the Defendants’ numerous false claims for payments

submitted to the government complete with dates, invoice

numbers, amounts requested and the Defendants’ certifi-

cations that work was in compliance with, inter alia,

applicable state and federal environmental and OSHA

laws and regulations.

The Court of Appeals erred in not distinguishing

between the false claims for payment, which were indis-

putably pleaded with particularity, and the underlying

misconduct. Even the underlying misconduct here was

pled with what most other courts would find sufficient

particularity. The extent to which the government or a qui

tam plaintiff will need to allege details of a defendant’s

misconduct that are exclusively under the control of the

wrongdoer defendant (such as in the instant case in regard

to dates of illegal tampering of instruments on a hazard-

ous waste facility) will continue to be interpreted differ-

ently by different courts of appeals until the issue is

settled by this Court.

Many courts will apply the long standing rule that a

defendant should not be allowed to benefit from his own

misconduct. Wrongdoers who break the law for profit

seldom take pains to create an incriminating record of the

dates, times and particulars of their fraudulent acts, false

claims, and crimes. They also seldom volunteer the in-

criminating evidence to the government or private plain-

tiff. Requiring the government or qui tam plaintiff to

produce and plead details of the underlying wrongful acts

which are exclusively in the control of the wrongdoer

defendant is an unreasonable burden. It would be in the

public interest for this Court to settle this point of law

now, before this erroneous requirement is allowed to

siphon off future funds which rightfully should be re-

turned to the federal treasury.

A third important question of federal law raised by

the instant case that should be settled by this Court is the

extent to which and under what circumstances a govern-

ment official having knowledge of a defendant’s false

claims can serve as a defense, either by negating a show-

ing of the required intent and knowing state of mind or by

indicating that the false claims were not “material.” Here,

the Eighth Circuit Court of Appeals affirmed the District

Court’s holding that EPA was aware of certain allegations

regarding Defendants’ misconduct and continued to pay

Defendants under the contract, for at least a time, indi-

cated that the required intent was absent (i.e., that Defen-

dants did not “knowingly” submit false claims) and that

the false claims were not “material” to EPA’s contract and

payment decisions, thereby precluding recovery under the

Act. App. 1-11. As noted, infra, the courts of appeals are

split on the relevance of government knowledge as a

defense, particularly in light of the 1986 amendments to

the Act which explicitly removed the government knowl-

edge defense. The public interest would be well served by

resolving this issue for the courts nationwide as soon as

possible.

C. A UNITED STATES COURT OF APPEALS

HAS ENTERED A DECISION IN CON-

FLICT WITH THE DECISION OF AN-

OTHER UNITED STATES COURT OF

APPEALS ON THE SAME IMPORTANT

MATTER

Granting the instant Petition would resolve splits in

the courts of appeals on at least three major legal issues

regarding the federal False Claims Act. First, the courts of

appeals are split on whether and under what circumstance

government knowledge can be a defense in a false claims

case following the 1986 amendment to the Act which

explicitly removed government knowledge as 1 defense. In

United States v. Sonoma County Water Agency, 929 F.2d

1416 (9th Cir. 1991), the Ninth Circuit addressed the issue

of government knowledge as a defense and made clear

that, absent special circumstances where the defendants

could be shown to have done nothing more than what the

government instructed them to do, the fact -that the

government knew a claim was false does not remove the

defendants’ liability if the defendants also knew the claim

was false and submitted it anyway.

What is crucial — and what must be proven at

trial — is that the Water Agency knew that the

information was false. The statute emphasizes

that the act, for which the civil claim may be

filed is to “knowingly” present or cause to be pre-

sented a false or fraudulent claim, 31 U.S.C. sec.

3729(a\(1).... The emphasis on “knowing” and

“knowingly” is reinforced by their statutory defi-

nitions. Id. (b).

That a defendant has disclosed all the underlying

facts to the government may, the United States

in its brief concedes, show that the defendant

’ had no intent to deceive. But what constitutes

’ the offense is not intent to deceive but knowing

presentation of a claim that is either fraudulent

or simply false. 31 U.S.C. sec. 3729(a)(1) and (2).

The requisite intent is the knowing presentation

of what is known to be false. That the relevant

government officials know of the falsity is not in

itself a defense. United States v. Ehrlich, 643

F.2d 634, 638-639 (9th Cir. 1981).

Id. This standard, which itself may be inconsistent with

the False Claims Act as amended in 1986, is more restric-

tive on use of the government knowledge defense than the

standard used by the Eighth Circuit and the District

Court below in the instant case.

The Tenth Circuit has also been more reluctant than

the Eigith Circuit to embrace government official knowl-

edge as a defense.

Assuming some level of government knowl-

edge would negate the intent requirement under

the FCA as a matter of law, the level of govern-

ment knowledge in the present case does not do

so. It was the plaintiff, Shaw, and not the indi-

vidual defendants or other AAA employees, who

told the government about the failure to practice

silver recovery. Additionally, AAA was not forth-

coming about silver recovery and repeatedly

evaded government employees’ questions on the

subject... . The government’s alleged knowledge

of Defendants’ actions therefore does not, as a

matter of law, negate the evidence of Defendants’

intent to submit a false record in support of a

claim. See 31 U.S.C. § 3729(aX2).

q Shaw v. AAA Engineering & Drafting, Inc., 213 F.3d 519

(10th Cir. 2000).

The courts of appeals are likewise split regarding the

level of detail required to satisfy Rule 9(b) pleading with

particularity requirements in a false claims case. “A court

should hesitate to dismiss a complaint under Rule 9(b) if

the court is satisfied (1) that the defendant has been made

aware of the particular circumstances for which he will

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

substantial prediscovery evidence of those facts.” Harrison

v. Westinghouse Savannah River Company, 176 F.3d 776,

784 (4th Cir. 1999). The Eighth Circuit panel in the

instant case imposed a more demanding standard than the

Fourth Circuit for pleading with particularity. Other

Circuits have also been less demanding than the Eighth

Circuit. See, e.g., Bly-Magee v. California, 236 F.3d 1014,

1018 (9th Cir. 2001); United States ex rel. Thompson uv.

Columbia/HCA Healthcare Corp., 125 F.3d 899 (5th Cir.

1998). Rule 9(b) does not apply to every single allegation

in a fraud complaint. As stated in United States ex rel.

Schwartz v. Coastal Healthcare Group, Inc., 232 F.3d 902

(10th Cir. 2000) the particularity requirements apply only

to the false statements themselves, not to every action

taken by the defendant.

The allegations of tampering in the instant case are

not about fraud. They involve other kinds of wrongs.

Tampering with the PT-125 instrument on the Vertac

incinerator violated governmental health and safety

regulations, and unquestionably breached the contract

between the parties but it was not, in itself, fraud. The

fraud did not occur until defendants covered up their

wrongdoing and submitted claims for payment without

disclosing the material facts including the tampering.

Plaintiffs’ complaint describes this cover-up in great

detail. It sets forth the time, place and contents of the

> Serene peer

a en ak Bone Wied k,

alleged false representations (i.e., the false claims for

payment and reports in support thereof) — the who, what,

where, when and how, not to mention the why. The Eighth

Circuit has applied a more demanding pleading require-

ment than Rule 9(b) intended and than other Circuits. The

Eighth Circuit has also applied this demanding “pleading

with particularity” requirement not just to the false claims

that were submitted but to the underlying misconduct of

Defendants. This decision conflicts with other circuits’

decisions which require only that details be given regard-

ing the false claims that were submitted, not the underly-

ing misconduct.

The courts of appeals are also split and considerably

uncertain, as noted in section IX.A. supra, regarding the

existence of and nature of any materiality requirement.

The Eighth Circuit noted this split in the decision in the

instant case:

The existence of and appropriate standard for a

materiality element is a matter_of some dis-

agreement in the courts. See, e.g., United States,

ex rel. Cantekin v. Univ. of Pittsbi:rgh, 192 F.3d

402, 415-16 (3d Cir. 1999) (declining to decide

whether such an element exists because the

claims at issue would easily qualify); United

States v. Southland Mgmt. Corp., 288 F.3d 665,

674-78 (5th Cir.) (questioning existence of mate-

riality element, but finding that false certifica-

tion of compliance with condition required for

payment satisfied even strict outcome material-

ity standard), reh’g en banc granted, 307 F.3d

352 (5th Cir. 2002); Harrison v. Westinghouse

Savannah River Co., 176 F.3d 776, 785 (4th Cir.

1999) (applying materiality requirement that de-

pends on “whether the false statement has a

natural tendency to influence agency actio.”).

United States ex rel. Castner v. United States, 317 F.3d 883

(8th Cir. 2003). App. 1-11.

xX. CONCLUSION

The instant case raises several important legal ques-

tions as to how the federal False Claims Act should be

interpreted. This interpretation will impact many cases

nationwide. These issues include whether or not the

government or a qui tam plaintiff must demonstrate the

materiality of a defendant’s false claims in order to recover

under the Act; what level of detailed knowledge must be

possessed and pled regarding the false claims to satisfy

the particularity requirement of Rule 9(b); and whether

and under what circumstances knowledge of the false

claims on the part of government officials demonstrates

that a defendant lacks the intent, scienter and knowing

state of mind required to establish liability. Given the

public importance of false claims litigation, which has

already recovered billions of dollars for the federal treas-

ury, and has deterred even greater losses from false claims

by government contractors, and given that the issues to be

settled in this case are central to the future effectiveness

of the Act in achieving the Congressional intent, the

Petitioners respectfully urge this Court to grant this

Petition for Writ of Certiorari.

Respectfully submitted,

RICHARD E. ConpDIT, Esq.

5505 Connecticut Ave., NW, #283

Washington, D.C. 20015-2601

(202) 829-2444

E-mail: rlcondit1@earthlink.net

Counsel of Record

MICK G. HARRISON, Esq.

426 River Mill Road Ext.

Jersey Shore, PA 17740

(859) 321-1586

GREGORY FERGUSON, Esq.

600 W. 4th Street

North Little Rock, AR 72114

(501) 374-3535

Attorneys for Petitioners

App. 1

United States Court Of Appeals

FOR THE EIGHTH CIRCUIT

No. 01-

3764

United States of America

ex rel. Pat Costner; Sharon

Golgan; Carolyn Lance;

Debra Litchfield; Becky

Summers; Kenny Brown;

Edward Campbell;

Don Daniel; Jeffrey Foot;

David Hermanson; Arkansas

Peace Center; Vietnam

Veterans of America,

Arkansas State Council, Inc.,

Plaintiffs/Appellants,

United States of America,

Movant,

URS Consultants, Inc.;

Morrison Knudsen Corpora-

tion; MRK Incineration, Inc.;

Vertac Site Contractors,

Defendants/Appellees.

* Appeal from the United

* States District Court for

* the Eastern District of

* Arkansas.

* * & &¥ HFEF HF He He HE HE HE KH HK OF

Submitted: November 4, 2002

Filed: January 28, 2003

App. 2

Before WOLLMAN, FAGG, and LOKEN, Circuit Judges.

WOLLMAN, Circuit Judge.

This is a qui tam action brought on behalf of the

United States by the plaintiffs as relators pursuant to the

False Claims Act (FCA), 31 U.S.C. §§ 3729-3733. The

complaint alleges that URS Consultants, Inc. (URS),

Morrison Knudsen Corporation (MK), MRK Incineration,

Inc. (MRK), and Vertac Site Contractors (VSC) conspired

to submit false claims for payment under a government

contract for the treatment and disposal of hazardous waste

at the Vertac Chemical Plant site in Jacksonville, Arkan-

sas. The plaintiffs appeal the district court’s' judgment in

favor of the defendants. We affirm.

The plaintiffs filed this False Claims Act suit in 1995.

The suit arises out of the defendants’ contract with the

Environmental Protection Agency to clean up a contami-

nated industrial site known as the Vertac site. We set out

the history of the site and this litigation in a prior appeal:

From 1948 to 1987, the Vertac site was home

to various chemical, herbicide, and pesticide pro-

duction facilities. Throughout the years, chemical

waste from such activity was deposited in land-

fills and stored in drums or barrels above ground

The Honorable James M. Moody, United States District Judge for :

the Eastern District of Arkansas.

App. 3

with little or no attention to human health or en-

vironmental consequences. As a result, the site

became extremely contaminated with dioxin and

other highly toxic chemicals. The United States

Environmental Protection Agency (EPA) has

placed the site on the Superfund National Priori-

ties List.

Substantial cleanup began in 1987, following

Vertac Chemical’s abandonment of the sita. After

learning that approximately 28,000 corroding

and leaking drums of toxic waste had been left

on the premises, the EPA initiated an emergency

removal action pursuant to section 9604 of the

Comprehensive Environmental Response, Com-

pensation, and Liability Act (CERCLA), 42

U.S.C. §§ 9601-9675 (1995 & Supp.1998). The

state then negotiated a contract for on-site incin-

eration of the waste with MRK Incineration, Inc.,

which subsequently assigned the contract to Ver-

tac Site Contractors, a joint venture composed of

MRK and MK Environmental Services, a division

of Morrison Knudsen Corp.

Pursuant to the agreement, the state im-

posed various conditions regarding the operation

of the incinerator constructed by the contractors,

but certified that the contractors had demon-

strated the ability to satisfy state and federal

regulations. In 1991, the district court approved

and entered an additional consent decree. The

EPA remained involved in the cleanup by moni-

toring air quality, handling and transporting the

drums of waste to be incinerated by the contrac-

tors, and disposing of incinerator ash.

App. 4

In 1992, after it became clear that the trust

fund would not be sufficient to complete the

cleanup, the EPA assumed primary responsibility

for the site and approved a federal removal ac-

tion using federal funds. When the trust fund

was depleted, the state terminated its contract

with Vertac Site Contractors. Soon after, the EPA

assigned general oversight authority of the site

to URS Consultants, Inc. URS then entered into

a contract with Vertac Site Contractors to con-

tinue incineration activities. In 1995, the EPA

transported the remaining drums of toxic waste

to a site in Kansas for incineration.

Costner v. URS Consultants, Inc., 153 F.3d 667, 671-72

(8th Cir. 1998) (citations omitted) (Costner I).

The EPA assumed responsibility for the project on

June 8, 1993. The EPA executed an agreement with URS,

giving URS general oversight authority over the incinera-

tor and authorizing it to contract with VSC to continue

VSC’s incineration operations. From the start of the

cleanup, the EPA had a Remedial Project Manager, a team

of engineers, a risk assessment specialist, and other

scientists assigned to the site. URS and VSC produced

daily, weekly, and monthly reports concerning site opera-

tions, as well as air monitoring reports, quality assurance

reports, and other regulatory compliance reports. In

response to allegations made by the plaintiffs and others

during the course of operations, the EPA conducted inves-

tigations into intentional tampering and regulatory

violations. The investigators suggested improvements,

improvements were made, and the EPA continued to make

payments under the contract.

The plaintiffs allege that before and during the course

of the contract the defendants concealed operational

+ ig SIRE IEA PI STE ea Oe ree ee i P a saat

App. 5

problems and numerous regulatory violations from the

EPA. They contend that in light of this concealment the

defendants’ requests for payment constituted false claims

under the FCA. After extended discovery, the district court

granted summary judgment to the defendants on all

claims except those that alleged tampering with monitor-

ing devices. The district court then dismissed certain of

the tampering claims, finding they had been pled with

insufficient particularity. After trial on the remaining two

tampering claims, the district court entered judgment in

favor of the defendants on all claims.

II.

We review the district court’s grant of summary

judgment de novo, applying the same standards as the

district court and viewing the evidence in a light favorable

to the nonmoving party. Hammond v. Northland Counsel-

ing Ctr., Inc., 218 F.3d 886, 891 (8th Cir. 2000). Summary

judgment is appropriate if there is no genuine issue of

material fact and the moving party is entitled to judgment

as a matter of law. Fed. R. Civ. P. 56(c). Once the party

moving for summary judgment has demonstrated that the

record contains no genuine issue on a material fact, the

burden is on the nonmoving party to present affirmative

evidence raising a genuine issue as to that fact.

Hammond, 218 F.3d at 891 (citing Celotex Corp. v. Catrett,

477 U.S. 317, 323 (1986)).

A. Materiality

The False Claims Act imposes liability on “[aJny

person who knowingly presents, or causes to be presented,

to an officer or employee of the United States Government

App. 6

__. a false or fraudulent claim for payment or approval.”

31 U.S.C. §3729(a). In addition, several courts have

required that the falsehood in the claim must be material

to the payment decision. The district court dismissed all

but two of the plaintiffs’ claims for failure to present

affirmative evidence raising a genuine issue of material

fact regarding the materiality of the defendants’ alleged

misstatements and omissions. The existence of and appro-

priate standard for a materiality element is a matter of

some disagreement in the courts. See, e.g., United States,

ex rel. Cantekin v. Univ. of Pittsburgh, 192 F.3d 402, 415-

16 (3d Cir. 1999) (declining to decide whether such an

element exists because the claims at issue would easily

qualify); United States v. Southland Mgmt. Corp., 288 F.3d

665, 674-78 (5th Cir.) (questioning existence of materiality

element, but finding that false certification of compliance

with condition required for payment satisfied even strict

outcome materiality standard), reh’g en banc granted, 307

F.3d 352 (5th Cir. 2002); Harrison v. Westinghouse Savan-

nah River Co., 176 F.3d 776, 785 (4th Cir. 1999) (applying

materiality requirement that depends on “whether the

false statement has a natural tendency to influence agency

action”).

Although we have not heretofore directly considered

whether a materiality element is implicit in the Act, we

have stated that the Act provides recovery from one “who

makes a material misrepresentation to avoid paying some

obligation owed to the government.” United States v. Q

Int'l Courier, Inc., 181 F.3d 770, 772 (8th Cir. 1997).

Moreover, our decision in Rabushka ex rel. United States v.

Crane Co. suggests that outcome materiality is the proper

standard. 122 F.3d 559, 563 (8th Cir. 1997) (“If Rabushka

cannot show that the PBGC would have terminated CF &

App. 7

I’s pension plan [if it had known of the misrepresentations

and nondisclosures], then there is no false claim because

__. liabilities would have occurred regardless of Crane’s

actions.”). In our prior decision in this case we in plied a

materiality standard stricter than mere relevancy: “only

- those actions by the claimant which have the purpose and

effect of causing the United States to pay out money it is

not obligated to pay ... are properly considered ‘claims’

within the meaning of the FCA.” Costner I, 153 F.3d at

677. We need not decide the precise contours of the mate-

riality requirement, however, because we hold that the

plaintiffs have failed to produce evidence raising a genuine

issue of material fact as to whether the allegedly withheld

information was even relevant to the EPA’s payment

decision.

In rejecting most of the plaintiffs’ claims, the district

court found that although the EPA undisputably was

informed of the operational problems from at least three

sources, it nonetheless continued to approve monthly

payments. The record contains extensive documentation

revealing the inspections conducted by the EPA, the

reports sent to the EPA by the defendant contractors and

on-site EPA personnel, and the information obtained by

the EPA through the plaintiffs’ previous lawsuits and

‘other complaints. The EPA did not consider the opera-

tional difficulties encountered by the defendants to be

contractual violations. The EPA worked with the defen-

dants to resolve problems as they arose and to improve the

efficiency of the process. The plaintiffs argue that the EPA

was unaware of the extent of the problems and that

complete knowledge would have been material to the

payment decisions. Only with respect to the allegations of

tampering with the PT-125 kiln draft monitor did the

App. 8

plaintiffs produce evidence that the EPA’s payment deci-

sion would have probably been affected if it had known of

a particular omission. Accordingly, the district court did

not err in granting summary judgment to the defendants

on all but the PT-125 kiln draft monitor claims.

B. Government Knowledge

The EPA’s knowledge of operational difficulties also

bears on whether the defendants had the requisite intent

under the Act. “[I]f the government knows and approves of

the particulars of a claim for payment before that claim is

presented, the presenter cannot be said to have knowingly

presented a fraudulent or false claim.” United States ex

rel. Becker v. Westinghouse Savannah River Co., 305 F.3d

284, 289 (4th Cir. 2002) (quoting United States ex rel.

Durcholz v. FKW, Inc., 189 F.3d 542, 543 (7th Cir. 1999)). A

contractor that is open with the government regarding

problems and limitations and engages in a cooperative

effort with the government to find a solution lacks the

intent required by the Act. United States ex rel. Butler v.

Hughes Helicopters, Inc., 71 F.3d 321, 327 (9th Cir. 1995)

(citing Wang ex rel. United States v. FMC Corp., 975 F.2d

1412, 1421 (9th Cir. 1992)). Similarly, we have held that

“simple contract breaches . . . cannot provide evidence of a

knowing violation of the [False Claims] Act.” United States

ex rel. Norbeck v. Basin Elec. Power Coop., 248 F.3d 481,

795 (8th Cir. 2001).

The plaintiffs contend that several of the alleged

omissions raise a genuine issue of fact sufficient to pre-

clude summary judgment. First, the plaintiffs cite dioxin

levels recorded by on-site air monitors. The record reflects,

however, that this data was available to the EPA, although

App. 9

it was not frequently examined because the EPA did not

view production of the data as a required part of the

contract. Second, the plaintiffs cite kiln puffs and kiln

leaks and the causes thereof. Again, the record reflects

that from the beginning the EPA knew of ongoing prob-

lems with kiln puffs and kiln leaks. The kiln puffs were

cited as the reason the EPA took over cleanup operation

from the state. Third, the plaintiffs cite tampering with

the stack gas monitors by opening the incinerator rod

ports. The EPA’s on-site Remedial Project Manager testi-

fied that the rod ports were regularly opened for mainte-

nance purposes during incineration operations. The

plaintiffs have directed us to no evidence that the rod

ports were open for an improper purpose. Fourth, the

plaintiffs cite the defendants’ 1994 OSHA violations. The

record shows that the EPA discussed these problems with

the defendants and referred the matter to OSHA for

investigation and possible sanctions. Although the record

indicates that the defendants’ performance under the

contract was not perfect, the extent of the government's

knowledge through its on-site personnel and other sources

shows that, as in Durcholz, the “government knew what it

wanted, and it got what it paid for.” Durcholz, 189 F.3d at

545. Thus, the district court did not err in finding that the

defendants’ openness with the EPA about their problems

and their close working relationship in solving the prob-

lems negated the required scienter regarding these issues.

C. Rule 9(b) Particularity

We review de novo the district court’s dismissal of a

claim for failure to plead with particularity. Murr Plumb-

ing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066,

1069 (8th Cir. 1995). A complaint alleging violations of the

App. 10

False Claims Act must be pled with particularity pursuant

to Rule 9(b). United States ex rel. Russell v. Epic Health-

care Mgmt. Group, 193 F.3d 304, 398 (5th Cir. 1999). This

particularity requirement demands a higher degree of

notice than that required for other claims. The claim must

identify who, what, where, when, and how. Parnes v.

Gateway 2000, Inc., 122 F.3d 539, 550 (8th Cir. 1997)

(applying Rule 9(b) to a securities fraud claim). Rule 9(b)

is to be read in the context of the general principles of the

Federal Rules, the purpose of which is to simplify plead-

ing. Thus, the particularity required by Rule 9(b) is

intended to enable the defendant to respond specifically

and quickly to the potentially damaging allegations. Abels

v. Farmers Commodities Corp., 259 F.3d 910, 920-21 (8th

Cir. 2001).

The only claims that survived the district court’s

rulings on materiality and scienter were those relating to

allegations of intentional tampering with the PT-125 kiln

draft monitor, a measuring device on the waste incinera-

tor. After five years of discovery, the plaintiffs alleged that

tampering occurred once on July 14, 1992, once in mid-

July 1993, and on other unspecified occasions. The alleged

illegal act is the omission of a material fact in a claim for

payment. To defend against the charge, the defendants

must either dispute the occurrence of the alleged acts or

attempt to prove that they adequately disclosed the acts to

the government. Because the plaintiffs did not provide any

information regarding the identity of those who allegedly

tampered with the monitors or when such tampering

occurred, the complaint is “not specific enough to give

defendants notice of the particular misconduct which is

alleged to constitute the fraud charged so that they can

defend against the charge and not just deny that they

App. 11

have done anything wrong.” United States ex rel. Lee v.

SmithKline Beecham Clinical Labs., 245 F.3d 1048, 1051-

52 (9th Cir. 2001). Without information as to who tam-

pered with the monitors and how and when the tampering

occurred, the defendants would be largely unable to

respond with contemporaneous witnesses and documents

and expert witnesses to testify as to whether the monitor-

ing data is consistent with tampering of the sort alleged to

have occurred. Thus, the district court did not err in

dismissing the claim of tampering on unspecified occasions

and allowing the plaintiffs to proceed to trial only on the

claims of tampering on July 14, 1992, and mid-July 1993.

We find the plaintiffs’ remaining arguments to be

without merit.

The judgment is aftirmed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH

CIRCUIT.

App. 12

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

UNITED STATES, ex rel.,

PAT COSTNER, SHARON GOLGAN,

CAROLYN LANCE, DEBRA LITCHFIELD,

BECKY SUMMERS, KENNY BROWN,

EDWARD CAMPBELL, DON DANIEL,

JEFFREY FOOT, DAVID HERMANSON,

ARKANSAS PEACE CENTER,

AND VIETNAM VETERANS

OF AMERICA, ARKANSAS

STATE COUNCIL, INC. PLAINTIFFS

Vs. NO. 4:95CV448 JMM

URS CONSULTANTS, INC.,

MORRISON KNUDSEN

CORPORATION, MRK

INCINERATION, INC., AND VERTAC

SITE CONTRACTORS DEFENDANTS

ORDER

(Filed Oct. 22, 2001)

This is a qui tam action brought on behalf of the

United States’ by Plaintiffs/Relators (“Plaintiffs”) pursu-

ant to the False Claims Act, 31 U.S.C. § 3729 et seq.

Following a grant of partial summary judgment, the Court

heard evidence on two issues: (1) whether tampering with

the PT-125 occurred on July 14, 1992 and mid-July, 1993

as testified to by Mr. Don Daniel in his deposition and (2)

whether defendants had the requisite knowledge of the

! The United States has declined to intervene.

App. 13

tampering required by the False Claim Act. After carefully

reviewing the transcripts of the trial on these issues and

the post trial briefs filed by the parties, the Court finds

that the plaintiffs have failed to sustain their burden of

proof on either issue and the complaint will be dismissed

in its entirety.

On the issue of whether tampering with the PT-125

occurred on any of the pertinent dates, plaintiffs relied

heavily on the testimony of Don Daniel. Daniel’s claim

that he tampered with the PT-125 to reduce the occurrence

of waste feed cutoffs is not credible and lacks support from

any other probative evidence presented at the trial.

Daniel’s demeanor on the witness stand did not

promote confidence in his testimony and he was easily led

into numerous inconsistencies by counsel for both sides.

On cross-examination, it was established conclusively that

Daniel has given numerous conflicting versions of his

tampering beginning with an affidavit and proceeding

through two statements to a government investigator, his

deposition, and then his trial testimony.

His lack of familiarity with the instruments in ques-

tion and the effect of changing the calibration in the

manner he described gives the Court no hesitancy in

completely discrediting his testimony.

Furthermore, Daniel’s different versions of the tam-

pering were contradicted by all of the other witnesses and

by the contemporaneous site records and historian data.

Although Daniel testified that all of the control room

operators and technicians knew what he was doing, no

witness would confirm his claims of tampering. The site

records, which reflect Daniel’s activities on the dates in

question, do not contain any entry that he performed any

App. 14

task on the PT-125. Finally, the historian data which

records the performance of the incinerator shows no

evidence that tampering of the instruments was occurring.

Defendants also presented credible evidence from

operators and engineers that, if tampering had occurred as

described by Daniel, the effects on the incinerator would

have caused emissions that would have been readily

observable and that no such events happened.

Daniel’s assertion that he altered priority settings on

the Turnbull Control System is likewise not credible.

Daniel admitted he never changed the interlock settings for

automatic waste feed cutoffs. Moreover, every knowledgeable

witness testified that priority settings did not affect waste

feed cutoffs or regulatory compliance, but rather only

controlled the annunciation of the alarms.

Plaintiffs’ case also fails on the second prong that

defendants had the requisite knowledge of the alleged

tampering. The False Claims Act defines “knowing” and

“knowingly” as: (1) “having actual knowledge of the infor-

mation”, (2) acting “in deliberate ignorance of the truth or

falsity of the information”, or (3) acting “in reckless disre-

gard of the truth or falsity of the information”. 31 U.S.C.

§ 3729(b).

The Court finds that neither URS Consultants, Inc.

(“URS”) nor Vertac Site Contractors (““VSC”) had actual

. knowledge of the alleged tampering. Plaintiffs conceded

that URS had no actual knowledge, and, although Daniel

testified that his immediate supervisors were aware of his

action, the overwhelming evidence was to the contrary.

The only supervisor called by the plaintiffs specifically

denied any knowledge and all of the VSC personnel

consistently and credibly denied any knowledge.

App. 15

The Court further finds that neither defendant acted

with “reckless disregard” of any alleged tampering. Gentry

and Associates was hired as an oversight contractor to

perform inspection services continuously on site. The

Gentry inspector, John Gillette, testified that he “never

saw any evidence of tampering” while he worked at the

site. Defendants instituted numerous procedures to

safeguard against improper operation of the incinerator

which was persuasive evidence of their vigilance and

refutes any contention of a reckless disregard of miscon-

duct.

Plaintiffs argue that there were “clues” which should

have placed defendants on notice that something was

amiss and prompted further investigation. These “clues”

were argued to be historian data readings and elevated

dioxin levels. Because all of the witnesses consistently

offered alternative reasons for erratic PT-125 readings, the

Court finds that the historian data reading has no proba-

tive value to prove knowledge or reckless disregard.

Likewise, the elevated readings of dioxin at the site are

attributable to numerous causes other than kiln puffs and

tampering, thus, this evidence was of minimal significance

to the issues to be resolved.

In accordance with the foregoing discussion, the Court

makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

1. From 1948 through 1987, the Vertac Site was

home to various chemical, herbicide, and pesticide produc-

tion facilities. Following abandonment of the site in 1987,

EPA initiated an emergency removal action under the

Comprehensive Environmental Response, Compensation

App. 16

and Liability Act (“CERCLA”) to dispose of the approxi-

mately 28,000 drums of waste remaining on site.

2. Initially, the State of Arkansas contracted for

performance of the cleanup, although EPA chose the

remedy of on-site incineration. In 1989, the Arkansas

Department of Pollution Control and Ecology (“‘ADPC &

E”) negotiated a contract for the on-site incineration of the

chemical waste with MRK Incineration, Inc., which later

assigned the contract to Vertac Site Contractors. The State

of Arkansas paid for this portion of the cleanup from a

privately-funded trust fund that resulted from litigation

against one of the parties responsible for the contamina-

tion.

3. During the summer of 1992, ADPC & E recognized

that the trust fund was insufficient to complete incinera-

tion of the waste. Consequently, EPA assumed primary

responsibility for the performance of the ongoing response

action. EPA determined that the threat of release posed by

the continuing deterioration of the on-site drums contain-

ing the waste warranted continuation of the on-site

incineration as the safest, most expedient way in which to

dispose of the waste.

4. EPA formally assumed responsibility for the

incineration project on June 8, 1993, when URS and EPA

executed a Work Assignment Form under their pre-

existing umbrella contract for Superfund remediation-

related work within EPA Region VIII (the “ARCS” Con-

tract). These instruments assigned URS the general

oversight authority over the incinerator activities at the

site. EPA also authorized URS to enter into a sole source

contract with VSC, which allowed VSC to continue its

incineration operations at the site.

App. 17

5. EPA participated at the Vertac Site from the

inception of the cleanup. EPA had a Remedial Project

Manager assigned to the site, as well as a team of engi-

neers, a risk assessment specialist and other scientists.

During the period of the State’s contract, EPA regularly

communicated with the State and had access to the

documents concerning the State contract and the perform-

ance of the incinerator. EPA also reviewed State reports

concerning the site and conducted regular discussions with

State personnel about various aspects of the operation.

EPA was present for both trial burns.

6. Shortly after the June 8, 1993 assumption of the

incineration operations, EPA sent another of its experts,

Catherine Massimino, a Senior RCRA/Superfund Techni-

cal Specialist for EPA Region 10, to conduct a review of the

incinerator. Ms. Massimino produced a written report on

July 13, 1993, which addressed both general operational

issues at the site and the allegations that site workers had

made to EPA through their attorneys in May of 1993.

7. Also following June 8, 1993, URS and VSC pro-

vided EPA with multiple reports of the site operations,

including: daily reports; weekly reports (which included

daily reports, shift engineer reports, unusual incident

reports, and photographs); monthly reports; special re-

ports authorized by Work Assignment Forms as to indi-

vidual aspects of the incineration operations; RCRA

compliance audit reports; quality assurance reports;

payment reports; fee award reports; and air monitoring

reports. URS’s shift engineers were present on-site 24

hours per day, and their contemporaneous shift reports

were included in the reports to EPA.

App. 18

8. During the performance of the Vertac on-site

incineration, EPA was aware of the allegations made by

plaintiffs in this lawsuit, including those relating to

tampering with the computer monitoring equipment. EPA

conducted numerous investigations of these allegations.

Despite plaintiffs’ allegations and its investigations, EPA

continued with the contract and continued to make pay-

ment under the contract.

9. The PT-125 sensor was located at the back of the

kiln and measured the draft in the kiln in inches of water

column (“w.c.”). It then transmitted an electrical current

signal to the computer monitoring system in a range of 4

to 20 milliamps. The kiln operated at a negative pressure.

When the signal sent by the PT-125 reached a pre-

established set point, or “interlock,” which indicated that

the kiln was approaching positive pressure, the system

would initiate an automatic waste feed cutoff.

10. If properly calibrated at zero draft, the electrical

signal from the PT-125 should read 4 milliamps. Proper

calibration of the PT-125 was as follows: O"w.c.= 4 milli-

amps; .5" w.c. = 8 milliamps; 1"w.c. = 12 milliamps; 1.5"

w.c. = 16 milliamps; and 2" w.c.= 20 milliamps.

11. Mr. Daniel testified that he tampered with the

PT-125 on July 14, 1992 and, during his last days on the

site, July 18-20, 1993. Mr. Daniel stated that he miscali-

brated the PT-125 in order to stop the occurrence of waste

feed cutoffs caused by the PT-125 reaching its interlock

point.

12. The amount by which Mr. Daniel testified he

elevated the zero changed throughout the case. Prior to

trial, Mr. Daniel described elevating the zero as setting the

PT-125 so that 1" water column read as zero pressure;

App. 19

setting the PT-125 so that 1'4" water column read as zero

pressure; or setting the PT-125 so that .5" water column

read as zero pressure.

13. At trial, Mr. Daniel testified that he elevated the

zero so that 0" water column equated with a milliamp

reading of 8 milliamps.

14. At different times during the proceedings, Mr.

Daniel also provided different versions of the manner in

which he claimed to have tampered with the PT-125. Prior

to trial, Mr. Daniel described a more “formal” calibration

process which involved resetting the PT-125 calibration on

the device. During trial, he testified that he also used a

less formal means of tampering in which he used a screw-

driver to adjust the zero. When asked how often he used

this less formal method of tampering, Mr. Daniel stated

“Several. Many times.”

15. Daniel testified at trial that when tampering

with the PT-125 he adjusted the zero by * inch.

16. Mr. Daniel stated that his “best estimate” of the

date of tampering in 1992 was July 14, 1992. To the best of

his recollection, Mr. Daniel stated that on that date he

elevated the zero by way of the less formal method of

tampering, the screwdriver method, in order to avoid

waste feed cutoffs.

17. Mr. Daniel also described historian graphs for

July 14, 1992. (The historian provided a contemporaneous

computer record of kiln operating conditions). Mr. Daniel

described one graph for July 14, 1992 as depicting data

that resembled an adjustment on the PT-125. This data

appeared at 23:15 on July 14, 1992.

App. 20

18. Mr. Daniel worked from 6:45 to 15:40 on July 14,

1992.

19. Mr. Daniel was not working on July 14, 1992 at

23:15 hours.

20. Based on the Control Room Operators Logbook

and eyewitness testimony, no Instrument and Electrical

Technician worked on the PT-125 during Mr. Daniel’s July

14, 1992 shift. Mr. Robert Thornton, the Control Room

Operator on duty during Mr. Daniel’s July 14, 1992 shift

testified that he did not call Mr. Daniel or any other

technician to make any adjustment to the PT-125 during

that shift.

21. The Event Log, which recorded waste feed cutoffs

from the computer, reflects that waste feed cutoffs for PT-

125 were minimal during Mr. Daniel’s shift on July 14,

1992. Thus, the asserted motivation for Mr. Daniel’s

tampering activities — a cessation of continuing automatic

waste feed cutoffs caused by positive kiln draft — did not

exist during Mr. Daniel’s shift on July 14, 1992.

22. Had Mr. Daniel tampered with the PT-125 as he

testified, one would expect automatic waste feed cutoffs to

have ceased after his shift ended. They did not. Instead,

problems with PT-125 waste feed cutoffs worsened after

Mr. Daniels July 14, 1992 shift and were not resolved until

other technicians investigated and fixed the problems with

the PT-125’s operations.

23. The evidence, consisting of credible eyewitness

testimony and contemporaneous records, establishes that

Mr. Daniel did not tamper with the PT-125 during his shift

on July 14, 1992 in order to stop waste feed cutoffs caused

by the PT-125.

PDE SM SIP OD

App. 21

24. The contemporaneously recorded computer

records from the site do not contain any evidence of tam-

pering with the PT-125 on July 14, 1992.

25. VSC’s project manager, Robert Apa, described the

historian data as it was recorded during Mr. Daniel’s shift

on July 14, 1992. Mr. Apa compared the historian data for

the PT-125 sensor to the non-regulatory PT-225 sensor. He

explained that due to the proximity of these two sensors,

one would expect both sensors to respond to operating

conditions in the incinerator in a similar fashion. If Mr.

Daniel artificially manipulated the PT-125, that manipula-

tion would also alter the relationship between the PT-125

and the PT-225. Mr. Apa demonstrated that, throughout

July 14, 1992, a strong correlation remained between the

two sensors, thereby negating the existence of tampering.

The Court finds that Mr. Apa was a credible and knowl-

edgeable witness.

26. The only upward spike in the PT-125 on July 14,

1992 that Plaintiffs cite, at 23:15 hours, occurred after Mr.

Daniel’s shift and was attributable to regular maintenance

issues.

27. Mr. Daniel testified that he worked for three

hours during the morning of July 18th or 19th and re-

turned for the night shift. He claimed to have adjusted the

PT-125 improperly using a screwdriver.

28. Mr. Daniel did not work on the PT-125 during

the July 18-20, 1993 time period.

29. The contemporaneous site records demonstrate

that no work was performed on the PT-125 during Mr.

Daniel’s shifts July 18-20, 1993.

App. 22

30. To the extent that the operational site records

reflect PT-125 cutoffs prior to Mr. Daniel’s shifts on these

dates, the records set forth the reasons for the cutoffs and

do not provide any evidence of tampering with the device.

31. Mr. Apa described the historian data as recorded

during Mr. Daniel’s shifts on July 18-20, 1993. Mr. Apa

compared the historian data for the PT-125 to that of the

PT-225. Mr. Apa testified that there is no step increase in

the PT-125 graph, and there is nothing in the historian

data that suggests tampering during these shifts.

32. Mr. Winchester, who designed and installed the

computer monitoring system also analyzed the historian

data from the mid July 1993 time period. Mr. Winchester

testified that there was no evidence of a miscalibration of

PT-125.

33. In addition to the records for July 14, 1992 and

July 18-20, 1993, Defendants examined the site records for

all the dates in July 1992 and July 1993 on which Mr.

Daniel worked. None contained evidence of tampering

with the PT-125.

34. Had Mr. Daniel miscalibrated the PT-125 as he

claimed, many other persons at the site would have

witnessed the tampering or its effects. Plaintiffs were

unable to present any eyewitness testimony to corroborate

Mr. Daniel’s allegations.

35. Mr. Daniel claimed that all of the other instru-

ment and electrical technicians knew about and partici-

pated in the tampering. Mr. Daniel also described the

miscalibration process in terms that would have required

the Control Room Operators to participate in the miscali-

bration.

ESD OEE

App. 23

36. No other witness confirmed Mr. Daniel’s version

of events.

37. Munro (“Buck”) Tucker was a Control Room

Operator at the Vertac Site. Mr. Tucker testified that he

did not instruct Mr. Daniel to elevate the zero nor does he

have any personal knowledge of any tampering or miscali-

bration event.

38. Greg Price, an Instrument and Electrical Techni-

cian, testified that he never elevated the zero. He also

stated that he has no personal knowledge of anyone at the

site elevating the zero.

39. Art Bates, an Instrument and Electrical Techni-

cian, testified that he did not tamper with the incinerator

or know of anyone else doing so.

40. Daniel Fuller, the Operations Menager at the

site from August 1991 through June 3,1993, testified that

he did not recall instructing Don Daniel or any other

Instrument and Electrical Technician to recalibrate the

TCS or to improperly recalibrate the PT-125.

41. Brent Weddle, a former maintenance worker,

testified that he understood he would have lost his job had

he tampered with the PT-125.

42. Robert Thornton, the Control Room Operator on

duty on July 14, 1992, denied involvement in or knowledge

of any tampering or miscalibration activities at the site.

43. Joey Moses, an Instrument and Electrical Tech-

nician, specifically accused by Mr. Daniel of participating

in the alleged tampering, denied Mr. Daniel’s allegations.

Mr. Moses testified that he did not participate in any

App. 24

tampering or miscalibration activities and he did not have

any knowledge of anyone else at the site doing so.

44. URS Shift Engineers Robert Rooke and James

Winchester, as well as VSC’s Site Manager, Robert Apa,

described the impact of a miscalibration of the sort de-

scribe by Mr. Daniel. They noted that if the incinerator

operated at a draft level lower than the true zero, there

would have been positive pressure, causing a kiln puff.

Thus, even had Mr. Daniel miscalibrated the PT-125 and

avoided waste feed cutoffs, his actions would have pro-

duced kiln puffs of significant frequency and duration.

Plaintiffs did not produce evidence of this occurring.

45. Mr. Daniel testified that he changed the “priority

settings” in the Computer Turnbull Control System

(“TCS”). He stated that other workers at the site did so

too. He stated that the priority settings determined how

often the TSC would process that particular signal. Ac-

cording to Mr. Daniel, the priority settings were improp-

erly lowered from at least July 1992 through July 1993,

except for temporary resettings performed in connection

with interlock checks. Mr. Daniel also said that when the

priority settings were properly set, the incinerator would

not operate.

46. Mr. Daniel testified that he never changed the

interlock settings for automatic waste feed cutoffs and he

did not change the scan time for the TCS.

47. The priority setting controlled the annunciation

of the alarms that tell the Control Room Operator of

potential problems. Robert Rooke stated that a change in

priority would not have affected how often the computer

system read the signal for any particular parameter but

would only have affected the manner in which the alarm

App. 25

was announced, ie. ringing of 2 bell or change in the color

of the light.

48. This was confirmed by Mr. Winchester.

49. Mr. Daniel also testified in connection with a

series of historian data graphs which depicted relatively

long periods of time when the PT-125 did not show any

movement. These examples were offered to show instances

when the priority setting for PT-125 was low due to tam-

pering.

50. Other historian data graphs presented by Mr.

Daniel contradict this testimony. Mr. Daniel testified that

lowering the priority setting would cause the TCS to

overlook the PT-125 sensor, and that this low priority

condition lasted for at least one year. Yet, the graphs show

that, during the same time period, the historian continued

to run and te record repeated movement of readings for

the PT-125.

51. All of the Instrument and Electrical Technicians

denied that they changed the priority settings. Mr. Fuller,

the Operations Manager who allegedly gave Mr. Daniel

the instruction to reset the priority, denied doing so.

52. Mr. Daniel described other types of PT-125

tampering that Plaintiffs contend demonstrates that

tampering occurred on a routine basis. These were: (1)

elevating the zero shortly after PT-125 was officially

recalibrated; (2) elevating the zero during a lengthy plant

shutdown to avoid showing an improperly elevated draft

when the I.D. fan was shut down; and (3) elevating the

zero when the kiln was experiencing low kiln draft to

avoid PT-125 waste feed cutoffs.

App. 26

53. Mr. Daniel testified that prior to an official PT-

125 calibration test, he and other technicians would reset

the PT-125 calibration to the proper level in order the [sic]

hide the miscalibration prior to the testing. After the

testing, he and other technicians would be called in to re-

elevate the zero because the incinerator could not operate

when the PT-125 was properly calibrated.

54. This testimony was refuted by other technicians,

control room operators, the oversight inspector and by

VSC and URS management.

55. Mr. Daniel contended that during a plant shut-

down he and other technicians would recalibrate the PT-

125 correctly. This practice was followed because PT-125

would incorrectly read an elevated draft during the shut-

down, and this reading would reveal the elevated zero

practice.

56. This testimony was refuted by other technicians,

control room operators, the oversight inspectors and by

VSC and URS management.

57. Mr. Daniel testified that he and other techni-

cians would be called on to elevate the zero of PT-125

when the incinerator was experiencing shutdown problems

due to low kiln draft. He would then turn the screw of PT-

125 until the waste feed cutoffs stopped. No other witness

confirmed Mr. Daniels’s version of these events.

58. Mr. Apa and Mr. Winchester evaluated the

contemporaneous operating records and both concluded

that there was no evidence of tampering with the PT-125.

59. Plaintiffs’ allegations that the incinerator was

operated while the rod ports were open does not show a

pattern and practice of tampering.

App. 27

60. Plaintiffs failed to establish that operation of the

incinerator with the rod ports open was a recurring event.

In fact, the evidence demonstrated that when this did

occur on one occasion, Mr. Apa told the Control Room

Operators that such a practice would not be tolerated. In

addition, EPA was aware of VSC’s practice of opening the

rod ports during operations to remove occlusions of salt,

and had no objection te this practice.

61. Plaintiffs presented evidence that Mr. Apa

directed Instrument and Electrical Technicians to change

the cutoff point for the non-regulatory PT-339 sensor prior

to the May 13, 1993 salt release. Mr. Apa testified that a

non-regulatory cutoff was in place which was engaging

due to a salt buildup. After consulting the equipment

limitations, the cutoff was raised. Nevertheless, an exces-

sive pressure buildup developed which ultimately dam-

aged the spray dryer and forced a shutdown of the

incinerator. Plaintiffs also showed that Mr. Fuller ordered

the I.D. fan turned on to cool down the unit. In order to do

that, the Instrument and Electrical Technicians had to

install “branches” in the PLC Logic, which was normal

procedure for a startup. As a result of the decision to

activate the I.D. fan, salt was released from the stack on

May 13, 1993.

62. EPA investigated this incident. EPA confirmed

that the change in the PT-339 cutoff was a non-regulatory

event and was consistent with the manufacturers specifi-

cations. EPA described the decision to start up the I.D. fan

as bad judgment, and approved the operating procedure

revisions that VSC implemented to avoid a similar inci-

dent. EPA did not find that the event violated applicable

contract provisions. EPA did not cite VSC for a regulatory

violation. EPA evaluated the impacts of the salt release

App. 28

and concluded that the contaminants released on May 13,

1993 did not present an unacceptable risk to human

health or the environment. The May 13, 1993 salt release

does not establish a pattern and practice of tampering.

63. URS did not have actual knowledge of the

alleged tampering with the PT-125 or the priority settings.

Mr. Daniel testified that URS did not have knowledge of

the tampering he alleges, and that, in his view, URS did

nothing improper at the site.

64. VSC did not have actual knowledge that the

alleged tampering had occurred. Mr. Daniel testified that

Bob Apa did not have knowledge of the tampering, and in

fact would have never condoned it. Mr. Daniel alleged that

his immediate supervisors were aware of his actions, but

the only supervisor called by Plaintiffs, Dan Fuller, denied

any knowledge.

65. The VSC Project Manager Bob Apa, the VSC

Operations Manager Dan Fuller, the Gentry Inspector

John Gillette, the URS Site Project Manager Jack Daniel-

son and the URS shift engineers Bob Rooke and James

Winchester never heard any allegations or encountered

any credible evidence of tampering with either the PT-125

or the TCS system in order to circumvent the regulatory

interlocks during operation of the incinerator. Defendants’

other witnesses URS Site Engineer Fritz Heneman,

Robert Thornton and Joey Moses, confirmed that they

were not aware of any evidence of tampering.

66. The record establishes that Defendants did not

have actual knowledge of tampering with the PT-125 or

any other incinerator devices in order to circumvent

applicable regulatory requirements.

CDR oar 2 fh erties PPE LE TREE PEE I AP RE mes aes

;

a ST re

App. 29

67. Plaintiffs did not establish that Defendants acted

with reckless disregard.

68. Defendants did not act with reckless disregard

with regard to evidence of tampering that should have

been apparent from the historian data. Plaintiffs’ wit-

nesses described normal operational conditions that would

produce the alleged erratic readings of the PT-125.

69. Witnesses identified normal operational causes

which would explain instances when the PT-125 would

exhibit a draft reading when the system was shut down.

70. Mr. Winchester testified that a positive reading

of the PT-125 during a divert situation with the I.D. fan

turned off was a natural phenomenon that did not indicate

that the instrument sensor was out of calibration.

71. Plaintiffs also assert that differences between

the historian data and the westronics “strip chart” should

have caused the Defendants to conclude that tampering

had occurred. However, testimony explained the reasons

for the discrepancies other than tampering.

72. Plaintiffs did not establish that VSC hid its on-

site air emissions data because it constituted evidence of

tampering.

73. Defendants did not recklessly disregard elevated

readings of dioxin levels at the site. The Vertac Site

housed various chemical, herbicide, and pesticide produc-

tion facilities from 1948 through 1987. Air-borne dioxin at

the site reasonably could result from wind-blown soil,

volatilization of the feedstock into the incinerator, or from

salt or ash produced as part of the incineration process.

The experts who studied the site for EPA in 1992 did not

themselves automatically attribute high dioxin readings to

App. 30

kiln puffs alone. Accordingly, the existence of air-borne

dioxin at the site should not have automatically led

Defendants to the conclusion that someone had tampered

with the PT-125.

74. At the February 1992 meeting convened by EPA

to study the cause of elevated dioxin levels at the site, VSC

Project Manager, Bob Apa advised EPA, ADPC & E and

the independent consultants that VSC believed four of the

five elevated dioxin samples being studied by EPA could be

correlated to reported kiln puffs or flame-outs occurring on

specific dates.

75. Unlike the URS perimeter air monitors, there

was no requirement that VSC report the results of its on-

site monitors.

76. As of June 1993, EPA was aware of the VSC on-

site monitoring data. On April 21, 1994, William Luthans,

Chief of EPA’s Arkansas/Louisiana Enforcement Section

wrote to the local newspaper explaining the differences

between the VSC monitoring data and the EPA ambient

air action levels. Mr. Luthans explained that because the

VSC monitors are located adjacent to the incinerator, they

cannot be compared to the EPA ambient air monitoring

action levels which are levels established to protect the

community beyond the fenceline who may be exposed

twenty-four hours a day, seven days a week.

77. Further, even during the time period when the

State of Arkansas had lead responsibility for the incinera-

tion, EPA used VSC’s operations logs and other site reports

to understand and interpret the URS perimeter air

monitoring data.

a yes Se AM. Mg NEN DA

I ah a

App. 31

78. The evidence does not show a deliberate effort on

the part of VSC to hide its on-site air monitoring data, or

other data.

79. In order to ensure continuous and consistent

inspection services during its transition as EPA oversight

contractor, URS subcontracted with the State’s oversight

contractor, Gentry & Associates to continue performing

inspection services at the site for a transitional period

after June 1993. While under contract with URS, the

Gentry inspectors were required to provide 24-hour per

day inspection services. The Gentry inspectors filled out

daily logs, unusual incident reports and photographed

conditions at the site. EPA received copies of all of Gentry’s

documentation.

80. John Gillette, a Gentry Inspector, testified that

he never saw any evidence of tampering.

81. URS Shift Engineer, James Winchester, testified

that he regularly checked the reading of the magnehelic

gauge against the PT-125 reading in the Control Room. He

watched the screen readings in the Control Room. He

compared the historian data to the strip chart. He looked

for signs of tampering but found none.

82. Mr. Winchester also participated in URS's

investigation and reports to EPA as to the causes of kiln

puffs, waste feed cutoffs and diverts. Throughout all of

this study, Mr. Winchester did not identify an incident in

which a kiln puff, divert, or similar occurrence went

unreported, or in which tampering was implicated.

83. URS Shift Engineer, Robert Rooke, also cross

checked the magnehelic gauge with the PT-125, compared

historian data to the strip chart readings and investigated

App. 32

rumors. He found no evidence of miscalibration of the PT-

125.

84. Bob Apa also testified that he looked out for

signs of tampering at the site, walked the site, and made

inspections. He never received any information that

anyone tampered with the PT-125.

85. VSC also employed an on-site compliance officer

who monitored the performance of the incinerator for

compliance, including regular interlock checks.

86. EPA representative, Richard Ehrhart testified in

his deposition which was received in evidence that URS

maintained a number of different logs and reports which

would enable one to corroborate whether a specific event

occurred. In addition, he testified that he had no reason to

believe that URS or VSC knowingly and intentionally

submitted false statements to the EPA. Mr. Ehrhart

testified that he did not feel misled by URS or by VSC

with regard to fugitive emissions, medical monitoring

data, blood test data or other exposure data.

87. Mr. William Luthans of the EPA stated by way of

deposition admitted at trial that he did not receive any

information that URS or VSC withheld or falsified infor-

mation.

88. Plaintiffs failed to prove their underlying theory

that design defects made the alleged tampering a neces-

sity in order to operate the incinerator. In February, 1992,

the EPA assembled a group of incineration experts to

evaluate the Vertac incinerator. The report summarizing

the evaluation revealed that the Vertac incinerator system

as a whole was well designed and properly operated. In

addition, in March 1992, the EPA stated that the Vertac

App. 33

incinerator employed state of the art equipment and was

fully in compliance with regulations governing hazardous

waste incinerators.

89. Plaintiffs also failed to tie their allegations of

design defects to the claimed tampering. Mr. Rooke testi-

fied that the problems noted with the incinerator would

not have been remedied by the alleged tampering with the

PT-125.

90. There was no tampering with the PT-125 on the

Vertac incinerator in order to circumvent regulatory or

contractual requirements.

91. Employees of defendants did not tamper with the

PT-125 sensor in order to bypass the regulatory interlocks

required of the incinerator on July 14, 1992.

92. Employees of defendants did not tamper with the

PT-125 sensor in order to bypass the regulatory interlocks

required of the incinerator during mid-July of 1993.

93. Defendants did not have knowledge, actual or

otherwise, of the tampering with the PT-125 sensor that is

alleged by plaintiffs in this case.

94. Defendants did not knowingly, as that term is

defined in the FCA, submit false claims for payment or

false statements to EPA in order to obtain payment of the

contract amounts or to avoid other obligations to the

government.

CONCLUSIONS OF LAW

1. An FCA relator must prove by a preponderance of

the evidence that the defendant knowingly submitted a

false claim or statement to the federal government for the

App. 34

purpose of obtaining payment from the government or for

decreasing an obligation owed to the federal government.

The term “knowingly” encompasses actual knowledge,

reckless disregard of the truth, or intentional ignorance of

the truth.

29. None of the defendants knowingly submitted a

false claim or statement to the government related to the

two instances of tampering to the PT-125 described by

relator Don Daniel.

3 None of the defendants knowingly submitted a

false claim or statement to the government with respect to

their performance of remediation work at the Vertac Site.

4. Plaintiffs are not entitled to any adverse infer-

ences and have not presented any evidence from which

knowledge of falsity or intent to submit a false claim may

be inferred.

CONCLUSION

It is therefore ordered that Plaintiffs’ complaint be

dismissed as to Defendants’ URS Consultants Inc., Morri-

son Knudsen Corporation and Vertac Site Contractors.

The Court will address Plaintiffs’ motion for default

judgment (docket # 307) against Separate Defendant,

MRK Incineration, Inc., by separate order.

IT IS SO ORDERED this 19 day of October, 2001.

/s/ James M. Moody

James M. Moody

United States District Judge

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App. 35

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

UNITED STATES, ex rel.,

PAT COSTNER, SHARON GOLGAN,

CAROLYN LANCE, DEBRA LITCHFIELD,

BECKY SUMMERS, KENNY BROWN,

EDWARD CAMPBELL, DON DANIEL,

JEFFREY FOOT, DAVID HERMANSON,

ARKANSAS PEACE CENTER,

AND VIETNAM VETERANS

OF AMERICA, ARKANSAS

STATE COUNCIL, INC. PLAINTIFFS

VS. NO. 4: 95CV448 JMM

URS CONSULTANTS, INC.,

MORRISON KNUDSEN

CORPORATION, AND

VERTAC SITE CONTRACTORS DEFENDANTS

JUDGMENT

(Filed Oct. 22, 2001)

Pursuant to the Order entered this date, Plaintiffs’

Complaint is hereby dismissed as to the above named

Defendants.

IT IS SO ORDERED this 19 day of October, 2001.

/s/ James M. Moody

James M. Moody

United States District Judge

App. 36

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 01-3764

United States of America

ex rel. Pat Costner, et al.,

Order Denying Petition

for Rehearing and for

Rehearing En Banc

Appellants,

vs.

United States of America,

Movant,

URS Consultants, Inc.,

et al.,

%*eeetetete=*re%tewte =e & & &

Appellees.

The petition for rehearing en banc is denied. The

petition for rehearing by the panel is also denied.

(5128-010199)

April 9, 2003

Order Entered at the Direction of the Court:

Clerk, U.S. Court of Appeals, Eighth Circuit

App. 37

False Claims Act 31 USCA Sec. 3729, et seq.

TITLE 31. MONEY AND FINANCE

SUBTITLE III. FINANCIAL MANAGEMENT

CHAPTER 37. CLAIMS

SUBCHAPTER III. CLAIMS AGAINST THE UNITED

STATES GOVERNMENT

§ $729. False claims

(a) Liability for certain acts. Any person who —

(1) knowingly presents, or causes to be presented, to an

officer or employee of the United States Government or a

member of the Armed Forces of the United States a false

or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used,

a false record or statement to get a false or fraudulent

claim paid or approved by the Government;

(3) conspires to defraud the Government by getting a

false or fraudulent claim allowed or paid;

(4) has possession, custody, or control of property or

money used, or to be used, by the Government and, intend-

ing to defraud the Government or willfully to conceal the

property, delivers, or causes to be delivered, less property

than the amount for which the person receives a certificate

or receipt;

(5) authorized to make or deliver a document certifying

receipt of property used, or to be used, by the Government

and, intending to defraud the Government, makes or

delivers the receipt without completely knowing that the

information on the receipt is true;

(6) knowingly buys, or receives as a pledge of an obliga-

tion or debt, public property from an officer or employee of

App. 38

the Government, or a member of the Armed Forces, who

lawfully may not sell or pledge the property; or

(7) knowingly makes, uses, or causes to be made or used,

a false record or statement to conceal, avoid, or decrease

an obligation to pay or transmit money or property to the

Government, is liable to the United States Government for

a civil penalty of not less than $5,000 and not more than

$10,000, plus 3 times the amount of damages which the

Government sustains because of the act of that person,

except that if the court finds that —

(A) the person committing the violation of this subsection

furnished officials of the United States responsible for

investigating false claims violations with all information

known to such person about the violation within 30 days

after the date on which the defendant first obtained the

information;

(B) such person fully cooperated with any Government

investigation of such violation; and

with the information about the violation, no criminal

prosecution, civil action, or administrative action had

commenced under this title with respect to such violation,

and the person did not have actual knowledge of the

existence of an investigation into such violation; the court

may assess not less than 2 times the amount of damages

which the Government sustains because of the act of the

person. A person violating this subsection shall also be

liable to the United States Government for the costs of a

civil action brought to recover any such penalty or dam-

ages.

App. 39

(b) Knowing and knowingly defined. For purposes of this

section, the terms “knowing” and “knowingly” mean that a

person, with respect to information —

(1) has actual knowledge of the information;

(2) acts in deliberate ignorance of the truth or falsity of

the information; or

(3) acts in reckless disregard of the truth or falsity of the

information, and no proof of specific intent to defraud is

required.

includes any request or demand, whether under a contract

or otherwise, for money or property which is made to a

contractor, grantee, or other recipient if the United States

Government provides any portion of the money or property

which is requested or demanded, or if the Government will

reimburse such contractor, grantee, or other recipient for

any portion of the money or property which is requested or

demanded.

(d) Exemption from disclosure. Any information fur-

nished pursuant to subparagraphs (A) through (C) of

subsection (a) shall be exempt from disclosure under

section 552 of title 5.

(e) Exclusion. This section does not apply to claims,

records, or statements made under the Internal Revenue

Code of 1986 [Title 26, USCS].

App. 40

TITLE 31. MONEY AND FINANCE SUBTITLE Ii.

FINANCIAL MANAGEMENT CHAPTER 37. CLAIMS

SUBCHAPTER III. CLAIMS AGAINST THE UNITED

STATES GOVERNMENT 31 USCS § 3730 (1994)

§ $730. Civil actions for false claims

(a) Responsibilities of the Attorney General. The Attor-

ney General diligently shall investigate a violation under

section 3729. If the Attorney General finds that a person

has violated or is violating section 3729, the Attorney

General may bring a civil action under this section against

the person.

(b) Actions by private persons.

(1) A person may bring a civil action for a violation of

section 3729 for the person and for the United States

Government. The action shall be brought in the name of

the Government. The action may be dismissed only if the

court and the Attorney General give written consent to the

dismissal and their reasons fer consenting.

(2) A copy of the complaint and written disclosure of

substantially all material evidence and information the

person possesses shall be served on the Government

pursuant to Rule 4(dX4) of the Federal Rules of Civil

Procedure. The complaint shall be filed in camera, shall

remain under seal for at least 60 days, and shall not be

served on the defendant until the court so orders. The

Government may elect to intervene and proceed with the

action within 60 days after it receives both the complaint

and the material evidence and information.

(3) The Government may, for good cause shown, move the

court for extensions of the time during which the com-

plaint remains under seal under paragraph (2). Any such

App. 41

motions may be supported by affidavits or other submis-

sions in camera. The defendant shall not be required to

respond to any complaint filed under this section until 20

days after the complaint is unsealed and served upon the

defendant pursuant to Rule 4 of the Federal Rules of Civil

Procedure.

(4) Before the expiration of the 60-day period or any

extensions obtained under paragraph (3), the Government

shall —

(A) proceed with the action, in which case the action

shall be conducted by the Government; or

(B) notify the court that it declines to take over the

action, in which case the person bringing the action shall

have the right to conduct the action.

(5) When a person brings an action under this subsec-

tion, no person other than the Government may intervene

or bring a related action based on the facts underlying the

pending action.

(1) If the Governmert proceeds with the action, it shall

have the primary responsibility for prosecuting the action,

and shall not be bound hy an act of the person bringing the

action. Such person shall have the right to continue as a

party to the action, subject to the limitations set forth in

paragraph (2).

(2XA) The Government may dismiss the action notwith-

standing the objections of the person initiating the action

if the person has been notified by the Government of the

filing of the motion and the court has provided the person

with an opportunity for a hearing on the motion.

App. 42

(B) The Government may settle the action with the

defendant notwithstanding the objections of the person

initiating the action if the court determines, after a hear-

ing, that the proposed settlement is fair, adequate, and

reasonable under all the circumstances. Upon a showing of

good cause, such hearing may be held in camera.

participation during the course of the litigation by the

person initiating the action would interfere with or unduly

delay the Government’s prosecution of the case, or would

be repetitious, irrelevant, or for purposes of harassment,

the court may, in its discretion, impose limitations on the

person’s participation, such as —

(i) limiting the number of witnesses the person may call;

(ii) limiting the length of the testimony of such wit-

nesses;

(iii) limiting the person’s cross-examination of witnesses;

(iv) otherwise limiting the participation by the person in

the litigation.

(D) Upon a showing by the defendant that unrestricted

participation during the course of the litigation by the

person initiating the action would be for purposes of

harassment or would cause the defendant undue burden

or unnecessary expense, the court may limit the participa-

tion by the person in the litigation.

(3) If the Government elects not to proceed with the

action, the person who initiated the action shall have the

right to conduct the action. If the Government so requests,

it shall be served with copies of all pleadings filed in the

App. 43

action and shall be supplied with copies of all deposition

transcripts (at the Government's expense). When a person

proceeds with the action, the court, without limiting the

status and rights of the person initiating the action, may

nevertheless permit the Government to intervene at a

later date upon a showing of good cause.

(4) Whether or not the Government proceeds with the

action, upon a showing by the Government that certain

actions of discovery by the person initiating the action

would interfere with the Government’s investigation or

prosecution of a criminal or civil matter arising out of the

same facts, the court may stay such discovery for a period

of not more than 60 days. Such a showing shall be con-

ducted in camera. The court may extend the 60-day period

upon a further showing in camera that the Government

has pursued the criminal or civil investigation or proceed-

ings with reasonable diligence and any proposed discovery

in the civil action will interfere with the ongoing criminal

or civil investigation or proceedings.

(5) Notwithstanding subsection (b), the Government may

elect to pursue its claim through any alternate remedy

available to the Government, including any administrative

proceeding to determine a civil money penalty. If any such

alternate remedy is pursued in another proceeding, the

person initiating the action shall have the same rights in

such proceeding as such person would have had if the

action had continued under this section. Any finding of

fact or conclusion of law made in such other proceeding

that has become final shall be conclusive on all parties to

an action under this section. For purposes of the preceding

sentence, a finding or conclusion is final if it has been

finally determined on appeal to the appropriate court of

the United States, if all time for filing such an appeal with

App. 44

respect to the finding or conclusion has expired, or if the

finding or conclusion is not subject to judicial review.

(d) Award to qui tam plaintiff.

(1) Ifthe Government proceeds with an action brought by

a person under subsection (b), such person shall, subject to

the second sentence of this paragraph, receive at least 15

percent but not more than 25 percent of the proceeds of

the action or settlement of the claim, depending upon the

extent to which the person substantially contributed to the

prosecution of the action. Where the action is one which

the court finds to be based primarily on disclosures of

specific information (other than information provided by

the person bringing the action) relating to allegations or

transactions in a criminal, civil, or administrative hearing,

in a congressional, administrative, or Government Ac-

counting Office report, hearing, audit, or investigation, or

from the news media, the court may award such sums as it

considers appropriate, but in no case more than 10 percent

of the proceeds, taking into account the significance of the

information and the role of the person bringing the action

in advancing the case to litigation. Any payment to a

person under the first or second sentence of this para-

graph shall be made from the proceeds. Any such person

shall also receive an amount for reasonable expenses

which the court finds to have been necessarily incurred,

plus reasonable attorneys’ fees and costs. All such ex-

penses, fees, and costs shall be awarded against the

defendant.

(2) If the Government does not proceed with an action

under this section, the person bringing the action or

settling the claim shall receive an amount which the court

decides is reasonable for collecting the civil penalty and

App. 45

damages. The amount shall be not less than 25 percent

and not more than 30 percent of the proceeds of the action

or settlement and shall be paid out of such proceeds. Such

person shall also receive an amount for reasonable ex-

penses which the court finds to have been necessarily

incurred, plus reasonable attorneys’ fees and costs. All

such expenses, fees, and costs shall be awarded against

the defendant.

(3) Whether or not the Government proceeds with the

action, if the court finds that the action was brought by a

person who planned and initiated the violation of section

3729 upon which the action was brought, then the court

may, to the extent the court considers appropriate, reduce

the share of the proceeds of the action which the person

would otherwise receive under paragraph (1) or (2) of this

subsection, taking into account the role of that person in

advancing the case to litigation and any relevant circum-

stances pertaining to the violation. If the person bringing

the action is convicted of criminal conduct arising from his

or her role in the violation of section 3729, that person

shall be dismissed from the civil action and shall not

receive any share of the proceeds of the action. Such

dismissal shall not prejudice the right of the United States

to continue the action, represented by the Department of

Justice.

(4) If the Government does not proceed with the action

and the person bringing the action conducts the action, the

court may award to the defendant its reasonable attorneys’

fees and expenses if the defendant prevails in the action

and the court finds that the claim of the person bringing

the action was clearly frivolous, clearly vexatious, or

brought primarily for purposes of harassment.

App. 46

(e) Certain actions barred.

(1) No court shall have jurisdiction over an action

brought by a former or present member of the armed

forces under subsection (b) of this section against a mem-

ber of the armed forces arising out of such person’s service

in the armed forces.

(2XA) No court shall have jurisdiction over an action

brought under subsection (b) against a Member of Con-

gress, a member of the judiciary, or a senior executive

branch official if the action is based on evidence or infor-

mation known to the Government when the action was

brought.

(B) For purposes of this paragraph, “senior executive

branch official” means any officer or employee listed in

paragraphs (1) through (8) of section 101(f) of the Ethics in

Government Act of 1978 (5 U.S.C. App.).

(3) In no event may a person bring an action under

subsection (b) which is based upon allegations or transac-

tions which are the subject of a civil suit or an administra-

tive civil money penalty proceeding in which the

Government is already a party.

(4A) No court shall have jurisdiction over an action

under this section based upon the public disclosure of

allegations or transactions in a criminal, civil, or adminis-

trative hearing, in a congressional, administrative, or

Government Accounting Office report, hearing, audit, or

investigation, or from the news media, unless the action is

brought by the Attorney General or the person bringing

the action is an original source of the information.

(B) For purposes of this paragraph, “original source”

means an individual who has direct and independent

App. 47

knowledge of the information on which the allegations are

based and has voluntarily provided the information to the

Government before filing an action under this section

which is based on the information.

(f) Government not liable for certain expenses. The

Government is not liable for expenses which a person

incurs in bringing an action under this section.

(g) Fees and expenses to prevailing defendant. In civil

actions brought under this section by the United States,

the provisions of section 2412(d) of title 28 shall apply.

(h) Any employee who is discharged, demoted, sus-

pended, threatened, harassed, or in any other manner

discriminated against in the terms and conditions of

employment by his or her employer because of lawful acts

done by the employee on behalf of the employee or others

in furtherance of an action under this section, including

investigation for, initiation of, testimony for, or assistance

in an action filed or to be filed under this section, shall be

entitled to all relief necessary to make the employee

whole. Such relief shall include reinstatement with the

same seniority status such employee would have had but

for the discrimination, 2 times the amount of back pay,

interest on the back pay, and compensation for any special

damages sustained as a result of the discrimination,

including litigation costs and reasonable attorneys’ fees.

An employee may bring an action in the appropriate

district court of the United States for the relief provided in

this subsection.

App. 48

TITLE 31. MONEY AND FINANCE

SUBTITLE III. FINANCIAL MANAGEMENT

CHAPTER 37. CLAIMS

SUBCHAPTER III. CLAIMS AGAINST THE UNITED

STATES GOVERNMENT 31 USCS § 3731 (1994)

§ 3731. False claims procedure

(a) Asubpoena requiring the attendance of a witness at a

trial or hearing conducted under section 3730 of this title

[31 USCS § 3730] may be served at any place in the

United States.

(b) Acivil action under section 3730 may not be brought —

(1) more than 6 years after the date on which the viola-

tion of section 3729 is committed, or

(2) more than 3 years after the date when facts material

to the right of action are known or reasonably should have

been known by the official of the United States charged

with responsibility to act in the circumstances, but in no

event more than 10 years after the date on which the

violation is committed, whichever occurs last.

States shall be required to prove all essential elements of

the cause of action, including damages, by a preponder-

ance of the evidence.

(d) Notwithstanding any other provision of law, the

Federal Rules of Criminal Procedure, or the Federal Rules

of Evidence, a final judgment rendered in favor of the

United States in any criminal proceeding charging fraud

or false statements, whether upon a verdict after trial or

upon a plea of guilty or nolo contendere, shall estop the

defendant from denying the essential elements of the

offense in any action which involves the same transaction

App. 49

as in the criminal proceeding and which is brought under

subsection (a) or (b) of section 3730.

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.