Monday, January 9, 2017

U.S. Supreme Court Ends 18 Year Long False Claims Act Case On US$74.3M Loans for Nigerian Government

U.S. Supreme Court Ends 18 Year Long False Claims Act Case On US$74.3M Loans for Nigerian Government

U.S. Supreme Court ends 18 year long False Claims Act case in favor of MWI

WASHINGTON, Jan. 9, 2017 /PRNewswire/ -- One of the longest running False Claims Act (FCA) cases in the history of that law came to an abrupt end today after 18 years and 136 days when the United States Supreme Court rejected the relator's petition for a writ of certiorari. Earlier, on September 19, 2016, the U.S. Department of Justice (DoJ) declined to file a petition for a writ of certiorari to seek Supreme Court review of an adverse decision (against the government and in favor of Moving Water Industries (MWI) by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), effectively ending their pursuit of the case against MWI. On November 21, 2016 DoJ filed an opposition brief in the Supreme Court which concluded by arguing that "The [relator's] petition for a writ of certiorari should be denied".

On November 24, 2015, the D.C. Circuit issued a unanimous opinion in the case of U.S. ex rel. Purcell v. MWI Corporation, 807 F.3d 281 (D.C. Cir. 2015), reversing a judgment of liability on two FCA counts against MWI and remanding the case with instructions to the District Court to enter judgment for MWI. The D.C. Circuit decisively held that there can be no FCA violation where the law or regulation at issue is ambiguous, where defendant's interpretation of the language is reasonable, and where the agency at issue (the Export-Import Bank of the United States or "Ex-Im") failed to issue any authoritative or official guidance to warn the defendant away from a different interpretation, however reasonable.  On June 21, 2016, the Court denied DoJ's petition for rehearing as well as its petition for rehearing en banc, and on August 18, 2016, the District Court entered judgment for MWI Corporation, effectively exonerating it from any wrongdoing.

The Government's case against MWI began on August 27, 1998, when a former MWI employee filed a complaint under seal in Washington, DC, under the qui tam (whistleblower) provisions of the FCA. The allegations in the complaint related to eight Ex-Im-financed sales by MWI to seven Nigerian states, which sales began in 1990 with all shipments completed by 1995. Grand jury proceedings then commenced into possible violations of the Foreign Corrupt Practices Act, but those proceedings concluded in early 2002 with no indictment.  At that time, the former employee's civil FCA complaint was unsealed and DoJ elected to intervene, seeking treble statutory damages amounting to $222.9 million. DoJ knew at that time that: (i) the $74.3 million Export-Import Bank loans had been repaid in full by the Government of Nigeria and (ii) the United States Government had actually received $33.7 million in interest and fees on the transactions.

The issue at trial, which did not commence until November 2013, ultimately centered around the meaning of the term "regular commission," a term that had never been defined (and still to this day has not been defined) by Ex-Im. The Government alleged that by certifying that it had not paid commissions other than "regular commissions" on required Supplier's Certificates that Ex-Im required MWI to execute and, at the same time, failing to disclose its agent's commission, MWI made false statements and submitted false claims under the FCA. In connection with pre-trial proceedings (over a decade following the events at issue), DoJ lawyers proffered for the very first time several new and differing interpretations of the meaning of "regular commission" and asserted that MWI should have been bound by one of them despite the fact that those definitions did not exist at the time the shipments and certifications in question were actually made. MWI, on the other hand, claimed that it interpreted the term straightforwardly and that, by paying its regular and exclusive agent in Nigeria the same commission on the transactions in question that it had paid him on past sales for over a decade before that, the commissions at issue were "regular commissions" and thus MWI was not required to disclose them on the Supplier's Certificates it provided to Ex-Im.

On November 25, 2013, after a lengthy trial before the District Court, MWI was found liable for violating the FCA with a $7.5 million verdict in damages which, after statutory trebling,  amounted  to a total judgment of $22.5 million plus any penalties. In a post-trial decision rendered on February 10, 2014, the District Court offset the damages to zero ($0) based on the undisputed fact that the loans backed by Ex-Im ($74.3 million) had been re-paid in full by Nigeria, along with $33.7 million in interest and fees. The District Court, however, assessed mandatory statutory civil penalties against MWI amounting to $580,000. DoJ appealed the offset of the damages and MWI cross-appealed the judgment of liability.  As a result of the D.C. Circuit's decision, the District Court's judgment of liability and fees against MWI were reversed.

MWI was represented at trial and on appeal by lead counsel Robert Rhoad of Shepard Mullin Richter & Hampton LLP and by co-lead counsel Brian Tully McLaughlin as well as Charlotte Gillingham and Richard L. Beizer of Crowell & Moring LLP. The National Association of Manufacturers submitted an Amicus brief to the D.C. Circuit on MWI's behalf.

SOURCE Moving Water Industries
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