United States v. Saavedra , 661 F. App'x 37 ( 2016 )

15-2307-cv
United States v. Saavedra
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New
York, on the 6th day of September, two thousand sixteen.
PRESENT: JON O. NEWMAN,
RALPH K. WINTER,
REENA RAGGI,
Circuit Judges.
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UNITED STATES OF AMERICA,
Intervenor-Plaintiff-Appellee,
UNITED STATES OF AMERICA EX REL. JOHN DOE
and THE STATE OF NEW YORK EX REL. JOHN DOE,
Plaintiffs,
v. No. 15-2307-cv
ALEX SAAVEDRA,
Intervenor-Defendant-Appellant,
SHOMARI GREENE, ALAN KATZ, TAGEWATEE
CHANDARPAUL, MITCHELL MCCLINTON,
Intervenor-Defendants,
STRUCTURED EMPLOYMENT ECONOMIC
DEVELOPMENT CORPORATION,
Defendant.*
*
The Clerk of Court is directed to amend the caption as set forth above.
1
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APPEARING FOR APPELLANT: BETTINA SCHEIN, ESQ. (Alan Samuel
Futerfas, Matthew C. McCann, Law Offices of
Alan S. Futerfas, New York, New York, on the
brief), New York, New York.
APPEARING FOR APPELLEE: JENNIFER ELLEN BLAIN, Assistant United
States Attorney (Christopher Connolly,
Assistant United States Attorney, on the brief),
for Preet Bharara, United States Attorney for
the Southern District of New York, New York,
New York.
Appeal from a judgment of the United States District Court for the Southern
District of New York (Alvin K. Hellerstein, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment entered on June 18, 2015, is AFFIRMED.
Following a jury trial, defendant Alex Saavedra, former director of two career
centers run by non-profit Structured Economic Employment Development Corporation
(“SEEDCO”), was found liable for violating the False Claims Act (“FCA”), see 31
U.S.C. § 3729(a)(1)(A), (a)(1)(B), by causing false claims to be made to the New York
City Division of Small Business Services (“SBS”), resulting in the payment of federal
funds. On appeal, he challenges (1) the sufficiency of the evidence; (2) the district
court’s (a) jury instructions and (b) denial of readback requests; and (3) the award of
$39,000 in damages, see id. § 3729(a)(1), and $143,000 in civil penalties, see id.
§ 3729(a); 28 C.F.R. § 85.3(a)(9). We assume the parties’ familiarity with the facts and
record of prior proceedings, which we reference only as necessary to explain our decision
to affirm.
2
1. Evidentiary Sufficiency
Saavedra argues that, in the absence of direct proof that quarterly
payment-authorization memoranda submitted by SBS’s third-party auditor contained
false job-placement data, the government failed to adduce sufficient evidence that he
caused SEEDCO to present any false “claim” or material record. Because Saavedra did
not renew his previously denied motion for judgment as a matter of law pursuant to Fed.
R. Civ. P. 50(b), however, he forfeited any challenge to the evidentiary basis for the
jury’s verdict on appeal. See Ortiz v. Jordan, 562 U.S. 180, 189 (2011) (“Absent such a
motion, we have repeatedly held, an appellate court is ‘powerless’ to review the
sufficiency of the evidence after trial.” (quoting Unitherm Food Sys., Inc. v.
Swift-Eckrich, Inc., 546 U.S. 394, 405 (2006))); Jacques v. DiMarzio, Inc., 386 F.3d 192,
199–200 (2d Cir. 2004).1 Accordingly, we may reach his sufficiency challenge only “to
prevent a manifest injustice,” which is present “in cases where a jury’s verdict is wholly
without legal support.” Jacques v. DiMarzio, Inc., 386 F.3d at 199 (brackets and
internal quotation marks omitted). This is not such a case.
Assuming, arguendo, that SBS’s quarterly internal calculation—and not
SEEDCO’s entry of false data into the WorkSource1 system—constituted the relevant
1
No different conclusion is warranted by Saavedra’s single-sentence statement in the
parties’ joint May 20, 2015 letter submitted “to present their respective positions
regarding assessing the mandatory civil penalty pursuant to 31 U.S.C. § 3729(a)(1).”
D.A. 1015; see id. at 1021 (“We respectfully submit that the government has not proven
that one false claim was submitted for payment to the United States.”). The Federal
Rules clearly provide that “[a] request for a court order must be made by motion,” which
must, inter alia, “state the relief sought.” Fed. R. Civ. P. 7(b)(1)(C) (emphasis added);
see also Fed. R. Civ. P. 50(b) (authorizing movant to file “renewed [postverdict] motion
for judgment as a matter of law” (emphasis added)).
3
“claim,” as Saavedra contends, the contracts introduced into evidence plainly established
that SBS would calculate SEEDCO’s performance payment on the basis of not only
statistical sampling by the auditor, Charney Research, but also the total number of
placements SEEDCO claimed. Thus, the more job placements SEEDCO claimed, the
more federal funds it was potentially entitled to receive, regardless of Charney’s
sampling results.2 Moreover, the jury reasonably could have interpreted—through a
former SBS Deputy Commissioner’s testimony—an internal SBS email as indicating that
401 false placements had been included in a roster sent to and validated by Charney.
See D.A. 264–65; see also id. at 859–61 (reflecting October 2012 email request for SBS
staff to “amend the performance calc[ulations]” based on “Seedco false placements” for
January to March 2011 period). The former Deputy Commissioner, Angie Kamath, also
discussed a New York City Department of Investigation (“DOI”) report concluding that
SEEDCO’s falsification “was done in a way that would have passed the Charney
validation methods.” Id. at 289. In fact, Kamath testified that SBS itself had
2
Saavedra cannot urge otherwise by speculating that, even if some false placements
were claimed, “by operation of the Charney Research validation process,” the percent
validated “would be decreased.” Appellant’s Reply Br. 8. Unless Charney validated
100% of SEEDCO’s claimed placements—or fewer than 50%, in which case SEEDCO
would receive no performance payment—the contract’s terms meant that SEEDCO
always would be paid for more placements than were verified. See D.A. 835 (indicating
that SEEDCO would receive 100% payment where Charney validated 75–100% of
placements, and 75% payment where Charney validated 50–74%). In any event,
Charney did not actually verify every placement claimed on SEEDCO’s roster; rather, it
relied on a randomly selected representative sample to obtain statistically significant
results. See, e.g., id. at 516 (discussing 5% error-margin target). Thus, the record
establishes that SBS paid SEEDCO for placements that were not individually validated.
4
discovered at least one false placement that had “passed through” the validation process,
and that SBS had paid SEEDCO for that false placement. Id. at 292.
Further, the jury heard testimony from (1) the SEEDCO employee responsible for
entering intake data, who stated that she falsified job placement information “50 percent
of the time,” P.A. 74; (2) Saavedra’s direct report, who stated that, during the majority of
his tenure, SEEDCO never met placement targets without using false placement data, see
id. at 2, 62–63; and (3) Saavedra’s administrative assistant, who stated that Saavedra
personally directed her to enter false placement data into WorkSource1, see D.A. 164–66.
On sufficiency review, we must assume that the jury credited these witnesses. See Cash
v. Cty. of Erie, 654 F.3d 324, 338 (2d Cir. 2011).
The totality of this evidence precludes a conclusion that the jury’s preponderance
finding was “wholly without legal support.” Jacques v. DiMarzio, Inc., 386 F.3d at 199
(internal quotation marks omitted). Indeed, the record evidence is sufficiently
compelling that, even if Saavedra had not forfeited his sufficiency claim, it would fail
upon de novo review in any event. Cf. Zeno v. Pine Plains Cent. Sch. Dist., 702 F.3d
655, 664 (2d Cir. 2012) (stating that reviewing court will reverse denial of Rule 50
motion if, drawing all inferences in favor of—and reviewing all evidence in light most
favorable to—plaintiff, no reasonable juror could have returned verdict for plaintiff).
2. Jury Instructions
a. Definition of “Claim”
Saavedra faults the district court for issuing the generic instruction on the meaning
of “claim” for FCA purposes even though it had previously concluded that: (1) whether
5
the claim was SEEDCO’s entry of false data (as the government urged) or SBS’s
quarterly internal calculation (as Saavedra maintained) was “an issue of law” for the
court to decide, D.A. 585; and (2) the relevant claim here was the quarterly calculation,
not the entry of false data, see, e.g., id. at 605 (“There is a difference between a record
and a claim. The claim is the request. If the custom under the contract is to ask for
payment quarterly, then that is the request and that’s the claim.”). Saavedra contends
that, by refusing to instruct the jury that only the quarterly calculation was an FCA claim,
as the defense requested, see id. at 583–84, the court erroneously permitted the jury to
find him liable under the government’s data-entry theory, which the court itself had
rejected as a matter of law.
We need not decide whether, upon de novo review, the challenged
instruction—which, as Saavedra concedes, accurately tracked the language of the
statute—“misled the jury about the correct legal standard” or otherwise “inadequately
informed [the jury] of the controlling law.” Crigger v. Fahnestock & Co., 443 F.3d 230,
235 (2d Cir. 2006) (internal quotation marks omitted); see United States v. Alfisi, 308
F.3d 144, 150 (2d Cir. 2002) (“Where a district court’s jury instructions accurately track
the language and meaning of the relevant statute, we generally will not find error.”).3
3
The court instructed:
A claim is “any request or demand for money or property
made to a contractor, grantee or other recipient if the money
or property is to be spent or used on the Government’s behalf
or to advance a Government program or interest, and if the
United States government provided any portion of the money
or property requested or demanded or will reimburse the
6
A new trial would be required only if, “considering the instruction as a whole, the cited
errors were not harmless, but in fact prejudiced the objecting party.” Crigger v.
Fahnestock & Co., 443 F.3d at 235 (internal quotation marks omitted). Assuming,
arguendo, that Saavedra can demonstrate charging error, he cannot show the requisite
prejudice in light of the above-described evidence, which showed that, regardless of
Charney’s validation results, each falsely claimed placement increased SEEDCO’s
potential performance payment under the contract’s methodology, thereby causing the
presentation of false claims. Indeed, the government argued in summation that, for this
reason alone, “whether you view the claim as coming through WorkSource1 or whether
you view it as some sort of compilation of those placements [in the authorization
memoranda], it amounts to the same thing.” D.A. 665. Accordingly, even if the jury
had been instructed that only the quarterly SBS calculation—and not the individual data
entries—could constitute an FCA claim, there is no basis to conclude here that it would
have rendered a different verdict. See Townsend v. Benjamin Enters., Inc., 679 F.3d 41,
56 (2d Cir. 2012) (stating that error is harmless “when we are persuaded it did not
influence the jury’s verdict” (internal quotation marks omitted)).
contractor, grantee, or other recipient for any portion of the
money or property requested or demanded.”
P.A. 107 (quoting 31 U.S.C. § 3729(b)(2)).
7
Thus, if there was any error in the district court’s FCA claim instruction, that error
was harmless.4
b. Relevance of Charney Research
Saavedra argues that the district court’s unsolicited instruction regarding Charney
Research impermissibly usurped the jury’s role as factfinder because it suggested that
such evidence had “no factual import.” Appellant’s Reply 20.5 We are not persuaded.
Insofar as “correct application” of the FCA “requires that the focus in each case be
upon the specific conduct of the person from whom the Government seeks to collect the
statutory forfeitures,” United States v. Bornstein, 423 U.S. 303, 312 (1976), the
challenged instruction was consistent with Supreme Court precedent. See id. at 312–13
(“The statute . . . does not penalize [a subcontractor] for what [the contractor who
ultimately submitted the claim] did. It penalizes [the subcontractor] for what it did.”
(emphasis added)). The district court, therefore, did not mislead the jury as to the
correct legal standard or otherwise inadequately inform it of controlling law by stating
4
We, therefore, need not decide whether—as the government insists—Saavedra failed to
preserve this challenge by agreeing to the instruction.
5
The challenged instruction stated:
There was testimony in the case that [SBS] contracted with
Charney Research to verify the job placement data submitted
by SEEDCO. The fact that a third-party verification service
was utilized does not by the mere fact of its use change the
issues that you have to decide regarding Mr. Saavedra’s
liability. The question is if he knowingly presented or
caused to be presented one or more false claims for payment
to [SBS] with funds that ultimately came from the United
States.
P.A. 108–09.
8
that use of a third-party validation service did not “by the mere fact of its use change the
issues” the jury had to decide regarding Saavedra’s liability. P.A. 109 (emphasis
added); see Crigger v. Fahnestock & Co., 443 F.3d at 235. Nor did the district court
suggest, as Saavedra contends, that testimony regarding Charney had “no bearing on the
issues in the case.” Appellant’s Reply Br. 20 (emphasis added). Rather, the
instruction clearly explained that Charney’s role did not necessarily affect Saavedra’s
FCA liability. This properly left the jury to decide whether Charney’s involvement, in
fact, had such an effect. See, e.g., Britt v. Garcia, 457 F.3d 264, 272 (2d Cir. 2006)
(noting “fundamental proposition” that jury is presumed to follow instructions (internal
quotation marks omitted)).
Accordingly, we reject Saavedra’s challenge to this instruction as meritless.
3. Readback Request
Saavedra contends that he is entitled to a new trial because the district court
improperly refused to read back to the jury the entire deposition testimony of William
Harper, the qui tam relator and SEEDCO employee who uncovered the fraudulent
scheme.6 Although we have stated “a clear preference for readbacks whenever they are
requested by a deliberating jury,” United States v. Escotto, 121 F.3d 81, 84 (2d Cir.
1997), “[a] trial court’s refusal to allow read-backs of testimony in response to jury
requests during deliberations is within its broad discretion,” United States v. Salameh,
6
While Saavedra also challenges the court’s refusal to provide the jury with DOI
investigator Chanterelle Sung’s entire testimony, we decline to consider the argument,
which he asserts only in a footnote in his opening brief. See Deutsche Bank Nat’l Tr.
Co. v. Quicken Loans Inc., 810 F.3d 861, 867 n.7 (2d Cir. 2015).
9
152 F.3d 88, 133 (2d Cir. 1998). We identify no abuse of that discretion here because
the district court did not categorically refuse to read back Harper’s testimony. Cf.
United States v. Criollo, 962 F.2d 241, 244 (2d Cir. 1992) (reversing conviction based on
blanket readback prohibition). Rather, the court explained—in response to a request to
rehear all testimony by Harper and DOI report drafter Chanterelle Sung, as well as
Saavedra’s entire cross-examination—that “[t]he purpose of the trial is to give you all
this evidence. If there is something specific that you can’t recall or that you’re debating
about, let me know what that specific item is and we’ll send that back to you. We are
not sending back globs of testimony, okay?” D.A. 680.
We cannot conclude that this response fell “outside the range of permissible
decisions” available to the district court. Schaeffler v. United States, 806 F.3d 34, 40
(2d Cir. 2015); see United States v. Escotto, 121 F.3d at 84 (instructing courts to consider
“jurors’ need to review the evidence before reaching a verdict . . . against the difficulty in
locating the specific testimony requested, the possibility of undue emphasis on any
portion of the testimony, and the possibility of undue delay”). While Saavedra insists
that Harper’s testimony was “central,” Appellant’s Reply Br. 24, the argument is
undermined not only by the jury’s failure to request further information before rendering
its verdict later that day, but also by the district court’s repeated observations that
portions of Harper’s testimony read into the record by the defense were redundant. Cf.
United States v. Parker, 903 F.2d 91, 101 (2d Cir. 1990) (observing trial judge is best
positioned “to sense whether the jury is able to proceed properly with its deliberations,”
10
and has “considerable discretion” in determining response to communications indicating
juror confusion).7
Accordingly, we identify no abuse of discretion in the district court’s handling of
the jury’s request for Harper’s testimony.
4. Damages and Penalties
a. Damages
Saavedra maintains that the jury’s $13,000 damage award should be offset by the
more than $1.7 million the government has already recovered from settling
codefendants.8 The argument fails because “a nonsettling defendant is entitled to a
credit of the settlement amount against any judgment obtained by the plaintiff against the
nonsettling defendant” only when the settlement and judgment represent “common
damages.” Singer v. Olympia Brewing Co., 878 F.2d 596, 600 (2d Cir. 1989). As the
district court correctly observed, the jury’s damages award and prior settlement amounts
are not “common damages” insofar as the jury’s determination here reflected the extent
to which only Saavedra’s false claims or statements damaged the government. See D.A.
1033; see also P.A. 119 (instructing jury that “[y]ou are not judging the government’s
case against any other party”). Accordingly, Saavedra is not entitled to credit the
government’s recovery from other defendants against his individual FCA liability. See
7
Defense counsel’s offer to provide the jury with transcripts warrants no different
conclusion. See, e.g., United States v. Escotto, 121 F.3d at 84 (recognizing “possibility
of undue emphasis on transcripts sent in lieu of readbacks” and, thus, according district
court same broad discretion in refusing transcript request).
8
The district court ultimately ordered Saavedra to pay $39,000 in damages pursuant to
31 U.S.C. § 3729(a)(1), which provides for treble damages.
11
United States v. Bornstein, 423 U.S. at 312 (reasoning that FCA “penalizes a person for
his own acts, not for the acts of someone else”).
That the government originally sought to hold Saavedra liable for $540,409.97 in
damages—the full amount of SEEDCO performance payments at issue—does not
warrant a different conclusion. Where, as here, the defendant fraudulently caused
payments to be made “for participating in programs designed to benefit third-parties
rather than the government itself and the government received nothing of tangible value
from the defendant . . . the government has entirely lost its opportunity to award the grant
money to a recipient who would have used the money as the government intended.”
United States ex rel. Feldman v. van Gorp, 697 F.3d 78, 88 (2d Cir. 2012) (emphasis
added). Under these circumstances, the government is entitled to damages “equal to the
full amount of grants awarded to the defendants based on their false statements.” Id.
Because SEEDCO had been awarded a total of $5.4 million in 2011 alone, the
government was entitled to recover at least that amount for the fraud caused by Saavedra
and his codefendants between January and August of that year. Thus, even if the two
amounts represent common damages, Saavedra cannot offset the $13,000 jury award
against the government’s more-than-$1.7 million recovery because the government has
not yet been made “completely whole for the money taken from it by fraud.” Id. at 87
(internal quotation marks omitted).
We, therefore, reject Saavedra’s damages challenge as meritless.
12
b. Penalties
Saavedra faults the district court for (1) imposing civil penalties for each false
statement the jury found and (2) applying the maximum $11,000 penalty per statement.
See 31 U.S.C. § 3729(a); 28 C.F.R. § 85.3(a)(9). Neither challenge has merit.
Contrary to Saavedra’s assertion, nothing in the statute requires the court to
impose penalties based on the number of false claims under § 3729(a)(1)(A), instead of
the number of false statements under § 3729(a)(1)(B).9 Indeed, the Supreme Court has
observed that the FCA “reaches beyond ‘claims’ which might legally be enforced, to all
fraudulent attempts to cause the Government to pay out sums of money.” United States
v. Neifert-White Co., 390 U.S. 228, 233 (1968); see also United States ex rel. Schwedt v.
Planning Research Corp., 59 F.3d 196, 199 (D.C. Cir. 1995) (“Each individual false
claim or statement triggers the statute’s civil penalty.” (emphasis added)). Accordingly,
§ 3729(a)(1)(B) imposes liability “for the commission of acts which cause false claims to
be presented,” United States v. Bornstein, 423 U.S. at 312 (emphasis added); accord
United States ex rel. Kreindler & Kreindler v. United Techs. Corp., 985 F.2d 1148, 1157
(2d Cir. 1993), regardless of the number of false claims that result, see United States v.
Bornstein, 423 U.S. at 312 (holding subcontractor liable only for number of false
shipments it made, and not for number of fraudulent invoices ultimately submitted by
9
Because neither Vermont Agency of Natural Resources v. United States ex rel.
Stevens, 529 U.S. 765, 787–88 (2000) (recognizing qui tam relator standing but holding
that FCA liability does not extend to state entities), nor United States ex rel. Eisenstein v.
City of New York, 540 F.3d 94, 95–96 (2d Cir. 2008) (discussing qui tam relator’s
deadline to file notice of appeal in FCA case where United States declined to intervene),
aff’d, 556 U.S. 928 (2009), addressed this question, Saavedra’s reliance thereon is
misplaced.
13
contractor). The district court, therefore, correctly assessed civil penalties for each of
the 13 false statements the jury found Saavedra personally to have made. Insofar as
Saavedra asserted throughout this litigation that the quarterly SBS calculations—and not
SEEDCO’s false data entries—constituted the relevant FCA claims, this determination
properly punished Saavedra “solely for [his] own wrongful acts” in causing these claims
to be made. United States v. Zan Mach. Co., 803 F. Supp. 620, 625 (E.D.N.Y. 1992)
(citing United States v. Bornstein, 423 U.S. 303).
The district court also acted within its discretion in imposing the maximum
statutory penalty of $11,000 for each of Saavedra’s false statements. See SEC v.
DiBella, 587 F.3d 553, 572 & n.13 (2d Cir. 2009) (reflecting standard of review).
Saavedra cannot urge otherwise by challenging the court’s reliance on the press release
issued by defense counsel following the jury’s verdict. Saavedra’s claim to have been
“gratified” by a result reflecting “a very significant vindication” manifests a gross
misunderstanding of the jury’s verdict and a disturbing refusal to accept responsibility,
D.A. 1030, both of which the district court properly took into account. See United
States v. Saavedra, No. 11 Civ. 6425, 2015 WL 7621481, at *2 (S.D.N.Y. June 16, 2015)
(citing BMY–Combat Sys. Div. of Harsco Corp. v. United States, 44 Fed. Cl. 141, 151
(1998)). While Saavedra challenges the court’s failure to consider his “lifetime of work
on behalf of the less fortunate,” Appellant’s Br. 57, the court was entitled to weigh this
history against trial evidence demonstrating not only that Saavedra instructed his own
assistant to falsify data, but also that he supervised two SEEDCO centers wherein data
falsification was a routine and “deliberate method of doing business” from at least
14
August 2009 through October 2011, D.A. 1041—a far longer period than that which the
jury considered in awarding damages. See, e.g., SEC v. Rosenthal, 426 F. App’x 1, 2
(2d Cir. 2011) (approving district court’s imposition of civil penalties after considering,
inter alia, egregiousness of defendant’s conduct, degree of defendant’s scienter, and
whether conduct was isolated or recurrent).
In this context, we identify no abuse of discretion in the district court’s imposition
of the maximum per-violation statutory penalty for each of Saavedra’s false statements.
5. Conclusion
We have considered Saavedra’s remaining arguments and conclude that they are
without merit. Accordingly, the district court’s judgment is AFFIRMED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
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