Purcell v. Mwi Corporation ( 2014 )


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    UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF COLUMBIA
    UNITED STATES OF AMERICA,
    ex rel. ROBERT R. PURCELL,
    Plaintiffs,
    v.                                          Civil Action No. 98-2088 (GK)
    MWI CORPORATION,
    Defendant.
    MEMORANDUM OPINION
    This matter comes before the Court for ruling after a jury
    trial.       The jury found Defendant MWI Corporation                      ("Defendant" or
    "MWI") liable for violations of the False Claims Act                              ("FCA"), 
    31 U.S.C. § 3729
    (a) (1),   (2).
    The      parties      were    ordered     to    submit     supplemental          briefs
    addressing the issue of damages.                    Plaintiff United States                  ("the
    Government")         filed a Motion for Entry of Judgment                       ("U.S. Mot.")
    [Dkt. No. 458]. Defendant MWI Corporation ("Defendant" or "MWI")
    filed     a      Memorandum     of     Points     and     Authorities          Regarding       the
    Calculation           of      Damages      ( "MWI       Mem. ")        [Dkt.     No.         459] .
    Subsequently,           the     Government        filed      a     Response        to        MWI' s
    Memorandum          ("U.S.    Resp. ")    [Dkt.     No.    463],       Relator     Robert       R.
    Purcell          ("Relator"     or     "Purcell")       filed      a    Response        to     the
    Government and MWI' s            Calculation of Damages Regarding Entry of
    Judgment       ("Relator          Resp. ")        [Dkt.    No.        464],     and   MWI    filed     a
    Response to United States'                    Submissions              ( "MWI Resp. ")      [Dkt.   No.
    465] .        After         consideration            of          those         submissions,          the
    representations             of     the     parties        at     the     damages      hearing       held
    December 19, 2013, and the entire record herein, the Court will
    now      address      the        issues     raised        and        determine     the     amount     of
    damages.
    A.    Factual Background
    In   1992,     MWI,       a      Florida     corporation,             arranged      to     sell
    irrigation pumps and other equipment to seven Nigerian states.
    The total sale price was $82.2 million dollars.
    To   finance       these        sales,    MWI     and the          Federal      Republic of
    Nigeria       ("Nigeria")          sought     and     received eight              loans     from     the
    Export- Import Bank of the United States                               ("Ex- Im") , an agency of
    the   United       States         that     finances        and        facilitates        transactions
    between U.S. exporters and international buyers. Ex-Im agreed to
    finance the deal and loan Nigeria $74.3 million dollars. Nigeria
    would pay back the $74.3 million dollars,                                   as well as interest
    and   fees,       and   the        individual        Nigerian           states     would     pay     the
    remainder of the $82.2 million dollar price.
    Before    Ex-Im          would      approve           the     loans     to     Nigeria,      it
    required        MWI     to        submit      a      "Letter           of      Credit      Supplier's
    Certificate" for each of the eight loans. On each of those eight
    -2-
    Letter of Credit Supplier's Certificates,                     MWI attested that it
    had only paid "regular commissions" in connection with the pump
    sales.
    After Ex-Im approved the loans, but before it disbursed any
    funds,   it    required    MWI     to    submit    a     "Disbursement       Supplier's
    Certificate."     MWI     attested        on    fifty    Disbursement        Supplier's
    Certificates     that     it   had      paid    only    "regular    commissions"        in
    connection with the pump sales. Thus, MWI submitted eight Letter
    of   Credit     Supplier's         Certificates         and     fifty      Disbursement
    Supplier's Certificates to Ex-Im. 1
    In 1998, Relator Robert Purcell,                   a former employee of MWI,
    filed this action against MWI under the FCA                        [Dkt.    No.   1]    He
    alleged that MWI paid commissions in excess of 30 percent of the
    contract prices for the irrigation pumps and equipment to its
    long-time     Nigerian     sales     agent,      Alhaji       Mohammed     Indimi.     
    Id.
    ,, 35-37.     Purcell    alleged that          those    commission payments were
    "irregular"    and thus should have been disclosed on all of the
    Supplier's Certificates that MWI submitted to Ex-Im. 
    Id.
    1
    MWI argued for the first time in its Response that the
    Complaint    identified   only    48   Disbursement  Supplier's
    Certificates and did not       identify any Letter of    Credit
    Supplier's Certificates. MWI Resp. at 10. At trial, MWI did not
    challenge the Government's evidence or testimony regarding 58
    total Supplier's Certificates, and therefore the Court accepts
    these figures as correct.
    -3-
    In April of 2002,           the United States decided to intervene,
    and      filed   a    complaint       which     then       governed     the    proceedings
    ("Complaint")     [Dkt.    No.    18] .    Based    in part       on the     amount    of
    commissions paid to Indimi,               which at the time was estimated to
    be approximately $28 million dollars, 2 the Complaint alleged two
    violations       of   the     FCA    (Counts    I    and    II)   and   two     common    law
    claims for unjust enrichment and payment by mistake                             (Counts III
    and IV)
    The   case    was     litigated        for     several    years       before    Judge
    Ricardo M. Urbina. After Judge Urbina's retirement, the case was
    reassigned       to   Judge    Colleen Kollar-Kotelly,                and   then   to    this
    Court. After resolving many pre-trial motions, the case went to
    trial on November 6, 2013.
    Counts I and II of the Complaint,                   the FCA violations, were
    to be decided by the jury. It was instructed that,                             if it found
    that MWI had violated the FCA,                  it was to identify the specific
    number of false claims and then "assess the amount of damages,
    2
    At trial, the Government argued that MWI had paid $25 million
    dollars in commissions to Indimi, not $28 million. See, e.g.,
    Pls. Opening St., Trial Tr. Nov. 8, 2013, A.M. Session at 25:9-
    12 (telling jury it needed "to decide whether MWI knew or should
    have known that the $25 million payment to Mr. Indimi was
    irregular and that it should have been disclosed"); Pls. Closing
    Arg., Trial Tr. Nov. 21, 2013, A.M. Session at 50:20-22 ("$25
    million in Ex-Im funds went into the bank account of MWI's
    Nigerian agent Alhaji Indimi."); 
    id. at 76:10-12
     (suggesting
    that amount United States "unknowingly paid to Mr. Indimi," $25
    million, be considered as measure of damages) .
    -4-
    if any,      that the       [G] overnment sustained because of MWI' s acts."
    Closing Instructions,              Trial Tr.             Nov.    21,   2013 A.M.          Session at
    41:13:18      (quoting        
    31 U.S.C. § 3729
    (a) (1),       which      states      that
    defendant is liable for "3 times the amount of damages which the
    Government sustains because of the act of that person").
    Iri order to assess the appropriate amount of damages,                                        the
    jury was instructed, under United States v. Science Applications
    Int'l     Corp.,      
    626 F.3d 1257
    ,       1278-79        (D.C.     Cir.     2010),      that
    damages were "the amount of money the government paid because of
    the false claims over and above what it would have paid had MWI
    not made the false claims," and that it would need to "set an
    award     that   puts       the    [G] overnment           in    the   same     position         as    it
    would     have     been     in     if   the     defendant's            claims       had    not    been
    false."      Closing        Instructions,               Trial    Tr.   Nov.     21,       2013    A.M.
    Session at 41:19-24. 3
    On   November       25,     2013,       the       jury    returned      a     verdict         for
    Plaintiffs       on     both       Counts       I       and     II.    The    Government          then
    dismissed Counts            III    and IV of             the Complaint,         its common law
    claims, with prejudice. Trial Tr. Nov. 25, 2013, A.M. Session at
    22:18-20.
    3
    The Government did not object to the damages instructions. MWI
    objected, arguing that the Court should instruct the jury that
    the Government also had to prove proximate causation and actual
    reliance. Closing Instructions, Trial Tr. Nov. 20, 2013, P.M.
    Session at 121:22-25.    It had no other objections to the
    instruction. Id. 122:10-12.
    -5-
    B.      Standard of Review
    Under        the        FCA,     "if      [the     jury]        finds     liability,          its
    instruction is to return a verdict for actual damages, for which
    the     court    alone          then     determines        any multiplier,           just       as    the
    court        alone       sets     any    separate        penalty."        Cook    Cty.,        Ill.    v.
    United States ex rel. Chandler, 
    538 U.S. 119
    , 132                                  (2003)       (citing
    
    31 U.S.C. § 3729
    (a)).        Thus,     it     is     now    the     Court's        job    to
    calculate       the        "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"    MWI' s    actions.        See    31    U.S. C.
    §    3729 (a)
    The     "chief purpose of the                    (Act's civil penalties)                was to
    provide for restitution to the government of money taken from it
    by     fraud,        and    that        the    device      of     [treble]       damages       plus     a
    specific sum was chosen to make sure that the government would
    be made completely whole." United States v. Bornstein, 
    423 U.S. 303
    ,     314    (1976)          (citing United States ex rel. ·Marcus v.                            Hess,
    
    317 U.S. 537
    ,       551-52       (1943)).     In order to make the Government
    "whole," the Supreme Court has instructed that "the Government's
    actual damages are to be                       [trebled]    before any subtractions are
    made      for    compensatory              payments        previously           received       by     the
    Government from any source." Bornstein, 
    423 U.S. at 316
    .
    -6-
    C.      Actual Damages
    First, the jury found that MWI knowingly presented 58 false
    or fraudulent claims for payment to the Government, in violation
    of 
    31 U.S.C. § 3729
    (a) (1).            Verdict Form,            at 1     [Dkt.      No.       453].
    Second,     it   found         that        the    amount       of    damages       the       Government
    sustained because of those claims was $7,500,000. 
    Id.
    The     jury       also         found       that    MWI       knowingly       made       58        false
    records     and/or           false        statements         that    were        material          to     the
    Government's       decision           to     pay    or       approve       false     or      fraudulent
    claims     for   payment,            in    violation          of    
    31 U.S.C. § 3729
    (a) (2).
    Verdict    Form,        at    2.     It    found    that       the       amount    of       damages       the
    Government       sustained                because       of     those         false          records        or
    statements was $7,500,000.
    The    Government             concedes        that      the     total       amount      of     actual
    damages for both counts is $7,500,000.                               U.S.     Mot.      3 at        1.    The
    only party that disagrees is the Relator,                                  who argues that the
    jury intended to award $7.5 million in damages for each count,
    for a total of $15 million. Relator Resp. at 2-3.
    Relator's          argument           that     the       jury       split     the       amount        of
    damages between the two counts is nothing more than speculation.
    Relator ignores the important fact that the jury identified the
    same 58 Supplier's Certificates for both Counts. At trial,                                                the
    Government argued that each of the                             58    Supplier's Certificates
    -7-
    constituted        a     false        claim    and/or    a      false     statement.            Pls.'
    Closing Arg.,          Trial Tr. Nov. 21,            2013, A.M. Session at 62:12-13
    ("MWI's certifications on the 58 Supplier's Certificates that it
    submitted to           Ex-Im were        false.").      Thus,     it     is   clear that          the
    jury determined that the same conduct,                       the submission of the 58
    Supplier's       Certificates,           was   a   violation of          both Count          I    and
    Count II. To aggregate the two sums would be to punish MWI twice
    for the same conduct, which would "amount to a double recovery."
    See Kakeh v.           United Planning Org.,             Inc.,      
    655 F. Supp. 2d 107
    ,
    122    (D.D.C.    2009)        ("It is well-settled that a plaintiff is not
    permitted     to       recover        multiple     awards     for      the    same        injury.")
    (citing supporting cases) .
    The jury found that the 58 false certifications damaged the
    Government       by $7,500, 000          and     therefore       that    is   the      amount         of
    actual damages.
    D.     Treble Damages
    An entity found liable for a violation of the FCA is liable
    for "3 times the amount of damages which the Government sustains
    because of       the     act     of    that person."         31 U.S. C.       §    3 72 9 (a) .   The
    parties agree that the first step in calculating treble damages
    is to treble the actual damages amount.                         See Bornstein, 
    423 U.S. at 316
    .   Thus,      the    treble     damages       amount      is   $7,500,000         x     3
    $22,500,000.
    -8-
    E.        Offset for Compensatory Payments Under Bornstein
    The       real     and difficult            issue      in   the   calculation of
    total damages is whether, under Bornstein, MWI is entitled to an
    offset     of    the   $108    million dollars        that    the   Ex-Im eventually
    received from the             federal    Nigerian government as               repayment    of
    the loans at issue.
    1.     United States v. Bornstein
    Bornstein        involved      a   Government    contract         for    radio     kits
    with a prime contractor,             Model Engineering.           
    423 U.S. at 307
    . A
    subcontractor, United, knowingly sold Model Engineering electron
    tubes for inclusion in the radio kits that did not conform to
    the   specifications            of   the    Government        contract.         After     the
    Government        discovered     the     nonconforming       electron     tubes,        Model
    Engineering paid the Government the difference in value between
    the radio kits as specified in the contract and the radio kits
    as supplied with the nonconforming electron tubes. 
    Id.
    Subsequently,        the Government sued United under the FCA and
    prevailed. 
    Id. at 308
    . A key issue before the Supreme Court was
    whether the amount of damages owed by United to the Government
    should be offset by the amount of Model Engineering's payments
    to the Government,            or whether the amount of damages should be
    -9-
    doubled 4      before       any       subtractions           should     be    made    for     Model
    Engineering's             payments.           
    Id. at 314
    .      Significantly,         the
    Government          did     not    argue       that         Model     Engineering's        payments
    should not be deducted at all -- the question was when to deduct
    the payments.             See   
    id.
        at   314      n. 9    (noting that      Government       had
    "abandoned"         the     position        that       "any     compensatory         payments    it
    received should not be deducted from its statutory damages at
    all").
    After evaluating the "language and purpose" of the FCA, the
    Supreme Court concluded that,                        "in computing the double damages
    authorized by the Act, the Government's actual damages are to be
    doubled        before       any       subtractions           are    made     for     compensatory
    payments previously received by the Government from any source."
    
    Id.
     at .316-17.
    2.         Issue Presented
    It is undisputed that Nigeria eventually paid approximately
    $108   million to the Ex-Im on the loans at                                issue       the $74.3
    million dollar principal and $33.7 million dollars in interest
    and    fees.    MWI       argues      that,     under Bornstein,             the    $108    million
    that     Nigeria           paid       the      Government           should     be      considered
    4
    The FCA was amended in 1986 and now provides for treble, not
    double, damages. See Cook Cty., Ill. v. United States ex rel.
    Chandler, 
    538 U.S. 119
    , 129-30 (2003) (discussing Congressional
    modernization of FCA in 1986, including raising the ceiling on
    damages from double to treble) .
    -10-
    "compensatory         payments      previously         received      by   the     Government
    from     any    source"      and   subtracted          from    the    amount      of    treble
    damages MWI owes the Government.                   Because the $108 million far
    exceeds      the     $22.5   million MWI         owes    the    government        as    treble
    damages,       MWI    insists that,       after applying the offset,                   it owes
    nothing to the Government in damages.
    MWI     also    argues      that    an    offset       for    these      payments     is
    mandatory under Bornstein and that the Court has no discretion
    about whether or not to apply it in this case. MWI Mem. at 2-4.
    That is incorrect.           Bornstein did not define what constituted a
    "compensatory payment," nor did it address the argument raised
    by     the     Government     in    this        case    that    certain         compensatory
    payments need not be deducted from statutory damages.                                 
    423 U.S. at
      314     n.9.    Moreover,     the    Bornstein Court            did not      address     a
    situation where the compensatory payments to be subtracted are
    larger than the          single damages amount,                much less,        as    in this
    case, entirely dwarf the treble damages amount.
    Thus, there are several questions raised in this case that
    were neither raised nor addressed in Bornstein.                           MWI' s argument
    that    Bornstein       resolves     this       issue    without       further         analysis
    ignores the complexity of the issue.
    -11-
    3.        MWI's Alleged "Influence" of Nigeria's Repayment
    The Government's first argument is that the Nigerian loan
    repayments were               not    "compensatory payments"                   because     they were
    only made after MWI lobbied Nigeria to repay its loans at the
    expense of other loans due the Ex-Im. U.S. Mot. at 3-5. For the
    reasons set out below,                  the Court concludes that the Government
    failed    to        prove       that        MWI   did      in     fact     lobby     the    Nigerian
    government          to     repay      the     MWI     loans       after        learning    that   its
    conduct was being investigated. Nor has the Government provided
    any evidence that Nigeria would have paid off other loans to the
    Ex-Im if it had not paid off the MWI loans.
    The primary evidence the Government                               identifies in support
    of its argument is the deposition testimony of Steve Ahaneku, a
    Nigerian attorney. Ahaneku did not testify at trial, nor did the
    Government          call      him      as     a   witness        at      the     damages    hearing.
    Instead, the Government relies on Ahaneku's deposition testimony
    that   "someone          at     [MWI]       talked to       [him]        about    talking    to   the
    Nigerian officials                  specifically about             repaying       the     EXIM loans
    that related to the Eight-State Projects." U.S. Mot. Ex. 2 at 3. 5
    Based on this deposition testimony,                               the Government argues
    that after MWI             "became aware of a                   criminal       investigation into
    5
    Though the parties did not raise the issue, this testimony
    would likely have been inadmissible at trial as hearsay. Fed. R.
    Evid. 802.
    -12-
    their conduct," MWI paid Ahaneku "to convince Nigerian officials
    to pay off the MWI loan while other Exim loans were in default."
    U.S.   Mot.    at   3.    The    testimony clearly does                  not   support       this
    allegation.
    The    Government's       assertion that Ahaneku was                    having       these
    conversations       "right around the time"                    that MWI      discovered the
    investigation is incorrect.              Ahaneku identified the time period
    when he was asked to speak to Nigerian officials about repaying
    the loans as between 1995,               1996,     and 1997.           Id.   at 2. Although
    the parties dispute when MWI became aware of the investigation
    into its conduct,         the Government does not suggest that MWI was
    aware of any investigation prior to December 1998. U.S. Resp. 7
    n.3.    That     date    is     well   after       the        period    that       Ahaneku    was
    discussing       in his       deposition.    Thus,        Ahaneku' s         testimony about
    speaking to Nigerian officials in the mid-1990s does not support
    the Government's assertion about what MWI did after it became
    aware of the investigation in the late 1990s.
    Second,      Ahaneku's          testimony          does         not     support        the
    Plaintiffs' argument that MWI lobbied Nigerian officials to pay
    off the MWI loans because MWI feared future liability.                                 Instead,
    Ahaneku      testified    that     MWI   sought          to    discuss       the    loans    with
    Nigerian officials because "officials come and go." Id. Ex. 2 at
    2.   Ahaneku noted that MWI was interested in assuring that the
    -13-
    loans     were       repaid      because        "it    is     an     obligation,          it's    an
    outstanding obligation.                The name is associated with it so they
    would like it to be tidied up." Id. at 3. The Government did not
    cite to any other portions of Ahaneku's deposition that impeach
    the    credibility of           this    witness       or his       testimony,       nor    did     it
    cite    to     any   other      testimony       or    evidence       that    contradicts          the
    testimony. 6
    Consequently,         the      Government       has    failed       to    persuade        the
    Court    that    Ahaneku' s       testimony          stands    for    anything      other        than
    the fact that,          before MWI knew about any investigation into its
    conduct,       its agent spoke to Nigerian officials in an attempt to
    ensure that loans that involved MWI were repaid.
    Other    evidence       marshaled by the              Government         also    fails     to
    supports       its   allegations.         The    Government          notes    the       deposition
    testimony of         James      Hess,    Ex- Im' s     Chief       Financial      Officer,        who
    stated that Nigeria             "singled out"          the MWI       loans       for repayment.
    U.S.    Mot.    at 4,     Ex.    3 at 1.        However,      Hess also testified that
    there    was     "nothing       improper"        about      Nigeria     choosing          to     make
    those payments, and that the Ex-Im would "rather have that money
    than not have it." Id. at 2.
    The    Government       emphasizes       that       after MWI        knew about          this
    lawsuit,       in 2002,    it retained an American lawyer,                        Warren Glick,
    6
    Naturally, there was              an opportunity for               cross-examination at
    the deposition.
    -14-
    to determine Nigeria's indebtedness on the MWI loans. U.S. Mot.
    at   4.   The    Government       argues      that     MWI   paid    Glick      to    request
    information about the loans from the Ex-Im under the Freedom of
    Information Act         ( "FOIA") ,     and     insinuates      that      MWI    took       that
    information       and   used      it    to    influence      Nigeria      to     repay       the
    remaining       balance.    Id.    at    4-5.       Again,   the    evidence         does    not
    support the Government's chain of inferences.
    The record shows that the vast majority of the loans were
    repaid well in advance of Glick's FOIA request. 7 Indeed, Ex-Im's
    response    to     Glick's     FOIA      request       states      that   the     remaining
    balance on the loans was approximately $270,000. U.S. Mot. Ex. 5
    at 2. That constitutes less than 1% of the entire amount of the
    loans in question.          In addition,        the Government has presented no
    evidence that anyone from MWI interacted-with Nigerian officials
    about the MWI loans after the FOIA request was made. Thus,                                   the
    evidence    cited by the Government                  simply does       not      support      its
    allegations.
    In addition,         the Court notes that,             even if the Government
    had identified evidence that MWI petitioned Nigeria to pay off
    7
    Approximately 42% of the loans were repaid by December 1998,
    the earliest date the Government suggests MWI could have known
    about an investigation into its conduct. See Def. Exs. 321, 331,
    364, 370, 382, 397, 416, 424. The loans were almost entirely
    paid off by May 3, 2001, over seven months before MWI received a
    copy of the Relator's Complaint and sent its FOIA request to the
    Ex-Im. See id.; see also U.S. Mot. Ex. 5 at 2 (Glick's FOIA
    request, dated January 16, 2002).
    -15-
    the MWI loans,        such actions would not have been inappropriate.
    The Government cites no law,              regulation, or case precluding MWI
    from      lobbying     Nigeria       to    take   particular         actions     within
    Nigeria 1 s discretion. 8 See MWI Mem. at Ex. 3 at 6 (Hess testimony
    that there was nothing "inappropriate or impropertt about Nigeria
    choosing     to     repay    the   MWI     loans) .   The    Government    fails     to
    acknowledge the indisputable fact that Nigeria has the right to
    pay off its debts in whatever order it chooses.
    The Government tries to avoid this fact by inferring that,
    had MWI not petitioned the Nigerian government to pay off the
    MWI loans,· Nigeria would have applied those funds to other Ex-Im
    loans.      Again,     it    provides       no    evidence      to     support     that
    proposition.         Thus,     the        Government 1   S   argument      is      pure
    speculation.
    Since the Government has failed to provide a factual basis
    for its allegation that Nigeria repaid the loans in question at
    MWI, s    behest,    or that Nigeria did so at               the expense of other
    loans to the Ex-Im,          the Court rejects the Government,s argument
    that Nigeria 1 s repayments were not "compensatory payments. 11
    8
    Moreover, the evidence at trial showed that the Ex-Im actually
    required MWI to lobby Nigeria to repay other loans it owed to
    the Government as a prerequisite to granting the loans in this
    case. Test. of William Bucknam, Trial Tr. Nov. 8, 2013 P.M.
    Session at 51:7-53:2 (testifying that Ex-Im officials required
    MWI to collect unrelated arrearages from Nigeria in order to
    make credits operative) .
    -16-
    4.     "Compensatory Payments"
    The    next   issue      that    must       be     addressed       is    whether       the
    Nigerian     loan    repayments        are    "compensatory              payments''       under
    Bornstein. 9 Neither the parties nor the Court have identified any
    factually-comparable           case   under        the     False        Claims      Act     that
    provides     helpful    guidance      on     this      issue.      In    the     absence      of
    specific guidance, the Court looks to Bornstein and its progeny.
    As noted above,          the Government did not argue in Bornstein
    that prime contractor Model Engineering's settlement payments to
    the   Government       were    not    compensatory         payments,          nor    did     the
    Government    argue     that    compensatory payments               should not            offset
    9
    MWI claims that the Government is judicially estopped from
    •
    arguing that the Nigerian repayments are not "compensatory." MWI
    Resp. at 2-3. A court may invoke judicial estoppel "where a
    party assumes a certain position in a legal proceeding, succeeds
    in maintaining that position, and then, simply because his
    interests have changed, assumes a contrary position." Moses v.
    Howard Uni v. Hosp., 
    606 F. 3d 789
    , 798 (D.C. Cir. 2010) (internal
    quotation marks and citations omitted) . MWI points out that the
    Government argued before trial that evidence of Nigerian
    repayment should not be presented to the jury specifically
    because    the   repayments   were  compensatory   payments   under
    Bornstein.     
    Id.
        (citing   United   States'    Mot.    Seeking
    Reconsideration of the Court's Damages Rulings, at 4-5 [Dkt. No.
    416] )
    This Court did not adopt the Government's position that the
    Nigerian repayments were "compensatory payments" that would
    necessarily offset    any  damages.   See   Order  on Mot.    for
    Reconsideration at 8 [Dkt. No. 425] (noting that if the jury
    determined the Government suffered damages, "the Court will then
    decide" whether MWI is entitled to a reduction based on
    Nigeria's repayments) (emphasis added) . Thus, the Government did
    not "succeed" in maintaining its position, and judicial estoppel
    is inapplicable.
    -17-
    the FCA liability of the subcontractor.                             The only question was
    when the payments should be used to offset liability -- before
    or after calculation of treble damages. See 
    423 U.S. at
    314 n.9
    (noting        that     Government         "abandoned"        the     position        that       "any
    compensatory payments                it    received should not be deducted from
    its statutory damages at all").
    The     Supreme       Court        posited    that     the     Government         may     have
    abandoned this           position         "for the     reason that           since United is
    liable to Model for Model's payment to the United States, United
    would in effect be assessed triple damages under such a rule."
    
    Id.
        ThGs,    the Court recognized the basic principle that,                                  in a
    case     involving           joint        tortfeasors,        the         liability       to      the
    Government        is     a   shared        liability        that     must     be     apportioned
    accordingly.           See    United        States      ex     rel.        Bunk     v.    Birkart
    Globistics, Nos. 1:02-cv-1168, 1:07-cv-1198, 
    2011 WL 5005313
    , at
    *16    (E.D. Va. Oct. 19, 2012)                 ("It is generally agreed that when
    a plaintiff settles with one of several joint tortfeasors,                                        the
    non-settling           defendants         are   entitled       to     a     credit       for     that
    settlement.")          (citation omitted);             United States ex rel.                   Miller
    v.    Bill Harbert Int'l Constr.,                   Inc.,    
    501 F. Supp. 2d 51
    ,       54-55
    (D.D.C. 2007)          (noting that "where there is a settlement between
    the plaintiff and one defendant,                     the liability of the remaining
    non-settling defendants must be calculated with reference to the
    -18-
    jury's            allocation           of          the         non-settling                   defendant's
    responsibility")                 (internal         quotation               marks        and      citation
    omitted).
    That       reasoning        could    be     used       to     distinguish              this     case,
    because no evidence was presented nor argument made that Nigeria
    should be          jointly or severally liable for MWI' s                                false        claims.
    See United States v.                Hawley,        
    562 F. Supp. 2d 1017
    ,          1025        (N.D.
    Iowa 2008)         (noting that Bornstein does not stand for "the broad
    proposition that             a     defendant       in a        FCA case           is    entitled to            a
    credit       for     any     amounts       recovered           by    the        United     States          from
    anothe~      party,"         but    instead        "stands           for    the        quite    different
    proposition          that     a     tortfeasor,           such       as     a    subcontractor,               is
    entitled to a credit for compensation that the United States has
    recovered from another tortfeasor, such as a prime contractor").
    However, the majority of post-Bornstein cases have not made this
    distinction.
    Rather,        the        cases     have         applied           the     Supreme            Court's
    statement in Bornstein that the offset encompasses "compensatory
    payments       previously          received        from        any    source"           literally.           
    423 U.S. at 316
        (emphasis           added)      In       particular,             this     issue        has
    arisen       in      cases        where     individuals              were        found        liable         for
    fraudulently procuring federal                      loans,          but the beneficiaries of
    those     loans       made        payments     on        the        underlying          loans         to     the
    -19-
    Government.         See    United        States      v.     Heck,    No.     08-0875,           
    1987 WL 49253
    , at *6          (D.N.J. Mar. 26,             1987)        (holding that defendant was
    entitled       to     offset       including         "amounts        recovered            from    other
    parties"); United States v. Ekelman & Ass'n, Inc., 
    531 F.2d 545
    ,
    547     (6th   Cir.       1976)     (decided        immediately after               Bornstein and
    holding that offset                should include               "any amount        recovered from
    the     veteran-mortgagor               by   the     government") ;         United         States      v.
    Globe Remodeling Co.,               
    196 F. Supp. 652
         (D. Vt.      1960)         (finding,
    pre-Bornstein,            that    offset      for     "repayments           to     the     government
    from the borrowers who defaulted" should be made "after doubling
    the original losses").
    Evaluating this line of cases,                          the District Court for the
    District of Puerto Rico observed:
    Nothing   in these   cases  holds   or   suggests  that
    Bornstein's recoupment rule turns on the nature or
    sdurce of the particular recoupment. Indeed, Bornstein
    itself forecloses such an interpretation. Bornstein
    twice   emphasized  that   its   holding   applies   to
    subsequent payments received from the government "from
    any source."
    United States v.            Irizarry-Colon,               No.    05-1607,     
    2006 WL 6911517
    ,
    at     *11. (D.P.R.       June     9,    2006)      (quoting Bornstein,                  
    423 U.S. at 316
    )
    The Government has brought no case to the attention of this
    Court     that      holds        that    third-party            payments      on     a     loan     that
    underlies      FCA liability should not be considered "compensatory
    -20-
    payments." In the absence of any contrary precedent, this Court
    finds        that    Nigeria's             repayments        are     "compensatory             payments
    previously          received       from      any     source,"        and    should thus          offset
    MWI's liability.
    5.         Limitation on the Amount                   of    Offset     to       "Original
    Loss"
    The     Government           argues          that,        even      if     Nigeria's          loan
    repayments          are    "compensatory payments"                   and     should        offset      the
    amount MWI owes in damages, the Court should limit the amount of
    the offset to the "original loss" of $7.5 million dollars.
    To    justify its          reasoning,         the Government               argues that         the
    Court must          segregate Nigeria's repayment                         into the        "legitimate"
    amount       repaid       and    the       amount      it     repaid        on     "the    fraudulent
    portion of the loan." U.S. Resp. at 2-3.                                  It insists that to do
    otherwise would allow                  "doublecounting,"              because       there       are    two
    separate obligations                 -- Nigeria's original obligation to repay
    the loans and MWI's new obligation to pay damages. 
    Id.
    The Government has identified no precedent from either the
    Supreme Court or our Court of Appeals that has applied such an
    analysis.       Its       argument         rests     on     two    cases     in which           district
    courts       evaluated       how     to      calculate        a    Bornstein        offset       when    a
    Defendant       had       pleaded guilty             and     paid    an     amount        in    criminal
    restitution          prior      to     a     civil     FCA        suit.     U.S.     Resp.       at    5-6
    -21-
    (discussing United States ex rel. Schaefer v. ContiMed Concepts                                                        1
    No.           04-400   1       
    2010 WL 1485660
            (W.D. Ky. Apr. 12                   1   2010)        ("Schaefer
    II   11
    )    and United States v.                  Eghbal      1     
    475 F. Supp. 2d 1008
          (C.D.
    Cal.           2007))           These cases are            factually distinguishable and do
    not provide sufficient support for the Government s position.                                  1
    Eghbal pleaded guilty to criminal charges of conspiring to
    defraud the United States by fraudulently assisting purchasers
    to obtain mortgages                        insured by the                  Department              of Housing and
    Urban Development in connection with the sale of 62 properties.
    Eghbal, 
    475 F. Supp. 2d at 1011
    . He paid $1,346,220 in criminal
    restitution based on those 62 properties. Amended Judgment and
    Commitment Order/                    United States v.                  Eghbal    1    No.          03-cr-465     (C.D.
    Cal. Jan. 27               1    2004).
    The     Government          then brought               an    FCA suit               against     Eghbal
    based on 27 of the 62 properties.                                    
    475 F. Supp. 2d at 1011
    . The
    Government                 sought        damages     of     $2.8           million,           trebled       to   $8.4
    million/ less $2.1 million it recovered on re-sale and "Eghbal's
    restitution payments of $499,387.                           11
    
    Id.
    The Government argues                  that        this       case demonstrates                  that    a
    district             court        has     discretion        to        apply      only         a     portion      of    a
    compensatory                    payment    as   an    offset.              The       Court         disagrees.       The
    parties in Eghbal did not dispute that the portion of the $1.3
    million           restitution payment                 that           related         to       the     27    loans     at
    -22-
    issue in the civil suit was $499,387. 
    Id.
     This comports with the
    facts    underlying        the Government's       civil      suit          the    FCA suit
    only related to 27 of the 67 loans at issue in Eghbal's criminal
    proceeding. Thus, the district court was not choosing to apply a
    portion of Eghbal's compensatory payments -- the court was only
    applying the portion of Eghbal's restitution that was,                            in fact,
    compensatory, based on the scope of the FCA case.
    Schaefer is similar. Defendant Conti pleaded guilty to one
    count of altering a prescription in 2007.                     See United States ex
    rel. Schaefer v. ContiMed Concepts, No. 04-400, 
    2009 WL 5104149
    ,
    at *2     (W.D.   Ky.   Dec.    17,   2009)    ("Schaefer I").           Conti then paid
    almost     $80,000      in     criminal       restitution     to     the     Center      for
    Medicare Services and the State of Kentucky for various schemes
    and conspiracies to alter and falsify medical records, including
    the     altered    prescription        underlying      his     criminal          liability.
    Judgment and Commitment Order,                United States v.           Conti,    No.   06-
    cr-152     (W.D. Ky. March 24, 2008); Order, United States v. Conti,
    No. 06-cr-152      (W.D. Ky. July 27, 2009).
    The Government brought a civil FCA suit,                     and the District
    Court found that,          based on the guilty plea,            Conti was estopped
    from     denying     the     elements     of     one   claim        of     falsifying      a
    prescription under 
    31 U.S.C. § 3729
    (a) (2).     Schaefer I,         
    2009 WL 5104149
    ,    at *6.      The court later found that the                   "actual damages
    -23-
    from that       single    count     [were]     $404.24.      11
    Schaefer II,              
    2010 WL 1485660
    , at *3. It trebled that amount, and found that Conti was
    liable for $1212.72,           in addition to a civil penalty of $5,500,
    for a total of $6,712.72. 
    Id.
    Conti argued that the approximately $80,000 he had paid in
    criminal      restitution      should offset           his        entire       civil        judgment.
    
    Id.
     The Government argued that "only the compensatory portion of
    the   judgment        should   be   offset,    11
    
    id.,
             and    the    Court        agreed,
    subtracting only "the compensatory component, $404.24,                                 11
    from the
    civil judgment. 
    Id. at *4
    .
    Thus,     the Schaefer and Eghbal courts                          found that only the
    portion    of    the     criminal     restitution            payment           related        to   the
    factual    conduct       underlying      the        false    claim        at     issue        in   the
    subsequent      FCA case       should be offset under Bornstein.                              Because
    the excess amounts paid in criminal                     restitution were paid for
    unrelated conduct,         the Court refused to apply those amounts as
    an offset.
    Here,     the     Government       argued,       and        the     jury    found,           that
    Defendant was liable for its certifications on all 58 Supplier's
    Certificates related to the eight Nigerian loans.                                 The Nigerian
    repayments      were     related    to    those       same        eight     Nigerian           loans.
    Thus, Schaefer and Eghbal do not provide guidance in a situation
    -24-
    such as     this    one,    where        the    entire       amount       paid by Nigeria             is
    unquestionably related to the underlying false claims.
    The Government makes a public policy argument that allowing
    Nigeria's      repayments      to    offset        the       entirety           of    MWI    liability
    will   "severely       undermine         Congress's          intent        to    hold       defendants
    accountable     for      defrauding        the    United       States           and    deter    others
    from engaging in similar misconduct." U.S.                            Resp.          at 6     (citation
    omitted).    However,       neither the language of the statute nor any
    prior case provides support fdr this Court                                to divide Nigeria's
    repayments      into      compensatory          and     non-compensatory                payments      in
    light of the fact          that the jury found liability for all of the
    loans in their entirety.             Thus,        in accord with the cases cited,
    this   Court    will      subtract       the     full    amount           of    the    compensatory
    payments    made     by    Nigeria        from     the       trebled       damage           amount,   as
    instructed in Bornstein.             
    423 U.S. at 316
        (holding that              "actual
    damages are to be doubled before any subtractions are made for
    compensatory payments previously received by the Government from
    any source")       (emphasis added) .
    This result accords with the Supreme Court's declaration in
    Bornstein that         "the device of            [treble]       damages plus a                specific
    sum was chosen to make sure that                        the government would be made
    completely whole."          
    Id. at 314
    .     Despite          the    fraudulent          actions
    taken by MWI        to    persuade        the    Government          to        make    these     loans,
    -25-
    •·
    they were        in fact      paid back       in full       with      interest     and fees.
    Indeed,     the Government           received a        total    o"f    approximately $108
    million on these loans from Nigeria -- $33.7 million more than
    the largest amount            it pursued in damages,                  $74.3 million.         That
    $33.7 million alone exceeds the $22.5 million in treble damages
    owed    by MWI.       Thus,    the    Government        has    been      "made    completely
    whole" because of Nigeria's repayments,                       and,     thus,   granting MWI
    an offset for those payments does not conflict with Bornstein.
    The Court also notes that this outcome is in accord with
    United States ex rel. Davis v. Dist. of Columbia,                              
    679 F.3d 832
    (D.C.     Cir.    2012).      Davis     sued     the    District         of    Columbia       for
    submitting       a    Medicaid        reimbursement         claim       without        adequate
    supporting       documentation.         
    Id. at 834
    .      Davis     did     not    allege,
    however,    that any medical services that the Government paid for
    were not provided. 
    Id. at 840
    . Thus, because the only defect was
    documentary,         the   Court   of Appeals upheld the                 district       court's
    conclusion that "[t]he Government got what it paid for and there
    are no damages." 
    Id.
     Although the factual and procedural posture
    of   that   case      is   very    different,        Davis      still     stands       for    the
    proposition that there are cases where fraud on the Government
    has occurred but, because the Government has gotten what it paid
    for, the Government's recovery is limited to civil penalties.
    -26-
    In short,     the Court concludes that,            in the absence of any
    contradictory precedent,          the Court will apply the $108 million
    dollars      repaid   by     Nigeria   against       the   $22.5   million    trebled
    damage amount. Thus, MWI owes nothing in damages. 10
    F.    Civil Penalties
    The Court now turns to the appropriate amount of statutory
    civil penalties which should be imposed. 11 The FCA establishes a
    statutory penalty of $5,000 to $10,000 for each false claim or
    false    statement.     
    31 U.S.C. § 3729
    (a)     (establishes    that    liable
    entity must pay "civil penalty of not less than $5,000 and not
    more than $10,000").          The jury identified 58 false claims. 12
    10
    If Congress agrees with the Government that this result is
    undesirable, it could change either the wording of the treble
    damage provision or increase the civil penalties, as it has done
    in the past. See, e.g., False Claims Amendments Act of 1986,
    Pub. L .. 99-562, § 2 (7), 
    100 Stat. 3153
     (raising the civil fines
    and changing the multiplier for damages from double to treble).
    11
    MWI did not argue that it was entitled to any offset against
    the amount it owes in statutory civil penalties.
    12
    MWI    initially agreed with Plaintiffs      that  the  jury's
    determination that MWI made 58 false claims provided the
    appropriate number of penal ties. However, in its Response, MWI
    argued for the first time that the Complaint did not identify
    the eight Letter of Credit Supplier's Certificates and only
    identified 48 Disbursement Supplier's Certificates, and now
    argues that 48 was the appropriate number of false claims for
    the Court to use in setting civil penalties. MWI Resp. at 10.
    As noted above, see supra note 1, MWI did not challenge the
    Government's testimony or evidence at trial identifying 58 total
    Supplier's Certificates issued on the underlying loans at issue
    in this case. The jury found each of those documents to be a
    false    claim and/ or    false statement.   Thus,  MWI' s belated
    challenge to the jury's finding will be denied, and the Court
    -27-
    The   parties       agree    that    the     appropriate     range    for   the
    statutory penalties is $5,000 to $10,000. 13 The determination of
    the   appropriate       statutory civil        penalty       is   firmly   within   the
    discretion of the district court. Bill Harbert,                     
    501 F. Supp. 2d at
    56     (citing Cook County,          
    538 U.S. at 132
    ) . The parties also
    agree     that   the    Court       should   consider       the   "totality    of   the
    circumstances"         in     determining          the     appropriate     amount    of
    penalties. U.S. Mot. at 7; MWI Mem. at 16. As the district court
    observed in Bill Harbert:
    Though there is no defined set of criteria by which to
    assess the proper amount of civil penal ties against
    the defendant,    the Court finds that an approach
    considering   the   totality   of  the   circumstances,
    including such factors as the seriousness of the
    misconduct, the scienter of the defendants, and the
    amount of damages suffered by the United States as a
    result of the misconduct is the most appropriate.
    will set civil penalties based on the 58 false claims identified
    by the jury.
    13
    The Federal Civil Penalties Inflation Adjustment Act of 1990
    ("Adjustment Act"), Pub. L. No. 101-410, § 5, provides for
    periodic increases to civil monetary penal ties. In 1996, the
    Omnibus Consolidated Rescissions and Appropriations Act of 1996
    was passed, and it included the Debt Collection Improvement Act
    of 1996 ("Improvement Act"). Pub. L. No. 104-134, § 31001. The
    Improvement Act amended the Adjustment Act to require the head
    of   each agency to     regularly adjust   civil   penalties for
    inflation. Id. § 13001(s) (1) (A). In 1999, the Department of
    Justice complied by issuing regulations raising such penalties,
    including False Claims Act penalties. 
    64 Fed. Reg. 47,099
    ,
    47,903-04 (Aug. 30, 1999). However, the regulations specified
    that the increase was only "effective for violations occurring
    on or after September 29, 1999." 
    Id. 47,903
    . The parties agree
    that the conduct at issue here took place before that date, and,
    thus, MWI is not subject to the increased penalties.
    -28-
    
    501 F. Supp. 2d at 56
                  (citation omitted). Under the totality of
    the     circumstances,        including      consideration            of    the     enumerated
    factors,    the Court finds that the appropriate penalty is $10,000
    per false claim for the following reasons.
    First, the Court finds that the evidence regarding scienter
    weighs in favor of a high penalty in this case.                                  Specifically,
    the     Court    finds      that    there       was    evidence        that       Mr.     Eller,
    President       of   MWI,    had    actual      knowledge       that       the     commissions
    should have been disclosed. When repeatedly asked whether or not
    Indimi's        commissions         were        disclosed        on        the      Supplier's
    Certificates, Eller refused to answer directly.                            Instead, he kept
    repeating that MWI "would have never done anything wrong." Test.
    of David Eller,         Trial Tr.     Nov.      8,    2013, A.M.       Session at 106:6-
    108:17;    111:10-112-1        (the Court asking Eller the question).                         He
    insisted he was "just an engineer,"                    
    id. at 109:21
    ,         and claimed
    that he signed the Supplier's Certificates on the advice of his
    attorney,       William      Bucknam,      or    his     Chief        Financial         Officer,
    Thomas Roegiers. 
    Id. at 107:6-13
    ; 109:10-21; 111:2-3; 113:12-14.
    However,     MWI     employees       testified         that     Eller       personally
    approved        every       commission       MWI       paid,      including             Indimi's
    commissions. Test. of Thomas Roegiers,                    Trial Tr. Nov.             19, 2013,
    A.M. Session at 20:9-23; Test. of Juan Ponce, Trial Tr. Nov. 13,
    2013,     A.M    Session      at     9:22-10:8,        14:14-21.           Moreover,       Eller
    -29-
    testified      that    MWI     never     paid         any    other      agent     on    any    other
    combined project a total commission of more than $5 million, far
    less    than some of          the   commissions             Indimi was paid for                single
    projects.     
    Id. at 120:11-22
    . Thus, despite his protests that MWI
    would       never     engage        in   wrongdoing,               Eller       signed      several
    Supplier's Certificates declaring that no irregular commissions
    had been paid even though he knew that Indimi's commissions were
    significantly higher than average commission rates,                                    even within
    MWI.
    Second,       the     evidence           of     actual           knowledge        suggests
    deliberate        misconduct,       which       goes        to    the     seriousness         of    the
    offense. Juan Ponce, MWI's Vice President of International Sales
    and    a    credible        witness,     testified,               "we   knew     that     we       were
    violating .            the rules. We just hoped that we would never get
    caught."     Test.     of    Juan    Ponce,       Trial          Tr.    Nov.    13,    2013,       A.M.
    Session at 35:3-4. This evidence that MWI deliberately withheld
    information about            Indimi' s   commissions              from Ex-Im in order to
    acquire      financing       supports       a     finding          that    "the       conduct       was
    deliberate and serious enough to weigh in favor of applying the
    maximum civil penalty." Bill Harbert, 
    501 F. Supp. 2d at 56
    .
    Third, the Court considers the "amount of damages suffered"
    by    the   Government.       The harm to              the       Government      was    more       than
    monetary -- it went to the integrity and purposes of the Ex-Im's
    -30-
    programmatic goals. See Test. of Rita Rodriguez, Nov.                                   14,    2013,
    A.M. Session at 20:1-7 (discussing Ex-Im's goals to support U.S.
    jobs     and    to    avoid      any    involvement      with    bribery) .        Given        that
    approximately a third of the total loan amount went to a single
    Nigerian individual, the goal of the Ex-Im to finance loans that
    primarily benefit U.S.                 exporters and workers was not achieved.
    Test. of David Chavern, Trial Tr. Nov. 12, 2013, A.M. Session at
    70:16-21        (noting that         "purpose of the bank's financing                         is not
    primarily                   to    finance      commissions;         it's    to    finance        the
    export of goods and services"); see also Ab-Tech Const.,                                     Inc. v.
    United States,         
    31 Fed. Cl. 429
    ,    434-35     (Fed Cl.         1994)        (noting
    that     penal ties    are       intended to        "compensate the Government                   for
    the     costs    of    corruption,"          which     include      the     "societal          cost"
    associated with abuse of a federal program)                           (internal quotation
    marks and citation omitted) .
    The Court also notes that the Government expended a massive
    amount of resources to pursue this case over the years.                                       In the
    damages hearing, Government counsel represented that over 11,000
    hours had been spent on the case. This consideration is relevant
    to determining the appropriate civil penalty.                              See Morse Diesel
    Int'l,    Inc. v. United States,               
    79 Fed. Cl. 116
    , 125-26                (Fed. Cl.
    2007)      (considering           that       Government       had     "spent            13     years
    investigating         and prosecuting           this    case     to   date"        in    deciding
    -31-
    maximum          civil      penalties        were     warranted);         United       States      v.
    Peters,      
    927 F. Supp. 363
    ,    368-69      (D.    Neb.     1996)      (considering
    "the costs of detection,                    investigation and prosecution" as part
    of    appropriate           civil     penalties);        Ab-Tech,        31   Fed     Cl.     at   435
    (determining that maximum civil penalty was "fully justified in
    light of the extensive diversion of resources"                                 that uncovering
    defendant's fraud necessitated).
    Considering the               totality of         the    circumstances,          the    Court
    concludes         that       a     civil    penalty      of     $10,000       per    false     claim
    provides appropriate deterrence,                     reflects the seriousness of the
    misconduct            and        evidence     of     actual       knowledge,          and      helps
    compensate the Government for the incredible amount of resources
    invested         in    identifying          and    litigating      this       lengthy       case    to
    successful conclusion.
    G.        Conclusion
    The jury found that MWI violated the False Claims Act by
    making      58    false          claims    and that      the Government             suffered $7.5
    million dollars in damages. Even after the damages are trebled,
    the amount            that Nigeria repaid compensated the Government                               for
    its   loss.       MWI       is    responsible,      however,       for    $580,000          in civil
    penalties.
    -32-
    An Order directing the Clerk to enter judgment accordingly
    shall accompany this Memorandum Opinion.
    February 10, 2014                     ``~·
    Gla ys Kess er
    United States District Judge
    Copies to: attorneys on record via ECF
    -33-