The district court dismissed nearly all counts of the relators’ complaint alleging that PAE engaged in fraudulent billing practices and other improper conduct under its contract with the Department of State. The court found the complaint of fraudulent billing was barred by the public disclosure bar, as a government audit had previously raised concerns about some PAE’s billing practices a year before the relators filed their initial case. The court rejected the other allegations as either unsupported by the contract requirements or based on brief, conclusory statements that failed to please the alleged wrongdoing with particularity. The court dismissed the complaint with prejudice, explaining that it had given the relators multiple opportunities and clear instructions on correcting its deficiencies.
In their qui tam action, relators Patricia Scott and John Tudbury alleged that Pacific Architects Engineers Inc. engaged in improper billing practices under a Department of State contract for police training in Beirut, Lebanon. PAE moved to dismiss.
The relators alleged that when they were employed by PAE, they became aware the company submitted false claims pursuant to the contract. Principally, they alleged PAE routinely falsified the numbers of hours worked by its personnel and inflated its invoices accordingly. They also alleged PAE hired personnel who did not meet the minimum requirements for their jobs; used government-paid drivers for the personal use of executives; encouraged employees to purchase airfare in violation of the Fly America Act; failed to pass onto employees money reimbursed by the government to pay for employee medical examinations; overbilled the government for parts; and engaged in similar activities at other international sites. Relator Scott also alleged she was terminated in retaliation for her efforts to investigate the alleged abuse.
PAE moved to dismiss, arguing the relators had failed to state a claim upon which relief could be granted. The court addressed each of the allegations in turn.
First, PAE argued that the claim of falsified timekeeping should be dismissed pursuant to the public disclosure bar, as substantially the same allegations had been publicly disclosed in a government audit of PAE’s billing practices, prior to the filing of this case. The court agreed. The relators’ third amended complaint cited the findings of a State Department audit, which itself triggered the public disclosure bar. The court allowed the relators to walk back the allegation and file a fourth amended complaint, but found that the relators had not excised the publicly disclosed information in its entirety.
While the relators eliminated most of the direct references to the government audit in the complaint, they did not remove these references from their statements of material disclosures. For example, relator Scott’s statement mentioned prior government audits of PAE’s billing and the State Department’s questions about its timesheet practices. This indicated the department was already alerted to the likelihood of wrongdoing a year prior to the initial filing of this action.
While the relators alleged specific instances of billing fraud about which the government may not have already been aware, the court found this immaterial, as the general practice had already been disclosed. The government had information about fraudulent billing, and the government’s concern was communicated to someone outside the government—a PAE employee—before the relators ever told the government of their alleged instances of fraud. The court also found the relators did not qualify under the original source exception to the bar, as they had not disclosed their information to the government prior to the disclosure and did not have independent information that added to the case.
Next, the court considered the allegation that PAE hired personnel that did not meet the minimum requirements for their jobs and thus provided services that were substandard or wasteful to the government under the contract and did not conform to contract requirements. For example, the relators alleged that one position required twelve years’ experiences in the criminal justice field, and yet the employee provided by PAE did not have this experience. In its motion to dismiss, PAE argued the claim was based on information taken from a job posting from a third-party website, rather than the actual contract requirement, which was the controlling document. In support, PAE provided copies of the general contract and task order, which did not include the twelve-year requirement for that position. The court agreed this claim was based on a non-existent requirement.
The court found a second related claim had slightly more merit, as a requirement for five years of certain experience did appear in the contract. However, the resume for the employee in question had been submitted with the task order proposal, and was accepted by the government when the order was issued. The court concluded that the government’s acceptance of the employee and its decision to pay invoices based in part on his work meant that the requirement was not material. The court also rejected the relators’ allegations about a third employee, finding they had provided no support that the agency required the qualifications the employee allegedly did not meet.
Next, the court considered the allegation that PAE employees used government-paid local drivers for personal use. While the plaintiffs failed to provide supporting documentation, the defendants supplied emails showing that local drivers sometimes complained about being asked to take a PAE manager and his wife to sightseeing destinations. Even accepting these allegations as true, the court could not conclude they were material, as a handful of chauffeured drives did not amount to major or substantial fraud.
Next, the relators alleged PAE purchased airline tickets that did not comply with the low-price requirements of the Fly America Act, and then requested government reimbursement for these overpriced flights in violation of the False Claims Act. In defense, PAE provided an email indicating that instructions for complying with the Fly America Act came from a government COR. Regardless of the accuracy of the instructions, the court held that PAE could not have knowingly violated the FCA when it followed the advice of a government representative.
Next, the relators alleged that PAE required employees to pay for medical examinations but did not reimburse the employees for these expenses as required by its contract. In response, PAE provided a copy of the contract, which contained no provision regarding reimbursement for medical exams and in fact, contained language that contradicted the relators’ position.
Next, the court dismissed the allegation that PAE overbilled for parts as non-specific accusations of wrongdoing, without the level of detail needed to plead fraud with particularity. The court came to a similar conclusion about the relators’ allegation that PAE engaged in similar conduct outside Lebanon.
Accordingly, the court dismissed count one of the complaint in its entirety, with the exception of the retaliation claim, which PAE did not contest here. Because counts two and three, which alleged fraudulent inducement and implied false certifications, relied on the same allegations and facts as count one, which were insufficient, the court dismissed both. Counts four through eight repeated the allegations in count one and were dismissed. The court allowed count nine, the claim of unlawful retaliation for protected conduct, to proceed.
