United States v. William Whyte
Opinion
A jury in the Western District of Virginia convicted William R. Whyte of three counts of major fraud against the United States, in violation of
I.
This case involves parallel False Claims Act ("FCA"),
The contract further specified a delivery timeline: four vehicles were to be delivered within forty-five days of the award and the remaining twenty no later than July 31, 2006. In June 2006, the JCC-I awarded Armet a second contract for eight more armored vehicles, at the cost of approximately $1.6 million. These additional vehicles were to be delivered no later than ninety days from the second award date. Altogether, Armet was to provide thirty-two vehicles with the last set to be delivered by mid-September 2006.
Less than a month after the first contract had been signed, Armet began requesting progress payments. The JCC-I initially denied these requests as contrary to the terms of the contract, which specified payment upon delivery. Nonetheless, following the delivery of the first four vehicles in August and October 2006, 4 Armet continued requesting such payments, noting at one point that a cash infusion was necessary for Armet to complete the remaining twenty-eight vehicles. Armet also sent emails stating it had "alternative business decisions to consider" if it did not receive such payments. J.A. 3415, 3417. In December 2006, the JCC-I issued a progress payment to Armet of $824,531.
Despite the payment, Armet delivered only two of the remaining twenty-eight vehicles over the next year. Instead, Whyte-while continuing to provide estimated delivery schedules to the JCC-I-directed Armet to prioritize other, higher-paying contracts. By March 2008, the JCC-I had terminated its contracts with Armet. As of that date, Armet had delivered six of the thirty-two vehicles and had been paid $2 million in delivery and progress payments.
Meanwhile, the DOD and the Federal Bureau of Investigation (the "FBI") had learned that Armet's vehicles were potentially deficient and did not meet the contract specifications. Toward the end of 2006, Skinner had become a confidential informant for the FBI in relation to a separate national security investigation. Through him, the FBI had discovered armoring and ballistic weaknesses in the vehicles. The FBI informed the DOD of the defects. In response, the DOD began pulling the vehicles from the field. Ballistics and explosives testing by the FBI in 2008 confirmed significant deficiencies in the Armet vehicles. For example, at least three test shots "penetrated or perforated the roof of the [vehicle]." J.A. 1250. A test explosion punctured parts of the vehicle that held motor oil and transmission fluid, as well as three of four tires, and also caused pieces of metal to enter the interior of the vehicle. And every test shot penetrated the gunner turret, which was fabricated with only one sheet of steel despite a contract specification of two.
In July 2012, a federal grand jury in the Western District of Virginia indicted Whyte on twelve counts of major fraud against the U.S., wire fraud, and presentation of false claims. 5 The Government 6 requested Whyte's extradition from Canada, which Whyte opposed.
In October 2012, Skinner filed a separate FCA civil suit in the Western District of Virginia as relator against Whyte and Armet.
See
United States ex rel. Skinner v. Armet Armored Vehicles, Inc.
, No. 4:12cv00045,
Whyte was eventually extradited from Canada to the U.S. in September 2016. He then sought to dismiss the Indictment, contending any criminal proceeding was collaterally estopped by the FCA action. The district court rejected this argument, concluding the Government was not precluded from filing the Indictment because
it could not have been a party to an FCA suit in which it had not intervened: "The [G]overnment is not bound by the findings of a jury in which the [G]overnment was only a party in interest with no authority to participate in the action."
United States v. Whyte
,
Later, Whyte filed a second motion to dismiss the Indictment on the grounds that the Government could not prove the legal elements of the major fraud and false claims charges, which require that the Government or one of its agencies be the victim of the fraud. Whyte argued that even if he had engaged in the charged conduct, neither the Government nor one of its agencies had been defrauded because Armet had contracted with the JCC-I-which fell under the multinational MNF-I-and not a Government agency. The district court also denied this motion, concluding that payment of Government funds was sufficient to establish the Government as a party to the contract for the purposes of the major fraud and false claims charges.
Following a September 2017 trial, the jury convicted Whyte on all nine counts. The district court sentenced Whyte to seventy months' imprisonment on the major fraud and wire fraud counts and sixty months' imprisonment on the false claims counts, to be served concurrently.
Whyte now appeals and seeks reversal of his convictions on three grounds. Ground One contends that the district court erroneously concluded that the Government was not precluded from prosecuting Whyte for the same conduct as alleged and adjudicated in the FCA action. Ground Two asserts that the Government could not prove the elements of the fraud counts because a Government agency was not a party to the contract. And Ground Three contends that the district court deprived Whyte of his due process right to a fair trial because of allegedly improper comments by the Government. This Court has jurisdiction pursuant to
II.
We first consider whether Whyte's criminal prosecution was collaterally estopped by the prior FCA action.
8
This Court reviews "de novo a district court's refusal to dismiss an indictment assertedly barred by collateral estoppel."
United States v. Ruhbayan
,
A.
1.
The following elements determine whether collateral estoppel bars a criminal
prosecution: (1) whether the issue in question is identical to the issue adjudicated in the prior proceeding; whether the issue was (2) actually and (3) necessarily determined in the prior adjudication; (4) "whether the resulting judgment settling the issue was final and valid[;] and (5) whether the parties had a full and fair opportunity to litigate the issue in the prior proceeding."
United States v. Fiel
,
While there is some dispute among the parties as to the resolution of the first four factors, we can resolve this case by discussing only the fifth factor: did the Government have a full and fair opportunity to litigate the issue in the prior proceeding? Although this factor would typically be resolved by determining whether the Government was a party to the prior proceeding, our analysis is complicated under the FCA by the Government's party status to an FCA action in which it did not intervene. Therefore, our resolution of this issue depends on what impact, if any, the Government declining to intervene in an FCA action has on determining whether the Government was a party to the prior FCA action. Whyte argues that because (1) a relator brings each FCA action on behalf of the Government and (2) the FCA accords a number of unique statutory powers to the Government, the Government is necessarily a party to every FCA case. The Government contends that it cannot be considered a party-with a full and fair opportunity to litigate-to an FCA action in which it did not intervene. Our review of the language and structure of the FCA compels the conclusion that for the purposes of an inquiry under Fiel , the Government is not a party to an FCA action in which it has declined to intervene.
2.
The FCA imposes civil liability upon any person who "knowingly presents, or causes to be presented" to the Government "a false or fraudulent claim for payment or approval."
By contrast, if the Government declines to intervene, the relator has the right to conduct the action.
This statutory framework has led the Supreme Court to recognize that even when the Government declines to intervene, it remains a "real party in interest" to an FCA suit,
United States ex rel. Eisenstein v. City of New York
,
The collateral estoppel issue under the FCA in the criminal context, as in this case, appears to be an issue of first impression. Nonetheless, the Supreme Court and this Court's consideration of the Government's party status under the FCA is highly instructive. In
Eisenstein
, the Supreme Court analyzed whether, when the Government had declined to intervene in a
qui tam
suit, the statute of limitations to appeal the suit was thirty days (the normal appeal period following entry of judgment) or sixty days (the appeal period applicable when the Government is a party).
Eisenstein
reached this conclusion for several reasons. First, when the Government "declines to intervene, the relator retains the right to conduct the action,"
Second, when the Government declines to intervene, it does not assume the de facto or de jure position of a "party." "A party to litigation is 'one by or against whom a lawsuit is brought.' "
This view is also supported by the FCA's statutory structure. Concluding that the Government is a party to FCA actions in which it has not intervened "would contradict well-established principles of statutory interpretation that require statutes to be construed in a manner that gives effect to all of their provisions."
Eisenstein
,
Furthermore, Congress gave the Government discretion to intervene-"a decision that requires consideration of the costs and benefits of party status."
This Court has similarly distinguished the party status of the Government pre- and post-intervention in the context of the FCA's statute of limitations. Section 3731(b) provides that an FCA suit may either be brought (1) six years after the date of the violation; or (2) up to ten years after the date "when facts material to the right of action are known or reasonably should have been known by the official of the [U.S.] charged with responsibility to act[.]" In considering whether the longer limitations period should have applied in an FCA case in which the Government had declined to intervene, this Court held that the latter limitations period only applies "in cases in which the [Government] is a party"-that is, in a case in which it intervenes in or initiates the FCA suit. To hold otherwise would "produce the bizarre scenario in which the limitations period in a relator's action depends on the knowledge of a nonparty to the action."
UnitedStates ex rel. Sanders v. N. Am. Bus Indus., Inc.
,
Therefore, for statute of limitations purposes, the Supreme Court and this Court have concluded that the Government is not a party to an FCA suit in which it has declined to intervene. For the reasons explained below, this logic applies in the case at bar to resolve the fifth Fiel factor.
B.
We agree with the district court that the Government cannot be considered to have been a party to the FCA suit-with a full and fair opportunity to litigate the matter-for collateral estoppel purposes as it relates to this criminal proceeding. And each argument that Whyte presents to the contrary-that (1) the Government did in fact litigate the FCA action and (2) the FCA's statutory structure supports a finding of party status-has already been considered and rejected by Eisenstein and Sanders .
First, because the Government did not intervene in the
qui tam
suit, it did not have the opportunity to litigate the matter of Whyte's fraud. Although Whyte argues that the Government's limited involvement in the FCA action, including receipt of pleadings and depositions as well as monitoring of discovery, demonstrates that the Government did participate in the litigation, the reasoning of
Eisenstein
and
Sanders
controls. The Government's party status when it is actively litigating the FCA action after intervention is distinguishable from the Government's interest in the action when it is not participating. Even if the Government remains the real party in interest to a
qui tam
suit in which it has not intervened, "party in interest" is a "term of art" that "does not automatically convert [the Government] into" an "actual party" to the case.
Eisenstein
,
Thus, when the Government does not intervene, it is not "conduct[ing] the action."
See
Second, the FCA's statutory scheme supports this conclusion. Finding the Government an actual party in this situation would, as
Eisenstein
noted, "render the intervention provisions of the FCA superfluous, as there would be no reason for the [Government] to intervene in an action in which it is already a party."
Whyte attempts to argue that such an interpretation would produce an asymmetrical result in which the Government could elect not to intervene, observe the evidence presented in an FCA proceeding, and then-should the action not resolve in its favor-have a proverbial second bite at the apple. But this argument does not account for the FCA's purposely asymmetrical structure. As
Eisenstein
noted in dismissing a similar argument, the FCA was designed so that the Government could choose to intervene (that is, expend resources on a case), to control whether a case is dismissed or settled, or to pursue alternate remedies.
Under the framework Whyte endorses, which both the Supreme Court and this Court have previously rejected, and which runs afoul of the language of the statute, the Government would have no real choice as to whether to become a party. Instead, it would be forced to intervene in all FCA suits to prevent being precluded from prosecuting future criminal actions based on the same underlying conduct.
10
This course would contravene the clear Congressional intent to give the Government the discretion to intervene in FCA actions after weighing all of the costs and benefits of intervention.
See
* * * *
Because Whyte has failed to demonstrate that all five Fiel factors must be resolved in his favor, Whyte's criminal prosecution was not estopped by the prior FCA action. We affirm the district court's denial of the motion to dismiss the Indictment on this basis.
III.
We next consider whether, even if Whyte engaged in the alleged fraud, the Government was not defrauded-as required by the major fraud and false claims charges 11 -because Armet's contract was ultimately with the multilateral MNF-I rather than the Government.
Whyte presented this challenge both in a motion to dismiss the Indictment and a post-trial motion challenging the sufficiency of the evidence. A challenge to an indictment is reviewed de novo.
United States v. Vinyard
,
In turn, a challenge to the sufficiency of the evidence is also reviewed de novo.
See
United States v. Howard
,
Upon review, we conclude that the Indictment properly charged the essential elements of the offense and that the evidence was sufficient to support the convictions.
A.
The central element that the parties dispute is whether the Government or one of its agencies was the defrauded party.
B.
1.
We conclude that the Indictment properly alleged that the Government-specifically, the DOD-was the defrauded party. When determining the sufficiency of the Indictment, this Court does not second guess the factual allegations but accepts them as true.
United States v. Mills
,
Here, the Indictment alleged that after the U.S. military entered Iraq in 2003, "the Department of Defense conducted most of its contracting for that operation through the United States Joint Contracting Command in Baghdad, Iraq[.]" J.A. 26. The Indictment further provided that Armet and Whyte "devised a scheme and artifice to defraud the United States ... as a prime contractor with the United States," J.A. 32, and that Armet and Whyte "made and presented" three specified "claims upon and against the United States Department of Defense," J.A. 36-37. Accordingly, the Indictment properly alleged that the Government-through one of its agencies, the DOD-was the contracting party. And because the Indictment supplied the legally required elements, it was sufficient.
2.
In turn, the evidence at trial was sufficient to establish the status of the Government under the contract because Armet contracted with and defrauded the DOD. First, the contract was signed by Skinner, acting on behalf of Armet, and Sergeant Hollon, as the "contracting officer" on behalf of "the United States." J.A. 3263. The plain language of the contract thus provides that the Government was the contracting party.
Second, even if the contract were ambiguous, testimony from Government witnesses established that the JCC-I derived its contracting authority from the DOD. U.S. military personnel testified at trial that they had worked in and contracted on behalf of the JCC-I in the course of their official DOD duties. See J.A. 896-97 (testimony that the JCC-I was jointly run by and for the "Army, Navy, Air Force, [and] Marines," all branches of the DOD); J.A. 1203 (testimony that JCC-I personnel understood their "contracting warrant [to be] a United States of America contracting warrant"); see also Laudes Corp. , 86 Fed.Cl. at 155 (explaining that the JCC-I's predecessor, the Iraq Project and Contracting Office, was created as a temporary organization within the DOD). 15
In addition, the evidence at trial established that the JCC-I's financing for the vehicles came from DOD funds: the payments were provided by the Iraqi Security Forces Fund, a Congressional appropriation that made $5.7 billion "available to
the
Secretary of Defense
... for the purpose of allowing" MNSTC-I to provide assistance and supplies for training Iraqi forces. Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Tsunami Relief, Pub. L. No. 109-13,
* * * *
For these reasons, we conclude that the Government was a party to the contract with Armet and that the Government both sufficiently alleged such party status in the Indictment and provided sufficient evidence at trial to establish this element of the charged crimes. We therefore affirm the decision of the district court in both respects.
IV.
A.
Finally, Whyte argues that the Government denied him a fair trial by making improper comments throughout the course of the proceedings and that the district court erred in denying his motion for a new trial. A district court's denial of a motion for a new trial is reviewed for abuse of discretion.
United States v. Wolf
,
B.
Whyte argues that the Government engaged in improper conduct by making comments suggesting (1) the burden of proof was on Whyte and (2) that defense counsel was attempting to mislead the jury while cross-examining Government witnesses. But the district court properly exercised its discretion in denying Whyte's motion for a new trial. First, the allegedly burden-shifting comments cannot reasonably be construed as such. For example, on cross examination, defense counsel asked Special Agent Schoeneweis about the details of Skinner's deposition testimony in the FCA action, to which the Government objected. The Government contended that Whyte should instead call Skinner as a witness. See, e.g. , J.A. 2043 ("If he wants Frank Skinner['s testimony], he can call Frank Skinner."). Defense counsel in turn objected to the Government's comments, arguing the Government's comments implied Whyte carried the burden of proof.
We disagree with Whyte. The Government's objections do not suggest any change in the burden of proof; rather, the Government was clarifying that the way to introduce testimony from Skinner was to call him as a defense witness, rather than through another witness's testimony. Furthermore, the statements were limited and the district court gave a curative instruction. For these reasons, we conclude the comments did not "so infect[ ] the trial with unfairness,"
Scheetz
,
Second, Whyte complains of instances in which he asserts the Government improperly suggested that defense counsel was attempting to mislead the jury about the FBI's investigation into Armet. Specifically, the Government objected to cross-examination questions by defense counsel asking Government witnesses if they were aware of the FBI's investigation into Armet at various points, or asking these witnesses if certain information had been considered in determining whether to continue with the contract with Armet. 17 The comments Whyte challenges appear to have been isolated-arising only in the context of the Government's objections to defense counsel's questions-and were not designed to mislead the jury. Furthermore, the district court instructed the jury that the statements by the attorneys were not to be considered as evidence. And finally, there was sufficient evidence separate from the issues related to the Government's comments to support the conviction. Altogether, Whyte does not explain any way in which the challenged statements could have misled the jury or deprived him of a fair trial. For these reasons, we conclude the district court's denial of the motion for a new trial was proper.
V.
For the reasons set forth above, we affirm the judgment of the district court.
AFFIRMED
Whyte does not challenge the sentence imposed by the district court.
The JCC-I was a temporary organization-created within and jointly run by various branches of the Department of Defense (the "DOD"), including the Army, Navy, Air Force, and Marine Corps-that procured contracts for supplies and services in Iraq. The JCC-I operated on behalf of the Multinational Security Transition Command-Iraq (the "MNSTC-I"), a military command created by the DOD and responsible for training and equipping Iraqi security and police forces. In turn, the MNSTC-I fell under the direction of the Multinational Force-Iraq (the "MNF-I"), the coalition force authorized by the United Nations Security Council that oversaw, "under United States command and control," military operations in Iraq.
See
Laudes Corp. v. United States
,
Armet had production facilities in Virginia and Florida. Whyte-a dual citizen of the United Kingdom and Canada-resided in Canada and oversaw a related Canadian company called Armet Armored Vehicles Canada, Inc. While Whyte managed much of the production that occurred in Canada, Armet President Frank Skinner oversaw U.S. operations.
Armet was charged in the July 2012 Indictment of the same major fraud, wire fraud, and false claims counts as Whyte, but was later dismissed as a defendant. Accordingly, it is not a party to this appeal.
After each of these deliveries, the USACE wired Armet $398,307.80 in payment under the contract.
Counts One through Three charged Whyte with major fraud against the U.S., in violation of
Throughout this opinion, "the Government" refers to both (1) the United States government in relation to its prosecution of Whyte and in its capacity to become a party to an FCA suit as well as (2) the United States or one of its agencies in their capacity to receive claims for payment, as required by the essential elements of the major fraud and false claims charges.
See
We have omitted any internal quotation marks, alterations, and citations here and throughout this opinion, unless otherwise noted.
This is not the first time Whyte has presented this issue to this Court: he previously filed an interlocutory appeal contesting the district court's pretrial order rejecting his collateral estoppel claim. This Court held that it lacked jurisdiction over that interlocutory appeal because collateral estoppel "is a defense to criminal liability, and thus is ineligible for immediate review."
United States v. Whyte
,
We further concluded that Whyte's appeal also could not be construed as a claim of double jeopardy. "Although Whyte attempt[ed] to shoehorn his [collateral estoppel] claim[ ]" into the rule that permits "interlocutory appeals of pretrial orders rejecting claims of former jeopardy, Whyte never faced a prior prosecution for the charges he [sought] to preclude."
Whyte alternatively contends that even if the Government cannot be considered a party, the relationship between the government and the relator is analogous to that of assignor and assignee such that the Government should be considered precluded from bringing a later criminal action based on the same conduct.
We disagree. Non-party preclusion based on an assignor-assignee relationship applies only to claims concerning assigned property.
See
Taylor v. Sturgell
,
We do not quarrel with Whyte's contention that the FCA creates a substantive legal relationship where the relator "is essentially a self-appointed private attorney general," representing the interests of the Government and prosecuting on its behalf.
Milam
,
But this appeal involves an ingredient not present in those cases: "the important federal interest in the enforcement of criminal law."
Standefer v. United States
,
Parties dispute whether the essential elements of the wire fraud charges include defrauding the Government. For the reasons set forth below, we need not resolve this question.
To prove false claims under
To prove major fraud under
Although the MNF-I and MNSTC-I were multinational organizations, they operated under U.S. control and command. The MNSTC-I was created by National Security Policy Directive 36, the same Directive that established the Project and Contracting Office, while the MNF-I was created as part of an agreement between the U.S., Iraq, and the United Nations.
See
Laudes Corp.
,
This conclusion is bolstered by decisions from the Court of Federal Claims, which has assumed jurisdiction over certain contract claims against the Government.
See
It appears that part of the defense strategy was to present evidence that the JCC-I was unaware of any deficiencies with the vehicles such that it could not present Armet with a cure notice or that the JCC-I continued contracting with Armet despite knowledge of the deficiencies.
Reference
- Full Case Name
- UNITED STATES of America, Plaintiff - Appellee v. William R. WHYTE, Defendant - Appellant, and Armet Armored Vehicles, Inc., Defendant.
- Cited By
- 5 cases
- Status
- Published