Case 4:02-cv-04329 Document 110 Filed 10/29/2007 Page 1 of 8

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

_______________________________________
)
UNITED STATES OF AMERICA, )
EX REL. ALFRED J. LONGHI, JR., )
)
PLAINTIFFS, ) No. H-02-CV-4329
) Judge Miller
v. )
) Jury Demanded
LITHIUM POWER TECHNOLOGIES, INC. )
AND MOHAMMED ZAFAR A. MUNSHI , )
)
DEFENDANTS. )
_______________________________________ )

PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT ON DAMAGES, PENALTIES,

ATTORNEY’S FEES, COSTS AND EXPENSES

The United States files this brief identifying the damages and civil penalties, and the

Relator’s attorney’s fees, costs and expenses, associated with the four contracts on which this Court

granted Plaintiffs’ summary judgment. The Plaintiffs now move for summary judgment on the

damages, penalties, attorneys’ fees, costs, and expenses set forth below.

Background

On September 27, 2007, this Court granted the Plaintiffs’ Motion for Partial Summary

Judgment, finding Defendants liable to the United States under the False Claims Act (FCA) for

fraudulently inducing the United States into entering into four research contracts. On that same date,

the Court entered an amended Scheduling Order asking that the Plaintiffs identify the damages they

sustained as a result of Defendants’ fraud. This brief responds to that Order, identifying damages

and civil penalties in an amount between $5,274,365 and $5,576,365, and Relator’s attorney’s fees,
 Case 4:02-cv-04329 Document 110 Filed 10/29/2007 Page 2 of 8

costs and expenses in the amount of $272,766.49. The Plaintiffs move for summary judgment on

these amounts.1

The Four Contracts

The research contracts that this Court found the Defendants fraudulently procured from

the United States can be identified as follows:

Contract 1 ARMY Phase 1 ARMY 8630 F08630-98-0066/P00001

Contract 2 ARMY Phase2 ARMY 0018 DASG60-00-C-0018
Contract 3 USAF Phase 1 USAF 2048 F33615-C-2048
Contract 4 USAF Phase 2 USAF 2122 F33615-00-C-2122

Each of these contracts was a form of “fixed fee” contract. The United States budgeted a maximum

amount of money it would pay out on each contract regardless of the actual costs incurred by

Defendants. Under the Federal Acquisition Regulations (FARs), the Defendants had to submit

vouchers or invoices to the United States to be paid. Each voucher or invoice had to request a sum

certain and identify the work performed. The Phase 2 contracts, Contracts 2 and 4, were paid

pursuant to vouchers that Defendants submitted monthly. The smaller Phase 1 contracts, Contracts

1 and 3, were paid out with less frequency. Contract 1 was paid out in one lump sum pursuant to

one voucher. Contract 3 was paid out every two months, again contingent upon the United States

receiving vouchers from Defendants. Spreadsheets identifying these payments for each contract are

attached to the Personal Declaration of NASA Investigative Auditor Melody J. Coston, which is

Exhibit 1 to this brief.

The United States would not have paid out any monies on these contracts had Defendants not

submitted the vouchers claiming payment.

1
The Plaintiffs briefed the 5th Circuit’s standards for summary judgment in their
memorandum of law filed in support of their motion for partial summary judgment.

2
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Damages and Civil Penalties under the False Claims Act

Any person violating the FCA becomes liable to the United States for civil penalties of not

less than $5,500 per false claim and not more than $11,000 per false claim, plus three times the

amount of actual damages the United States sustains because of the fraudulent acts of that person.

31 U.S.C. § 3729(a).2 FCA damages “typically are liberally calculated to ensure that they afford the

Government complete indemnity for the injuries done it.” United States ex rel. Compton v. Midwest

Specialties, Inc., 142 F.3d 296, 304 (6th Cir. 1998). The fact that Congress provided for treble

damages and an automatic civil monetary penalty per false claim shows that Congress believed that

making a false claim to the Government was a serious offense. United States v. Mackby, 339 F. 3d

1013, 1017 (9th Cir. 2003), citing S. Rep. No. 99-345 at 17 (1986), reprinted in U .S. Code Cong.

& Admin. News 1986 p. 5266, 5282. Congress also felt that treble damages were necessary to fully

compensate the United States where a portion of that money might go to a relator, and in light of the

fact that the FCA did not include a provision for pre judgment interest or consequential damages.

See generally, Cook County, Illinois v. United States ex rel. Chandler, 538 U.S. 119 (2003).

Damages and Civil Penalties under a Fraud in the Inducement Theory

Under the fraudulent inducement theory of FCA liability, pursuant to which this Court found

Defendants’ liable, the measure of actual single damages becomes the total amount of monies paid

out by the United States under the subject contracts. Marcus v. Hess, 317 U.S. 537 (1943) (applying

an “out of pocket” measure of damages under the FCA). See also, Harrison v. Westinghouse

Savannah River Company, 176 F. 3d 776 (4th Cir. 1999).

2
This penalty range applies to false claims made after August 30, 1999. Prior to that date,
the penalty range was $5,000 to $10,000. 28 C.F.R., Section 85.3(a)(9)(2007)

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Further, the United States is entitled to FCA penalties on the individual invoices or vouchers

submitted by the Defendants under which they made their claims for payment to the United States

because each voucher or claim was submitted on a contract procured by fraud. See, Marcus v. Hess,

317 U.S. 537 (1943)(all claims subsequently submitted pursuant to a contract procured by fraud are

sufficient to constitute “false claims” within the meaning of the false claims act), Harrison v.

Westinghouse Savannah River Company, 176 F. 3d 776 (4th Cir. 1999), United States ex rel. Thomas

M. Ubl v. IIF Data Solutions, 2007 WL 2220586 (E.D. Va. August 1, 2007). The FCA “covers all

fraudulent attempts to cause the government to pay out sums of money.” United States v. Neifert-

White Co., 390 U.S. 228, 232-33 (1968).

Here then, the United States is entitled to damages in the maximum amount of three times

the actual monies paid out to Defendants under the four contracts, in addition to civil penalties in

the range of $5,500 to $11,000 per false claim.3

Damages and Penalties under the Four Research Contracts at Issue in this Case

To calculate actual damages, NASA’s Investigative Auditor - Melody Coston, located all of

the payment vouchers Defendants submitted to the United States under the four contracts. She then

confirmed the amounts paid under each voucher, adding up those amounts for each contract. Those

amounts, which she calls “Mischarged Costs” on her spreadsheets, are as follows:

Contract Amounts Paid Out

1 $ 58,535
2 $ 749,148
3 $ 99,991
4 $ 749,781

3
With one exception (noted in the brief), where the penalty range would be $5,000 to
$10,000.

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Total Single Damages: $1,657,455

To fully compensate the United States, the FCA permits the United States to recover up to

three times this single damage amount, for a recovery of $4,972,365 in this case. These calculations

are attached to Exhibit 1, Ms. Coston’s Personal Declaration.

Ms. Coston also calculated a range of penalties to which the United States would be entitled

under the FCA. As pointed out, that range is anywhere between $5,500 and $11,000 per false claim.

For the one voucher requesting payment on Contract 1, the penalty range would be $5,000 to

$10,000, because that voucher was submitted prior to August 30, 1999, the date on which Congress

made effective increased penalties. Each voucher, which served as a claim for payment upon the

United States, constitutes a false claim.4

Under the four contracts, Defendants submitted a total of 55 vouchers. Ms Coston

determined the penalty range as follows:

Low Range: (1 x $5,000) + (54 x $ 5,500) = $ 302,000

High Range: (1 x $10,000) + (54 x $11,000) = $ 604,000

Again, these calculations are identified in the spreadsheets attached to Exhibit1.

4
The FCA does not expressly address the circumstances that would warrant
imposing a higher or lower penalty within the statutory range. However, most courts take the
position that the penalties are mandatory and must be imposed, even if at the low end. See
generally, United States v. Stocker, 798 F. Supp. 531 (E.D. Wis. 1992), United States v. Peters,
927 F. Supp. 363 (D. Neb. 1996), United States v. Panini, 717 F. Supp. 1013 (S.D.N.Y. 1989),
United States v. Hill, 676 F. Supp. 1158 (N.D. Fla. 1987).
The 5th Circuit has generally taken the position that the penalties should not be in excess
and out of proportion to the damages sought by the Government. See e.g. Peterson v.
Weinberger, 508 F. 2d 45, 55 (5th Cir. 1975). This should not be an issue here because the
Plaintiffs seek penalties which, even at the high end, are no more than approximately 12% of
treble damages.

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Adding treble damages to the penalty range, the United States is entitled to damages and

penalties between the range of $5,274,365 and $5,576,365.

Relator’s Attorneys’ Fees and Litigation Expenses

The False Claims Act also provides that a relator in a successful qui tam case “shall also

receive an amount for reasonable expenses which the court finds to have been necessarily incurred,

plus reasonable attorneys’ fees and costs. All such expenses, fees, and costs shall be awarded against

the defendant.” 31 U.S.C. § 3730(d)(1). Consistent with this statutory mandate, Plaintiffs have

attached as Exhibit 2 the declaration of Relator Longhi’s counsel, Mitch Kreindler, describing the

reasonable expenses, fees and costs incurred on Mr. Longhi’s behalf during this litigation. In total,

Mr. Longhi incurred $270,345.83 in attorneys’ fees and $2,420.66 in out-of-pocket costs and

expenses. Mr. Kreindler’s detailed attorney billing records include the date, description of the

services performed, time taken, an hourly rate and the dollar amount. Because the records contain

information protected by the attorney client privilege and detailed descriptions of work product, they

are not appended here. However, the records are for the Court to review in camera and will be made

available to Defendants counsel pursuant to an agreement designed to preserve the confidential and

privileged character of the information.

Conclusion

WHEREFORE, the Plaintiffs request that the Court enter judgment in favor of the Plaintiffs

for treble damages and civil penalties in an amount between $5,274,365 and $5,576,365 and for

attorney’s fees, costs and expenses of $272,766.49.

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Respectfully submitted,

DONALD J. DeGABRIELLE, JR.

United States Attorney

Andrew A. Bobb
ANDREW A. BOBB
Assistant United States Attorney
State Bar No. 02530350
919 Milam, Suite 1500
P.O. Box 61129
Houston, Texas 77208-1129

Telephone: 713-567-9766
Facsimile: 713-718-3303

MICHAEL F. HERTZ
DENNIS PHILLIPS
Attorneys, Department of Justice
Civil Division
Patrick Henry Building
601 D Street
Washington, D.C. 20530

Telephone: (202) 307-1086

Facsimile: (202) 616-3085

ATTORNEYS IN CHARGE FOR THE

UNITED STATES OF AMERICA

Mitchell R. Kreindler
Texas Bar No. 24033516
KREINDLER & ASSOCIATES
9219 Katy Freeway, Suite 206
Houston, Texas 77024-1415
713.647.8888
FAX: 713.647.8889
mkreindler@blowthewhistle.com

ATTORNEY IN CHARGE FOR QUI TAM

RELATOR ALFRED J. LONGHI, JR.

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CERTIFICATE OF SERVICE

I certify that on October 29 , 2006, the foregoing document was filed electronically and
service accomplished automatically though the Notice of Electronic Filing issued by the Court’s
Electronic Case Filing (ECF) System to the following counsel of record:

DHolmes282@aol.com
MKreindler@blowthewhistle.com

Andrew A. Bobb
Andrew A. Bobb
Assistant United States Attorney