Here’s a rather bizarre case arising from the now infamous Minerals Management Service (MMS). (United
States of America v. Project on Government Oversight and Robert A. Berman,
C.A.D.C. No. 08-5182, 8/3/10)
It seems a very lucky Interior Department economist was presented with a large ($383,600) monetary award, citing the employee’s “public-spirited work” that apparently kept oil companies “from underpaying the Mineral Management Service for oil extracted from federal lands.” (Opinion p. 2) The group doing the presenting is The Project on Government Oversight (POGO), which is “dedicated to remedying systematic abuses of power, mismanagement, and subservience of the federal government to special interests.” The lucky Interior Department employee is Robert A. Berman.
It seems that POGO filed two “qui tam” false claims actions in Texas in 1997 in which they argued that various major oil companies had defrauded the government by undervaluing oil extracted from federal lands, and underreporting and underpaying the royalties they owed to MMS. The United States decided to intervene in the suit and ended up settling with the oil companies to the tune of $440 million. (United States v. Project on Government Oversight, 525 F.Supp.2d, 161, 164 (D.D.C. 2007).
Now, POGO found Mr. Berman to be of great help in the investigation leading up to its lucrative qui tam suit. The POGO executive director had numerous (20 to 30) telephone conversations with Berman to discuss the oil royalty issues. “Berman helped [POGO] understand the underpayment question and draft Freedom of Information Act (FOIA) requests for government documents.” (p. 4)
POGO was so grateful for Berman’s assistance that it asked him to join in the qui tam actions. Berman declined, but did enter into some kind of agreement with POGO that provided that Berman would receive a third of the money that POGO recovered from the suits. (p. 4)
True to its word, POGO sent Berman the $383,600 check indicating it represented a “Public Service Award” based on his “decade-long public-spirited work to expose and stop the oil companies’ underpayment of royalties for the production of crude oil on federal and Indian lands.” (p. 4)
None too pleased, the U.S. Government sued POGO and Berman charging a civil violation of 18 U.S.C. 209(a), which provides:
“Whoever receives any salary, or any contribution to or supplementation of salary, as compensation for his services as an officer or employee of the executive branch of the United States Government…from any source other than the Government of the United States…; or
“Whoever…makes any contribution to, or in any way supplements, the salary of any such officer or employee under circumstances which would make its receipt a violation of this subsection—
“Shall be subject to the penalties set forth in section 216 of this title.” (i.e. imprisonment for one to five years as well as a possible civil penalty.)
The district court granted summary judgment to the government and the defendants appealed. The appeals court (on the first go-around of the case), reversed and sent the case back, holding that there was a “genuine dispute as to whether POGO issued the check as compensation for [Berman’s] government service.” (p. 5)
When the district court got the case back, it went to trial and the jury found both defendants liable for violating 209(a). The latest legal dispute back before the appeals court is over the penalties imposed as
well as two issues: (1) the trial court’s refusal to instruct the jury that a violation of 209(a) required proof
that POGO intended the award to be compensation for Berman’s services as a government employee; and (2) the court’s refusal to grant summary judgment to the defendant Berman based on his argument that 209(a) does not apply to lump-sum (as opposed to periodic) payments. The defendants also appealed the trial court’s treatment of penalty—it assessed a penalty of $383,600 against Berman and $120,000 against POGO. (pp. 5-6)
Briefly, here is how the appeals court has now disposed of these issues on appeal.
On the significant question as to whether the jury should have been instructed that proof of intent is required for a 209(a) violation, the appeals court rules that it is required. Because the trial court refused to do this, the appeals court has now vacated the verdict and remanded the case for a new trial where the proper instruction can be included. It was not persuaded by the government’s argument that elements of intent were introduced
at the trial and the jury had every opportunity to weigh this element of the facts. (See pp. 7-31 of the Opinion for the lengthy discussion on the issue.)
Somewhat anticlimactic, but also an important element of the appeals decision, the court rebuffs Berman’s argument that 209(a) cannot be violated with a one-time payment as opposed to a supplemental salary: “Nor do we think it likely that Congress would have wanted to bar small but periodic payments intended to compensate an employee for his government services, but to permit large single—or irregular—payments that total a far greater sum….It is hard to see why the public would regard the former as worse than the latter” (pp. 32-33)
Finally, the government challenged the trial court’s handling of the penalty against POGO, arguing that fining it less than the entire illegal payment was contrary to the statute. The lower court’s rationale for fining Berman the full amount of the illegal payment ($383,600), but POGO a lesser amount ($120,000) had to do with its finding that POGO made the unlawful payment “openly and in good faith.” (p. 35)
The appeals court rejects the government’s reasoning that the court had no discretion to impose a penalty less than the amount of the illegal payment. (p. 37) It goes on to point out that the government will have another shot at arguing the penalty amount before the trial court since the case has been remanded for a new trial.
This protracted case now goes back to the drawing board—literally—unless the government opts to try to get the Supreme Court to review this appeals court decision.
If nothing else, Berman and POGO get to keep the money invested for several more months while the government tries to bring to a successful conclusion what almost seems to be in my opinion a “slam dunk” case for a 209(a) violation.