Former Fed Who Breached His Fiduciary Duty to the Government Ordered to Repay $383,600

There is yet another chapter in the case of the Interior Department economist who was bestowed with a $383,600 monetary award by a group that the employee had assisted in bringing a successful false claims action involving underpayment by oil companies of royalties owed to the Mineral Management Service.

There is yet another chapter in the case US v. POGO of the Interior Department economist who was bestowed with a $383,600 monetary award by a group that the employee had assisted in bringing a successful false claims action involving underpayment by oil companies of royalties owed to the Mineral Management Service. My write-ups on two previous court decisions relating to the handling of the government’s cases brought against this employee contain more details on the facts in the case and may be found here:

Recapping briefly, Robert A. Berman, a GS-15 Economist at Department of the Interior, helped the Project on Government Oversight behind the scenes as POGO pursued “qui tam” false claims actions in Texas. In fact, Berman and POGO had a written agreement that Berman would participate in any recovery in the qui tam case—an agreement that Berman did not disclose to anyone in his agency. (Opinion p. 3)

In those qui tam actions POGO argued that various major oil companies had defrauded the U.S. government by undervaluing oil extracted from federal lands and therefore underreporting and underpaying the royalties they owed to MMS (Minerals Management Service). This turned out to be a very lucrative situation for POGO when the government intervened in their suits and settled with the companies for around $440 million. (United States v. Project on Government Oversight, 525 F.Supp.2d, 161, 164 (D.D.C. 2007)

In gratitude to Berman for his help, POGO sent him a hefty award check ($383,600) for his “public-spirited work.” Berman did not mention this award to anyone at his agency. As the district court stated, “There is … no dispute that Berman did not inform his ethics officer or anyone else at the DOI when he made the informal oral agreement to share proceeds, when he and POGO signed a written agreement, or when he actually accepted payment. (p. 34, citations omitted)

The appeals court vacated the district court’s order that Berman repay the entire award amount and sent the case back for more findings. (United States v. POGO, 616 F.3d 544 (DC Cir. 2010))

Now, the district court has once again ruled against Berman and ordered him to repay the entire amount. (United States of America v. Project on Government Oversight, DDC CA No. 03-0096 (JDB))

In this latest go-around, the US moved for summary judgment against Berman on a charge of breach of fiduciary duty. (It also indicated to the court that it would proceed against POGO separately in a later trial.) Berman, not to be outdone, filed his own motions for summary judgment and dismissal, arguing essentially that the government had engaged in “improper conduct,” and that the appeals court had vindicated him and therefore there was nothing left to decide. (pp. 1-2)

Not so fast, says the district court to Berman, pointing out that “ ‘the same facts that support the jury verdict …[against Berman]’ together with Berman’s undisputed violation of ‘numerous Office of Government Ethics regulations’ also supported the government’s contention that Berman had breached his fiduciary duty to his employer.” (p. 32) The court explains that in its earlier decision it had reserved a ruling on this “fiduciary duty” claim only because Berman was found to have violated section 209 and for that violation had been ordered to repay the entire award amount, and, should that violation be overturned on appeal, “this assessment could change.” (p. 32) The court’s assessment has in fact now changed.

Because the appeals court overturned the jury verdict against Berman on section 209 violations, the district court now has revisited the government’s breach of fiduciary duty claim, concluded that claim can be decided on summary judgment, entered judgment for the government on that claim, and now has ordered “disgorgement” of the ill-gotten fruits of Berman’s wrongdoing—he must repay the “award.”

So, just what is this fiduciary duty that the court has found that Berman violated? The district court cites this passage from a Supreme Court decision explaining that duty:

“The larger interests of public justice will not tolerate, under any circumstances, that a public official shall retain any profit or advantage which he may realize through the acquirement of an interest in conflict with his fidelity as an agent. If he takes any gift, gratuity, or benefit in violation of his duty, or acquires any interest adverse to his principal, without a full disclosure, it is a betrayal of his trust and a breach of confidence, and he must account to his principal for all he has received.” (p. 33, citation omitted)

In this case, the court “finds” that “Berman breached his fiduciary duty to the government by accepting an investment interest in POGO’s litigation without any disclosure at all, and eventually accepting a payment from POGO without ‘full disclosure.’” (p. 39)

The upshot: Berman must “disgorge” the $383,600 he received from POGO. (p. 39)

Stand by for yet another appeal on this one.

About the Author

Susan McGuire Smith spent most of her federal legal career with NASA, serving as Chief Counsel at Marshall Space Flight Center for 14 years. Her expertise is in government contracts, ethics, and personnel law.