Tuesday, August 26, 2014

Could a Qui Tam Suit Be Brought Based on the Unlawfulness of the Bergdahl Prisoner Exchange?

     Professor Solmin at Volokh Conspiracy has a post on how the General Accounting Office has announced that the Obama administration violated   federal law when it exchanged five  Taliban leaders for  the  U.S. deserter Private Bowe Bergdahl without giving Congress  the  30 days   notice required by law. The GAO also said this violates the Anti-Deficiency Act. The GAO report  was in response to a request by a number of Republican senators.  The Department of Defense lawyers told GAO that Obama’s action was legal under the relevant statute and that the statute is unconstitutional anyway. GAO was asked in 2010 about another Obama use of funds for the Secret Service and found that it violated the Anti-Deficiency Act. The current report says: 

Like the Secret Service, DOD obligated funds that were not legally available for obligation because DOD did not satisfy the notification requirements under section 8111. Accordingly, DOD violated the Antideficiency Act. See 31 U.S.C. § 1341(a). If Congress specifically prohibits a particular use of appropriated funds, any obligation for that purpose is in excess of the amount available.[7] B‑321982. Here, DOD obligated at least $988,400 in excess of available appropriations. 

So what happens next?   ---A qui tam suit!

That’s one of my obsessions, of course  (see the tax whistleblower post here), so let me go slowly.

    What would ordinarily happen is that the violation would be reported to the Justice Department and they would go after the violator. 31 US  Code §1341   says

(a) (1) An officer or employee of the United States Government or of the District of Columbia government may not—

(A) make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation;

(B) involve either government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law;

31 US Code  §1350 is about punishment:

 An officer or employee of the United States Government or of the District of Columbia government knowingly and willfully violating section 1341 (a) or 1342 of this title shall be fined not more than $5,000, imprisoned for not more than 2 years, or both.

    Of course, there’s a problem. The President controls the Justice Department and wouldn’t want to punish himself.  So the punishment has to come from outside the present executive branch. Congress could impeach the President, combining this with other of his actions. Or the Administration elected in 2016 could prosecute, since the statute of limitations probably won’t have run out.

     What I find interesting is the Qui Tam Act, or False Claims Act.  A qui tam action can be brought by a private person against someone who defrauds the government and against the opposition of the government if the judge does not stop it.   31 U.S. Code §3729 - False claims says

 (a) Liability for Certain Acts.—

(1) In general.— Subject to paragraph (2), any person who—

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);

(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;

(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;

(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or

(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government,

is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104–410  [1] ), plus 3 times the amount of damages which the Government sustains because of the act of that person.

     Does the unauthorized spending and receiving of government funds come under the False Claims Act?  I don’t know the case law on it. What I’d like to see is a case where a  government official  or the seller is liable for when he buys something he’s not legally authorized to buy. Someone makes a claim for payment, but the government official who pays him is not authorized to pay money for that purpose. The act applies either if the claim is “fraudulent or false” or if “public property” is  given away unlawfully. This is Problem One: The False Claim. It is a problem of fact as well as of law: was the $1,000,000 the amount spent on outside vendors, internal “funny money”, or a mix? Who exactly paid it, and who received it? Senators have a right to ask for those details, I expect.

      The defendant pays treble damages if found liable. The relator gets a sizable share of that amount. Also, important when we only have about $1,000,000 in misspending to deal with:

(3) Costs of civil actions.— A person violating this subsection shall also be liable to the United States Government for the costs of a civil action brought to recover any such penalty or damages.

31 U.S. Code §3730 - Civil actions for false claims, however, says something which will come up later in this post:

The Government is not liable for expenses which a person incurs in bringing an action under this section.

    There are two other  hitches. First, we have Problem Two: Knowledge. The perceptive reader will have noticed the word “knowingly” in the statute.  Maybe that just means the person buys or sells knowing he is doing so, or maybe it means he must know that the transaction is unlawful. If the latter, discovery would be helpful in establishing who in the Administration knew about the law. The person at the very top acted in “reckless disregard” at the least, since the President signed the law that was passed, a law specifically designed to restrain Barak Obama. Most False Claims Act cases involve transactions in which the relevant information is that the quality or amount of the goods has been lied about, something usually only the liar could be expected to know. Here, though, the transaction is one   that a public law says is unlawful. Maybe the fact that this is a public law means those involved have a legal obligation to know it; “Ignorance of the law is no excuse”. Here is what the statute says about knowledge: 

(b) Definitions.— For purposes of this section—

(1) the terms “knowing” and “knowingly”—

(A) mean that a person, with respect to information—

(i) has actual knowledge of the information;

(ii) acts in deliberate ignorance of the truth or falsity of the information; or

(iii) acts in reckless disregard of the truth or falsity of the information; and

(B) require no proof of specific intent to defraud;

    The last hitch is Problem Three: The Senior Official Problem.  The Qui Tam Act excludes high-ranking civilian and military officials.  31 U.S. Code §3730 - Civil actions for false claims, says:

(2) (A) No court shall have jurisdiction over an action brought under subsection (b) against a Member of Congress, a member of the judiciary, or a senior executive branch official if the action is based on evidence or information known to the Government when the action was brought.

(B) For purposes of this paragraph, “senior executive branch official” means any officer or employee listed in paragraphs (1) through (8) of section 101(f) of the Ethics in Government Act of 1978 (5 U.S.C. App.).

    I looked up paragraphs (1) through (8) but won’t go to the trouble of refinding and putting it here. It says that any official above a certain GS rating (GS-15 maybe) or a certain military job rating is a senior executive branch official. So President Obama cannot be sued in a qui tam action. 

On the other hand, Sergeant John Doe can be sued.

     We may have a situation like in 17th Century England. King Charles I had collected unauthorized taxes, avoiding assembling Parliament for as long as he could. Eventually, he did call Parliament because these illegal work-arounds weren’t raising enough money. Once in session, Parliament started impeachment proceedings against Lord Strafford, the King’s chief minister, and Archbishop Laud, and passed bills of attainder to execute both of them. The law did not allow such proceedings against the King, but it allowed them against his subordinates. (Of course, King Charles I was executed later too, but that was by an illegal process after the army overthrew Parliament.)  Since the King cannot do everything himself, this form of impeachment was a reasonable replacement for impeaching the King.

        Now things get murky and interesting, liability-wise. Sergeant Doe surely does not know of the 30-day notice requirement (and any non-government seller surely does not know either, or maybe even know what the goods are being used for--- and Sergeant Doe has “apparent authority” in any case).   Moreover, he is an agent, not a principal--- he was only obeying orders when he bought, say,  new trousers for Private Bergdahl.

    By the doctrine of respondeat superior, the principal is liable for the actions of the agent, and even for unauthorized contracts if it’s more reasonable to impose the burden of an agent’s mistake on the principal than on the third party (because, for example, the agent usually does have authority and it’s just in this particular case that the contract was against the principal’s wishes).  See my paper on the topic: "The Economics of Agency Law and Contract Formation," American Law and Economics Review, 6 (2): 369-409 (Fall 2004). 

     So Sergeant Doe only did what President Obama told him to do, and President Obama is exempt from suit via the False Claims Act.  If Sergeant Doe loses,  can he  in turn sue President Obama for giving him unlawful orders?    I don’t know--- an interesting question.  Note, too, that Sergeant Doe is not wealthy, and so may be judgment-proof--- tho that won’t block the lawsuit, only the collection of damages and legal fees.

     But President Obama is not exactly the principal either. He is acting on behalf of the federal government.  I don’t know if he’s an agent. Probably not; he is more like a trustee, since “the federal government” is unable to give him direct orders and can’t fire him.   Anyway, I haven’t heard of the President being liable for the undesired misdeeds of a subordinate. Rather, the United States of America is liable, as in a Section 1983 civil rights lawsuit.  Respondeat superior  is commonly applied to corporations. If an employee dumps toxic waste onto the neighbor’s lawn, it is not his foreman and not the CEO who is liable to the neighbor, but the corporation.  I am not sure, but I expect the corporation is also expected to know the law and to design procedures to keep the employee from breaking it. We can’t have the relator suing the United States on behalf of the  United States though, probably.  A corporate derivative suit is very much like a qui tam suit, but in it the relator sues the directors on behalf of the corporation, and the damages the directors pay (or, more likely, their insurance company) go to the corporation, though the relator gets his legal fees paid.  Thus, probably we cannot attribute the knowledge of his principal, Obama or the United States, to the agent, Sergeant Doe.

    There are  three other ways to get at the knowledge element that might help: 

  1. Sue and use discovery to investigate the element of Sergeant Doe’s knowledge. This discovery would be interesting enough in itself to make the lawsuit worthwhile.
  2. See if you can find a Sergeant Doe who’s a lawyer. That is, were any lawyers consulted? If so, probably one is junior enough not to be a “senior executive official” and we can go after him. It can be presumed that he has knowledge. To be sure, maybe he was consulted and said, “No, we can’t do this; it’s illegal.” If so, let him bring up that defense! It would be nice to have the Administration on record as ignoring its own lawyers.

       3. Go back to what I said earlier about how “knowingly” interacts with public statutes. In this situation can we say that Sergeant Doe has some kind of “constructive knowledge” that his spending is unlawful, because everyone (and especially government officials) are supposed to know  laws that Congress passed.

 Lots of interesting stuff here, isn't there?



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