Major False Claims Act Victory for Whistleblowers in Iraq Fraud Case: Fourth Circuit Reverses Custer Battles Decision

In a major victory today for whistleblowers reporting fraud in the Iraq reconstruction effort, the Fourth Circuit Court of Appeals reversed a trial court’s decision that took away a jury verdict from the whistleblowers or relators in this qui tam case under the False Claims Act.

The Custer Battles case has been a hard-fought one, which until this decision had produced one of the odder results found.

With hundreds of billions of U.S. dollars spent on the Iraq War and Iraq reconstruction, and with the False Claims Act supposedly protecting U.S. taxpayer funds from fraud, the whistleblowers filed a qui tam case under the False Claims Act that alleged fraud in certain contracts that addressed, among other things, replacing Iraqi currency in the Iraq reconstruction effort.

After the jury awarded a verdict to the whistleblowers, the trial court overturned it. The trial court did not view claims presented to the Coalition Provisional Authority (“CPA”) that was created and funded by the United States as the same as claims presented to the U.S. Government, even though the CPA officials were U.S. Government employees, and U.S. dollars were lost. Today’s decision by the Court of Appeals reversed the trial court’s decision and corrected that odd result.

This is a very positive development for whistleblowers reporting fraud in Iraq and elsewhere, as it corrects a strained interpretation of the law that has allowed fraud to go unaddressed. We congratulate everyone associated with this effort.

The Court’s conclusion from the decision today is quoted below:

In sum, we conclude: (1) that the district court erred in limiting the relators’ claim for damages on the Dinar Exchange Contract to a claim for $3 million; (2) that the court erred in ruling as a matter of law that the relators did not present evidence sufficient to demonstrate that Custer Battles presented false claims on the Dinar Exchange Contract to officers or employees of the United States; (3) that the court erred in implying a requirement of presentment in 31 U.S.C.
§ 3729(a)(2); and (4) that the court correctly entered summary judgment in favor of Custer Battles on the Airport Contract.

Accordingly, we reverse the district court’s orders limiting the relators’ claims and granting Custer Battles’ Rule 50(a)
motion for judgment as a matter of law and remand for further proceedings. On remand, the district court shall first give the relators the option to have a new trial on the Dinar Exchange Contract claims and, if a new trial is not elected, shall address Custer Battles’ remaining issues on its Rule 50(a) motion. If the court denies Custer Battles’ Rule 50(a) motion on the remaining issues, it shall enter judgment on the verdict in favor of the relators. We affirm the district court’s summary judgment with respect to the Airport Contract.

AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED FOR FURTHER PROCEEDINGS