| BALLEW PLED ALL OF THE FOLLOWING:
CONSPIRACY - FOIA SMOKING GUN- USCG / MAIN JUSTICE: EXTRINSIC AND EGREGIOUS FRAUD ON THE COURT BY OFFICERS OF THE COURT:
PLAINTIFF’S FIRST AMENDED COMPLAINT AND JURY DEMAND TO THE HONORABLE UNITED STATES DISTRICT COURT:
Plaintiff Robert C. Ballew (“Ballew”) complains of the actions of Defendants United States
Department of Justice (“DOJ”), United States Coast Guard (“USCG”), and the United States of America (“United
States”) (collectively, the “Defendants”), and respectfully shows this Court the following:
I.
This action is a Fed. R. Civ. P. 60(b) independent action in equity and based on the Defendants’
fraud on the Court in connection with the settlement of United States ex rel. Robert C. Ballew v. Aerospatiale
Helicopter Corporation and Textron Lycoming Corporation; Civil Action No. CA 4-88-287-E; in the United States
District Court for the Northern District of Texas (the “Underlying Qui Tam”).
Specifically, Defendants DOJ and USCG, on behalf of Defendant United States, intervened in the
Underlying Qui Tam, negotiated and implemented a settlement of the Underlying Qui Tam without
Ballew’s involvement in the settlement negotiations, and conspired to fraudulently misrepresent and conceal (and,
in fact, misrepresented and concealed) to the court (and Ballew) the true nature and extent of the settlement
proceeds, among other reasons, to minimize Ballew’s statutory share of the settlement proceeds.
II.
2.1 This action for monetary relief is brought, and jurisdiction lies, pursuant to the equitable
jurisdiction of this Court under Fed. R. Civ. P. 60(b) in conjunction with 28 U.S.C. § 1331 and 31 U.S.C. §3732.
2.2 The Underlying Qui Tam was filed, prosecuted and settled in the Northern District of
Texas. A substantial part (if not all) of the events giving rise to Ballew’s claims occurred in the Northern District of
Texas. Accordingly, venue is proper in the Northern District of Texas pursuant to Fed.R. Civ. P. 60(b); 28 U.S.C.
§§ 1391(e); 1402 and 31 U.S.C. § 3732.
III.
3.1 Plaintiff Ballew is a citizen and resident of Fort Worth, Texas.
3.2 Defendant DOJ is an agency and subdivision of Defendant United States. DOJ has been served with
Summons and a copy of the Complaint.
3.3 Defendant USCG is an agency and subdivision of Defendant United States. USCG has been served with
Summons and a copy of the Complaint.
3.4 Defendant United States must be served with Summons by serving Paul Coggins, Esq., the U.S. Attorney
for the Northern District of Texas. The U.S. Attorney for the Northern District of Texas may be served with Summons
by mailing the Summons and First Amended Complaint, via certified mail, return receipt requested, to the Civil
Process Clerk, U.S. Attorney for the Northern District of Texas, 1100 Commerce, 3rd Floor, Dallas,
Texas 75242-1699. Paul E. Coggins previously was served with Summons and the Original Complaint onbehalf of
Defendants DOJ and USCG.
3.5 Defendant United States also must be served with Summons by serving Janet Reno, Esq., the U.S.
Attorney General. The U.S. Attorney General may be served with Summons by mailing the Summons and First
Amended Complaint, via certified mail, return receipt requested, to Janet Reno, Esq., U.S. Attorney General,
Department of Justice, 10th & Constitution Ave., N.W., Room B-324, Washington, D.C. 20530.
Janet Reno, Esq., previously was served with Summons and the Original Complaint on behalf of Defendants DOJ
and USCG.
IV.
A. The Underlying Qui Tam.
4.1 On May 5, 1988, Ballew filed the Underlying Qui Tam.
4.5 As early as early 1986, Ballew disclosed the SRR helicopter defalcations to John Uribe, USCG
Aircraft Program Office, who, in turn, passed the information on to the DOT Office of Inspector General. Immediately
prior to filing the Underlying Qui Tam, Ballew also twice met with agents of the Federal Bureau of Investigation
to disclose and explain his discoveries and provide supporting documentation.
B. Post-filing activity in the Underlying Qui Tam.
4.6 Immediately after filing the Underlying Qui Tam, Ballew and/or his counsel met with
Assistant U.S. Attorneys in the Northern District of Texas to further explain the claims and deliver all relevant
documents. From the date of his first disclosure through the conclusion of the litigation, Ballew delivered to the
Defendants approximately 3900 pages of documents on microfiche (which was prepared at Ballew’s expense) as
well as over 1000 pages of documents and reports in hard copy format. Ballew also granted the Defendants open
and unrestricted access to another three (3) filing cabinets of documents. Ballew and/or his counsel also
participated in numerous meetings and telephone conference calls with attorneys and representatives of the
Defendants explaining the case, reviewing the documents and other evidence produced, rebutting the arguments
made by AHC and AVCO, and assisting with the preparation of document and information requests.
4.7 The documents and information provided by Ballew to the Defendants collectively revealed the
following specific deficiencies in the AVCO engines installed in the SRR helicopters:
(i) Power turbine wheel cracks in the AVCO engines.
The power turbine wheel is a one-piece cast disc/blade assembly with an inertially welded shaft.
High stress created during the manufacturing process caused cracks at the trailing edge of the root of the blade
during engine operation. The monolithic wheel also exacerbated resonances and vibrations, which further aggravated
the wheel cracks.
(ii) Gas Producer turbine blade unwrap and blade tip separation.
Blade unwrap took place gradually during engine operation as the result of the high centrifugal
force acting on the trailing edge of the tip of the airfoil. Blade unwrap is detected by a very gradual loss of power.
Blade tip separation due to stress rupture occurred in the vicinity of the blade and also could lead to excessive
vibrations. The problems were traced to insufficient high temperature strength of the blade.
(iii) Axial compressor blade damage.
Damage to the axial compressor included blade cracking and foreign object damage (i.e., nicks,
scratches and erosion). Blade cracking occurred as a result of fatigue failure caused by a stress riser from a
material defect. The foreign object damage also caused fatigue failure and blade erosion that reduced compressor
performance.
(iv) Gas Producer nozzle heat erosion.
Some gas producer nozzles were found to be cracked and burned by heat during engine operation
due to substandard air cooling, leaking ring seals and defective materials.
(v) Oil coking.
Oil coking (i.e., the formation of carbon) occurred in the rear bearing support housing due to
extremely high engine temperatures. The carbon, in turn, clogged filters, restricted oil flow, scored mating surfaces
and broke down seals.
(vi) Production changes.
Production changes were implemented without being submitted in advance for USCG approval. For
example, parts that did not conform to the principal contract between AHC and the USCG were being incorporated
into the SRR helicopters by AHC and AVCO without securing advance approval by the USCG as required by the
principal contract.
The documents and information provided to the Defendants by Ballew also confirmed that AHC,
AVCO and the USCG were aware of many of these problems, but took no steps to remedy them.
4.8 During May 1989, one year after the Underlying Qui Tam was filed, and unbeknownst to
Ballew, Robert L. Vogel (“Vogel”), the first year DOJ lawyer assigned to the case, T.W. Sechler (“Sechler”),
representing the USCG, and possibly others, commenced serious settlement discussions with AHC and AVCO.
Vogel subsequently revealed the existence of the settlement negotiations to Ballew during September 1989. From
September 1989 until the Underlying Qui Tam was settled, Ballew repeatedly asked Vogel for details about
the negotiations and offered to assist with the negotiations to ensure that a fair and equitable settlement for all
parties was reached. Ballew’s requests repeatedly were denied.
4.9 During September 1989, Vogel further told Ballew that the Defendants had identified “over $500
million of contract claims against AHC and AVCO,” but affirmatively represented to Ballew that the contract claims
“were not under the qui tam case.” Ballew strongly (and repeatedly) disagreed with Vogel’s position about
the contract claims, because the contract claims did not exist at the time the Underlying Qui Tam was filed
and, in fact, clearly arose out of the investigation of the Underlying Qui Tam.
4.10 Settlement negotiations (excluding Ballew), nevertheless, continued. On February 6, 1990,
DOJ, the USCG and AVCO entered into a Memorandum of Understanding (“MOU”) to settle the case. Ballew was
not a party to the MOU. In fact, Ballew purposely was not involved by the parties in negotiating the MOU, provided
with drafts of the MOU, or provided with a copy of the executed MOU. Footnotes 1 AHC
mysteriously was not a party to the MOU even though all Underlying Qui Tam claims against AHC would be
dismissed under the proposed settlement.
4.11 The MOU outlined the exact terms of the settlement between AVCO, the DOJ and the USCG.
Among other things, AVCO agreed to:
After the MOU was executed, it became Vogel’s task to secure Ballew’s buy-in to that portion of
the settlement the Defendants chose to disclose to Ballew. Ballew’s approval of the settlement was critical because
pursuant to Paragraph 6(a) of the MOU, the settlement could not be consummated without it.
4.12 The $17 million cash payment was disclosed to the court and Ballew prior to the
consummation of the settlement. The existence of the PBTH contract (but not its terms, the fact that the
Defendants assigned settlement value to it or the value assigned) was disclosed to the court and Ballew prior to
the consummation of the settlement. The nature and existence of the Transition Period Agreement (and the value
assigned to it by the Defendants), however, was not disclosed to the court and Ballew prior to the consummation of
the settlement.
4.13 Numerous discussions ensued between Ballew and/or his lawyer and Vogel regarding the
proposed settlement.Vogel repeatedly told Ballew that Ballew’s claims were settled for $17 million (and only $17
million), and he (Vogel) would recommend that Ballew receive 15% of the $17 million if Ballew would agree to the
settlement. Vogel repeatedly represented to Ballew that the PBTH contract related solely to contract claims
unrelated to Ballew’s allegations and the documents and information provided to the Defendants by Ballew in the
Underlying Qui Tam. Ballew repeatedly asked Vogel for detailed information about the PBTH contract, including
a copy of the executed MOU, to confirm Vogel’s representations, but his requests were refused.
4.14 After numerous communications between Ballew and/or his lawyer and Vogel did not result in
Ballew’s buy-in to the proposed settlement, a then frustrated Vogel resorted to strong-arm tactics. Notwithstanding
the fact that Ballew risked his career and reputation to bring the United States a case that resulted in a highly
favorable recovery, Vogel threatened to oppose Ballew’s claim for a share of the settlement, and seek Ballew’s
dismissal as the Relator, if Ballew did not go along with the settlement.Under threat from the federal government,
Ballew finally executed his Waiver and Release Agreement on June 29, 1990, and received his 15% share of the
$17 million cash payment.
4.15 On July 10, 1990, the United States filed its formal Notice of Intervention and Motion to
Dismiss all claims against AHC and AVCO in the Underlying Qui Tam even though AHC, at that time,
apparently had not contributed anything to the settlement. Shortly thereafter, the Court dismissed the Underlying
Qui Tam.
C. Post-settlement revelations.
4.16 Ballew first learned about both the initial six (6) year term and detailed deal points of the
PBTH contract when he first saw a copy of the executed MOU during March 1991. This also is the first time that
Ballew became aware of the existence of the Transition Period Agreement. During early 1996, and with knowledge
that the PBTH contract was scheduled to expire, Ballew sent a formal request to the USCG for a Contract Closeout
Summary (“CCS”), the internal USCG contract recap document, to confirm whether the PBTH contract and
Transition Period Agreement, in fact, remedied contract claims unrelated to the Underlying Qui Tam (as the
Defendants repeatedly had represented). The USCG instructed Ballew to send a formal FOIA request for the
information, which Ballew sent on April 1, 1996. Footnote 2
4.17 On or about July 29, 1996, Ballew received a packet of documents in response to the USCG
FOIA Request that revealed, for the first time, that the PBTH contract and Transition Period Agreement directly
related to Ballew’s claims and allegations in the Underlying Qui Tam as well as being critical (and integral)
components of the Underlying The meat of the settlement for the Coast Guard is the six year, commercial derivative PBTH agreement. … The
Coast Guard specifically requested this arrangement as part of any potential settlement [of the Underlying Qui
Tam].
The Sechler Memorandum further details the specific terms and mechanics of the PBTH contract
and Transition Period Agreement and how these agreements remedy the very claims and allegations asserted by
Ballew in the Underlying Qui Tam. A true copy of the Sechler Memorandum is attached as Exhibit “A.”
4.18 In response to the USCG FOIA Request, Ballew also received a March 2, 1990 memorandum
entitled “Analysis of Settlement,” which was authored by Phillip M. Gillihan, USCG (the “Gillihan Memorandum”).
The Gillihan Memorandum further confirms that the PBTH contract and Transition Period
Agreement were the USCG’s preferred vehicles for settling the Underlying Qui Tam claims and allegations
on a going forward basis. These types of settlements were preferred because a simple cash payment would be
deposited in the miscellaneous receipts account of the U.S. Treasury while the PBTH contract and Transition
Period Agreement would inure directly to the benefit of the USCG. Consistent with the DOJ’s analysis of the PBTH
contract in its July 10, 1990 Press Release, the Gillihan Memorandum estimated the value of the initial six year
period of the PBTH contract to be $30-60 million. The Gillihan Memorandum also values the Transition Period
Agreement at $1.5 million. A true copy of the Gillihan Memorandum is attached as Exhibit “B.”
4.19 Pursuant to a November 29, 1993 Memorandum authored by Thomas S. Johnson of the
USCG (referring to the PBTH contract), and on information and belief, the PBTH contract (or a variation thereof) has
been extended an additional twenty-four (24) years (i.e., the balance of the useful life of the SRR helicopters). The
potential for the PBTH contract being extended for twenty-four years and the value assigned by the Defendants to
such an extension were not disclosed to the court or Ballew prior to the consummation of the settlement.
4.20 After processing the shocking revelations contained in the Sechler Memorandum and Gillihan
Memorandum, Ballew, on September 11, 1996, sent a FOIA request to the DOJ seeking to confirm the
corresponding DOJ analysis of the Underlying Qui Tam settlement (the “DOJ FOIA Request”). Although the
DOJ refused to produce to Ballew its settlement analysis under a claim of privilege, Ballew, nevertheless, received a
packet of documents in response to his DOJ FOIA Request during December 1997.
4.21 The DOJ documents also contained shocking revelations about the nature and extent of
the Underlying Qui Tam settlement. Perhaps the most revealing document is the March 15, 1990
Memorandum for File authored by Stuart M. Gerson, Assistant Attorney General, Civil Division (the “Gerson
Memorandum”), which addresses, for the first time anywhere, what AHC contributed to the settlement:
In addition, authority is granted to accept Textron’s [AVCO’s] offer to pay the Government $17
million (with interest from November 2, 1989) and other valuable consideration, and to accept Aerospatiale’s offer
to dismiss administrative claims against and to grant other valuable consideration to the Government, in settlement
of the above-referenced suit [the Underlying Qui Tam], and to move to dismiss that suit with prejudice.
(emphasis added).A true copy of the Gerson Memorandum is attached as Exhibit “C.”
4.22 Pursuant to the agreement referenced in the Gerson Memorandum, AHC and the USCG filed
a Joint Motion to Dismiss AHC’s administrative claims with the Department of Transportation (“DOT”) Board of
Contract Appeals. On July 24, 1990, two weeks after the Underlying Qui Tam settlement was announced,
the final order dismissing AHC’s administrative claims, which totaled approximately $26,440,130 was entered. The
Defendants never revealed to the court and Ballew the nature or existence of this component of the Underlying
Qui Tam settlement prior to the consummation of the settlement.
4.23 On or about September 15, 1998, Ballew secured a copy of the December 1989
Assessment of the U.S. Coast Guard’s HH-65A Helicopter Engine Options (the “Assessment”). The Assessment
was prepared for the DOT Assistant Secretary for Administration by the DOT Research and Special Programs
Administration Transportation Systems Center. The Assessment is the final piece of the Underlying Qui Tam
settlement puzzle since a substantial portion of the Assessment focuses on the LTS 101 [AVCO] Engine
Improvement Program (a.k.a. the PBTH contract). The Engine Improvement Program discussion specifically focuses
on the very AVCO engine shortcomings identified in the claims, allegations and information provided by Ballew to
the Defendants in the Underlying Qui Tam. In short, the Assessment is the final link between the Underlying
Qui Tam settlement and the PBTH contract and Transition Period Agreement as integral components of the
settlement.
4.24 The following table summarizes the various components of the Underlying Qui Tam
settlement proceeds identified to date by Ballew:
Ballew paid 15% as the qualified Relator The extension of the PBTH contract was disclosed to the court and Ballew prior to the
consummation of the Underlying Qui Tam settlement. Its terms and value, however, were not. In fact,
the Defendants repeatedly represented to Ballew that the PBTH contract did not relate to Ballew’s claims and
allegations in the Underlying Qui Tam. Total minimum value of the Underlying Qui Tam settlement proceeds on which Ballew has not been paid his fair share 4.25 Based on the above post-settlement revelations, which have taken Ballew almost ten years to
piece together through FOIA requests and FOIA request litigation, Ballew, in good faith, requested payment for his
statutory share of that portion of the Underlying Qui Tam settlement proceeds intentionally concealed from
the court and him. To date, the DOJ has refused Ballew’s request. This action has resulted.
V.
5.1 The preceding factual statements and allegations are incorporated herein by reference.
5.2 The final judgment dismissing the Underlying Qui Tam, which was entered without any
fault or negligence on the part of Ballew, was obtained by fraud and, in equity and good conscience, should not be
allowed to stand. Specifically, that portion of the Underlying Qui Tam final judgment computing Ballew’s
statutory share of the settlement proceeds should not be allowed to stand because it is based on the Defendants’
fraudulent misrepresentations and concealment of the true nature and extent of the Underlying Qui Tam
settlement proceeds. At this time, Ballew does not have an adequate remedy at law other than this Rule 60(b)
independent action.
5.3 The fraud committed by the Defendants was “extrinsic” to the Underlying Qui Tam in that the concealment of the
true nature and extent of the Underlying Qui Tam settlement proceeds does not pertain to the substantive issues
involved in the Underlying Qui Tam; the Defendants’ fraud simply relates to the amount of Ballew’s statutory share
of the Underlying Qui Tam settlement proceeds.
5.4 The Defendants’ misrepresentations and omissions were made intentionally, or made recklessly without any
knowledge of their truth.
The Defendants made the above misrepresentations and omissions with the intent to conceal from the court and
Ballew the full nature and extent of the Underlying Qui Tam settlement, among other things, to minimize Ballew’s statutory
share of the total settlement proceeds.
The Defendants further made the above misrepresentations and omissions, in conjunction with their strong arm
tactics, with the intent that Ballew act (or not act) upon them.
Ballew, in fact, relied upon the Defendants’ misrepresentations and omissions to his detriment.
Had the Defendants disclosed to Ballew the full value of the Underlying Qui Tam settlement, Ballew, at the
very least, would not have settled for just 15% of the $17 million cash portion of the settlement proceeds, and presented to the
court his claim for a share of the total settlement proceeds.
The Defendants’ fraudulent concealment of the true nature and extent of the Underlying Qui Tam settlement
proceeds prevented Ballew from having an opportunity to present a claim for his statutory share of the total Underlying Qui
Tam settlement proceeds and, in fact, deprived Ballew of his day in court.
5.5 The Defendants’ wrongful actions, as set forth in Section IV and Sections VI-XIV of this First Amended Complaint, were
egregious.
Ballew, therefore, brings this Rule 60(b) independent action in equity to prevent
(and correct) a grave miscarriage of justice.
VI.
RULE 60(b) INDEPENDENT ACTION BASED ON THE DEFENDANTS’ FRAUD ON THE COURT
6.1 The preceding factual statements and allegations are incorporated herein by reference.
6.2 By their above wrongful actions, DOJ (as officers of the Court) and on behalf of the
United States deliberately planned and entered into a scheme with the USCG (and the defendants in the Underlying Qui Tam)
to fraudulently subvert the judicial process by misleading the Court as to the true nature and extent of the Underlying Qui Tam
settlement proceeds and, in the process, shortchanged Ballew his statutory share of the total settlement proceeds.
6.3 The Defendants’ unconscionable conduct resulted in a far greater injury than the injury
suffered by Ballew.
By deliberately concealing the true nature and extent of the Underlying Qui Tam settlement proceeds, the
Defendants (some of whom are officers of the Court):
(i) defiled the Court in such a way that the judicial machinery could not perform in its
usual manner;
(ii) injured the American public by concealing the massive mechanical and structural
defects of the SRR helicopters (and corresponding private sector helicopters)manufactured and serviced by the Underlying Qui Tam
defendants;
(iii) injured American taxpayers by concealing that the United States dismissed over $26 million of
administrative claims against the Underlying Qui Tam defendants relating to the above defects; and
(iv) injured American taxpayers by propagating the DOJ scheme of not involving qui tam relators
in settlement negotiations, not disclosing the true nature and extent of qui tam settlement proceeds and using strong-arm
tactics at the conclusion of successful False Claims Act cases in an effort to minimize qui tam relators’ statutory share
of qui tam recoveries.
This scheme acts as a disincentive to potential qui tam relators to come forward and
report fraud on the government which, in turn, injures American taxpayers.
6.4 The Defendants’ egregious conduct, as set forth in Section IV and Sections VI-XIV of this First Amended
Complaint, corrupted the judicial process itself.
Ballew brings this Rule 60(b) independent action to remedy the Defendants’ egregious fraud
on the court.
IN SUPPORT OF HIS RULE 60(b) INDEPENDENT ACTION IN EQUITY AND BASED ON THE DEFENDANTS’ FRAUD ON THE COURT,
BALLEW FURTHER ASSERTS THAT THE DEFENDANTS COMMITTED THE FOLLOWING WRONGFUL ACTS:
VII.
FRAUD, CONSTRUCTIVE FRAUD, AND FRAUDULENT CONCEALMENT
7.1 The preceding factual statements and allegations are incorporated herein by reference.
7.2 By virtue of Ballew’s relationship with the Defendants as the Relator in the Underlying Qui Tam, the
Defendants’ superior and unrestrained power to control all aspects of the prosecution and settlement of the Underlying Qui Tam
(including the flow of information to Ballew), and Ballew’s resulting reliance on the Defendants, the Defendants entered into
special and confidential relationships, relationships of trust, and fiduciary relationships with Ballew.
DOJ employees also were officers of the court.
p align=justify>As such, and at the very least, the Defendants had an affirmative duty to disclose to the court and to Ballew all
of the components of the Underlying Qui Tam settlement, and pay Ballew his statutory share of the total settlement proceeds.
7.3 Ballew risked his career and reputation to bring to the United States a case that resulted in a highly favorable
recovery.
In fact, if only the $17 million cash payment is considered, the Underlying Qui Tam settlement was the
largest qui tam settlement in history at that time.
The Defendants, however, rewarded Ballew’s patriotism by intentionally misrepresenting and failing to disclose to
the court and to Ballew material aspects of the Underlying Qui Tam settlement (as set forth above).
7.4 The Defendants’ misrepresentations and omissions were made intentionally, or made recklessly without any
knowledge of their truth.
The Defendants made the above misrepresentations and omissions with the intent to conceal from the court and
Ballew the full nature and extent of the Underlying Qui Tam settlement, among other things, to minimize Ballew’s statutory
share of the total settlement proceeds.
The Defendants further made the above misrepresentations and omissions, in conjunction with their strong arm
tactics, with the intent that Ballew act (or not act) upon them.
Ballew, in fact, relied upon the Defendants’ misrepresentations and omissions to his detriment.
Had the Defendants disclosed to Ballew the full value of the Underlying Qui Tam settlement, Ballew, at the
very least, would not have settled for just 15% of the $17 million cash portion of the settlement proceeds, and presented to the
court his claim for a share of the total settlement proceeds.
7.5 The Defendants’ (i) covert settlement negotiations with AHC and AVCO commencing in May 1989, (ii) affirmative
misrepresentations, (iii) silence (when they had a duty to disclose), (iv) failure to pay Ballew his statutory share of the total
Underlying Qui Tam settlement, and (iv) enjoyment and retention of the resulting financial benefits constitute fraud,
constructive fraud and fraudulent concealment.
VIII.
NEGLIGENT MISREPRESENTATION
8.1 The preceding factual statements and allegations are incorporated herein by reference.
8.2 By virtue of Ballew’s relationship with the Defendants as the Relator in the Underlying Qui Tam,
the Defendants’ superior and unrestrained power to control all aspects of the prosecution and settlement of the Underlying Qui
Tam (including the flow of information to Ballew), and Ballew’s resulting reliance on the Defendants, the Defendants entered
into special and confidential relationships, relationships of trust, and fiduciary relations with Ballew.
DOJ employees also were officers of the court.
As such, and at the very least, the Defendants had an affirmative duty to disclose to the court and to Ballew all
of the components of the Underlying Qui Tam settlement, and pay Ballew his statutory share of the total settlement proceeds.
8.3 Ballew risked his career and reputation to bring to the United States a case that resulted in a highly
favorable recovery.
In fact, if only the $17 million cash payment is considered, the Underlying Qui Tam settlement was the
largest qui tam settlement in history at that time.
The Defendants, however, rewarded Ballew’s patriotism by negligently misrepresenting and failing to disclose to
the court and to Ballew material aspects of the Underlying Qui Tam settlement (as set forth above).
8.4 The Defendants’ negligent misrepresentations and omissions were made recklessly without any knowledge of their
truth. The Defendants’ negligent misrepresentations and omissions concealed from the court and Ballew the full value of the
Underlying Qui Tam settlement and, as a result, Ballew was not paid his statutory share of the total settlement proceeds.
Ballew relied upon the Defendants’ negligent misrepresentations and omissions to his detriment.
Had the Defendants disclosed to Ballew the full value of the Underlying Qui Tam settlement, Ballew, at the
very least, would not have settled for just 15% of the $17 million cash portion of the settlement, and presented to the Court his
claim for a share of the total settlement proceeds.
8.5 The Defendants’ (i) above wrongful actions, (ii) failure to pay Ballew his statutory share of the total
Underlying Qui Tam settlement proceeds, and (iii) enjoyment and retention of the resulting financial benefits constitute
negligent misrepresentations and omissions.
IX.
VIOLATION OF THE FALSE CLAIMS ACT
9.1 The preceding factual statements and allegations are incorporated herein by reference.
9.2 By paying Ballew 15% of the cash portion of the Underlying Qui Tam settlement, the Defendants confirmed
Ballew’s status as a qualified Relator under the False Claims Act, 31 U.S.C. §§ 3729-3733, for purposes of the Underlying Qui Tam.
As such, and pursuant to 31 U.S.C. § 3730(d), Ballew should have received at least 15% (but not more than 25%) of
the total Underlying Qui Tamsettlement proceeds.
9.3 The total Underlying Qui Tam settlement proceeds included the $17 million cash payment plus the value
to the United States of the PBTH contract, extended PBTH contract, Transition Period Agreement, dismissed administrative claims and
other valuable consideration provided by AHC and AVCO.
The Defendants’ failure to pay Ballew his statutory share of the total Underlying Qui Tam settlement proceeds
constitutes a violation of 30 U.S.C. § 3730(d)(1).
X.
BREACH OF FIDUCIARY DUTY
10.1 The preceding factual statements and allegations are incorporated herein by reference.
10.2 As set forth above, the relationships between Ballew and the Defendants were special and confidential
relationships, relationships of trust and fiduciary relationships at common law.
10.3 Certain fiduciary obligations arose from these relationships as a matter of law.
As fiduciaries, the Defendants owed Ballew
The Defendants were obligated to exercise the highest degree of care in carrying out their actual and implied
obligations to Ballew under their respective relationships with Ballew.
10.4 The Defendants, however, breached their fiduciary duties to Ballew by, inter alia:
(i) affirmatively misrepresenting to Ballew that the PBTH contract was not related in any way to the claims, allegations, documents
and information asserted and provided to the United States by Ballew in the Underlying Qui Tam and, therefore, not a part of the
Underlying Qui Tam settlement;
(ii) affirmatively concealing from Ballew the very nature, existence and value of the extended PBTH contract, Transition Period
Agreement, dismissed administrative claims and other valuable consideration as integral components of the Underlying Qui Tam
settlement;
(iii) failing to pay Ballew his statutory share of the total proceeds of the Underlying Qui Tam settlement; and forcing Ballew
to spend ten years of his life piecing together the true components and value of the Underlying Qui Tam settlement via FOIA
requests (and FOIA request litigation) when the total settlement proceeds should have been disclosed to Ballew (and the court), and
Ballew’s statutory share of the total settlement proceeds paid to him, at the time the Underlying Qui Tam was settled.
The Defendants willfully and wantonly breached the fiduciary duties they owed to Ballew or, at the very least, committed these breaches with conscious indifference and reckless disregard of Ballew’s rights and interests.
XI.
BREACH OF THE DUTY OF GOOD FAITH AND FAIR DEALING
11.1 The preceding factual statements and allegations are incorporated herein by reference.
11.2 The Defendants’ above wrongful actions were committed during the time that they were engaged in fiduciary and
special relationships with Ballew.
As such, the Defendants’ wrongful actions also constitute breaches of the common law duty of good faith and fair
dealing owed by the Defendants to Ballew.
XII.
VIOLATION OF THE FIFTH AMENDMENT TO THE UNITED STATES CONSTITUTION
12.1 The preceding factual statements and allegations are incorporated herein by reference.
12.2 The documents and information obtained, organized, evaluated, analyzed and delivered by
Ballew to the Defendants in support of the Underlying Qui Tam were the intellectual property of Ballew. The
Defendants utilized Ballew’s intellectual property to secure a highly favorable settlement in the Underlying Qui
Tam ostensibly for the beneficial use and enjoyment of the public. Ballew, however, was not justly compensated
for the public use of his intellectual property (as mandated by the False Claims Act) principally because the
Defendants affirmatively misrepresented and concealed the total Underlying Qui Tam settlement proceeds.
The Defendants’ wrongful actions violated the “just compensation” clause of the Fifth Amendment to the United
States Constitution.
XIII.
CONVERSION
13.1 The preceding factual statements and allegations are incorporated herein by reference.
13.2 As set forth above, Ballew is rightfully entitled to his statutory share of the total proceeds of
the Underlying Qui Tam settlement proceeds. By their fraudulent concealment of the total Underlying Qui
Tam settlement proceeds, and failure to pay Ballew his statutory share of such proceeds, the Defendants are
unlawfully and wrongfully exercising dominion and control over Ballew’s statutory share of the total settlement
proceeds to the exclusion and defiance of Ballew’s right to receive and possess such funds. The Defendants’
wrongful acts, therefore, constitute conversion and fraudulent conversion at common law.
XIV.
UNJUST ENRICHMENT
14.1 The preceding factual statements and allegations are incorporated herein by reference.
14.2 The Defendants have been unjustly enriched by their above wrongful actions. The Defendants,
at the very least, have been (and continue to be) unjustly enriched by the Defendants’ unlawful retention of Ballew’s
statutory share of the total Underlying Qui Tam settlement proceeds (and the corresponding time value of
money). Accordingly, Ballew seeks to impose a constructive trust over (and recover) all amounts by which the
Defendants have been unjustly enriched.
XIV.
RELIEF REQUESTED
15.1 The preceding factual statements and allegations are incorporated herein by reference.
15.2 Minimum damages based on the total Underlying Qui Tam settlement proceeds.
As a direct and proximate result of the Defendants’ wrongful actions, Ballew intentionally was
misinformed about the total Underlying Qui Tam settlement proceeds and, as a result, not paid his statutory
share of the total settlement proceeds. At the very least, Ballew should be paid 15% of the total value to the United
States of the PBTH contract, extended PBTH contract, Transition Period Agreement, dismissed administrative
claims and other valuable consideration received. Under this calculation, and at the very least, Ballew should be
paid $49,191,020 (i.e., $327,940,130 15%) plus an appropriate factor for the time value of money. Ballew’s (unpaid
to date) share of the total Underlying Qui Tam settlement proceeds was reasonably foreseeable by the
Defendants, and exceeds the minimum jurisdictional limits of this Court.
15.3 Increased Relator’s percentage of the total Underlying Qui Tam settlement proceeds.
Ballew further asserts that his percentage share of the total Underlying Qui Tam settlement
proceeds should be increased from 15% to 25%. The documents and information obtained, organized, evaluated,
analyzed and delivered by Ballew to the United States in support of the Underlying Qui Tam were the
intellectual property of Ballew. The Defendants willingly took Ballew’s intellectual property and used it to generate a
substantially larger settlement than what the Defendants disclosed to the court and Ballew. As such, the
documents, information and analyses provided by Ballew to the United States had greater value to the United
States than originally reported. Ballew, therefore, should receive 25% of the total Underlying Qui Tam
settlement proceeds as compensation for the true value of his intellectual property, Defendants’ intentional
misinformation and concealment of the total value of the Underlying Qui Tam settlement, and Ballew’s efforts
over the last decade to confirm and disclose the Defendants’ wrongful actions to the Court.
15.4 Attorneys’ fees and litigation expenses.
Ballew also is entitled to recover his reasonable and necessary attorneys' fees, litigation expenses
and court costs in prosecuting this action pursuant to Universal Oil Products Co. v. Root Ref. Co., 328 U.S.
575 (1946).
15.5 Jury Demand.
Ballew respectfully demands a trial by jury of this Rule 60(b) independent action.
WHEREFORE,
Plaintiff Robert C. Ballew requests that the Defendants be cited to appear and answer this lawsuit and, upon final
trial or hearing, judgment be awarded against the Defendants, jointly and severally for:
Submitted, RICHARD L. COFFMAN, P.C.
CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing First Amended Complaint has been served on counsel for the Defendants, as set forth below, via certified mail, return receipt requested, on September ___, 1999. ________________________________
David W. Ogden, Esq.
Michael F. Hertz, Esq.
ENDNOTES:
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