United States District Court, Central District of Illinois, Springfield Division
September 17, 1996
UNITED STATES OF AMERICA, EX REL., WILLIAM RUETER, PLAINTIFF,
RICHARD SPARKS AND DALE WIEWEL, D/B/A SPARKS & WIEWEL, A PARTNERSHIP, DEFENDANTS.
The opinion of the court was delivered by: Richard Mills, District Judge:
False Claims Act.
Judgment for defendants.
Sparks & Wiewel Construction Company ("S & W") is a
partnership in the business of constructing and repairing heavy
highways and bridges. William Rueter, a former employee of S &
W, brought this action against Richard Sparks and David Wiewel,
d/b/a Sparks & Wiewel, under the qui tam provisions of the
False Claims Act, 31 U.S.C. § 3729 et seq.*fn1 Rueter claimed
Defendants knowingly submitted false hours, wage rates, and
federal tax and FICA withholdings for the purpose of acquiring
federal funds under false pretenses.
From September 1989 through May 1990, Defendants were
contractors with respect to Project No. ACBHF — 83(6), in Pike
County, Illinois, for highway and bridge work. The project was
federally funded. Therefore, the wages paid were subject to the
minimum prevailing standards pursuant to the Davis-Bacon Act,
40 U.S.C. § 276a et seq. Section 2 of the Copeland Act, 40 U.S.C. § 276c,
requires contractors of federally funded projects to
submit weekly certified payroll records of wages paid to their
employees to assure that minimum wages prevailing in the area
are being paid. The contract for the Pike County Project
contained a document titled the "General Wage Decision" which
stated the wages to be paid to various classes of workers on
Plaintiff worked for S & W on the Pike County project as an
operating engineer and ran the heavy equipment on the dozers,
scrapers and motor graders. The prevailing wage for this job
classification was $18.00 an hour. For approximately one-half
hour of every day, Plaintiff would perform maintenance work on
the machines. Maintenance work consisted of checking levels of
water and oil in the machines and greasing the machines.
Because the "General Wage Decision" did not provide a
classification nor a prevailing wage rate for maintenance work,
Richard Sparks ("Sparks"), the partner in charge of determining
wage rates for employees, believed that S & W was not required,
under the Davis-Bacon Act, to pay prevailing wages for time
spent on maintenance. Therefore, as was S & W's practice and
policy, Plaintiff was paid $8.00 an hour for the time spent
performing maintenance work.
This lawsuit arose, however, because of the way Sparks
reported time and wages on the
certified payroll record and the way the employees were
actually paid. Sparks was only reporting the $18.00 an hour
wage rate on the certified payroll record and not reporting the
$8.00 an hour paid for maintenance work, even though one half
of the time Sparks included the time employees spent performing
maintenance work on the certified payroll record. For example,
an employee may have worked 8 hours as a machine operator and
one hour on maintenance. Approximately one half of the time,
the certified payroll record would indicate only that the
employee worked 7 hours at $18.00 an hour; other times it would
reflect that the employee worked 8 hours, but at the $18.00 an
hour rate for all 8 hours, rather than what the employee was
actually being paid, which was 7 hours at $18.00 an hour and
one hour at $8.00 an hour.
A description of how payroll records were completed is
necessary. Sparks completed all payroll and wage records
manually. The certified payroll record required the following
information: employee name and address, days and hours worked,
total hours worked, overtime hours worked, rate of pay, amount
earned, federal and state withholding, net pay. The information
used to complete the certified payroll record came from the
foreman's worksheet, titled the "Daily Cost Report," which was
completed on a daily basis by the foreman. This worksheet
provided information about the number of hours an employee
spent in any given job classification. Information to complete
the employees' actual paychecks was gathered from the
employees' time cards. The time cards were not used to complete
the certified payroll record because it would be very time
consuming due to the number of employees and the different job
classifications the employees performed.
The False Claims Act (FCA) imposes liability on any person
who "knowingly presents, or causes to be presented, to an
officer or employee of the United States Government . . . a
false or fraudulent claim for payment or approval." "Knowing"
and "knowingly", for purposes of this section, mean that a
(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or
falsity of the information; or
(3) acts in reckless disregard of the truth or
falsity of the information.
No proof of specific intent to defraud is
31 U.S.C. § 3729(b).
Plaintiff must show the required scienter to state a claim
under the False Claims Act. Negligence is not actionable.
Hindo v. University of Health Sciences, 65 F.3d 608 (7th Cir.
1995), cert. denied, ___ U.S. ___, 116 S.Ct. 915, 133 L.Ed.2d
846 (1996). "`The requisite intent is the knowing presentation
of what is known to be false,' as opposed to innocent mistake
or mere negligence." United States ex rel. Anderson v. Northern
Telecom, Inc., 52 F.3d 810 (9th Cir. 1995), citing United
States ex rel. Hagood v. Sonoma County Water Agency,
929 F.2d 1416, 1421 (9th Cir. 1991). See also X Corp. v. Doe,
816 F. Supp. 1086, 1093 (E.D.Va. 1993) ("The heart of fraud is an
intentional misrepresentation. A violation of a regulatory
provision, in the absence of a knowingly false or misleading
representation, does not amount to fraud.")
At most, Sparks was only negligent in this case.
Plaintiff presented only one witness in support of his claim
— Richard Sparks, the defendant. To succeed in his claim under
the FCA, Plaintiff must demonstrate, by a preponderance of the
evidence, that the Defendants had either actual knowledge,
acted with deliberate ignorance, or acted in reckless disregard
for the truth. Sparks did not have actual knowledge that he was
presenting a false claim to the Government. He testified that
he thought maintenance hours need not be included on the
certified payroll record because the "General Wage decision"
did not provide a classification for maintenance. Further, S &
W followed this practice for 25 years.
Similarly, the evidence does not demonstrate that Sparks
acted in deliberate ignorance
of the truth or falsity of the information nor in reckless
disregard of the truth or falsity of the information. S & W was
audited in October 1990 by the United States Department of
Labor to ensure compliance with the Davis-Bacon and Related
Acts. S & W was informed of areas of non-compliance, but the
audit did not indicate that the proper rate for maintenance
work was not being paid to the employees. In fact, it was not
until 1995 that the Federal Department of Labor informed S & W
that maintenance time should be paid the same scale as the
operator's classification. Sparks did not know, or have reason
to know, until 1995 that S & W's procedure of paying
maintenance hours at the rate of $8.00 an hour was improper.
The evidence presented to the Court does not rise to the
level of "deliberate ignorance" or "reckless disregard."
Plaintiff has failed to meet his burden. This Court concludes
from the evidence that the inclusion of maintenance hours on
the certified payroll records was due to negligence.
Ergo, for the above reasons, Defendants' Motion for Directed
Verdict (d/e 66) (treated as a motion for judgment as a matter
of law pursuant to Fed.R.Civ.P 50) is ALLOWED, with each party
to bear its own costs.