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April 27, 2004.


The opinion of the court was delivered by: ROBERT GETTLEMAN, District Judge


In his second amended complaint, relator-plaintiff, Dimitri Yannacopolous ("relator"), a former General Dynamics employee, alleges that defendants General Dynamics and Lockheed Martin Corporation ("GD" and "Lockheed") violated the False Claims Act, 31 U.S.C. § 3279 ("FCA") by submitting false claims in connection with F-16 fighter aircraft sales to Greece. Defendants, in separate motions, have moved to dismiss the second amended complaint, arguing: (1) the complaint should be dismissed pursuant to Fed.R.Civ.P. 12(b)(1) or, alternatively, Fed.R.Civ.P. 12(b)(6);*fn1 and (2) plaintiff fails to plead fraud with particularly as required by Fed.R.Civ.P. 9(b).*fn2 For the reasons stated below, the court denies defendants' motions to dismiss in their entirety. FACTS*fn3

According to plaintiff's' second amended complaint, relator is a Greek citizen and consultant. During all times relevant to this action, defendant GD, through its Fort Worth Division, was the leading U.S. contractor in the development, manufacture, assembly and sales of F-16 fighter aircraft and support services to the U.S. and foreign governments. In 1978, the Greek government began "shopping" for fighter jets, ultimately electing to purchase 40 F-16s. In 1985, Greece signed a letter of intent ("LOI") to purchase 40 F-16s from GD. GD and Greece entered into a final contract in January 1987. Defendant Lockheed purchased the Fort Worth Division from GD effective at the end of February 1993, and is alleged by relator to be GD's successor in interest to all of GD's F-16 business, including the Greek contract.

  Pursuant to a 1979 written consulting agreement with GD, relator assisted GD in its efforts to persuade the Greek government to select the F-16. That agreement expired in October 1983, and was not renewed. After 1983, relator had no further involvement in efforts to sell the F-16 to Greece.

  U.S. taxpayer funds financed the F-16 sales. The Foreign Military Sales Financing Program ("FMS") established by the Arms Control Export Act, 22 U.S.C. § 2751 (the "Act") authorizes sales of American military equipment from the U.S. Government to foreign allies. The Act allows the U.S. to provide loans, subsidized loans and grant funds to foreign allies so that they can purchase American military equipment directly from the manufacturer. Using FMS funds, the Greek government purchased the F-16s directly from GD. Pursuant to the Act, GD submitted the LOI to the Defense Security Assistance Agency ("DSAA")*fn4 for approval of the contract terms. In February 1986, GD submitted a signed contractor's certification to the DSAA. As a manufacturer selling military equipment to a foreign government under the FMS program, GD was required to meet certification requirements, guidelines and restrictions as monitored by the DSAA. GD was also required to submit the final contract for DSAA approval. GD was further required to provide Greece with DSAA invoices, quarterly waybills and DD250*fn5 forms for each payment claim. In turn, DSAA relied on those documents when releasing FMS funds. GD began receiving FMS funds as soon as the LOI and mutually agreed draft contract received U.S. Government approval in April 1986. The contract was finalized in January 1987, and contained 11 contract line items ("CLINs") that specified the price for each part of the contract (airframe, spare parts, post-sale maintenance, etc.) After the final contract, GD (then Lockheed) submitted at least seven contract modifications stating adjustments to the CLINs.

  Relator alleges that GD engaged in various fraudulent conduct to obtain the F-16 contract with Greece.*fn6 However, that initial fraud is not the subject of this suit. The initial fraud was the subject of Greek proceedings commenced in 1989 when a new political party took control. The new party was in opposition to the party that held control during the F-16 negotiations. In parliamentary and criminal proceedings ("the Greek Proceedings"), the new Greek government investigated allegations that it was duped into overpaying for the F-16s, The Greek Proceedings were well publicized in Greece, but minimally reported in the U.S. The Greek Proceedings contained no allegations of fraud committed against the U.S. government, and were conducted under seal and, of course, in Greek. In 1992, the Greek Proceedings concluded with a determination that no wrongdoing occurred in connection with the sale. Thereafter, Greece purchased more F-16s from GD.

  Approximately six months after the Greek Proceedings commenced, in 1989, relator sued GD in the United States District Court for the District of Columbia, later transferred to the Eastern District of Missouri. No. 91-324C-8 (DJS); aff'd Yannacopolous v. General Dynamics Corp., 75 F.3d 1298 (8th Cir. 1996). In that suit ("Yannacopolous I"), relator alleged: (1) a personal claim for approximately $50,000,000 in commissions from the F-16 sale; and (2) three RICO counts. Relator partially supported his RICO counts with facts relating to the F-16 fraud scheme alleged in the Greek Proceedings. In the course of the Yannacopolous I proceedings, and pursuant to the Freedom of Information Act ("FOIA"), relator obtained much information regarding GD's F-16 sales. In August 1994, the court granted GD's motion for summary judgment on relator's RICO counts, finding that he was not directly injured by the alleged fraud. In November, the court ruled against relator on his remaining claims.

  The fraud alleged in the instant suit differs from the fraud alleged in the Greek Proceedings and Yannacopolous I, by alleging overbilling subsequent to the initial contract, and by naming the U.S. (not Greece) as the victim. Due to various overtoiling strategies and improper conduct in making FMS claims, relator alleges that defendants defrauded the U.S. government of hundreds of millions of dollars. The Greek Proceedings and Yannacopolous I focused on facts pertaining to the initial F-16G bait and switch allegations as affecting Greece, not to subsequent fraudulent activity alleged in relator1's second amended complaint that affected the U.S. Government

  On April 23, 2003, relator filed his second amended complaint against defendants, seeking: damages in an amount equal to three times the amount of damages sustained by the U.S. Government; a civil penalty for each violation of 31 U.S.C. § 3729; the maximum award allowed by 31 U.S.C. § 3730(d); attorneys' fees, costs and expenses; and prejudgment and post-judgment interest.*fn7 Relator's Second Amended Complaint contains seven counts of FCA violations through submissions of false claims.

  In Count I, relator claims that GD knowingly submitted false records, statements and claims to the DS AA, collecting at least $24,000,000 of excess, fraudulently-obtained funds in connection with the F-16 airframe. In Count II, relator claims that GD knowingly submitted false records, statements and claims to the DSAA, collecting $52,100,000 of excess and fraudulently obtained funds in connection with depot-level maintenance, ln Count III, relator claims that GD knowingly submitted false records, statements and claims to the DSAA to collect $47,693,487 of excess and fraudulently obtained funds in connection with co-production that was never performed (allegedly, GD capitalized a Greek business entity known as HBDIC to co-produce F-16 parts, although no co-production was performed).

  In Count IV, relator claims that Lockheed knowingly submitted false records, statements and claims to the DS AA to collect $54,000,000 for Integrated Electronic Measure Counter work, but that only $11,000,000 of that work was actually performed. Count V alleges that GD knowingly submitted false records, statements, and claims to collect excess and inflated amounts of $45,000,000 and $6,000,000. In Count VI, relator claims that GD failed to disclose to the U.S. Government that it deleted a price adjustment schedule between the LOI and final contract dates. By failing to make the adjustments, GD knowingly submitted false documents, including inflated quarterly progress payment invoices, that withheld between $156,642,328 and $220,996,120 of excess funds owed to the U.S. Government.

  In Count VII, relator alleges that Lockheed modified the contract to include a $29 million charge owed to the U.S. Government for recoupment of certain funds from Greece, but that Lockheed returned the money above-the-line, thus inflating the contract and price and not really returning the $29 million. Further, relator alleges that Lockheed kept the one-time recoupment cost above-the-line in subsequent years, thus inflating the overall contract price.


 I. FED. R. Civ. P. 9(b)

  Defendants have moved pursuant to Fed.R.Civ.P. 9(b), arguing that relator fails to plead fraud with particularity. False Claims Act complaints must be pled with particularity. United States ex rel. Garst v. Lockheed-Martin Corp., 328 F.3d 374, 375-377 (7th Cir. 2003); United States ex rel. Robinson v. Northrop Corp., 149 F.R.D. 142, 144-145 (N.D. Ill. 1993). Three primary policies support Rule 9(b)'s requirement that fraud be pled with particularity: "(1) protecting a defendant's reputation from harm; (2) minimizing' strike suits' and `fishing expeditions'; and (3) providing notice of the claim to the adverse party." Jepson. Inc, v. Makita Corp., 34 F.3d 1321, 1327 (7th Cir. 1994)(quoting Vicom. Inc, v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 777 (7th Cir. 1994). To satisfy these policies, Rule 9(b) requires that "the `circumstances' must be pleaded in detail. This means the who, what, when, where, and how: the first paragraph of any newspaper story." DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). Rule 9(b) does not require that plaintiff explain his entire case, only that he state the actions that allegedly constitute fraud. Midwest Commerce Banking Co. v. Elkhart Citv Ctr., 4 F.3d 521, 524 (7th Cir. 1993).

  Defendants argue that relator failed to plead the "who, what, when, where and how" of the alleged fraudulent claims. In arguing a failure to plead "who," defendants note relator's failure to identify the specific employees of GD or Lockheed responsible for inflating claims. Those details, however, are in the exclusive possession of defendants, and relator need not allege them under Rule 9(b). See Winthrop Resources Corp. v. Lacrad Int'l Corp., 2002 WL 24248, *2 (N.D. Ill. 2002)(citing Corley v. Rosewood Care Ctr., Inc., 142 F.3d 1041, 1051 (7th Cir. 1998)). Relator ceased working for GD in 1983 and never consulted with Lockheed. It is not possible ...

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