The opinion of the court was delivered by: ROBERT GETTLEMAN, District Judge
MEMORANDUM OPINION AND ORDER
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
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.
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
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.
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.
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 ...