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United States ex rel. John v. Hastert

United States District Court, N.D. Illinois, Eastern Division

September 18, 2014

UNITED STATES OF AMERICA, ex rel. J. DAVID JOHN, Plaintiff and Relator,
v.
J. DENNIS HASTERT, Defendant.

MEMORANDUM OPINION

CHARLES P. KOCORAS, District Judge.

This matter comes before the Court on the motion of Defendant J. Dennis Hastert ("Hastert") to dismiss the complaint brought by Plaintiff J. David John ("John") pursuant to Federal Rules of Civil Procedures 12(b)(1), 12(b)(6) and 9(b). For the reasons set forth below, the motion is granted. Hastert's motion to stay discovery is denied as moot.

BACKGROUND

The following are matters alleged in the complaint. John is a resident of Burr Ridge, Illinois. Hastert is a resident of Yorkville, Illinois ("Yorkville"). Both former college wrestlers, John and Hastert knew each other from their days as student athletes at Wheaton College. From 2008 to 2012, John engaged in a variety of business ventures with companies, including ESPN and Interstate, to organize a professional golf tournament in the Middle East and to develop a Formula One racetrack and technology park in California.

Hastert served as the 59th Speaker of the United States House of Representatives for approximately eight years. Upon retirement from United States Congress in 2007, Hastert maintained an office ("Office") in his hometown of Yorkville with three full-time administrative personnel, as is permitted under 2 U.S.C. § 31b-1 to 31b-7 (reclassified as 2 U.S.C. §§ 5125-29) (the "Statute"). The Statute states in pertinent part that upon retirement the former Speaker of the House is allowed to maintain an office for the purpose of "the administration, settlement, and conclusion of matters pertaining to or arising out of his incumbency in office as a Representative in Congress and as Speaker of the House of Representatives." Hastert was given an allowance for the Office equal to a Congressional Member's Representational Allowance for the Office's expenses. See 2 U.S.C. § 31b-2 (now 2 U.S.C. § 5126). He was provided with staff, including an administrative assistant and two secretaries. See 2 U.S.C. § 31b-5 (now 2 U.S.C. § 5128).

Also upon his retirement, Hastert was employed by the lobbying firm, Dickstein Shapiro, which lobbies for companies, including the Chicago Mercantile Exchange, The Servicemaster Company, HR Green, Polybrite and Centerpoint. John alleges that he hired Hastert to perform consulting and lobbying services for various existing and future projects. Pursuant to the contract between Hastert and John, Hastert would receive 7 to 10 percent of the founders' equity and corresponding profits from cash flow and sale if any of the deals were successfully completed.

In 2008 and 2009, John claims he met with Hastert on three separate occasions at the Office to discuss his business ventures. John asserts that "for a significant amount of the time" Hastert used the Office and equipment for private business dealings. For instance, John contends that Hastert used vehicles registered to the Office for personal engagements and had his staff work on his private business. John claims that these staff members used the Office's telephone and email equipment in 2008, 2009, and 2010 to make arrangements for Hastert and John to travel to Saudi Arabia to discuss corporate opportunities. John also alleges that Office staff researched, prepped slide presentations, and arranged meetings between Hastert, John, and potential business contacts.

On July 12, 2013, John filed a two-count complaint alleging that Hastert: (i) violated the qui tam provision of the Federal False Claims Act ("FCA"), 31 U.S.C. §3729, et seq. (Count I); and (ii) caused violations of the FCA (Count II). As for Count I, John states that Hastert violated the FCA when he forwarded, using United States Mail, the employee wage contracts and hourly claims with knowledge that the claims were false and significant amounts of time were being spent on his personal business dealings. John also claims that Hastert violated the FCA by accepting payment from the federal government for the false submissions. In addition, John alleges in Count II that each month when Hastert signed a "verification" of the submitted claims that Hastert knew that the Office's space, equipment, and administrative employees were being used for his private business interests.

John asks this Court to enter judgment against Hastert: (i) in favor of the United States of America for the Office, operational expenses and salaries paid for the Office during 2008, 2009, 2010, 2011, and 2012, and triple the amount of the judgment pursuant to the FCA; (ii) in favor of the United States of America, for $5, 000 to $11, 000 for each monthly claim or claims submitted for expenses and salaries relating to the Office in violation of the FCA; (iii) in favor of John for a percentage of the total amount of the judgment against Hastert pursuant to 31 U.S.C. § 3730, et seq.; and (iv) any other appropriate relief. On July 30, 2014, Hastert moved to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) ("Rule 12(b)(1)"), 12(b)(6) ("Rule 12(b)(6)") and 9(b) ("Rule 9(b)"). On September 12, 2014, Hastert filed a motion to stay discovery pending the outcome of the instant motion.

LEGAL STANDARD

Although Hastert also moves to dismiss under Rule 12(b)(1) and 12(b)(6), the only applicable legal standard this Court uses in its analysis is Rule 9(b). Rule 9(b) of the Federal Rules of Civil Procedure provides that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). The False Claims Act "is an anti-fraud statute and claims under it are subject to the heightened pleading requirements of Rule 9(b)." United States ex rel. Gross v. AIDS Research Alliance-Chicago, 415 F.3d 601, 604 (7th Cir. 2005). A complaint satisfies Rule 9(b) when it alleges "the who, what, when, where, and how: the first paragraph of a newspaper story." Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007) (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)). Rule 9(b), read in conjunction with Rule 8, requires that the plaintiff plead "the time, place and contents" of the purported fraud. Fujisawa Pharm. Co., Ltd. v. Kapoor, 814 F.Supp. 720, 726 (N.D. Ill. 1993). "The purpose of this heightened pleading requirement is to force the plaintiff to do more than the usual investigation before filing his complaint.'" Amakua Dev. LLC v. Warner, 411 F.Supp.2d 941, 953 (N.D. Ill. 2006) (citations and internal quotation marks omitted).

DISCUSSION

I. Legal Sufficiency of John's Claims Under Rule 9(b)

Hastert posits that John's complaint should be dismissed under Rule 9(b). The heightened pleading requirement of Rule 9(b) applies to Count I and II. Both of John's claims involve allegations that Hastert defrauded the United States by, among other things, falsely certifying that his use of federal funds were only being used for matters ...


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