United States District Court, N.D. Illinois, Eastern Division
UNITED STATES OF AMERICA EX REL. LAWRENCE MCCARTHY, Relator-Plaintiff,
MARATHON TECHNOLOGIES, INC., SIGMATEK, INC. d/b/a MTI SIGMATEK, and JERRY KOZLOWSKI, Defendant.
MEMORANDUM OPINION AND ORDER
SHARON JOHNSON COLEMAN, District Judge.
Relator-plaintiff, Lawrence McCarthy ("relator"), filed a six-count complaint under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq. on behalf of the United States of America against corporate defendants Marathon Technologies, Inc. ("Marathon") and Sigmatek, Inc. ("Sigmatek"), and the president and owner of Marathon and Sigmatek, Jerry Kozlowski. Relator claims that the defendants knowingly violated the terms of two contracts with the United States government and knowingly submitted false claims for payment. Defendants move to dismiss all counts for failure to state a claim pursuant to Federal Rule of Civil Proocedure 12(b)(6). For the reasons set forth herein, defendants' motion to dismiss  is granted in part and denied in part.
The following factual allegations are accepted as true for purposes of ruling on the instant motion. Relator-plaintiff, Lawrence McCarthy, formerly worked as a Purchasing Manager for Marathon from February 14, 2005, until January 17, 2011. Defendant, Jerry Kozlowski owns and operates Marathon. In August 2006, McCarthy was advised he would also be the ISO9001 Administrator/Internal Auditor/Management Representative. In that role, he was responsible for the purchasing of "all components, raw materials, services and outside vendors" and ensuring compliance with the quality assurance processes under standards set by the International Organization for Standardization ("ISO"). (Dkt. 1, Compl. at ¶ 15, n.2). After beginning his employment with Marathon, McCarthy learned that Sigmatek, a separate corporation, was run out of the same location as Marathon, and was also owned and operated by Kozlowski.
On September 2, 2004, Marathon contracted with the U.S. Army to manufacture MK93 Heavy Machine Gun Mounting Systems in exchange for $21.7 million. The finalized contract number is W52H09-09-D-305.
On January 14, 2008, Sigmatek won a contract with the U.S. army to produce and deliver M3 Tripod Mounts in exchange for $9, 244, 642. The finalized contract number is W52H09-08-D-0147. The U.S. government designated the contract as a 100% HUBZone set-aside contract, giving contracting preference to small businesses. ( Id. at ¶¶ 127-28). In order to solicit a bid for the M3 Tripod contract, a company had to be HUBZone certified at the time of the solicitation closing on September 1, 2007. ( Id. at ¶ 141). In order to be HUBZone certified a business must:
a) Be a small business by SBS standards;
b) Be owned and controlled at least 51% by a U.S. citizen;
c) Have its principal office (location with the greatest number of employees) located within a HUBZone; and
d) Have at least 35% of its employees residing within a HUBZone. ( Id. at ¶ 128).
Sigmatek filed an application to become HUBZone certified on December 11, 2007. On December 19, 2007, Sigmatek received a letter from Cean Hartleben, Contracting Officer from the U.S. Department of the Army, Rock Island Arsenal, stating that as of the date of the letter Sigmatek had not been certified as HUBZone, and because solicitation for the M3 Tripod contract closed on September 1, 2007, the proposal from Sigmatek would not be considered. ( Id. at ¶¶ 140-41). On December 27, 2007, Sigmatek received notice from the SBA that the company had become HUBZone certified. ( Id. at ¶ 142). That same day, Kozlowski instructed McCarthy to email Maria Vera, Contract Specialist from the U.S. Department of the Army, to reconsider the contract following Sigmatek's HUBZone certification. ( Id. at ¶ 143). The next day Vera responded via email that the quote for the contract could not be considered because Sigmatek was not certified prior to the closing date. On January 14, 2008, Vera emailed Sigmatek that they had been awarded the contract for the M3 Tripod.
In each contract, the United States government included specifications regarding the parts and processes required for the manufacturing of the MK93 Gun Mounts and M3 Tripod, as well as the required testing to be performed on the products prior to delivery. Relator alleges that defendants knowingly produced MK93 Gun Mounts and M3 Tripods without complying with the contractual requirements of MIL-STD-1916. ( Id. at 62).
Both contracts between the defendant companies involved the United States Government and required payment upon the delivery of the manufactured products. ( Id. at ¶ 55). A DD Form 250 and a Certificate of Conformance accompanied each lot of delivered products. ( Id. at ¶ 57). The Certificate of Conformance identifies the product, part number, revision, lot size, and configuration of the product and expressly represents compliance with the contract terms and requirements. ( Id. at ¶¶ 57, 124). It states that the document is "made for the purpose of inducing payment and with the knowledge that the information and certification may be used as a basis for payment." ( Id. at ¶ 57). Kozlowski signed each DD Form 250 and Certificate of Conformance.
Relator filed the six-count complaint at issue here on October 6, 2011. Count I alleges that all defendants "knowingly present[ed], or cause[d] to be presented, a false or fraudulent claim for payment or approval, " under 31 U.S.C. § 3729(a)(1)(A) when it submitted false or fraudulent claims for payment to the United States Government. Count II alleges that all defendants knowingly made false statements that were material to the alleged false claims referenced in Count I in violation of 31 U.S.C. § 3729(a)(1)(B). Count III alleges a conspiracy to submit false claims by and between all defendants. Count IV alleges a false claim under 31 U.S.C. § 3729(a)(1)(A) against Sigmatek and Kozlowski for submitting claims for payment on a contract obtained through a fraudulent HUBZone certification. Count V alleges ...