PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA ex rel.
DRC, INCORPORATED, ex rel.
ROBERT J. ISAKSON; WILLIAM D.
BALDWIN,
Plaintiffs-Appellants,
v.
CUSTER BATTLES, LLC; SECURE
GLOBAL DISTRIBUTION, a resident of
Lebanon; MIDDLE EAST LEASING, a
Cayman Islands entity; CUSTER
BATTLES LEVANT, a Lebanese
entity; SCOTT CUSTER, County of
Fairfax, Virginia; MICHAEL No. 07-1220
BATTLES, State of Rhode Island;
JOSEPH MORRIS,
Defendants-Appellees,
and
MURTAZA LAKHANI, a citizen of
Pakistan who resides in Canada
and Iraq; LARU, LIMITED;
MOHAMMED ISSAM ABU DARWISH, a
citizen of Lebanon who resides in
Lebanon and Iraq,
Defendants.
2 UNITED STATES v. CUSTER BATTLES
TAXPAYERS FOR COMMON SENSE;
TAXPAYERS AGAINST FRAUD
EDUCATION FUND; UNITED STATES OF
AMERICA,
Amici Supporting Appellants.
Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
T. S. Ellis, III, Senior District Judge.
(1:04-cv-00199)
Argued: December 5, 2008
Decided: April 10, 2009
Before NIEMEYER, SHEDD, and DUNCAN,
Circuit Judges.
Affirmed in part, reversed in part, and remanded for further
proceedings by published opinion. Judge Niemeyer wrote the
opinion, in which Judge Shedd and Judge Duncan joined.
COUNSEL
ARGUED: Douglas Neal Letter, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for the
United States of America, Amicus Supporting Appellants;
Alan Mark Grayson, GRAYSON & KUBLI, P.C., Vienna,
Virginia, for Appellants. Barbara Van Gelder, MORGAN,
LEWIS & BOCKIUS, L.L.P., Washington, D.C.; Robert
Thomas Rhoad, CROWELL & MORING, L.L.P., Washing-
UNITED STATES v. CUSTER BATTLES 3
ton, D.C., for Appellees. ON BRIEF: Victor A. Kubli,
GRAYSON & KUBLI, P.C., Vienna, Virginia, for Appel-
lants. Salvatore A. Romano, PORTER, WRIGHT, MORRIS
& ARTHUR, L.L.P., Washington, D.C., for Appellees Custer
Battles, LLC, Secure Global Distribution, a resident of Leba-
non, Middle East Leasing, a Cayman Islands entity, Custer
Battles Levant, a Lebanese entity, Scott Custer, County of
Fairfax, Virginia, and Michael Battles, State of Rhode Island;
Andrew M. Miller, WILEY REIN, L.L.P., Washington, D.C.,
for Appellee Joseph Morris. Daniel Schumack, SCHUMACK
RYALS, P.L.L.C., Fairfax, Virginia, for Taxpayers for Com-
mon Sense, Amicus Supporting Appellants. James W. Moor-
man, Joseph E. B. White, TAXPAYERS AGAINST FRAUD
EDUCATION FUND, Washington, D.C., for Taxpayers
Against Fraud Education Fund, Amicus Supporting Appel-
lants. Peter D. Keisler, Assistant Attorney General, Scott R.
McIntosh, Attorney, Appellate Staff, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C.; Chuck
Rosenberg, United States Attorney, Alexandria, Virginia, for
the United States of America, Amicus Supporting Appellants.
OPINION
NIEMEYER, Circuit Judge:
In this qui tam action,* the relators, on behalf of the United
States, alleged fraud perpetrated by Custer Battles, LLC, in
making fraudulent statements or submitting fraudulent
invoices on two contracts entered into in 2003 with the Coali-
tion Provisional Authority in Iraq, in violation of the False
Claims Act, 31 U.S.C. §§ 3729-3732. The Coalition Provi-
sional Authority was a temporary governing body that was
created by U.S. General Tommy Franks, the Commander of
*A qui tam action is one filed not only for the benefit of the plaintiffs
but also as relators for the benefit of the state, here the United States. See
31 U.S.C. § 3730(b)-(d).
4 UNITED STATES v. CUSTER BATTLES
Coalition Forces, and recognized by a United Nations Secur-
ity Council resolution. It was staffed by personnel mostly
from the United States but also from over a dozen countries,
and it governed Iraq from May 2003 to June 2004.
The district court limited the relators’ fraud claim in con-
nection with the first contract to a claim for $3 million, which
was the amount paid to Custer Battles with a United States
Treasury check and, as so limited, submitted the claims to the
jury. After the jury found Custer Battles liable for fraud and
returned a verdict of $3 million against it, the district court
granted Custer Battles’ earlier-filed motion for judgment as a
matter of law under Federal Rule of Civil Procedure 50(a) on
the ground that the evidence was insufficient to demonstrate
that Custer Battles "presented" the fraudulent invoices to "an
officer or employee of the United States Government or a
member of the Armed Forces of the United States," as
required by the False Claims Act.
On the fraud claim made in connection with the second
contract, the court did not submit the claim to the jury but
instead granted Custer Battles’ motion for summary judg-
ment. The court found that the relators’ evidence was insuffi-
cient to demonstrate any fraud.
On appeal, the relators, supported by the United States as
amicus curiae, contend that the district court erred (1) in limit-
ing the applicability of the False Claims Act to a claim for
funds paid from the United States Treasury; (2) in concluding
that U.S. government personnel detailed to the Coalition Pro-
visional Authority were not "officer[s] or employee[s] of the
United States government" for purposes of the False Claims
Act; and (3) in granting summary judgment in favor of Custer
Battles on the fraud claim alleged in connection with the sec-
ond contract.
For the reasons that follow, we reverse the district court’s
order limiting the relators’ claim on the first contract to $3
UNITED STATES v. CUSTER BATTLES 5
million; we reverse its order granting Custer Battles’ Rule
50(a) motion because substantial evidence was presented that
the persons at the Coalition Provisional Authority, to whom
the fraudulent invoices on the first contract were presented
and who processed and approved them, were United States
personnel detailed to the Coalition Provisional Authority as
part of their official duties; and we affirm the district court’s
summary judgment on the claim made in connection with the
second contract. Accordingly, we remand this case for further
proceedings consistent with this opinion.
I
The Coalition Provisional Authority in Iraq ("Coalition
Authority") governed Iraq from May 2003 to June 28, 2004,
when it turned over governing authority to the Interim Gov-
ernment of Iraq. The Coalition Authority’s administrator, L.
Paul Bremer, was appointed by the U.S. President and the
U.S. Secretary of Defense, and the large majority of the
Coalition Authority’s personnel were either U.S. civilian con-
tractors and employees or in the U.S. Military. The remainder
of the Coalition Authority’s personnel were from other coun-
tries in the coalition occupying Iraq, including Australia, the
Czech Republic, Denmark, Italy, Japan, Poland, Romania,
Spain, the United Kingdom, Ukraine, and others.
At the time of the Coalition Authority’s formation, the Iraqi
currency, the dinar, bore the portrait of Saddam Hussein, the
deposed ruler of Iraq. In early July 2003, Administrator
Bremer announced an initiative to replace all of these dinars
with a new dinar that would not bear Saddam Hussein’s por-
trait. The exchange was a massive undertaking. The new
dinars were shipped into Iraq on 28 fully-loaded Boeing 747
cargo planes, and the exchange required the services of multi-
ple contractors, ranging from providers of currency-counting
machines to transportation providers.
To build, equip, and service three hubs of the dinar
exchange program—to be located in Baghdad, Mosul, and
6 UNITED STATES v. CUSTER BATTLES
Basra—the Coalition Authority entered into a contract (the
"Dinar Exchange Contract") on August 27, 2003, with Custer
Battles, LLC. Custer Battles was founded, managed, and
owned by two former U.S. Army Rangers, Scott Custer and
Michael Battles, and described itself as a "leading interna-
tional risk management firm with extensive experience assist-
ing large organizations reduce and manage risk in extremely
volatile environments." As of 2003, it had "offices in Wash-
ington, DC, New York City, Newport, Las Vegas, Amman
and Kuwait City" and claimed that it had "assembled an inter-
national team with an unparalleled level of experience, train-
ing and success in managing risk and providing specialized
security solutions."
The Dinar Exchange Contract was a cost-plus contract,
meaning that Custer Battles would be reimbursed for its
actual expenses, plus 25% of its actual expenses to cover
overhead and provide a profit. On the day the contract was
signed, the Coalition Authority paid Custer Battles an
advance of $3 million. Although the Coalition Authority was
funded from multiple sources, it paid Custer Battles the $3-
million advance with a U.S. Treasury check funded by its
"seized assets" account, consisting of assets seized from Iraqi
government sources as part of the war effort. The check was
signed by a lieutenant colonel in the U.S. Military. The
invoices that Custer Battles thereafter submitted under the
contract, however, were paid from the Coalition Authority’s
"Development Fund for Iraq," which was recognized by
United Nations Security Council Resolution 1483 and
included funds from various non-U.S. sources but also
included $210 million confiscated by the United States from
Iraqi bank accounts and transferred to the Development Fund,
as well as funds appropriated by Congress.
During the course of Custer Battles’ performance of the
Dinar Exchange Contract, which began in August 2003 and
continued to early 2004, Custer Battles submitted invoices for
payment to U.S. personnel who were detailed to work with
UNITED STATES v. CUSTER BATTLES 7
the Coalition Authority. Specifically, the invoices were typi-
cally submitted to Patricia Logsdon, a U.S. government
employee detailed to the Coalition Authority, who then for-
warded the invoices to a U.S.-retained contractor and U.S.
Military personnel for approval and ultimately to the finance
office of the Coalition Authority for payment. The invoices
were paid from the Development Fund usually by wire trans-
fers or with "bricks" of cash. Under this practice, Custer Bat-
tles was paid approximately $12 million in addition to the $3
million initially advanced, for a total of approximately $15
million.
Problems developed with the quality of Custer Battles’ per-
formance, leading to a meeting on October 18, 2003, between
representatives of the Coalition Authority, the U.S. Military,
and Custer Battles’ co-owners Michael Battles and Scott Cus-
ter. After this meeting ended, Battles accidentally left behind
an astonishing spreadsheet, which contained rows listing
items invoiced under the Dinar Exchange Contract and sepa-
rate columns listing the "Actual Cost" for the items and the
amounts "Invoiced" for the items. This document showed, for
example, that for the Baghdad hub of the dinar exchange pro-
gram, Custer Battles provided two flatbed trucks, for which it
paid $18,000 but invoiced the Coalition Authority $80,000.
To provide "Life Support, basic level" at the Bagdad hub, it
provided generators that cost $74,000 but for which it
invoiced the Coalition Authority $400,000. And for the Basra
hub, it spent $4,000 to provide laundry facilities but invoiced
the Coalition Authority for $12,000. Thus under the Dinar
Exchange Contract, Custer Battles improperly received the
difference between the actual costs and the inflated invoiced
amounts and also 25% of the inflated invoiced amounts.
In addition to the Dinar Exchange Contract, the Coalition
Authority entered into a separate contract with Custer Battles
for the provision of security at the Baghdad International Air-
port (the "Airport Contract"). As Coalition Authority officials
were determined to open the airport for commercial flights as
8 UNITED STATES v. CUSTER BATTLES
soon as possible, its Ministry of Transportation issued a
request for proposals on June 19, 2003, defining the security
requirements primarily in terms of opening the airport
promptly rather than in terms of a specific number of security
personnel needed. Custer Battles submitted a comprehensive
proposal five days later, which included the provision of
armed patrols and checkpoints, an airport police force, and
baggage screeners certified by the U.S. Transportation Secur-
ity Administration. The proposal’s initial cost estimate of
approximately $13.6 million was based partly on the salaries
of 138.5 personnel.
Because Custer Battles’ proposal was not only the lowest
bid but also the only one addressing the Coalition Authority’s
demanding timetable for opening the airport to commercial
traffic, the Coalition Authority accepted Custer Battles’ pro-
posal. On July 1, 2003, it entered into a one-month temporary
"Letter Contract" with Custer Battles, and Custer Battles
began performing security services for the Baghdad Interna-
tional Airport that same day. On July 31, 2003, the Letter
Contract was extended by another month in an "Extended Let-
ter Contract." Not until August 31, 2003 did the Coalition
Authority and Custer Battles enter into a "Final Contract,"
which covered the next ten months, ending June 30, 2004.
The Airport Contract was "a firm-fixed price" contract in
the amount of $16,840,832. As a result of the fixed-price
structure, Custer Battles did not include the cost of personnel
as part of the invoices submitted to receive payment, but
rather received advances and subsequent monthly fees, as
specified in the contract. Neither the request for proposal nor
the contract itself specified a fixed number of personnel to
perform the contract, but at least at the start, Custer Battles
provided more than 138 personnel, a number that fluctuated
thereafter as needs changed.
Custer Battles received high marks for its performance of
the Airport Contract, and the Coalition Authority’s Minister
UNITED STATES v. CUSTER BATTLES 9
of Transportation, Franklin D. Hatfield, found Custer Battles
performance, "far above and beyond what was required" by
the Contract.
DRC, Incorporated, a "leading provider of post-conflict
management services, with considerable experience and con-
tacts throughout the Middle East," acted as a subcontractor on
Custer Battles’ contracts in Iraq, and Robert Isakson was
DRC’s managing director. Based on their belief that Custer
Battles defrauded the United States, DRC and Isakson, acting
as relators under the False Claims Act, commenced this action
against Custer Battles, its subsidiaries, related entities, and
employees (collectively hereafter, "Custer Battles"), claiming
that Custer Battles submitted inflated invoices to the Coalition
Authority and that it understaffed its Airport Contracts by not
providing a consistent level of at least 138.5 persons, in viola-
tion of the False Claims Act. In addition, William Baldwin,
a former Custer Battles employee, claimed that he was dis-
charged in retaliation for his whistleblowing activity in con-
nection with the contracts.
In Count I of their amended complaint, the relators alleged
that Custer Battles knowingly presented to a U.S. government
official false claims for both the Dinar Exchange Contract and
the Airport Contract, in violation of 31 U.S.C. § 3729(a)(1).
In Count II, they alleged that Custer Battles knowingly made
or caused to be made "false records in the form of altered Pur-
chase Orders or invoices, receipts, wire transfer reports, or the
like, in an effort to ensure that the false claims for payment
submitted to the [Coalition Authority] for the [Dinar
Exchange] contract would be paid," in violation of 31 U.S.C.
§ 3729(a)(2). In Count III, they alleged a conspiracy among
the defendants to defraud the United States under the Dinar
Exchange Contract, in violation of 31 U.S.C. § 3729(a)(3).
And in Count IV, they alleged that the relator Baldwin had
been discharged in retaliation for his "efforts to investigate the
Defendants’ fraud," in violation of 31 U.S.C. § 3730(h).
10 UNITED STATES v. CUSTER BATTLES
Although the United States was provided notice of the
complaint, in accordance with 31 U.S.C. § 3730(b)(2), it
declined to intervene in the case. Nonetheless, it filed numer-
ous briefs in the district court as amicus curiae, supporting the
relators. It also submitted an amicus curiae brief to this court
and participated in oral argument.
On Custer Battles’ motion for summary judgment, the dis-
trict court granted the motion in part. See United States ex rel.
DRC, Inc. v. Custer Battles, LLC ("DRC I"), 376 F. Supp. 2d
617 (E.D. Va. 2005). It dismissed Count III, which alleged a
conspiracy under § 3729(a)(3) because "[e]very defendant
named in the complaint in addition to Custer Battles itself is
an employee of Custer Battles, a related entity or subsidiary
. . . . Thus a conspiracy among the defendants is a ‘legal
impossibility.’" Id. at 651 (quoting Marmott v. Md. Lumber
Co., 807 F.2d 1180, 1184 (4th Cir. 1986)). It also limited the
relators’ claims in Counts I and II, finding that Custer Battles’
liability for damages under the Dinar Exchange Contract was
limited to a claim for $3 million. Id. at 649. It reached this
conclusion after conducting a thorough source-of-funds analy-
sis, concluding that of the approximately $15 million paid on
the Dinar Exchange Contract, only the $3-million advance
came from U.S. government funds. Id. at 641-49.
The district court thereafter severed the Dinar Exchange
Contract and retaliation claims from the Airport Contract
claim and proceeded to trial on the Dinar Exchange Contract
and retaliation claims. The jury returned a verdict in favor of
the relators, finding all of the defendants liable under both
§ 3729(a)(1) and § 3729(a)(2), regardless of whether the
Coalition Authority was or was not a U.S. government instru-
mentality. And the jury found the maximum amount of dam-
ages allowed by the district court—$3 million. In addition, the
jury awarded Baldwin $165,000 in damages for Custer Bat-
tles’ retaliation against his whistleblowing.
Before entering judgment on the verdict, the district court
considered Custer Battles’ motion for judgment as a matter of
UNITED STATES v. CUSTER BATTLES 11
law under Federal Rule of Civil Procedure 50(a), filed earlier
in the proceedings when the relators had completed the pre-
sentation of their case, which the court had deferred, and
granted the motion, entering judgment for Custer Battles on
Counts I and II. See United States ex rel. DRC, Inc. v. Custer
Battles, LLC ("DRC II"), 444 F. Supp. 2d 678, 692 (E.D. Va.
2006). With respect to claims made under § 3729(a)(1), the
court found that the relators did not prove that the invoices
were presented to U.S. government employees or officers, as
required by that provision, but rather to the Coalition Author-
ity. Id. at 683-85. For the same reason, the court granted judg-
ment as a matter of law on the claims under § 3729(a)(2),
which the court concluded had an implied requirement that
the false record or statement be presented to the U.S. govern-
ment. Id. at 685.
With respect to the severed claim on the Airport Contract,
Count IV of the complaint, the district court granted Custer
Battles’ motion for summary judgment. United States ex rel.
DRC, Inc. v. Custer Battles, LLC ("DRC III"), 472 F. Supp.
2d 787, 800 (E.D. Va. 2007). The court concluded that the
elements of a false claim had not been fulfilled and rejected
the relators’ efforts to take the complaint as constructively
amended at that late date. Id. at 795-96.
The relators now appeal, contending (1) that the district
court erred in conducting its source-of-funds analysis that
resulted in limiting the relators’ claim to a claim for damages
of $3 million on the Dinar Exchange Contract; (2) that the
relators introduced evidence sufficient to prove that present-
ment was made to an officer or employee of the United States
government under the Dinar Exchange Contract; and (3) that
the district court erred in granting summary judgment with
respect to the Airport Contract.
II
The relators contend that the district court "erred in ruling
that claims paid ultimately from [the Development Fund for
12 UNITED STATES v. CUSTER BATTLES
Iraq] are not actionable under the [False Claims Act],"
thereby limiting their claims to a $3-million claim for dam-
ages. They argue that the district court’s position is not sup-
ported by the language of the Act or case law.
The district court made two findings to reach its conclusion
that "[r]equests for payment from funds in [the Development
Fund] . . . were requests for Iraqi funds and thus did not con-
stitute [a False Claims Act] ‘claim.’" DRC I, 376 F. Supp. 2d
at 647. First, the court found that a "claim" under the False
Claims Act is defined in part by the source of funds from
which the claim is to be paid:
In sum, therefore, § 3729(a)(1) requires a "claim," or
a request or demand for payment that if paid would
result in economic loss to the government fisc, i.e. a
request for payment from government funds; it does
not extend to cases where the government acts solely
as a custodian, bailee, or administrator, merely hold-
ing or managing property for the benefit of a third
party. The significance of this conclusion for this
case is that if the funds used to pay the Custer Bat-
tles contracts were "Iraqi funds," even if adminis-
tered or held in the possession of the United States,
then the presentment of a fraudulent request for pay-
ment from these funds does not constitute a "claim"
within the meaning of the [False Claims Act]. On the
other hand, if the funds used to pay for the contracts
belonged to the United States, then [False Claims
Act] liability may attach if Custer Battles knowingly
presented a false or fraudulent claim to a United
States government officer for payment from these
funds. Thus, it is necessary to consider each source
of funds separately to determine whether a request
for payment therefrom constitutes a "claim."
Id. at 641. Second, it found that the United States did not
"provide" funds that could determine the scope of a claim if
the United States "relinquished control of those funds":
UNITED STATES v. CUSTER BATTLES 13
Yet, once the Vested Funds [U.S. funds] were trans-
ferred to the [Development Fund for Iraq], the
United States relinquished control of those funds and
they ceased to be United States government prop-
erty. Therefore, the United States did not "provide"
a portion of the money or property requested or
demanded from the [Development Fund of Iraq].
Id. at 646.
In reaching its holdings, the district court conducted a
source-of-funds analysis, analyzing each of the four sources
of funds used by the Coalition Authority — (1) funds appro-
priated by Congress and its counterparts in the Coalition
countries; (2) "vested funds"; (3) "seized funds"; and (4) "the
Development Fund for Iraq." Id. at 623. Because the parties
agreed that no appropriated funds were used in connection
with the Dinar Exchange Contract, the court addressed only
the other three funds in its analysis.
It concluded that "vested funds" consisted of Iraqi funds
held in bank accounts in the United States that were legally
confiscated by Executive Order and thereby became property
of the United States government. See DRC I, 376 F. Supp. 2d
at 624-25, 641-42. It classified as "seized funds" those that
were physically located in Iraq but legally confiscated by U.S.
and Coalition forces as occupying forces and that also, under
the laws and usages of war, became property of the United
States government. Id. at 626, 642-45. These assets included
U.S. dollars, euros, Iraqi bonds, Iraqi dinars, and other prop-
erty, much of which was found hidden near Saddam Hus-
sein’s presidential palaces. Id. at 626. Finally, it concluded
that the "Development Fund for Iraq" belonged to the Iraqi
people. The Development Fund was formally recognized by
United Nations Security Council Resolution 1483, and the
Coalition Authority had responsibility for administering the
Fund during the time that it exercised governmental powers
in Iraq. See S.C. Res. 1483, ¶¶ 12-14, U.N. Doc. S/RES/1483
14 UNITED STATES v. CUSTER BATTLES
(May 22, 2003); see generally DRC I, 376 F. Supp. 2d at 629,
645-47. The district court found that although the United
States contributed $210 million of its "vested funds" to the
Development Fund for Iraq during the summer of 2003, the
United States government no longer had title to the $210 mil-
lion when the Development Fund was used to pay claims sub-
mitted under the Dinar Exchange Contract. See DRC I, 376 F.
Supp. 2d at 625, 646.
Because the $3-million advance made to Custer Battles on
the Dinar Exchange Contract was drawn from "seized funds"
and the remaining $12 million was drawn from the Develop-
ment Fund for Iraq, the district court held that of the total pay-
ments made under the Dinar Exchange Contract, only the $3-
million advance drawn from "seized funds" supported a
"claim" under the False Claims Act, and it so instructed the
jury.
The relators argue that this was error and that Custer Bat-
tles’ liability should not have been so limited. They ground
their argument on the text of the False Claims Act.
The False Claims Act provides in pertinent part:
Any person who —
(1) knowingly presents, or causes to be presented, to
an officer or employee of the United States Govern-
ment or a member of the Armed Forces of the United
States a false or fraudulent claim for payment or
approval; [or]
(2) knowingly makes, uses, or causes to be made or
used, a false record or statement to get a false or
fraudulent claim paid or approved by the Govern-
ment;
***
UNITED STATES v. CUSTER BATTLES 15
is liable to the United States Government [for a civil
penalty and treble damages].
31 U.S.C. § 3729(a) (emphasis added). The Act in turn
defines "claim" as follows:
For purposes of this section, "claim" includes any
request or demand . . . for money or property which
is made to a . . . grantee, or other recipient if the
United States Government provides any portion of
the money or property which is requested or
demanded, or if the Government will reimburse such
. . . grantee, or other recipient for any portion of the
money or property which is requested or demanded.
31 U.S.C. § 3729(c). The Act thus addresses a false or fraudu-
lent claim even if the claim is "made to a . . . grantee, or other
recipient" of U.S. money so long as the claim would draw on
money of which the U.S. government provides "any portion."
Textually, therefore, a claim made to a grantee of U.S.
money is not defined by the amount of money that the U.S.
government paid directly to the claimant. So long as "any por-
tion" of the claim is or will be funded by U.S. money given
to the grantee, the full claim satisfies the definition of claim
as used in § 3729(a)(1) or (a)(2). The district court thus erred
when it concluded that "it is necessary to consider each source
of funds separately to determine whether a request for pay-
ment therefrom constitutes a ‘claim.’" DRC I, 376 F. Supp. 2d
at 641 (emphasis added). And its conclusion that "if the funds
used to pay the Custer Battles contracts were ‘Iraqi funds,’
even if administered or held in the possession of the United
States, then the presentment of a fraudulent request for pay-
ment from these funds does not constitute a ‘claim’ within the
meaning of the [False Claims Act]" was also erroneous. See
id.; United States ex rel. Marcus v. Hess, 317 U.S. 537, 544
(1943) (noting that the False Claims Act "does not make the
16 UNITED STATES v. CUSTER BATTLES
extent of [funds’] safeguard dependent upon the bookkeeping
devices used for their distribution").
The district court also erred in imposing a "control of
funds" requirement. The court concluded that when U.S.
funds (the $210 million in "vested funds") were transferred to
the Development Fund for Iraq, the United States "relin-
quished control of those funds and they ceased to be United
States government property," such that "the United States did
not ‘provide’ a portion of the money or property requested or
demanded from the [Development Fund for Iraq], as
§ 3729(c) requires, even if it, at one time, provided a portion
of the money now held in the [Development Fund for Iraq]."
DRC I, 376 F. Supp. 2d at 646. This interpretation overlooks
the False Claims Act’s language that includes claims "made
to a . . . grantee, or other recipient" of U.S. funds, so long as
the United States "provides any portion" of the funds that the
grantees or recipients would use to pay the claim. 31 U.S.C.
§ 3729(c). This statutory language precludes an interpretation
requiring that the U.S. retain control over funds used to pay
claims by extending the reach of the Act to money in the
hands of a U.S. government "grantee" or "other recipient." A
grantee is one to whom the money is given, and the U.S. need
no longer have control over the funds.
In this case, the record demonstrates that over and above
the $3-million advance it received, Custer Battles made
claims to a grantee of U.S. money, i.e., the Coalition Author-
ity, and that the claims were paid from the grantee’s funds,
i.e., the Development Fund for Iraq, a portion of which was
provided to the grantee by the U.S. government, i.e., $210
million.
Custer Battles contends that the language of the Dinar
Exchange Contract itself precludes a finding that its requests
for payment under that contract are "claims." That contractual
language provides, "No funds, appropriated or other, of any
Coalition country are or will be obligated under this contract."
UNITED STATES v. CUSTER BATTLES 17
This language, however, provides no support to Custer Bat-
tles. Section 3729(c) does not define a "claim" in relation to
the obligation of the United States government but rather to
the provision of United States funds. For the Dinar Exchange
Contract the United States provided funds not only directly
but also to the Development Fund for Iraq, a portion of which
was used to pay the claims.
Custer Battles also argues that their requests or demands
were not "claims" because Custer Battles was not in privity
with the United States government. But the statutory language
provides no indication that Congress intended to require priv-
ity. Indeed, the Supreme Court recently rejected the very
notion in Allison Engine Co. v. United States ex rel. Sanders,
128 S. Ct. 2123, 2129-30 (2008). In Allison Engine, the Court
held that a subcontractor could be liable for submitting a false
claim to a prime contractor of the United States. Id. at 2130.
Of course, a subcontractor is by definition not in privity with
the U.S. government. See also Marcus, 317 U.S. at 544-45
(liability attaches "without regard to whether [the defrauding
claimant] had direct contractual relations with the govern-
ment").
We thus conclude that all false or fraudulent claims made
by Custer Battles under the Dinar Exchange Contract were
"claims" as defined in 31 U.S.C. § 3729(c) and used in
§ 3729(a).
In the end, the district court’s source-of-funds analysis
might prove harmless because damages sustained by the
United States might not have exceeded the $3-million amount
found by the jury. Nonetheless, all of the false or fraudulent
claims presented on the $15-million Dinar Exchange Contract
were qualifying "claims" under the False Claims Act,
although damages would be limited to those sustained by the
United States. We cannot, on appeal, determine the United
States’ damages and therefore determine whether the district
court’s errors were indeed harmless. Thus, we reverse the dis-
18 UNITED STATES v. CUSTER BATTLES
trict court’s order limiting the definition of "claims" and
remand to give the relators the right to elect a new trial on the
claims made under the Dinar Exchange Contract. We do not
order a new trial because the claims that the jury found in its
verdict to be claims did indeed qualify as "claims" under the
False Claims Act.
III
The relators also contend that the district court erred in
granting Custer Battles’ motion for judgment as a matter of
law, filed under Federal Rule of Civil Procedure 50(a). Spe-
cifically, relators challenge the court’s conclusion that the
relators "failed to produce sufficient evidence of present-
ment," as it construed both § 3729(a)(1) and § 3729(a)(2) to
require. DRC II, 444 F. Supp. 2d at 689. The district court
held that because the False Claims Act requires presentment
to "an officer or employee of the United States Government,"
presentment to the Coalition Authority did not satisfy the
requirement because the Coalition Authority was not an
instrumentality of the United States. As the court explained:
[A]lthough the [Coalition Authority] was principally
controlled and funded by the U.S., this degree of
control did not rise to the level of exclusive control
required to qualify as an instrumentality of the U.S.
government. . . . Thus, it follows that because the
[Coalition Authority] was not a U.S. government
entity, and therefore U.S. employees of the [Coali-
tion Authority] were not working in their official
capacity as employees or officers of the United
States government, relators have demonstrably failed
to provide sufficient evidence to enable a jury to find
presentment, as required by both § 3729(a)(1) and
§ 3729(a)(2).
Id. The court accordingly granted judgment as a matter of law
in favor of Custer Battles on both Counts I and II. Id. at 692.
UNITED STATES v. CUSTER BATTLES 19
Because the court found the evidence of presentment insuf-
ficient, it did not decide three other issues raised in Custer
Battles’ Rule 50(a) motion, i.e., whether the claims were
materially false; whether the United States suffered damage;
and whether the individual defendants had sufficient knowl-
edge of the fraudulent conduct to be liable. See DRC II, 444
F. Supp. 2d at 689.
"Judgment as a matter of law is proper when, without
weighing the credibility of the evidence, there can be but one
reasonable conclusion as to the proper judgment," Chaudhry
v. Gallerizzo, 174 F.3d 394, 405 (4th Cir. 1999) (internal quo-
tation marks and citation omitted), and we review a district
court’s judgment as a matter of law de novo, id. at 404-05.
Section 3729(a)(1) of the False Claims Act creates liability
for any person who "knowingly presents, or causes to be pre-
sented, to an officer or employee of the United States Govern-
ment or a member of the Armed Forces of the United States
a false or fraudulent claim for payment or approval." 31
U.S.C. § 3729(a)(1) (emphasis added). To fulfill this require-
ment, the relators presented extensive evidence that Custer
Battles presented or caused to be presented fraudulently
inflated invoices to U.S. government personnel who were
detailed to the Coalition Authority. Indeed, the district court
observed about the sufficiency of this evidence that "the trial
record is replete with evidence that invoices and records were
presented to [Coalition Authority] employees, including
members of the United States Armed Forces detailed to the
[Coalition Authority]." DRC II, 444 F. Supp. 2d at 686.
But the district court found that this evidence did not fulfill
the presentment requirement, as "the presentment requirement
could not be satisfied by presentment to a United States gov-
ernment employee or officer where the employee or officer is
not working in his or her official U.S. capacity." DRC II, 444
F. Supp. 2d at 684. As an example, the district court noted
that "if a contractor submitted a false claim to a U.S. govern-
20 UNITED STATES v. CUSTER BATTLES
ment employee for remodeling her kitchen, the presentment
requirement would not be satisfied." Id. (quoting DRC I, 376
F. Supp. 2d at 648 n.86). Because the U.S. government per-
sonnel were detailed to the Coalition Authority at the time of
presentment, the district court concluded that they could not
have been acting in the requisite official capacity as employ-
ees of the United States.
While we agree with the district court that § 3729(a)(1)
requires that presentment be made to U.S. government per-
sonnel working in their official capacity, we conclude that the
court erred in assuming that U.S. government personnel
detailed to the Coalition Authority could not be working in
their official capacities as U.S. government employees. This
can be demonstrated by reexamining the district court’s hypo-
thetical about "a contractor submit[ing] a false claim to a U.S.
government employee for remodeling her kitchen." DRC II,
444 F. Supp. 2d at 684. If that employee were a soldier
detailed to remodel the kitchen in her government-owned
housing, the court would surely have to hesitate in concluding
that the soldier was not acting in her official capacity when
the soldier’s orders required her to remodel the kitchen.
In this case the relators introduced ample evidence to show
that the fraudulently inflated invoices were presented to U.S.
government employees or officials who were acting in their
official capacities. They demonstrated that invoices claiming
payment were presented in the first instance to professional
U.S. government contracting officers, who were paid and
supervised by the U.S. Military. The principal contracting
officer, Patricia Logsdon, who was typical of those who
administered the Dinar Exchange Contract, testified that she
was a contracting officer working for and paid by the U.S.
Army Contracting Agency. She functioned under a "warrant,"
a document authorizing her to contract on behalf of the United
States and to administer the Dinar Exchange Contract. She
stated that as a contracting officer she was "someone who
[was] warranted by the appropriate authority to spend U.S. tax
UNITED STATES v. CUSTER BATTLES 21
dollars." In describing her particular function on the Dinar
Exchange Contract as a U.S. Army Contracting Officer, she
testified:
My responsibilities included ensuring that perfor-
mance was done; that if there were any changes that
needed to be made, that they were done in accor-
dance with the contract; if there were fund issues
that needed to be addressed, that I ensured that the
proper funding was there.
Finally, Ms. Logsdon testified that she reported to Colonel
Anthony Bell of the U.S. Military.
Patricia Logsdon’s successor, Lori Pierce, testified simi-
larly. Ms. Pierce testified that she also operated under a "war-
rant," which "vests in a government employee the right—
well, it’s actually a document that says that you have the
authority to execute contractual documents on behalf of the
U.S. Government."
After Custer Battles’ invoices were "administered" by the
contracting officers, they were presented for approval to con-
sultants managing the contract. In the case of the Dinar
Exchange Contract, the contract was managed by employees
of BearingPoint, Inc., a contractor hired by the U.S. Agency
for International Development to help manage the Dinar
Exchange Contract, and by members of the U.S. Military.
BearingPoint in turn answered to U.S. General Hugh Tant,
who was in charge of implementing the dinar exchange pro-
gram. Finally, once approved, the invoices were presented to
U.S. Military officers working in the financial office of the
Coalition Authority for payment from available funds.
In short, the evidence showed that Patricia Logsdon and her
other two counterparts, while detailed to the Coalition
Authority, were functioning as employees of the United States
to do precisely the jobs that the United States hired them to
22 UNITED STATES v. CUSTER BATTLES
do full-time and for which the United States paid them. We
conclude that this evidence was sufficient for a jury to con-
clude that the invoices on the Dinar Exchange Contract were
presented to "an officer or employee of the United States
Government or a member of the Armed Forces of the United
States." 31 U.S.C. § 3729(a)(1).
The district court’s interpretation of § 3729(a)(1) appears to
derive from its assumption that the presentation to a U.S. offi-
cer or employee must be for payment or approval "by the U.S.
government." But the text of § 3729(a)(1) does not contain
that language or that requirement. It stands in stark contrast
to § 3729(a)(2), which does contain the requirement of intent
to "get" the claim "paid or approved by the Government." As
the Supreme Court has repeatedly stated, "when Congress
includes particular language in one section of a statute but
omits it in another section of the same Act, it is generally pre-
sumed that Congress acts intentionally and purposely in the
disparate inclusion or exclusion." Barnhart v. Sigmon Coal
Co., 534 U.S. 438, 452 (2002) (internal quotation marks and
citation omitted). Here, Congress included a requirement of
payment or approval "by the Government" in § 3729(a)(2),
but not in § 3729(a)(1). Thus, courts are not free to read "by
the Government" into (a)(1) when Congress omitted it.
Moreover, our conclusion comports with the structure cre-
ated by the juxtaposition of §§ 3729(a)(1) and 3729(a)(2).
Section 3729(a)(1) defines liability in terms of the person to
whom the claim is presented, whereas § 3729(a)(2) defines
liability in terms of the intended source of the payment or
approval.
Custer Battles argues also that, with respect to the $3-
million advance payment, there was no presentment to a U.S.
official or employee because it submitted no claim or invoice
before receiving that advance. But this argument ignores the
fact that the $3-million advance was expressly conditioned
upon the subsequent submission and approval of invoices jus-
UNITED STATES v. CUSTER BATTLES 23
tifying the advance. Moreover, the language of § 3729(a)(1)
covers not only presentment of claims for payment, but also
presentment of claims for approval. See 31 U.S.C.
§ 3729(a)(1).
Because the relators have introduced evidence sufficient for
a jury reasonably to conclude that Custer Battles presented or
caused to be presented fraudulently inflated invoices to per-
sons acting in their official capacity as U.S. officials or
employees, we reverse the district court’s order granting Cus-
ter Battles’ Rule 50(a) motion.
The district court also granted judgment as a matter of law
on the relators’ claims based on 31 U.S.C. § 3729(a)(2),
which provides that "[a]ny person who . . . knowingly makes,
uses, or causes to be made or used, a false record or statement
to get a false or fraudulent claim paid or approved by the
Government . . . is liable to the United States Government."
The district court concluded that this language implicitly
requires presentment to a U.S. officer or employee acting in
the officer or employee’s official capacity. DRC II, 444 F.
Supp. 2d at 685. Because the court found the relators’ evi-
dence of presentment insufficient, it also granted judgment as
a matter of law on their claims made under § 3729(a)(2).
The district court’s holding that § 3729(a)(2) has a "pre-
sentment" requirement has subsequently been rejected by the
Supreme Court in Allison Engine, 128 S. Ct. at 2129-30. The
Supreme Court reasoned that because the statutory language
in § 3729(a)(1) expressly requires presentment, courts should
not read such a requirement into § 3729(a)(2) when the statu-
tory language does not expressly contain that requirement. In
light of the Supreme Court’s holding in Allison Engine, we
conclude that the district court erred in finding a presentment
requirement in § 3729(a)(2), recognizing that the district court
did not have the benefit of Allison Engine.
In short, we hold that the district court erred in basing its
order granting Custer Battles’ Rule 50(a) motion on an insuf-
24 UNITED STATES v. CUSTER BATTLES
ficiency of evidence with respect to presentment. This leaves
open the other arguments advanced by Custer Battles in its
Rule 50(a) motion, which the court did not address. Accord-
ingly, we remand this case to the district court to allow it to
address the other points raised by Custer Battles’ Rule 50(a)
motion, provided that the relators do not first elect a new trial
as authorized by our determination in Part II, above. If the
court denies the Rule 50(a) motion, it should enter judgment
on the verdict.
IV
Finally, relators contend that the district court erred in
granting summary judgment to Custer Battles on the Airport
Contract claim. See DRC III, 472 F. Supp. 2d at 788. At its
core, the relators’ claim with respect to the Airport Contract
was based on alleged fraud-in-the-inducement — that Custer
Battles promised 138 security personnel but actually provided
fewer.
A review of the record, however, reveals that the proposal
submitted by Custer Battles to the Coalition Authority neither
stated nor promised that Custer Battles would provide 138
security personnel, nor did any of the relevant contracts refer
to that number. And because the Airport Contract was for a
fixed price, no invoices for personnel expenses were submit-
ted.
The relators rely solely upon Custer Battles’ "detailed cost
estimate" for the Airport Contract which was based on the sal-
aries of 138.5 security-related personnel. But this figure was
just an estimate of the costs of providing security to enable
Custer Battles to make a fixed-price proposal to the Coalition
Authority, and that figure did not become a part of any com-
mitment made by Custer Battles. Indeed, Franklin D. Hatfield,
the Coalition Authority’s Minister of Transportation, testified
in his affidavit that "Custer Battles was not required to main-
tain any particular staffing levels in order to receive payment
UNITED STATES v. CUSTER BATTLES 25
under the [Airport] Contract." Moreover, relator Robert Isak-
son testified in his deposition that Custer Battles actually
commenced performance of the contract with more than 138
personnel, although the number throughout the performance
of the contract fluctuated.
We agree with the district court that the relators have not
presented evidence sufficient to support finding that Custer
Battles violated the False Claims Act in connection with the
Airport Contract. See DRC III, 472 F. Supp. 2d at 800 ("the
undisputed facts manifestly demonstrate that Relators cannot
establish a fraudulent inducement claim"). Accordingly, we
affirm the district court’s summary judgment in favor of Cus-
ter Battles on that claim.
V
In sum, we conclude: (1) that the district court erred in lim-
iting the relators’ claim for damages on the Dinar Exchange
Contract to a claim for $3 million; (2) that the court erred in
ruling as a matter of law that the relators did not present evi-
dence sufficient to demonstrate that Custer Battles presented
false claims on the Dinar Exchange Contract to officers or
employees of the United States; (3) that the court erred in
implying a requirement of presentment in 31 U.S.C.
§ 3729(a)(2); and (4) that the court correctly entered summary
judgment in favor of Custer Battles on the Airport Contract.
Accordingly, we reverse the district court’s orders limiting
the relators’ claims and granting Custer Battles’ Rule 50(a)
motion for judgment as a matter of law and remand for further
proceedings. On remand, the district court shall first give the
relators the option to have a new trial on the Dinar Exchange
Contract claims and, if a new trial is not elected, shall address
Custer Battles’ remaining issues on its Rule 50(a) motion. If
the court denies Custer Battles’ Rule 50(a) motion on the
remaining issues, it shall enter judgment on the verdict in
26 UNITED STATES v. CUSTER BATTLES
favor of the relators. We affirm the district court’s summary
judgment with respect to the Airport Contract.
AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED FOR FURTHER PROCEEDINGS