does not begin to run until the government actually pays the claim."
The government's cases do not support the proposition for which they are cited. Kreindler & Kreindler v. United Technologies Corp., 985 F.2d 1148, 1157 (2d Cir.), cert. denied, 125 L. Ed. 2d 663, 113 S. Ct. 2962 (1993), is factually distinguishable and deals with the qui tam provisions of the False Claims Act. It contains no analysis of the government's proposition and cites only Blusal Meats, Inc. v. United States, 638 F. Supp. 824 (S.D.N.Y. 1986). The opinion in Blusal Meats announces, again without analysis, that "the six-year limitations period under the False Claims Act begins to run on the date the claim is filed or, if the claim is paid, on the date of the payment." Id. at 829. That ambiguous holding, in turn, recites its reliance upon three cases: Jankowitz v. U.S., supra at 545, whose holding appears to favor default or presentment over payment as the trigger for the statute of limitations; U.S. v. Cripps, 451 F. Supp. 598, 600 (E.D. Mich. 1978), where Chief Judge Kennedy found it "clear that the statute of limitations period began to run on the date each voucher was presented to HUD for payment"; and U.S. v. Klein, 230 F. Supp. 426 (W.D. Pa. 1964), aff'd 356 F.2d 983 (3d Cir. 1966), whose ambiguous holding is that "until the Government had to pay under its guarantee program, the statute did not begin to run." (emphasis added).
A recent decision of the First Circuit provides analysis that is both helpful and persuasive. U.S. v. Rivera, 55 F.3d 703 (1st Cir. 1995), was a False Claims Act case brought against officers of a hospital in Puerto Rico for fraudently diverting the proceeds of a federally insured mortgage loan. The hospital defaulted on the loan and filed a bankruptcy petition. The lender declared the loan in default and presented HUD with a formal application for insurance benefits. The False Claims Act suit was filed more than six years after all of these events -- but it was filed six years to the day after the lender formally assigned its mortgage on the hospital's property to the government, thereby complying with a condition precedent to HUD's obligations to pay. The district court found that the action was timely filed because the government's obligation to pay did not arise until the mortgage was assigned. 839 F. Supp. 92, 95 (D.P.R. 1993).
The First Circuit reversed. After reviewing the McNinch decision and its progeny, the court articulated the "theory" that, for purposes of 31 U.S.C. § 3731(b), the violation was committed, and the statute began to run, whenever the lender "can properly be said to have presented its insurance claim to the government." The court then concluded that the lender's claim, even if not perfected by the assignment of the mortgage, amounted to a "demand for money" that would induce the government to disburse funds or to "otherwise suffer immediate financial detriment," referring again to the McNinch opinion. Id. at 709. The First Circuit's extensive analysis concludes: "Thus, in deciding whether a given false statement is a claim or demand for payment, a court should look to see if, within the payment scheme the statement has practical purpose and effect, and poses the attendant risk, of inducing wrongful payment." Id. at 709 (emphasis added).
Application of the First Circuit's analysis to the facts of the instant case, including particularly the payment scheme reflected by the offering circular, leads to the conclusion that the SBA's own act of transferring River Capital to a liquidation status operated as the "claim" or "demand for money" required by the McNinch decision and its progeny. That act took place on August 24, 1988, which was more than six years before the instant suit, including Counts One and Five, was filed. Accordingly, the False Claims Act statute of limitation bars those two counts.
Count Two is based on 31 U.S.C. § 3728(a)(7) and requires a different, but much simpler, analysis of the statute of limitation defense. For this count, the false statement itself is the "violation," which is charged as the knowing use of "false statements or records to conceal, avoid or decrease an obligation to pay or transmit money or property to the SBA." The relevant date is March 3, 1988 -- the day River Capital submitted its financial statements for the year ended December 31, 1987. The statute of limitations began to run at that time. Count Two was filed more than six years later and is barred.
The FIRREA Counts
Counts Three and Four of the original complaint and Count Six of the government's amended complaint
seek civil penalties under 12 U.S.C. § 1833a, for violations of, or conspiracies to violate, three designated sections of Title 18 of the United States Code.
The predicate act charged in Count Three is a violation of 18 U.S.C. § 287, which is the criminal analog of the Civil False Claims Statute, 31 U.S.C. § 3729. The predicate act charged in Count Four is a violation of 18 U.S.C. § 1001, the general criminal false statement provision. FIRREA civil penalties apply only to those violations of § 287 and § 1001 that "affect . . . a federally insured financial institution." 12 U.S.C. § 1833a(c). River Capital was not a federally insured financial institution. Punitive statutes, such as FIRREA, are to be narrowly construed. See Busic v. United States, 446 U.S. 398, 406, 64 L. Ed. 2d 381, 100 S. Ct. 1747 (1980); Yellow Bus Lines, Inc. v. Drivers, Chauffeurs & Helpers Local Union 639, 286 U.S. App. D.C. 182, 913 F.2d 948, 956 (D.C. Cir. 1990). The false claims count (Count Three) and false statements count (Count Four) are beyond the reach of FIRREA and must be dismissed.
The predicate act charged in the proposed new Count Six is a violation of 18 U.S.C. § 1014, which is not modified for FIRREA purposes by the requirement that a violation affect a federally insured financial institution. This very specific statute makes it a crime knowingly to make any false statement or report or willfully to overvalue any land, property or security for the purpose of influencing in any way the action of any of a list of enumerated agencies or persons.
SBA is not mentioned by name and is not among the listed generic types of agencies, and it follows that the proposed Count Six could not stand even if leave were granted to file it.
* * *
For the above-stated reasons, defendant's motion to dismiss must be granted. An order consistent with this opinion is filed herewith.
United States District Judge
Date: August 31, 1995
Upon consideration of the parties' arguments at a motions hearing on June 29, 1995, the entire record, and for the reasons stated in the Court's opinion issued herewith, it is this 31st day of August, 1995 ORDERED that:
1. Defendant's motion to dismiss , which has been treated as a motion for summary judgment, F.R.Civ.P. 12(b), is GRANTED;
2. This case is DISMISSED.
United States District Judge