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United States of America v. Project On Government Oversight

March 21, 2012

UNITED STATES OF AMERICA, PLAINTIFF,
v.
PROJECT ON GOVERNMENT OVERSIGHT, ET AL., DEFENDANTS.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

This matter is before the Court on remand from the D.C. Circuit. On February 11, 2008, a jury found that defendants Robert Berman and the Project on Government Oversight ("POGO") had violated 18 U.S.C. § 209, which prohibits making "any contribution to or supplementation of salary" to a federal employee "as compensation for his services as an officer or employee of the executive branch of the United States Government," and prevents federal employees from accepting any such payments. This Court assessed a civil penalty of $383,600 against Berman and $120,000 against POGO, and both defendants appealed. The D.C. Circuit found that the jury had been improperly instructed on the issue of intent and that the error was not harmless. It therefore vacated the jury's verdict and remanded the case to this Court. On remand, the United States has sought summary judgment against only defendant Berman, and has indicated that it plans to proceed against POGO at a later trial. See Notice of Intentions Regarding Summary Judgment [Docket Entry 138]; see also Tr. of Status Hearing (Nov. 19, 2011) at 6. Berman has cross-moved for summary judgment and moved to dismiss the case based on the government's allegedly improper conduct. For the reasons given below, the Court will deny both of Berman's motions and grant in part the government's motion for summary judgment.

BACKGROUND

The background of this case has been recited in numerous opinions, so only the most important facts will be summarized here. See United States v. POGO, No. 03-96, Order [Docket Entry 31] ("POGO I"); United States v. POGO, 454 F.3d 306 (D.C. Cir. 2006) ("POGO II"); United States v. POGO, 484 F. Supp. 2d 56 (D.D.C. 2007) ("POGO III"); United States v. POGO, 525 F. Supp. 2d 161 (D.D.C. 2007) ("POGO IV"); United States v. POGO, 531 F. Supp. 2d 59 (D.D.C. 2008) ("POGO V"); United States v. POGO, 543 F. Supp. 2d 55 (D.D.C. 2008) ("POGO VI"); United States v. POGO, 572 F. Supp. 2d 73, 75-77 (D.D.C. 2008) ("POGO VII"); United States v. POGO, 616 F.3d 544 (D.C. Cir. 2010) ("POGO VIII").

The case arose in the 1980s when Robert Berman, then a senior economist in the Office of Policy Analysis within the Department of the Interior ("DOI"), became interested in the proper valuation of oil royalties. His concern was that oil companies were underestimating the royalties they are required to pay when they extract oil from federal or Native American lands. POGO IV, 525 F. Supp. 2d. at 162. In the early 1990s, POGO, an organization dedicated to investigating and exposing "subservience of the federal Government to special interests," also began investigating underpayment of oil royalties. POGO II, 454 F.3d at 306 (internal quotation marks omitted); POGO IV, 525 F. Supp. 2d at 162. In June 1994, an anonymous source leaked one of Berman's memoranda on oil royalty issues to Danielle Brian, POGO's Executive Director, who found it helpful. POGO IV, 525 F. Supp. 2d at 163. Brian contacted Berman, and over the next two years they had "twenty or thirty telephone conversations" in which Berman "explained . . . the mechanics of the transactions employed by the oil industry" to Brian. Id.; see also POGO II, 454 F.3d at 307. Berman also advised Brian on how to file FOIA requests on the topic. POGO VIII, 616 F.3d at 546.

Based in part on the information acquired through Berman's aid, POGO filed two qui tam actions to recover unpaid royalties in the United States District Court for the Eastern District of Texas. Id. Berman declined POGO's invitation to serve as a co-relator in the lawsuits, but he did enter into a written agreement specifying that he would receive one third of any monetary award POGO received as a result of the qui tam litigation. Id. The United States ultimately intervened in the qui tam proceedings and collected a $440 million recovery. POGO IV, 525 F. Supp. 2d at 164. In October 1998, POGO "received its 1.2 million share of the first settlement in the qui tam actions," and in November 1998, POGO issued a check for $383,600 to Berman. Id.; see also POGO II, 454 F.3d at 307. The check stated that the payment was a "Public Service Award," and the accompanying letter described the check as an award for Berman's "decade-long public-spirited work to expose and stop the oil companies' underpayment of royalties for the production of crude oil on federal and Indian lands." POGO II, 454 F.3d at 307; see also POGO IV, 525 F. Supp. 2d at 164.

This transaction drew the attention of attorneys at the Department of Justice. They launched a criminal investigation, but ultimately charged Berman and POGO with only civil violations of 18 U.S.C. § 209 and various common-law claims. 18 U.S.C. § 209 forbids one from "receiv[ing] any salary, or any contribution to or supplementation of salary, as compensation for his services as an officer or employee of the executive branch of the United States Government . . . from any source other than the Government of the United States" or from "mak[ing] any contribution to, or in any way supplement[ing], the salary of any such officer or employee under circumstances which would make its receipt a violation of this subsection." 18 U.S.C. § 209; POGO IV, 525 F. Supp. 2d at 164. In 2004, a previous district judge granted the government's motion for summary judgment on Count I, the § 209 count, without explanation. See POGO I [Docket Entry 31] at 1. POGO appealed, and the D.C. Circuit reversed. POGO II, 454 F.3d at 306. The D.C. Circuit called the government's evidence "impressive," id. at 311, but after reviewing the record in detail, it found several pieces of conflicting evidence that favored the defendants. Id. at 311-13. The court of appeals observed that, in light of the conflicting evidence, the outcome of the litigation would likely hinge on defendants' credibility. Id. at 313. Because credibility determinations are generally the province of a factfinder, the D.C. Circuit reversed the grant of summary judgment and remanded to this Court for further proceedings. Id.

After remand, the government moved for summary judgment on Count I a second time, "citing 'new' evidence that allegedly eliminate[d] the credibility issues that the D.C. Circuit identified." POGO IV, 525 F. Supp. 2d 166. This Court found, however, that the so-called "new" evidence was either not new or failed to "decisively refute[]" the conflicting evidence that the court of appeals had found significant. Id. at 170. This Court concluded that the government's motion was largely an attempt to relitigate the decision of the D.C. Circuit. Id. Berman also moved for summary judgment, arguing that a lump-sum payment could not constitute a "contribution to or supplementation of salary" as a matter of law. Id. at 171-73. This Court disagreed. Id. Both summary judgment motions were therefore denied, and the case proceeded to trial.

At trial, no party disputed that POGO had made, and Berman had accepted, a payment. The trial therefore focused on whether that payment had been made "as compensation for [Berman's] services as an officer or employee of the executive branch of the United States Government." See 18 U.S.C. § 209. To prove the payment had been made as compensation for Berman's government work, the United States called, among other witnesses, Berman, Brian, and Theodore Heintz. Berman testified that he had written several memoranda on oil royalty valuation issues and sent them to his superiors. Tr. Day 2 at 187-88. He explained that he had not been assigned to analyze oil royalty valuation issues, but that he had undertaken the analysis on his own initiative, with his supervisor's approval, because he was interested in the oil market. Tr. Day 2 at 91, 98-99. At some point around 1993, Berman testified, his supervisors told him "not to do any further work" on oil royalty valuation issues. Tr. at 101-02. Berman acknowledged that he had written several of the memoranda cited in POGO's investigative reports, and stated that POGO's payment to him was an award for his efforts "to bring the undervaluation issue to the attention of people within the Department of the Interior." Tr. Day 3 at 160; see also POGO VI, 543 F. Supp. 2d at 58.

Brian's testimony was largely consistent with Berman's. She explained that Berman had helped her understand the issues surrounding oil royalty valuation and given her advice on how to prepare her FOIA requests. Tr. Day 1 at 136. She also testified that the payment was "at least in part . . . for Mr. Berman's years of bringing this issue, the undervaluation of oil royalties, to the attention of his supervisors," but that Berman's superiors had ignored his efforts. Tr. Day 2 at 77; see also Tr. Day 1 at 211-13; Tr. Day 2 at 45. In sum, she stated, POGO had paid Berman and one other government employee because "I thought it was the right thing to do . . . I wanted them to know that I wasn't going to forget that they had been the whistle-blowers." Tr. Day 2 at 9.

Heintz testified that he had been Berman's supervisor from the mid-1980s to mid-1990s. Tr. Day 2 at 124, 137. Heintz explained that Berman was the "lead analyst" on oil royalty issues at the DOI for "roughly 10 years from the mid-80s to the mid-90s." Tr. Day 2 at 81. He identified several of Berman's memoranda on oil royalty valuation issues, and testified that he had reviewed them and passed them up the line to his superiors. Tr. Day 2 at 96-102. He also testified that preparation of the memoranda was part of Berman's "official job responsibilities," Tr. Day 2 at 102, and that the DOI leadership had "considered [Berman's] analysis but did not accept the recommendations that Mr. Berman was making." Tr. Day 2 at 88. On vigorous cross-examination by the defense, Heintz admitted to some uncertainty about the timing and extent of Berman's participation on oil royalty issues. He conceded that his deposition statement that Berman had worked on an interagency task force on oil royalty valuation was wrong, and that he had merely assumed that Berman was involved because of his expertise on the issues. Tr. Day 2 at 136; see also POGO VI, 543 F. Supp. 2d at 58. Heintz also admitted that he was unsure when Berman had been told to stop working on oil royalty valuation issues. Tr. Day 2 at 131, 141, 166-75.

In response to the government's evidence, defendants called only two witnesses. Mark Guiton discussed Berman's appearance before Congress to testify on oil royalty valuation issues. Guiton, a former Congressional staffer who had arranged the oil royalty hearing, explained that he, not anyone at DOI, had suggested that Berman appear as a witness at the hearing. Tr. Day 4 at 9-10. He did so because "Berman seemed to have both the knowledge [on oil royalty valuation] and he had a lot of evidence of the department not pursuing this issue." Tr. Day 4 at 10. Finally, Lon Packard, outside counsel for POGO, testified that he had notified a DOJ attorney about the planned payment to Berman before making the payment. Tr. Day 4 at 25-26. He acknowledged, however, that he had not asked for permission to make the payment. Tr. Day 4 at 36.

In its closing argument, the government argued that it had successfully shown that POGO paid Berman "as compensation for his services as an officer or employee of the executive branch of the United States Government." POGO VI, 543 F. Supp. 2d at 59 (quoting 18 U.S.C. § 209). The government emphasized Heintz's testimony that Berman's assigned duties had included oil royalty valuation issues, and pointed out that POGO's investigative reports cited memoranda that Berman wrote "on government time while [he was] drawing a salary from DOI." Id. The government also stressed that Brian had testified that the purpose of POGO's payment was "to compensate individuals who had been advocating . . . for years within the government." Id. at 59. Defendants countered that Heintz's credibility was suspect and that, far from being assigned to work on oil royalty valuation issues, Berman was "expressly instructed to cease work[]" on those issues by his superiors. Id. After brief deliberation, the jury found against both defendants. Id. at 60.

After trial, the government moved for summary judgment against Berman on its common law claims, including Count III, its breach of fiduciary duty claim. This Court concluded that "the same facts that support the jury verdict" and Berman's undisputed violation of "numerous Office of Government Ethics regulations" supported the government's contention that Berman had breached his fiduciary duty to his employer. POGO VII, 572 F. Supp. 2d at 75-77. The Court declined, however, to award the traditional remedy for a breach of fiduciary duty -- disgorgement -- because it had already ordered Berman to pay back the entire $383,600 sum based on his violation of § 209. Id. at 77.

Both defendants appealed, focusing on the § 209 count and arguing primarily that the jury instructions on intent were flawed. This Court had instructed the jury that it could "consider what services POGO subjectively intended the payment to be for, and what [services] Mr. Berman believed that payment was for," but it could not consider whether either defendant subjectively intended that payment be for Berman's "services as an officer or employee of the executive branch of the United States Government." Tr. Day 5 at 98-99. That is, the jury was instructed that the parties' intent might determine whether the payment was meant to be compensation for Berman's work on oil royalty valuation, but whether oil royalty valuation analysis was part of Berman's official government work was an objective fact to be determined without reference to the parties' intent. As the D.C. Circuit summarized:

This meant, for example, that the jury was permitted to determine whether POGO intended its payment to be compensation for Berman's internal government memoranda (as the government would have it), or instead for his generalized whistleblowing activities (as POGO would have it). But it also meant that the jury was not permitted to consider whether POGO knew that either kind of service (and particularly the latter) was actually part of Berman's government duties.

POGO VIII, 616 F.3d at 566. Before this Court and on appeal, defendants argued that the jury was required to consider defendants' subjective intent both in determining what the payment was for, and in determining whether that work was Berman's official government work.

The D.C. Circuit agreed. It began by observing that § 209 does not contain an explicit mens rea requirement. But because § 209 can be either a civil or a criminal statute, and a court "must presume that criminal statutes and regulations contain a mens rea element unless otherwise clearly intimated in the language or legislative history,'" the court of appeals held that the presumption of a mens rea element applied even in this civil lawsuit. Id. at 549 (quoting United States v. Sheehan, 512 F.3d 621, 629 (D.C. Cir. 2008)) (brackets omitted). The court also noted that an intent requirement was "necessary to separate wrongful conduct from otherwise innocent conduct." Id. at 550 (internal quotation marks omitted). For instance, the court wrote, "a parent's monthly checks to a child [employed by the federal government] could be construed as violating § 209" without an intent requirement, because "only the parent's intent distinguishes payments to help cover the rent from payments to subsidize what the parent regards as an insufficient public-sector salary." Id. Finally, the D.C. Circuit explained that an intent requirement was "necessary to distinguish between lawful and unlawful public service awards," and cited several memoranda by the Office of Legal Counsel ("OLC") and the Office of Government Ethics ("OGE") that held that "a bona fide award for public service or other meritorious achievement" would not violate § 209. Id. at 551 & nn.7-8.

The court of appeals held that § 209 has a general rather than a heightened intent requirement, i.e., that the government must show that the defendant "know[s] that his act has the characteristics bringing it within the scope of the statute," but need not show a willful violation of the statute. Id. at 552-53 (brackets, internal quotation marks, and citation omitted). The court also explained that the intent requirement applied to each element of § 209, because "the evil Congress sought to prohibit [is] payment intended as compensation not just for 'services,' but for 'services as an officer or employee of the executive branch.'" Id. at 557. Hence, the government must prove that the payor intends to compensate the employee for government work, not just any work done by someone who happens to be a government employee. Similarly, the payee must intend to be compensated for his actual government work, not work outside his official duties. Id. at 559.

Finally, the court of appeals noted in a footnote that "[b]ecause [the district court's conclusion on the fiduciary duty count] appears to have been largely premised on Berman's now-vacated liability under § 209(a), we leave this issue for the court's reconsideration upon remand." POGO VIII, 616 F.3d at 562 n

The court of appeals then vacated the jury verdict and remanded the case to this Court "to conduct further proceedings consistent with this opinion." Id. at 566. On remand, the United States has moved for summary judgment against Berman and Berman has cross-moved for summary judgment against the United States -- a surprising situation, given the posture of this case and the D.C. Circuit's prior opinion holding that the case was not amenable to summary judgment. See POGO II, 454 F.3d 306. Berman argues that the D.C. Circuit effectively found for him as a matter of law on Count I. See Motion for Summary Judgment by Robert A. Berman [Docket Entry 151] ("Berman's MSJ"). He also moves for dismissal, arguing that the government violated Brady v. Maryland, 373 U.S. 83 (1963), by failing to disclose exculpatory evidence, improperly coached a witness, and suborned perjury. See Motion for Dismissal and Sanctions [Docket Entry 150] ("Berman's MTD"). For its part, the government argues that new evidence -- specifically, Berman's trial and post-trial admissions -- shows that there is no longer any genuine dispute of material fact as to Count I, and hence it is entitled to summary judgment as a matter of law. See Motion for Summary Judgment Against Robert A. Berman [Docket Entry 148] ("Gov't MSJ"). In the alternative, the government argues that this Court should grant summary judgment against Berman on Count III, the breach of fiduciary duty claim Id. The Court will first consider both of Berman's motions, then the government's motion for summary judgment.

STANDARD OF REVIEW

Summary judgment is appropriate when the materials in the record show that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56. In determining whether there exists a genuine issue of material fact sufficient to preclude summary judgment, the court must regard the non-movant's statements as true and accept all evidence and make all inferences in the non-movant's favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A non-moving party, however, must establish more than the "mere existence of a scintilla of evidence" in support of its position. Id. at 252. Thus, the non-moving party cannot rely on mere speculation or compilation of inferences to defeat a motion for summary judgment. See Hutchinson v. Cent. Intelligence Agency, 393 F.3d 226, 229 (D.C. Cir. 2005). Nor can the non-moving party rely on conclusory statements with no evidentiary basis to establish a genuine issue of material fact. See Ass'n of Flight Attendants v. Dep't of Transp., 564 F.3d 462, 465 (D.C. Cir. 2009). "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted). Summary judgment is appropriate if the non-movant fails to offer "evidence on which the jury could reasonably find for the [non-movant]." Id. at 252.

ANALYSIS

I. Berman's Motion for Summary Judgment

Berman, currently representing himself pro se, argues that (1) there is no genuine dispute that POGO's payment to him was a bona fide public service award and (2) "the explicit finding by the D.C. Circuit makes a bona fide public service award not within the ambit of 18 U.S.C. § 209." Berman's MSJ at 9-10. He also contends that "there is no dispute that the payment he received from POGO was an award for whistleblowing," and that the caselaw clearly holds that whistleblowing cannot be part of an employee's duties, so the payment could not have been compensation for his government duties. Id. at 8, 16-18. Hence, Berman concludes, he is entitled to judgment as a matter of law.

These arguments are unpersuasive. As a preliminary matter, it is an overstatement to say that the D.C. Circuit clearly held that a bona fide public service award would not violate § 209. The issue of public service awards arose in the D.C. Circuit's discussion of whether § 209 contains an intent requirement. See POGO VIII, 616 F.3d at 551 & nn. 7-8. The court pointed to, among other things, various memoranda by the OLC and OGE stating that public service awards are exempted from § 209 because such awards are "motivated by a disinterested desire to honor distinguished public service" and are not intended to supplement a government employee's salary. Id.; see also 8 Op. Off. Legal Counsel 143, 144 (1984). Based in part on these memoranda, the court of appeals decided that § 209 does contain an intent requirement. The court had no occasion, however, to decide precisely what constitutes a bona fide public service award and whether such an award could ever violate § 209.

More importantly, even if it were perfectly clear that a bona fide public service award could not violate § 209, it is vigorously disputed whether POGO's payment to Berman was actually a bona fide public service award intended to recognize Berman's whistleblowing activities, rather than a prohibited contribution to Berman's salary. See Gov't Resp. to Berman's Stmt. of Material Facts [Docket 157] at 1 ("The United States does dispute the characterization of this payment as a 'public service award'. The payment was a share of POGO's proceeds from qui tam litigation that, by 'private agreement' in 1996, POGO had agreed to share with Mr. Berman to 'compensate[]' him for work he had been doing for years at the Department of Interior."). Indeed, that question was the reason the case proceeded to trial, and it is disingenuous for Berman to argue the issue is undisputed.

Berman claims that it is now obvious that the payment was a public service award because the D.C. Circuit described POGO's payment as a public service award "without comment." Reply in Support of Berman's MSJ [Docket Entry 159] at 3-4. But the D.C. Circuit was only describing the notation on the check and the accompanying cover letter; it was not agreeing that the check actually was a public service award. See POGO VIII, 616 F.3d at 546 ("The face of the check indicated that it was a 'Public Service Award,' and the accompanying letter explained that POGO was awarding it to Berman for his 'decade-long public-spirited work to expose and stop the oil companies' underpayment of royalties for the production of crude oil on federal and Indian lands.'"). Berman also rehashes the evidence presented at trial to support his argument that the payment was a public service award. See Berman's MSJ 15-16, 18. The only new evidence Berman presents is a 1999 memoranda by William Bettenberg, Berman's second level supervisor, that states that "Berman had no assigned work in [the area of oil royalty valuation] and probably had not had for several years." Berman's MTD, Ex. 1, at 3; see Berman's MSJ at 16. This document may help Berman's case, but it certainly is not enough to show that there is no genuine dispute over whether the payment was a bona fide public service award. The government has never argued that POGO's 1998 payment to Berman was for ongoing work, but rather that it was compensation for government work he had performed in the past. Hence, a 1999 statement that Berman had no oil royalty valuation work at that time and "probably" had not had such work for "several years" does not foreclose the possibility that POGO compensated Berman for his official government duties in the late 1980s and early 1990s.

The government also correctly points out that POGO's payment to Berman is not a public service award under the criteria set out in 5 C.F.R. § 2635.204(d)(1). Although that regulation applies to a different statute, both the OLC and the OGE have relied on it in distinguishing between compensation for government services and permissible bona fide public service awards in the § 209 context. See OGE Informal Advisory Memorandum 02 x 4 (July 1, 2002), 2002 WL 32100961, at Example 19 (following criteria laid out in 5 C.F.R. § 2635.204(d)(1)); 21 U.S. Op. Off. Legal Counsel 204 (Oct. 28, 1997), 1997 WL 33100655, at *4 (citing 5 C.F.R. § 2635.204(d)(1) and noting that some payments to federal employees are public service awards, not "compensation for services to the government"). Under § 2635.204(d)(1), bona fide public service awards are those that "are part of an established program of recognition . . . [u]nder which awards have been made on a regular basis or which is funded, wholly or in part, to ensure its continuation on a regular basis; and . . . [u]nder which selection of award recipients is made pursuant to written standards." Additionally, § 2635.204(d)(1) requires that an employee obtain advance written authorization before accepting a bona fide public service award over $200. POGO's payment to Berman does not fit within those criteria. The payments to Berman and one other government employee are apparently the only such awards POGO has made, there is no funding "to ensure . . . continuation on a regular basis," the recipients were not selected pursuant to written standards, and Berman did not obtain advance written authorization before accepting the payment. ...


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