United States District Court, District of Columbia
UNITED STATES OF AMERICA, ex. rel. ANDREW SCOLLICK, Plaintiff-Relator,
VIJAY NARULA, et al., Defendants.
C. Lamberth United States District Judge
case was brought by plaintiff-relator Andrew Scollick against
eighteen defendants for violations of the False Claims Act
(“FCA”) in connection with a scheme to obtain
certain set-aside government contracts through fraudulent
means. The United States has declined to intervene in this
matter. See Notice, ECF No. 6. The following
defendants have moved to dismiss for failure to state a
claim: Hudson Insurance Co., Hanover Insurance Co.,
Centennial Surety Associates, Inc., Michael Schendel, Ajay K.
Madan, Vijay Narula, Optimal Solutions and Technologies, Inc.
(“OST”), CB Construction Group, Inc.
(“CB”), Dilip Parekh, Shobha N. Mehta, Melvin G.
Goodweather, Citibuilders Solutions Group, and Guatam
Chitnis. Defendants Amar Gogia, Centurion Solutions Group,
LLC (“CSG”), and Neil Parekh have not moved to
dismiss. They have filed answers to
plaintiff-relator's Complaint. See Defs. Gogia
and CSG's Answer, ECF No. 63; Def. Parekh's Answer,
ECF No. 103. Plaintiff-relator, with the consent of the U.S.
government [110, 113], filed a notice of voluntary dismissal
 with respect to defendants KCGI, Guatam Chitnis, and
Anita Chitnis. Accordingly, no analysis of defendant Guatam
Chitnis' motion to dismiss, ECF No. 108, is necessary
because he has been voluntarily dismissed from this action.
the foregoing motions to dismiss were granted by this
Court's Order of September 30, 2016, ECF No. 122. The
Court finds that plaintiff-relator has failed to state claims
against defendants Hudson Insurance Co., Hanover Insurance
Co., Centennial Surety Associates, Inc., Michael Schendel, CB
Construction, Dilip Parekh, Shobha N. Mehta, Melvin G.
Goodweather, and OST and has granted their motions to
dismiss. Upon further review, the Court has determined that
plaintiff-relator has stated claims against defendants
Citibuilders, Ajay K. Madan, and Vijay Narula for certain FCA
violations-presenting false claims in violation of 31 U.S.C.
§ 3729(a)(1)(A), making false statements in violation of
31 U.S.C. § 3729(a)(1)(B), and conspiracy in violation
of 31 U.S.C. § 3729(a)(1)(C) (Counts I, II, IV). The
Court will accordingly vacate its prior Order granting the
defendants' motions to dismiss as to these three
defendants and will grant in part and deny in part defendants
Citibuilders, Madan, and Narula's motions to dismiss.
Counts I, II, and IV remain pending against defendants
Citibuilders, Madan, Narula, CSG, Neil Parekh, and Gogia.
factual allegations in this case center around an alleged
scheme to defraud the United States government by submitting
bids to obtain government construction contracts.
Plaintiff-relator claims that the defendants participated in
this scheme by fraudulently claiming or obtaining
service-disabled veteran-owned small business
(“SDVOSB”) status, HUBZone status, or section
8(a) status for certain companies to bid on and obtain
set-aside contracts, when in fact the bidders did not qualify
for the statuses claimed. Plaintiff-relator alleges that
defendants, as part of this scheme, falsely certified these
statuses, made false claims regarding past performance, hid
certain aspects of the management and control of the
companies at issue, and hid or falsified certain information
regarding the employees of the companies at issue.
central actors in this scheme are Neil Parekh, Ajay K. Madan,
Vijay Narula, Centurion Solutions Group (“CSG”),
and Citibuilders Solutions Group
(“Citibuilders”). Parekh, Narula, and Madan
allegedly engaged in conspiracy to defraud the government by
bidding on SDVOSB construction contracts although none of
them were service disabled veterans. Accordingly, Parekh,
Narula, and Madan established CSG as a “front
company” for the purpose of allowing them to bid on and
obtain SDVOSB set-aside contracts. Compl. ¶ 43. To
qualify for SDVOSB status, defendant Gogia-a service disabled
veteran-was allegedly falsely identified as a 100% service
disabled owner of CSG, although he did not actually exercise
control or ownership over CSG. Id. at ¶ 50.
Parekh, Narula, Madan, and Gogia also falsely identified that
CSG operated out of a HUBZone when in fact it did not.
Id. at ¶ 51. Plaintiff-relator alleges that CSG
then submitted false claims and statements to the government.
Id. at ¶¶ 53-85. Plaintiff-relator claims
that the CSG bids contained falsified information regarding
past performance, id. at ¶¶ 86-106, and
false representations concerning CSG's employees,
id. at ¶¶ 107-115. Finally,
plaintiff-relator claims that CSG obtained millions of
dollars in government contracts as a result of this
fraudulent scheme, and lists the specific contracts allegedly
fraudulently obtained. Id. at ¶ 116.
regard to Citibuilders, plaintiff-relator alleges that Parekh
established Citibuilders to branch out his fraudulent SDVOSB
contracting activity. Id. at ¶ 118. According
to the Complaint, Parekh falsely certified Citibuilders as a
service-disabled veteran-owned entity-utilizing defendant
Goodweather's service-disabled veteran status even though
Parekh was the de facto owner and controller of Citibuilders,
and misrepresented Citibuilders' past performance and
project personnel. Id. at ¶¶ 119-128.
Plaintiff-relator claims that Citibuilders obtained millions
of dollars in government contracts as a result of this
fraudulent scheme, and lists the specific contracts allegedly
fraudulently obtained. Id. at ¶ 129.
Plaintiff-relator claims that the creation of Citibuilders by
Parekh caused a rift between himself and Narula and Madan.
Id. at ¶¶ 131-147. Plaintiff-relator
claims that Narula is the alter ego of OST, that Neil Parekh,
Dilip Parekh, CB, and Citibuilders are all alter egos of each
other, that Narula, Neil Parekh, Madan, OST, and CB are
joint-alter egos of CSG, and that Neil Parekh, Goodweather,
and Citibuilders are joint alter egos. Id. at
¶¶ 29 - 32.
Plaintiff-relator claims that similar fraud was committed in
the name of a third company, KCGI. Id. at
¶¶ 166-174. Specifically it alleges that Narula,
Parekh, Madan, Guatam Chitnis, and Anita Chitnis schemed to
use KCGI to defraud the government by seeking Small Business
Administration section 8(a) contracts and/or service disabled
contracts. Id. at ¶ 166. On December 21, 2015
plaintiff-relator, with the consent of the U.S. government,
filed a notice of voluntary dismissal with respect to KCGI,
Guatam Chitnis, and Anita Chitnis.
of the number of defendants and the various and sometimes
disparate allegations against them, the Court will summarize
the remaining factual allegations against the rest of the
OST Defendants: Ajay Madan, Vijay Narula, Optimal Solutions
and Technologies (“OST”)
a corporation located in Washington, D.C. Compl. ¶ 11.
Vijay Narula is the president and CEO of OST. Id. at
¶ 15. Ajay K. Madan is the chief operating officer of
OST and is a 49% owner of CSG. Id. at ¶ 20.
Narula is alleged to be the alter ego of OST, and Narula,
Madan, and OST are alleged to be (some of) the alter egos of
CSG. Id. at ¶¶ 29, 31. Regarding OST, the
Complaint alleges that CB's business operations were
relocated to OST's office, id. at ¶ 42,
that CSG's business operations occurred out of OST's
headquarters, id. at ¶ 51, and that Narula,
Madan, and Parekh prepared CSG bid proposals while working
out of OST's office space, id. at ¶¶
67, 84. It alleges that OST never qualified for SDVOSB or
HUBZone status and was not a small business enterprise.
Id. at ¶ 45-47. The Complaint further alleges
that CSG's bid proposals “include[d] statements
pertaining to work alleged to have been completed at
defendant OST's corporate headquarters . . . [but] CSG
never performed any such construction activity.”
Id. at ¶ 102. Narula allegedly “would
personally provide past performance survey responses
[regarding the OST project] to the government.”
allegations regarding defendants Narula and Madan are
interspersed throughout the Complaint, which paints them as
having a central role in the scheme. In sum,
plaintiff-relator claims that Narula and Madan, along with
Neil Parekh, were involved in the creation of CSG for the
purpose of submitting fraudulent bids on certain government
contracts, that Parekh, Narula, and/or Madan had control over
and ownership of CSG, that they prepared the CSG bid
proposals and decided the content, and that Gogia was
subservient to them. Plaintiff-relator then describes Narula
and Madan's reaction to the formation of
Citibuilders-that it caused a rift among the three
defendants. Id. at ¶ 131. He also discusses
several communications between the defendants regarding the
following: the transfer of funds, payroll and payment
disputes, CSG's projects and profits, the separation of
CB and CSG, the distribution of surplus CSG income between
Parekh, Madan, and Narula, and the financial needs of CSG,
OST, and CB. Id. at ¶¶ 133-47. Finally,
plaintiff-relator alleges that Narula executed a corporate
resolution for Hudson and Hanover acknowledging that OST,
CSG, and CB shared common ownership, and the OST bonding
agreement securing the CSG bonding included personal
indemnity of Narula. Id. at 160-61.
Dilip Parekh and CB Construction
Construction is a company owned by Neil and Dilip Parekh.
Id. at ¶ 12. Dilip Parekh is the father of Neil
Parekh and a 55% owner of CB Construction. Id. at
¶ 17. He is alleged to be an alter ego of Neil Parekh,
CB Construction, and Citibuilders. Id. at ¶ 30.
CB is alleged to be an alter ego of Neil Parekh, Dilip
Parekh, and Citibuilders, as well as an alter ego of CSG.
Id. at ¶¶ 30-31. CB does not qualify as a
service-disabled veteran-owned business. Id. at
¶ 48. In 2010, CB's business operations were
relocated to OST's corporate office. Id. at
¶ 42. Many of the factual allegations in the Complaint
surrounding CB are related to its relationship with CSG. It
alleges that Neil Parekh transferred money from the CSG
checking account into the CB checking account which was
controlled by Neil and Dilip Parekh. Id. at
¶¶ 70, 78. It alleges that the day to day
management and oversight of CSG's SDVOSB construction
contracts was performed in part by CB. Id. at ¶
72. It alleges that CSG used credit cards issued to CB to
conduct CSG business, that the primary cardholder on the CB
account was Dilip Parekh, and that the CB cards used to
conduct CSG business were in part issued in the name of Dilip
Parekh. Id. at ¶ 79. It alleges that a credit
card issued to Dilip Parekh was used to bill CSG costs, and a
card in the name of CB was used to conduct CSG business.
Id. at ¶ 80. Regarding CB only, the Complaint
alleges that the CSG bids falsely claimed that CSG employed
individuals who were actually employed by CB. Id. at
¶¶ 113-14. It also discusses apparent payments from
CSG to CB. Id. at ¶¶ 133-35. Regarding
Dilip Parekh only, it alleges that domination and control of
Citibuilders was in the hands on Neil and Dilip Parekh, not
defendant Goodweather, and that government contracting funds
awarded to Citibuilders were funneled into accounts
controlled by Neil and/or Dilip Parekh. Id. at
¶¶ 122, 127.
Melvin G. Goodweather
Goodweather is a service disabled veteran allegedly falsely
identified as the sole owner and CEO of Citibuilders,
although he was subservient to Neil Parekh. Id. at
¶ 19. He is alleged to be an alter ego of Neil Parekh
and Citibuilders. Id. at ¶ 32. The Complaint
claims that Parekh utilized Goodweather's service
disabled veteran status to establish Citibuilders as a SDVOSB
entity, but that Citibuilders was under the direct control of
Parekh who was the de facto owner. Id. at ¶
Shobha N. Mehta, MD
Mehta is the aunt of Neil Parekh. Id. at ¶ 21.
The Complaint alleges that, as part of the scheme, the
defendants falsified past performances of CSG. Specifically,
it claims that defendants used a renovation project at Dr.
Mehta's office as a credential of past performance that
was necessary to bid and win contracts for medical centers.
Id. at ¶¶ 96-97. Plaintiff-relator alleges
that Dr. Mehta's office was never renovated and that
“[t]he defendants manufactured the Mehta Project and
cut and pasted reference to the Mehta Project in various
solicitations and bid proposals with differing size and costs
of that project to fit the particular contract requirements
under bid.” Id. at ¶¶ 99-100. He
claims that the defendants conspired with Dr. Mehta to allow
them to identify her office as an example of CSG's past
performance and that Dr. Mehta “would provide past
performance survey information to the government falsely
attesting to work CSG never performed.” Id. at
The Insurance Defendants: Centennial Surety Associates,
Michael Schendel, Hudson Insurance Co., Hanover Insurance
has also brought claims against several insurance related
entities and one individual: Centennial Surety Associates,
Michael Schendel, Hudson Insurance Co., and Hanover Insurance
Co. (the “insurance defendants”). Under the
Miller Act, contractors bidding for government construction
contracts are required to post bid bonds, performance bonds,
and payment bonds, and the bid bond company is required to
ensure that the contractor will perform the work.
Id. at ¶ 148. Centennial is an insurance
broker, Schendel is the president of Centennial, and Hudson
and Hanover are insurance companies that provided surety
bonds to the defendants. Id. at ¶¶ 22-25.
proposals submitted here were dependent upon the issuance of
surety bonds and performance bonds by Centennial, “as
the agent and attorney-in-fact for Hudson Insurance Company
and Hanover Insurance Company.” Id. at ¶
151. Plaintiff-relator claims that Centennial and Schendel
were the lawful agents of and attorneys-in-fact for Hanover
and Hudson and that Schendel was responsible for causing
Hudson and Hanover to issue bid and performance bonds to CSG
and Citibuilders. Id. at ¶¶ 152-53.
Plaintiff-relator claims that Schendel had a long-standing
relationship with Neil Parekh and that Centennial knew that
OST, CSG, and CB Construction shared a single office and that
Parekh and Narula were in functional control of CSG.
Id. at ¶¶ 154- 55.
alleges that the contracts at issue required Citibuilders and
CSG to obtain bid bonds and performance bonds, without which
the fraudulent activity could not be carried out.
Id. at ¶ 156. He claims that Schendel and
Centennial knew the details of the bid proposals submitted by
OST, CSG, and CB. Id. at ¶ 158. He also claims
that Hudson and Hanover “by and through its agent and
attorneys-in-fact Centennial” understood that OST, CSG,
and CB shared common ownership, requiring Narula, Parekh, and
Gogia to execute corporate resolutions acknowledging this
fact. Id. at ¶ 160. In addition, Schendel and
Centennial allegedly “understood that Parekh, Narula,
and Madan had ownership interests in CSG and deliberately
disregarded this fact when issuing bonds in connections with
the false certifications contained in the bidding proposals
submitted to the government.” Id. at ¶
163. Finally, the Complaint alleges that Hudson and Hanover
knew that bonds were required for the contracts at issue and
“[b]ut for Defendant Schendel, Centennial Surety
Associates, Inc., acting as agents and attorney-in fact to
Hudson Insurance Company and Hanover Insurance Company for
the purpose of issuing bid bonds and performance bonds, the
fraudulent bid submissions made by CSG and Citibuilders would
not have been awarded.” Id. at ¶¶
Motion to Dismiss
survive a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6), “a complaint must contain
sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.'”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). A plaintiff must furnish “more than labels and
conclusions” or “a formulaic recitation of the
elements of a cause of action.” Twombly, 550
U.S. at 555. Instead, the complaint's “[f]actual
allegations must be enough to raise a right to relief above
the speculative level, on the assumption that all the
allegations in the complaint are true (even if doubtful in
fact).” Id. (internal citations omitted). When
considering a motion to dismiss under Rule 12(b)(6),
“the court must assume ‘all the allegations in
the complaint are true (even if doubtful in fact), ' and
the court must give the plaintiff ‘the benefit of all
reasonable inferences derived from the facts
alleged.'” Aktieselskabet AF 21. Nov. 2001 v.
Fame Jeans Inc., 525 F.3d 8, 17 (D.C. Cir. 2008)
(internal citations omitted).
Rule of Civil Procedure 9(b) applies to FCA actions.
United States v. Toyobo Co., Ltd., 811 F.Supp.2d 37,
44 (D.D.C. 2011) (citing United States ex rel. Totten v.
Bombardier Corp., 286 F.3d 542, 551-52 (D.C. Cir.
2002)). An FCA plaintiff “must state with particularity
the circumstances surrounding the defendants' allegedly
false claims, as required by Rule 9(b) of the Federal Rules
of Civil Procedure.” Totten, 286 F.3d at 544.
The “time, place, and contents of the false
representations” must be pleaded with specificity, as
these are the “element[s] of fraud about which
the rule is chiefly concerned.” Id.
“[A]n FCA plaintiff must identify the ‘who, what,
when, where, and how of the alleged fraud.'”
United States v. Kellogg Brown & Root Servs.,
Inc., 800 F.Supp.2d 143, 153 (D.D.C. 2011). In sum,
“[c]ombining Rules 8 and 9(b), we require that
‘the pleader . . . state the time, place and content of
the false misrepresentations, the fact misrepresented and
what was retained or given up as a consequence of the fraud,
” and that he “identify individuals allegedly
involved in the fraud.” U.S. ex rel. Williams v.
Martin-Baker Aircraft Co., 389 F.3d 1251, 1256 (D.C.