United States District Court, D. New Jersey
For MITCHELL KURLANDER, Defendant: WILLIAM A. DESTEFANO, STEVENS & LEE, PHILADELPHIA, PA.
For ALAN ABESHAUS, Defendant: KEVIN HARRY MARINO, MARINO TORTORELLA & BOYLE, PC, CHATHAM, NJ.
For USA, Plaintiff: LEE M. CORTES, LEAD ATTORNEY, OFFICE OF THE U.S. ATTORNEY, DISTRICT OF NEW JERSEY, NEWARK, NJ.
William H. Walls, United States Senior District Judge.
Gerry and Patricia Dale (" Relators" ) move to intervene in the above-captioned criminal matter against defendants Mitchell Kurlander (" Kurlander" ) and Alan Abeshaus (" Abeshaus" ) (collectively, " Defendants" ) under the False Claims Act (" FCA" ), 31 U.S.C. § 3730(c)(5), for the purpose of obtaining a relator's share of the criminal fines, restitution and/or forfeiture paid by Defendants. Defendants and the Government oppose. Relators' motion is denied.
FACTUAL AND PROCEDURAL BACKGROUND
The following pertinent facts are taken from the parties' briefs, Relator's Fourth Amended Complaint (" FAC" ), United States ex rel. Dale, et al. v. Abeshaus, et al., No. 06-cv-04747 (JKG) (E.D. Pa.), ECF No. 90, and the criminal indictment (the " Indictment" ) in United States v. Kurlander, et al., No. 11-cr-00315 (WHW) (D.N.J.), ECF No. 1, to which Defendants have pled guilty as to Count I.
Defendant Kurlander served as the Chief Financial Officer (" CFO" ) of Circle Systems Group, Inc. (" Circle" ), a privately owned Pennsylvania corporation engaged in the business of selling and reconditioning
athletic equipment, uniforms, and apparel. Indictment ¶ 1. From about 2003 until the company was sold in September 2005, Kurlander was also part owner of Circle. Id. As CFO, Kurlander was responsible for overseeing and managing Circle's accounts payables, accounts receivables, billing and the submission of bids and quotes to Circle's customers. Id. Defendant Abeshaus served as the de facto Chief Executive Officer (" CEO" ) of Circle and was the largest single shareholder of Circle until it was sold. Id. ¶ 2. As de facto CEO, Abeshaus was responsible for setting the policies and framework for Circle's operations, and he was always kept abreast of company developments by Circle's employees, including Kurlander (who is also his son-in-law). Id. About September 2005, Circle was acquired by Schutt Holdings, Inc. Id. ¶ 3.
Although Circle's products and reconditioning services were marketed nationally (and internationally--to schools funded and run by the Department of Defense Education Activity, see FAC ¶ ¶ 23-26), a large portion of its sales of athletic equipment and reconditioning services were to middle and high schools, colleges, and youth sports programs in New Jersey. Indictment ¶ 5. From at least August 1997 to June 2007, " in the District of New Jersey and elsewhere," Defendants " knowingly and intentionally combined, conspired, confederated and agreed to devise a scheme and artifice to defraud, and to obtain money and property from the [schools with which they did business] by means of materially false and fraudulent pretenses, representations, and promises," and for the purpose of executing that scheme and artifice, they " did use the United States mails, private and commercial interstate carriers, and interstate wire communications, contrary to Title 18, United States Code, Section 1341 (mail fraud) and Section 1343 (wire fraud)." Id. ¶ 8. The object of the conspiracy was to obtain money and other things of value from the schools for Circle by means of a number of fraudulent business practices, which included, but were not limited to, the following: (a) retaining, and converting to Circle's own use, duplicate payments by the schools that should have been returned or credited to the schools; (b) submitting fake quotes to school athletic officials so that their purchases from Circle would seemingly comply with applicable law, regulations, and policies; and (c) submitting fraudulent invoices to the schools in order to: (i) recoup money that Circle had expended for donations to the schools and the school athletic officials; (ii) pay for personal gifts given to the school athletic officials; (iii) ensure that Circle achieved its desired profits on goods and services that had been intentionally " underpriced; " and (iv) hide the nature and timing of purchases by the school athletic officials when requested to do so by those school athletic officials. Id. ¶ 9; see also id. ¶ ¶ 10-46 (Means and Methods of the Conspiracy).
Relators brought the corresponding civil matter, United States ex rel. Dale, el al. v. Abeshaus, et al., No. 06-cv-04747 (JKG) (E.D. Pa.). Beginning November 19, 1993, Gerry Dale was employed by Circle as a sports production manager. Mot. to Dismiss Op. at 14, E.D. Pa. No. 06-cv-04747 (ECF No. 106). Relators filed a civil qui tam action in the Eastern District of Pennsylvania under the federal FCA on October 20, 2006, alleging that Defendants were engaged in fraudulent activities. See
FAC ¶ 26 n.5. The case was placed in civil suspense by the Clerk of the Court and remained under seal until 2009, during which time Relators filed a second amended complaint. See Mot. to Dismiss Op. at 5, E.D. Pa. No. 06-cv-04747. On September 3, 2009, the United States notified Relators and the court that it was declining to intervene in that action. See Notice to Decline Intervention, E.D. Pa. No. 06-cv-04747 (ECF No. 17). On September 22, 2009, Relators filed their third amended complaint under seal. See Third Am. Compl., E.D. Pa. No. 06-cv-04747 (ECF No. 41). After various proceedings in the Eastern District of Pennsylvania, see Mot. to Dismiss Op. at 5-7, E.D. Pa. No. 06-cv-04747, Relators filed their FAC on August 15, 2012, which alleges claims against Abeshaus and Kurlander, along with Eric Abeshaus and David Drill (the President of Circle during the relevant time period). Count I of the FAC asserts a claim under the FCA. Counts II through IX assert state-law claims for violations of the false claims acts of various states.
Defendants had ceased directing the operations of Circle (then owned by Schutt Holdings, Inc.) in October 2008, and on December 22, 2008, David Drill was charged by a one count information in the District of New Jersey with conspiracy and defrauding the United States' government in violation of 18 U.S.C. § 371. Mot. to Dismiss Op. at 23-24, E.D. Pa. No. 06-cv-04747. On May 10, 2011, Defendants Kurlander and Abeshaus were charged by a twenty-two count indictment in this Court with violations of 18 U.S.C. § § 981(a)(1)(C), 1341, 1343, 1349 and 2, as well as violations of 28 U.S.C. § 2461. See Indictment.
The charges against Kurlander and Abeshaus in the information and Indictment arose from the same underlying conduct that formed the basis of the FAC. See Mot. to ...