United States v. Karron
2011 WL 1126578
S.D.N.Y.2011Background
- Karron was President/CTO of CASI; CASI sought a $2,000,000 ATP grant for three years for a project titled Anatomic Computer Modeling.
- CASI budget projected $2,110,500 total costs with $2,000,000 from ATP and planned a CASI–CUNY subcontract.
- CASI provided forms SF-270, SF-272, and SF-269 as Authorized Certifying Official, with Karron signing at least twenty such forms.
- ATP audit in June 2003 revealed noncompliance (cost share, excess drawdowns, no CUNY subcontract, unauthorized expenditures) leading to suspension.
- In 2007–2008, Karron was criminally convicted under 18 U.S.C. § 666 for intentionally misapplying funds; sentenced in 2008 and affirmed on appeal.
- The Government filed this FCA civil action November 24, 2008 seeking liability, treble damages, and civil penalties; state-law claims were later dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Collateral estoppel under FCA | Government relies on prior conviction estopping Karron from denying elements. | Karron argues estoppel does not apply or misapplies the standard. | Yes; conviction estops denial of FCA liability on both claims. |
| FCA elements of falsity and knowledge | Karron's certifications were false and knowingly so; jury found intentional misapplication. | Karron contends no proof of intent to defraud is required or misstatements were not knowingly false. | FCA elements satisfied; estoppel forecloses contrary defense. |
| Damages measurement under FCA | Damages treble the total funds ($1,345,500) with restitution offset. | Damages limited by milestones/reports and potential offsets for benefits conferred. | Treble damages awarded as $4,036,500 less restitution; no offset for intangible benefits. |
| Civil penalties availability | Penalties for each false statement (up to 20) should be imposed. | Penalties should be tied to specific false statements; not all twenty are non-disputably false. | Civil penalties not granted for all twenty; $5,500 imposed for one false statement; others remain unresolved for penalties. |
| Confluence with state-law claims | FCA judgment resolves pending related state-law claims. | State-law claims should proceed independently. | Remaining state-law claims dismissed following government’s representation. |
Key Cases Cited
- Allen v. McCurry, 449 U.S. 90 (1981) (preclusive effect of criminal judgments on civil claims)
- Emich Motors Corp. v. Gen. Motors Corp., 340 U.S. 558 (1951) (collateral estoppel principles in civil proceedings)
- New York v. Julius Nasso Concrete Corp., 202 F.3d 82 (2d Cir.2000) (collateral estoppel in government-related actions)
- Stichting ter behartiging van de belangen van oudaandeelhouders in het kapitaal van Saybolt Int'l B.V. v. Schreiber, 327 F.3d 173 (2d Cir.2003) (federal collateral estoppel standard)
- United States v. Bornstein, 423 U.S. 303 (1976) (measure of actual government damages in fraud cases)
- United States ex rel. Mikes v. Strauss, 274 F.3d 687 (2d Cir.2001) (FCA liability standards and falsity/knowledge concepts)
- Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008) (statutory interpretation of intent/materiality under FCA)
- Rogan, 517 F.3d 449 (7th Cir.2008) (FCA damages and penalties framework; constitutional concerns)