Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Hobbs

United States District Court, N.D. West Virginia

March 16, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
RAYMOND HOBBS, ISAAC BERZIN, ALANA McCAMMAN, SCOTT McCAMMAN, DONALD KARNER, BRIAN WAIBEL, JOY WAIBEL, ALGEM, LLC, DYNASEP, LLC, ELECTRIC TRANSPORTATION ENGINEERING CORP., ELEMENT CLEANTECH, INC., GREENFUEL TECHNOLOGIES CORPORATION, OMNI ENGINEERING, PLLC, Defendants.

          MEMORANDUM OPINION AND ORDER DENYING MOTION TO DISMISS OR, IN THE ALTERNATIVE, MOTION TO TRANSFER [DKT. NO. 101]

          IRENE M. KEELEY, UNITED STATES DISTRICT JUDGE

         This case involves an alleged kickback scheme in violation of the Anti-Kickback Act, 41 U.S.C. §§ 8701, et seq., as well as the defendants' alleged submission of false or fraudulent claims in violation of the False Claims Act, 31 U.S.C. §§ 3729-3733.

         Pending before the Court is defendant Donald Karner's motion to dismiss for improper venue, lack of personal jurisdiction, and failure to state a claim or, in the alternative, motion to transfer venue (Dkt. No. 101). Defendants Brian Waibel, Joy Waibel, and Raymond Hobbs have joined Karner's motion (Dkt. Nos. 103, 104, and 105). For the reasons that follow, the Court DENIES the motion (Dkt. No. 101).

         I. BACKGROUND[1]

         Defendant Raymond Hobbs (“Hobbs”) was an employee of Arizona Public Service Company (“APS”)[2], which generated, transmitted, and distributed electricity to eleven Arizona counties. Its operations included limited exploration and implementation of renewable and sustainable energy alternatives. Hobbs was the principal investigator for two projects awarded to APS by the National Energy Technology Laboratory (“NETL”).

         The NETL is part of the Department of Energy (“DOE”) national laboratory system, and is owned, operated, and funded by the DOE. The first project with which Hobbs was involved, NETL Award No. DE-FC26-06NT42759, involved the development of a hydro-gasification process for the co-production of substitute natural gas (the “CSNG Project”). The government's share of the CSNG Project was $15, 000, 000. The second project, NETL Award No. DE-FE0001099, involved developing an integrated energy system with beneficial carbon dioxide use (the “IES Project”). The government's share of the IES Project was $70, 000, 000. The NETL administered the Projects from its Morgantown, West Virginia, offices (“NETL-Morgantown”).

         In its amended complaint, the government alleges that defendants Algem, LLC, Dynasep, LLC, Electric Transportation Engineering Corporation, Element Cleantech, Inc., Greenfuel Technologies Corporation, and Omni Engineering, PLLC (collectively the “Entity Defendants”) were prime contractors or subcontractors on the Projects. It further alleges that defendants Isaac Berzin, Alana McCamman, Scott McCamman, Raymond Hobbs, Donald Karner, Brian Waibel, and Joy Waibel (collectively the “Individual Defendants”) were subcontractors or vendors on the Projects, or were employees of, or otherwise affiliated with, the Entity Defendants.

         In his position as principal investigator for APS, Hobbs was primarily, if not exclusively, responsible for issuing purchase orders, entering into subcontracts, and authorizing payment of invoices generated by vendors and subcontractors. Around March of 2010, APS discovered “improprieties” related to the Projects, including insufficient supporting documentation and undisclosed conflicts of interest related to the administration of the Projects. APS determined that Hobbs was responsible for the improprieties, and it terminated his employment in March of 2010.

         APS also ordered an external audit and inquiry, following which it prepared a report and forwarded it to the DOE.

         The government alleges that Hobbs received kickbacks from the Entity Defendants in return for issuing them subcontracts or purchase orders for the Projects, and that he approved invoices from the Entity Defendants based upon the kickbacks he received. The alleged kickbacks included cash payments, as well as employment for Hobbs' immediate family members or family members of his associates. According to the amended complaint, some or all of the payments made to the Entity Defendants could not be substantiated or verified as legitimate, and some claims for services contained within the invoices lacked supporting detail.

         Finally, the government alleges that the defendants concealed the kickbacks through various means, including:

(a) making payments to Hobbs in cash;
(b) providing payments to Hobbs through subsidiary or unrelated entities that did not have direct contractual ties to APS or NETL;
(c) using corporate entities to hide the fact that subcontractors were employing and paying members of the Hobbs family;
(d) submitting invoices for lodging in the Landmark Towers condominium units, which were owned by Hobbs' son, to shroud the fact that the payments would benefit the Hobbs family; and
(e) directing invoices to Hobbs, so that APS representatives could not question unsupported and unsubstantiated services or the existence of conflicts of interest.

         The government asserts that the kickback scheme violated the Anti-Kickback Act (“AKA”), 41 U.S.C. §§ 8701, et seq., and caused the knowing submission of false or fraudulent claims to NETL in violation of the False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733. The Court has subject matter jurisdiction under 28 U.S.C. § 1345, which provides that “the district courts shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States . . . .” During a scheduling conference in the case on May 22, 2017, the Court addressed with the parties the issues of personal jurisdiction and venue. During the conference, the government indicated that it intended to amend its complaint to more adequately plead the basis for jurisdiction and venue. After the government filed its amended complaint (Dkt. No. 97), defendant Donald Karner (“Karner”) filed a combined motion and memorandum to dismiss for improper venue, lack of personal jurisdiction, and failure to state a claim, or to transfer venue (Dkt. No. 101). Individual defendants Brian Waibel, Joy Waibel, and Raymond Hobbs have filed notices of joinder in Karner's motion (Dkt. Nos. 103, 104, and 105).

         II. DISCUSSION

         A. Motion to Dismiss

         Karner has moved to dismiss the amended complaint, arguing (1) that venue is improper, (2) that the Court does not have personal jurisdiction over him, and (3) that the government has failed to state a claim against him (Dkt. No. 101).

         1. Improper Venue

         Pursuant to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. § 1406, Karner argues that venue in this district is improper, as the events giving rise to this action occurred almost exclusively in Arizona. Once a defendant objects to venue, the plaintiff bears the burden of establishing that venue is proper. See Alvarez v. Babik, 2014 WL 1123383, at *2 (N.D.W.Va. 2014) (Bailey, J.) (citing Plant Genetic Sys., N.V. v. Ciba Seeds, Mycogen Plant Sci., Inc., 933 F.Supp. 519, 526 (M.D. N.C. 1996) (citing in turn Bartholomew v. Va. Chiropractors Ass'n, Inc., 612 F.2d 812, 816 (4th Cir.1979))).

         Importantly, in the absence of an evidentiary hearing, a plaintiff need only present a prima facie showing of proper venue to survive a 12(b)(3) motion to dismiss. See Mitrano v. Hawes, 377 F.3d 402, 405 (4th Cir. 2004).

         In this case, the government asserts claims for violations of the FCA, which contains its own venue statute:

Any action under section 3730 may be brought in any judicial district in which the defendant or, in the case of multiple defendants, any one defendant can be found, resides, transacts business, or in which any act proscribed by section 3729 occurred. . . .

31 U.S.C. § 3732(a). The government does not allege that any defendant resides in West Virginia. The question presented therefore is whether any defendant transacts business in this district, or whether any of the acts proscribed by § 3729 occurred here.

         a. Business Transactions

         The FCA provides that “[a]ny action under section 3730 may be brought in any judicial district in which . . . any one defendant . . . transacts business.” 31 U.S.C. § 3732(a). A plaintiff satisfies the FCA's venue provision if it is alleged that a defendant entered into business agreements in the district or visited the district to work on business projects. See, e.g., Pickens v. Kanawha River Towing, F.Supp. 702, 709 (S.D. Ohio 1996). Here, at least one defendant transacted business in the Northern District of West Virginia within the meaning of 31 U.S.C. § 3732(a).

         The government alleges that, as part of the alleged kickback scheme, Hobbs awarded subcontracts to defendant Electrical Transportation Engineering Company (“ETEC”), a company controlled by Karner. According to the amended complaint, Karner was the President and CEO of ETEC, and was directly and extensively involved in the management and operation of the NETL Projects.

         The government further alleges that defendant ETEC was the primary engineering firm for the CSNG Project and, therefore, frequently transacted business in the Northern District in connection with the Project. The government specifically alleges that ETEC management and personnel, including Karner in his role as Project Manager, routinely communicated with NETL personnel in Morgantown, West Virginia, regarding the CSNG Project, and also submitted invoices and claims for reimbursement directly to NETL in Morgantown. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.