Following a whistleblower trial in
which a Virginia federal jury found Birkart Globalistics GmbH guilty of
submitting 9,136 fraudulent invoices under contracts for moving household goods
for U. S. military families to and from bases in Belgium, Germany, Italy,
Luxemburg and The Netherlands, U. S District Judge Anthony J. Trenga declined
to impose any civil penalty at all on the company, ruling that the apparently
mandatory minimum civil penalty under the False Claims Act of over $50 million
was unconstitutionally disproportional to the harm caused by the price fixing
found by the jury, and that the False Claims Act permitted no deviation from
the range of penalties set out in the statute. Since the statutory minimum
penalty was impermissible under the Eighth Amendment as cruel and unusual
punishment, Judge Trenga decided, he had no authority to fashion a lesser,
constitutional penalty, and therefore could impose no penalty at all.
Federal contracting officials held
a pre-bid meeting at a U. S. military base in Grafenwoehr, Germany, for
prospective bidders on the goods moving contract before bids were due.
Immediately following that meeting, several prospective bidders met in the base
cafeteria to discuss subcontracting with each other to divide up the European
territory covered by the contract, and fixed subcontract prices within each of
the allocated territories, in contravention of the “Certificate of Independent
Pricing” required of each bidder. When the contract was awarded to Birkart,
each of the 9,136 separate invoices it submitted to the government under the
contract became a separate violation of the False Claims Act, subject to a
minimum statutory penalty of $5,500.00.
Kurt Bunk, a Birkart employee,
brought the whistleblower case against his employer, seeking the
whistleblower’s reward share of the $50 million in civil penalties. The U. S.
government refused to join in Bunk’s whistleblower lawsuit, in which Bunk’s
attorneys obtained a jury verdict of liability against Birkart under the False
Claims Act. In ruling that the proposed civil penalties would violate the Eight
Amendment’s ban on cruel and unusual punishment, Judge Trenga decided that,
while Burkart’s price fixing scheme did corrupt the contracting process, there
was no proof the government actually overpaid Burkart for the moving services,
and therefore a $50 million penalty would be unconstitutioinally
disproportionate to Burkart’s profit under the contract of merely $150,000.00.
In his opinion, Judge Trenga
considered the possibility of imposing a single penalty of $11,000.00, or in
the alternative a penalty of $1.5 million, which he concluded would be the
maximum constitutionally permissible under the facts of the case. He wrote the
reasoning behind these alternative results in his opinion, in case a reviewing
court should later determine that he had authority to remit the statutory
penalty to a lesser amount when the statutory minimum was unconstitutional.
However, until such a ruling might be issued by a higher court, Judge Trenga
declined to impose any penalty at all in which the whistleblower might
participate.
