Could Diversion of A Whistle-Blower's "Proceeds"
Trigger A UCMJ Court Martial?

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|   APPENDIX I    |   APPENDIX II   |

Whistle-Blower Whammy

         Today's media headlines scream about the punishments planned for targets of financial, business and medical fraud. The public's outrage could pull certain members of the United States Armed Forces into the same legal net.
        Every member of the Armed Forces (below GS-15) involved in the analysis and settlement planning of a "Whistle-blower" lawsuit, where fraud against the government has been claimed, must be very careful to avoid personal liability or even a court martial.
        It is true that the law aims to redress purely public injuries and the United States does receives the majority of any cash amount and the value of everything recovered (including alternate remedies like price discounts, future work, contract adjustments, forfeitures of unrelated claims in the Board of Contract Appeals, etc.) These items are all considered "proceeds of the action or settlement of the claim" and must be price identified to the district court handling the lawsuit. The total value of the recovered proceeds is the "claim"; a major element of an allegation of a False Claims Act violation. The three elements of a 15 C.F.R. § 3729 violation are (1) a claim for payment (2) that was false and (3) was made knowingly.
        You must remember that everything is payable to the public treasury first, not directly back to the agency. 1

Lawful Orders

        In spite of what Department of Justice Civil Division attorneys might tell you 2, Armed Services personnel must be extremely cautious and avoid violations of the Code of Military Justice when identifying what is and what isn't part of the fraud recovery in a qui tam fraud action, or, as Main Justice attorneys like to call them, "Whistle-blower lawsuits." You might be taking proceeds that belong to the U.S. Treasury 3.
        The mandatory term "shall" is used more that 35 times in what Congress drafted and legislated into the "fraud against the government" law 4. Caselaw clearly states that injured party is the taxpayer, generaly refered to as the Public Fisc. Everything that is recovered is considered to be "proceeds of the action or settlement of the claim" and is to be identified to the District Court of jurisdiction and ultimately delivered to the Treasury Department's general account, with a few exceptions.
        But therein lies the minefield. Can a superior officer's order to place this amount in a different column, such as "damages" instead of "proceeds" be an illegal order? Are you then personally liable under military or civil law. Will military retirement insulate you from it?

What are "proceeds"?

        Several federal courts have specifically included all items of value. This can be almost every type of alternate remedy often negotiated while the fraud case is still under seal. This could include future price discounts, future or additional work, waived administrative claims in an unrelated Board of Contract Appeals litigation, and forfeitures. Anything that trades hands as a result of the fraud proceedings may no longer be shielded by renaming it as "damages" in lieu of "proceeds".
        It is taxpayer money and the defrauded agency must now face Congressional scrutiny to get the same or replacement money reallocated to a program in which the agency did not discover, prevent, terminate or litigate the fraud. Congress investigations may insist that heads may roll and programs and careers may end. Additionally, the presently allocated budget funds required to administer a current, on-going program, have been sent back to the Treasury Department's General Account. Not "use it or lose it"... just lose it.
        This can set a dangerous action in motion within the government agency to attempt to reclassify a major portion of the "proceeds" as damages so that it does not face congressional or oversight scrutiny and stay within the "unfettered" budget and control of the agency.

A Justice Department Conspiracy?

        A misguided DOJ attorney, trying to do his best for his Executive Branch agency client, may attempt to reduce the proceeds by fraudulently concealing them by reclassifying them as some type of alternate remedy. If it gets caught, have you been an Article 77 Principal, an Article 78 Accessory after the fact, also guilty of an Article 80 Attempt and Article 81 Conspiracy. Have you made or signed any Article 107 False official statements and caused an Article 108 Wrongful disposition or Article 121 Wrongful appropriation of any of the proceeds? Have you generated a new Article 132 Fraud against the United States which will require you to commit an Article 131 Perjury to avoid detection?
        If anything in the above mess sticks to you, do you really believe you can avoid an Article 133 Conduct unbecoming an officer charge or even an Article 134 General Article?
        Keep it simple. Just follow the rules.
        Two additional spin-off allegations or charges against everyone involved could be an unconstitutional "taking" 5 of the Treasury's and Relator's statutory share of the "proceeds" and a new false claim action alleging "delivery of less than what was due the government (U.S. Treasury). If found guilty, this carries person liabilities for replacement of the lost proceeds. 6.

Wrongful Appropriation

        An Article 81 Conspiracy and an Article 80 Attempt to illegally divert the funds back to the agency, as "alternate remedies" of contract adjustments, forfeitures, future work, or quid-pro-quo settlement barters in the Board of Contract Appeals, may set in motion violations of the clear and mandatory language of the False Claims Act.
        It could also trigger a parallel COMJ Article violation. Article 78 Accessory After The Fact charges or even Article 121 Wrongful Appropriation charges could follow a service person's misguided attempt to placate a budget-hungry superior officers wishes to coverup "the dirty laundry". A conspiracy implimented by the agency, the defendents and the Main Justice attorneys to rename the "recovered funds" as "damages" or anything not subject to delivery to Treasury under the False Claims Act should be strictly avoided.
        If anyone, especially a member of the armed services, attempts to divert "fraud recovery cash or assets", that is, "...proceeds of the action or settlement of the claim..." away from identification to the District Court of jurisdiction and the Treasury Department's General Fund, they may well be guilty of violations of the Uniform Code of Military Justice and subject to a Court Martial under one of the Articles listed in the table below.

Extortion?

         A simple two step charge could be an Article 127 Extortion charge and an Article 121 Wrongful Appropriation charge. Simple dictionary definitions clarify the initial step.

    Webster's Revised Unabridged Dictionary gives one definition of "Extortion" as the offense committed by an officer who corruptly claims and takes, as his fee, money, or other thing of value, that is not due, or more than is due, or before it is due.

    The American Heritage® Dictionary of the English Language gives another definition of "extortion" as the illegal use of one's official position or powers to obtain property, funds, or patronage.

        The UCMJ's definition of extortion 7 seems far less serious than the civilian definition 8. Neither could be good for even the shortest military career.
        The second step would be an Article 121 Wrongful Appropriation charge for "delivering less of the "proceeds of the action or settlement of the claim" than was due to the U.S. Treasury under the False Claims Act, 31 USC 3729 - 3733. The second step could also include any or a combination of the violations defined in the table below.
        A retired, Judge Advocate General (JAG) stated anomously (because of the sensitivity of the subject matter) that a misplaced sense of service loyalty, no matter how sincere, may make the individual personally liable to a legal theory of a reverse, false claim, that is, delivering less to the Government (Treasury Department's General Fund / Public Fisc) than is owed. This is exactly as serious as the original fraud.

Grounds For A Court Martial?

         Most armed services personnel, along with many others under certain conditions, are subject to both the False Claims Act and the Uniform Code of Military Justice (UCMJ). The laws says that one armed service member cannot file a False Claims Act allegation against another armed service member. 9.
        What they may fail to tell you is that a civilian's letter of allegations or complaint to an Executive Officer can and probably must trigger a UCMJ investigation, that parallels a False Claims Act lawsuit, if he or she believes the civilian can prove an UCMJ violation in relation to the diverted "proceeds of the action or settlement of the claim. Also, this does not prevent a civilian from filing charges to be made whole from the wages of the member of the armed forces.
        In serious violations of the COMJ, the President of the United States may recall a retired violator back into service to face charges. The most important administrative penalty is a court-martial. The most over-looked possibilities for court-martials are for:

  • Wrongful disposition of U.S. Military property. Article 108

  • Larceny and wrongful appropriation. Article 121

        US military soldiers know that if they receive an illegal order they are not to obey it. As military law is written now, the subordinate, and not the superior issuing the order, is the one responsible for determining the legality of an order. Every person is responsible for his or her actions.
        It is a well articulated principle of US and international law that no court can enforce an unlawful order and no individual is obligated to follow an unlawful order. The "war criminal" defense of following an unlawful order has been widely rejected. Many constitutional tests have come from disobedience and subsequent litigation of unlawful statutes and orders.

Military Personnel Are Accountable

        The Uniform Code of Military Justice (UCMJ) provides the articles to which every soldier is legally held accountable. The UCMJ also dictates the proper punishment that would be applicable to a specific violation, and specifies the difference (if any) if the act were committed during "times of war." For example, Article 90 calls for the soldier to obey all lawful orders and imposes up to 6 months imprisonment when the act is not committed in times of war, and the death penalty when it is. Other violations that carry the death penalty in times of war include desertion, mutiny, sedition, and espionage (the only one with a mandatory death sentence).
        The U.S. Army is becoming aware of the fact that all soldiers need a basic education in military ethics, and to this end the U.S. Army recently extended its basic training period by one week. A few years ago Secretary of the Army Louis Caldera made an announcement in a Joint Services Conference on Professional Ethics (JSCOPE) that this extra week allows several military ethics topics to be inserted throughout the basic training period, thus increasing the soldier's awareness of the importance of this topic.

Conclusion

         When an Executive Branch agency does not prevent, discover, or stop any alleged fraud subject to the False Claims Act, and some individual files a valid action under that act, Armed Services personnel must exert great care to avoid personal liabilities when identifying the U. S. Treasury Department's "proceeds of the action or settlement of the claim."
 

ENDNOTES:
1

...were in part proceeds of the action and due to the public treasury. U.S. ex rel. Gibeault v. Texas Instruments, 104 F.3d 276 (9th Cir. 1997) Note 35. ...Qui tam actions, unlike title VII suits, aim to redress purely public injuries. "Joyce Riley, Plaintiff - Appellant, v. St. Lukes Episcopal Hospital, et. al. Defendants - Appellees, No. 97-20948 in the United States Court of Appeals for the Fifth Circuit, before Smith, DeMoss, and Stewart, Circuit Judges, Opinion by Jerry E. Smith, Circuit Judge. The court noted that, even without intervention, the United States receives the majority of any amount recovered... U.S. ex rel. Jane Doe 1 et al. v. X, Inc. et al., 2000 WL 305742 (E.D. Va. March 23, 2000) "Qui tam provisions are meant to ...which will return money to the Federal Treasury." (United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649 (D.C. Cir. 1994) "Moreover, in the course of the qui tam proceedings, ...any findings of fact which show a potential for increased return to the Federal Treasury are material to the court's application of Section 3730(b)(5). (Page 3, Brief of Taxpayers Against Fraud, The False Claims Act Legal Center as AMICUS CURIAE Supporting Appellant in United States of America, ex rel. Linda A. Lujan, Appellant, vs. Hughes Aircraft Company, Appellee, No, 00-55328, in the United States Court of Appeals For The Ninth Circuit.)
2

Agency practices which "reflect an attitude 'of concealment rather than enlightenment' do not meet the basic demands of due process. Glasgow, 12 F.3d at 799 (quoting Menkarell v. Bureau of Narcotics, 463 F.2d 88, 94 (3d Cir.1972)
3

When government actions result in a financial loss it is a "taking" of property which demands compensation. U.S. v. Causby, 328 US 256, 90 Led2d 1206, 66 Sct 1062(1946)
4

Shall - As used in statutes, contracts, or the like, this word is generally imperative or mandatory. In common or ordinary parlance, and in its ordinary signification, the term "shall" is a word of command, and one which has always or which must be given a compulsory meaning; as denoting obligation. The word in ordinary usage means "must" and is inconsistent with a concept of discretion. People v. Municipal Court for Los Angeles Judicial Dist., 149 C.A.3d 951, 197 Cal.Rptr. 204, 206. It has the invariable significance of excluding the idea of discretion, and has the significance of operating to impose a duty which may be enforced, particularly if public policy is in favor of this meaning, or when addressed to public officials, or where a public interest is involved, or where the public or Persons have rights which ought to be exercised or enforced, unless a contrary intent appears. People v. O'Rourke, 124 Cal.App 752, 13 P.2d 989, 992. But it may be construed as merely permissive or directory (as equivalent to "may"), to carry out the legislative intention and in cases where no right or benefit to any one depends on its being taken in the imperative sense, and where no public or private right is impaired by its interpretation in the other sense. Wisdom v. Board of Sup'rs of Polk County, 236 Iowa 669 19 N.W.2d 602, 607, 608.

5

Ibid at 3.

6

31 USC § 3729. False claims. (a) Liability for Certain Acts. - Any person who - 7) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person,...
7

Article 127. Extortion. Any person subject to this chapter who communicates threats to another person with the intention thereby to obtain anything of value or any acquittance, advantage, or immunity is guilty of extortion and shall be punished as a court-martial may direct. (Aug. 10, 1956, ch. 1041, 70A Stat. 74.) (10 USC 927)
8

Extortion is a crime when, by color of office, any person extorts that which is not due, or more than is due, or before the time when it is due. 18 U.S.C.A. § 871 et seq.; § 1951. Extortion has been defined, among other things, as the obtaining of property from another induced... under color of official right. 18 U.S.C.A. § 871 et seq.; § 1951. A person is guilty of theft by extortion if he purposely obtains property of another by threatening to take or withhold action as an official, or cause an official to take or withhold action; or testify or provide information or withhold testimony or information with respect to another's legal claim...; or inflict any other harm which would not benefit the actor.

9

31 USC § 3730. (e) Certain Actions Barred. - - - (1) No court shall have jurisdiction over an action brought by a former or present member of the armed forces under subsection (b) of this section against a member of the armed forces arising out of such person's service in the armed forces. (Note: A civilian's letter of allegations or complaint to an Executive Officer could trigger a UCMJ investigation. Also, this does not prevent a civilian from filing charges if a member of the armed forces has committed a violation of the Uniform Code of Military justice. A major fraud against the government may even justify actions to request the President of the United States to recall an armed services retiree to active duty to face charges.)

 
APPENDIX I
Title 10 – Armed Forces, Subtitle A -- General Military Law, Part II -- Personnel,
Chapter 47-- Uniform Code Of Military Justice,
Subchapter X - PUNITAVE ARTICLES:
 
ARTICLE SECTION CITE PUNITAVE ARTICLES
77 877 (10 USC 877) Principals.
78 878 (10 USC 878) Accessory after the fact.
79 879 (10 USC 879) Conviction of lesser included offense.
80 880 (10 USC 880) Attempts.
81 881 (10 USC 881) Conspiracy.
107 907 (10 USC 907) False official statements.
108 908 (10 USC 908) Military property of U.S. -- Loss, damage, destruction, or wrongful disposition.
121 921 (10 USC 921) Larceny and wrongful appropriation.
127 927 (10 USC 927) Extortion.
131 931 (10 USC 931) Perjury.
132 932 (10 USC 932) Frauds against the United States.
133 933 (10 USC 933) Conduct unbecoming an officer and a gentleman.
134 934 (10 USC 934) General article.
       

PUNATIVE ARTICLES

Article 77. Principals. Any person punishable under this chapter who-- (1) commits an offense punishable by this chapter, or aids, abets, counsels, commands, or procures its commission; or (2) causes an act to be done which if directly performed by him would be punishable by this chapter; is a principal. (Aug. 10, 1956, ch. 1041, 70A Stat. 65.) (10 USC 877)

Article 78. Accessory after the fact. Any person subject to this chapter who, knowing that an offense punishable by this chapter has been committed, receives, comforts, or assists the offender in order to hinder or prevent his apprehension, trial, or punishment shall be punished as a court-martial may direct. (Aug. 10, 1956, ch. 1041, 70A Stat. 65.) (10 USC 878)

Article 79. Conviction of lesser included offense. An accused may be found guilty of an offense necessarily included in the offense charged or of an attempt to commit either the offense charged or an offense necessarily included therein. (Aug. 10, 1956, ch. 1041, 70A Stat. 65.) (10 USC 879)

Article 80. Attempts. (a) An act, done with specific intent to commit an offense under this chapter, amounting to more than mere preparation and tending, even though failing, to effect its commission, is an attempt to commit that offense. (b) Any person subject to this chapter who attempts to commit any offense punishable by this chapter shall be punished as a court-martial may direct, unless otherwise specifically prescribed. (c) Any person subject to this chapter may be convicted of an attempt to commit an offense although it appears on the trial that the offense was consummated. (Aug. 10, 1956, ch. 1041, 70A Stat. 65.) (10 USC 880)

Article 81. Conspiracy. Any person subject to this chapter who conspires with any other person to commit an offense under this chapter shall, if one or more of the conspirators does an act to effect the object of the conspiracy, be punished as a court-martial may direct, (Aug. 10, 1956, ch. 1041, 70A Stat. 66.) (10 USC 881)

Article 107. False official statements. Any person subject to this chapter who, with intent to deceive, signs any false record, return, regulation, order, or other official document, knowing it to be false, or makes any other false official statement knowing it to be false, shall be punished as a court-martial may direct. (Aug. 10, 1956, ch. 1041, 70A Stat. 71.) (10 USC 907)

Article 108. Military property of United States -- Loss, damage, destruction, or wrongful disposition. Any person subject to this chapter who, without proper authority -- (1) sells or otherwise disposes of; (2) willfully or through neglect damages, destroys, or loses; or (3) willfully or through neglect suffers to be lost, damaged, destroyed, sold, or wrongfully disposed of; any military property of the United States, shall be punished as a court-martial may direct. (Aug. 10, 1956, ch. 1041, 70A Stat. 71.) (10 USC 908)

Article 121. Larceny and wrongful appropriation. (a) Any person subject to this chapter who wrongfully takes, obtains, or withholds, by any means, from the possession of the owner or of any other person any money, personal property, or article of value of any kind-- (1) with intent permanently to deprive or defraud another person of the use and benefit of property or to appropriate it to his own use or the use of any person other than the owner, steals that property and is guilty of larceny; or (2) with intent temporarily to deprive or defraud another person of the use and benefit of property or to appropriate it to his own use or the use of any person other than the owner, is guilty of wrongful appropriation. (b) Any person found guilty of larceny or wrongful appropriation shall be punished as a court-martial may direct. (Aug. 10, 1956, ch. 1041, 70A Stat. 73.) (10 USC 921)

Article 127. Extortion. Any person subject to this chapter who communicates threats to another person with the intention thereby to obtain anything of value or any acquittance, advantage, or immunity is guilty of extortion and shall be punished as a court-martial may direct. (Aug. 10, 1956, ch. 1041, 70A Stat. 74.) (10 USC 927)

Article 131. Perjury. Any person subject to this chapter who in a judicial proceeding or in a course of justice willfully and corruptly -- (1) upon a lawful oath or in any form allowed by law to be substituted for an oath, gives any false testimony material to the issue or matter of inquiry; or (2) in any declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, subscribes any false statement material to the issue or matter of inquiry; is guilty of perjury and shall be punished as a court-martial may direct. (Aug. 10, 1956, ch. 1041, 70A Stat. 75; Pub. L. 94-550, Sec. 3, Oct. 18, 1976, 90 Stat. 2535; Pub. L. 97-295, Sec. 1(13), Oct. 12, 1982, 96 Stat. 1289.) (10 USC 931)

Article 132. Frauds against the United States. Any person subject to this chapter-- (1) who, knowing it to be false or fraudulent -- (A) makes any claim against the United States or any officer thereof; or (B) presents to any person in the civil or military service thereof, for approval or payment, any claim against the United States or any officer thereof; (2) who, for the purpose of obtaining the approval, allowance, or payment of any claim against the United States or any officer thereof-- (A) makes or uses any writing or other paper knowing it to contain any false or fraudulent statements; (B) makes any oath to any fact or to any writing or other paper knowing the oath to be false; or (C) forges or counterfeits any signature upon any writing or other paper, or uses any such signature knowing it to be forged or counterfeited; (3) who, having charge, possession, custody or control of any money, or other property of the United States, furnished or intended for the armed forces thereof, knowingly delivers to any person having authority to receive it, any amount thereof less than that for which he receives a certificate or receipt; or (4) who, being authorized to make or deliver any paper certifying the receipt of any property of the United States furnished or intended for the armed forces thereof, makes or delivers to any person such writing without having full knowledge of the truth of the statements therein contained and with intent to defraud the United States; shall, upon conviction, be punished as a court-martial may direct. (Aug. 10, 1956, ch. 1041, 70A Stat. 75.) (10 USC 932)

Article 133. Conduct unbecoming an officer and a gentleman. Any commissioned officer, cadet, or midshipman who is convicted of conduct unbecoming an officer and a gentleman shall be punished as a court-martial may direct. (Aug. 10, 1956, ch. 1041, 70A Stat. 76.) (10 USC 933)

Article 134. General article. Though not specifically mentioned in this chapter, all disorders and neglects to the prejudice of good order and discipline in the armed forces, all conduct of a nature to bring discredit upon the armed forces, and crimes and offenses not capital, of which persons subject to this chapter may be guilty, shall be taken cognizance of by a general, special, or summary court-martial, according to the nature and degree of the offense, and shall be punished at the discretion of that court. (Aug. 10, 1956, ch. 1041, 70A Stat. 76.) (10 USC 934)

 
APPENDIX II