                                UNITED STATES DISTRICT COURT
                                FOR THE DISTRICT OF COLUMBIA

                                                         )
UNITED STATES OF AMERICA, ex. rel.                       )
ANDREW SCOLLICK,                                         )
                                                         )
                 Plaintiff-Relator,                      )
                                                         )
        v.                                               )    Case No: 14-cv-01339-RCL
                                                         )
VIJAY NARULA, et al.,                                    )
                                                         )
                Defendants.                              )
                                                         )

                                       MEMORANDUM OPINION

I.      INTRODUCTION

        This case was brought by plaintiff-relator Andrew Scollick against eighteen defendants for

violations of the False Claims Act (“FCA”) in connection with a scheme to obtain certain set-aside

government contracts through fraudulent means. The United States has declined to intervene in

this matter. See Notice, ECF No. 6. The following defendants have moved to dismiss for failure

to state a claim: Hudson Insurance Co., Hanover Insurance Co., Centennial Surety Associates, Inc.,

Michael Schendel, Ajay K. Madan, Vijay Narula, Optimal Solutions and Technologies, Inc.

(“OST”), CB Construction Group, Inc. (“CB”), Dilip Parekh, Shobha N. Mehta, Melvin G.

Goodweather, Citibuilders Solutions Group, and Guatam Chitnis. Defendants Amar Gogia,

Centurion Solutions Group, LLC (“CSG”), and Neil Parekh have not moved to dismiss.1 They

have filed answers to plaintiff-relator’s Complaint. See Defs. Gogia and CSG’s Answer, ECF No.

63; Def. Parekh’s Answer, ECF No. 103. Plaintiff-relator, with the consent of the U.S. government



1
 The Court, finding that it is “patently obvious” that plaintiff-relator cannot prevail on Count III—reverse false
claims—against any of the defendants, will sua sponte dismiss Count III against defendants CSG, Neil Parekh, and
Gogia. See infra Note 3.

                                                         1
[110, 113], filed a notice of voluntary dismissal [112] with respect to defendants KCGI, Guatam

Chitnis, and Anita Chitnis. Accordingly, no analysis of defendant Guatam Chitnis’ motion to

dismiss, ECF No. 108, is necessary because he has been voluntarily dismissed from this action.

       All of the foregoing motions to dismiss were granted by this Court’s Order of September

30, 2016, ECF No. 122. The Court finds that plaintiff-relator has failed to state claims against

defendants Hudson Insurance Co., Hanover Insurance Co., Centennial Surety Associates, Inc.,

Michael Schendel, CB Construction, Dilip Parekh, Shobha N. Mehta, Melvin G. Goodweather,

and OST and has granted their motions to dismiss. Upon further review, the Court has determined

that plaintiff-relator has stated claims against defendants Citibuilders, Ajay K. Madan, and Vijay

Narula for certain FCA violations—presenting false claims in violation of 31 U.S.C.

§ 3729(a)(1)(A), making false statements in violation of 31 U.S.C. § 3729(a)(1)(B), and

conspiracy in violation of 31 U.S.C. § 3729(a)(1)(C) (Counts I, II, IV). The Court will accordingly

vacate its prior Order granting the defendants’ motions to dismiss as to these three defendants and

will grant in part and deny in part defendants Citibuilders, Madan, and Narula’s motions to dismiss.

       In sum, Counts I, II, and IV remain pending against defendants Citibuilders, Madan,

Narula, CSG, Neil Parekh, and Gogia.

II.    BACKGROUND

       The factual allegations in this case center around an alleged scheme to defraud the United

States government by submitting bids to obtain government construction contracts. Plaintiff-

relator claims that the defendants participated in this scheme by fraudulently claiming or obtaining

service-disabled veteran-owned small business (“SDVOSB”) status, HUBZone status, or section

8(a) status for certain companies to bid on and obtain set-aside contracts, when in fact the bidders

did not qualify for the statuses claimed. Plaintiff-relator alleges that defendants, as part of this



                                                 2
scheme, falsely certified these statuses, made false claims regarding past performance, hid certain

aspects of the management and control of the companies at issue, and hid or falsified certain

information regarding the employees of the companies at issue.

       The central actors in this scheme are Neil Parekh, Ajay K. Madan, Vijay Narula, Centurion

Solutions Group (“CSG”), and Citibuilders Solutions Group (“Citibuilders”). Parekh, Narula, and

Madan allegedly engaged in conspiracy to defraud the government by bidding on SDVOSB

construction contracts although none of them were service disabled veterans. Accordingly,

Parekh, Narula, and Madan established CSG as a “front company” for the purpose of allowing

them to bid on and obtain SDVOSB set-aside contracts. Compl. ¶ 43. To qualify for SDVOSB

status, defendant Gogia—a service disabled veteran—was allegedly falsely identified as a 100%

service disabled owner of CSG, although he did not actually exercise control or ownership over

CSG. Id. at ¶ 50. Parekh, Narula, Madan, and Gogia also falsely identified that CSG operated out

of a HUBZone when in fact it did not. Id. at ¶ 51. Plaintiff-relator alleges that CSG then submitted

false claims and statements to the government. Id. at ¶¶ 53–85. Plaintiff-relator claims that the

CSG bids contained falsified information regarding past performance, id. at ¶¶ 86–106, and false

representations concerning CSG’s employees, id. at ¶¶ 107–115. Finally, plaintiff-relator claims

that CSG obtained millions of dollars in government contracts as a result of this fraudulent scheme,

and lists the specific contracts allegedly fraudulently obtained. Id. at ¶ 116.

       With regard to Citibuilders, plaintiff-relator alleges that Parekh established Citibuilders to

branch out his fraudulent SDVOSB contracting activity. Id. at ¶ 118. According to the Complaint,

Parekh falsely certified Citibuilders as a service-disabled veteran-owned entity—utilizing

defendant Goodweather’s service-disabled veteran status even though Parekh was the de facto

owner and controller of Citibuilders, and misrepresented Citibuilders’ past performance and



                                                  3
project personnel. Id. at ¶¶ 119–128. Plaintiff-relator claims that Citibuilders obtained millions

of dollars in government contracts as a result of this fraudulent scheme, and lists the specific

contracts allegedly fraudulently obtained. Id. at ¶ 129. Plaintiff-relator claims that the creation of

Citibuilders by Parekh caused a rift between himself and Narula and Madan. Id. at ¶¶ 131–147.

Plaintiff-relator claims that Narula is the alter ego of OST, that Neil Parekh, Dilip Parekh, CB, and

Citibuilders are all alter egos of each other, that Narula, Neil Parekh, Madan, OST, and CB are

joint-alter egos of CSG, and that Neil Parekh, Goodweather, and Citibuilders are joint alter egos.

Id. at ¶¶ 29 – 32.

        Finally, Plaintiff-relator claims that similar fraud was committed in the name of a third

company, KCGI. Id. at ¶¶ 166–174. Specifically it alleges that Narula, Parekh, Madan, Guatam

Chitnis, and Anita Chitnis schemed to use KCGI to defraud the government by seeking Small

Business Administration section 8(a) contracts and/or service disabled contracts. Id. at ¶ 166. On

December 21, 2015 plaintiff-relator, with the consent of the U.S. government, filed a notice of

voluntary dismissal with respect to KCGI, Guatam Chitnis, and Anita Chitnis.

        Because of the number of defendants and the various and sometimes disparate allegations

against them, the Court will summarize the remaining factual allegations against the rest of the

defendants separately.

        A.      OST Defendants: Ajay Madan, Vijay Narula, Optimal Solutions and
                Technologies (“OST”)

        OST is a corporation located in Washington, D.C. Compl. ¶ 11. Vijay Narula is the

president and CEO of OST. Id. at ¶ 15. Ajay K. Madan is the chief operating officer of OST and

is a 49% owner of CSG. Id. at ¶ 20. Narula is alleged to be the alter ego of OST, and Narula,

Madan, and OST are alleged to be (some of) the alter egos of CSG. Id. at ¶¶ 29, 31. Regarding

OST, the Complaint alleges that CB’s business operations were relocated to OST’s office, id. at ¶


                                                  4
42, that CSG’s business operations occurred out of OST’s headquarters, id. at ¶ 51, and that Narula,

Madan, and Parekh prepared CSG bid proposals while working out of OST’s office space, id. at

¶¶ 67, 84. It alleges that OST never qualified for SDVOSB or HUBZone status and was not a

small business enterprise. Id. at ¶ 45–47. The Complaint further alleges that CSG’s bid proposals

“include[d] statements pertaining to work alleged to have been completed at defendant OST’s

corporate headquarters . . . [but] CSG never performed any such construction activity.” Id. at

¶ 102. Narula allegedly “would personally provide past performance survey responses [regarding

the OST project] to the government.” Id.

       Factual allegations regarding defendants Narula and Madan are interspersed throughout

the Complaint, which paints them as having a central role in the scheme. In sum, plaintiff-relator

claims that Narula and Madan, along with Neil Parekh, were involved in the creation of CSG for

the purpose of submitting fraudulent bids on certain government contracts, that Parekh, Narula,

and/or Madan had control over and ownership of CSG, that they prepared the CSG bid proposals

and decided the content, and that Gogia was subservient to them. Plaintiff-relator then describes

Narula and Madan’s reaction to the formation of Citibuilders—that it caused a rift among the three

defendants. Id. at ¶ 131. He also discusses several communications between the defendants

regarding the following: the transfer of funds, payroll and payment disputes, CSG’s projects and

profits, the separation of CB and CSG, the distribution of surplus CSG income between Parekh,

Madan, and Narula, and the financial needs of CSG, OST, and CB. Id. at ¶¶ 133–47. Finally,

plaintiff-relator alleges that Narula executed a corporate resolution for Hudson and Hanover




                                                 5
acknowledging that OST, CSG, and CB shared common ownership, and the OST bonding

agreement securing the CSG bonding included personal indemnity of Narula. Id. at 160–61.2

        B.       Dilip Parekh and CB Construction

        CB Construction is a company owned by Neil and Dilip Parekh. Id. at ¶ 12. Dilip Parekh

is the father of Neil Parekh and a 55% owner of CB Construction. Id. at ¶ 17. He is alleged to be

an alter ego of Neil Parekh, CB Construction, and Citibuilders. Id. at ¶ 30. CB is alleged to be an

alter ego of Neil Parekh, Dilip Parekh, and Citibuilders, as well as an alter ego of CSG. Id. at

¶¶ 30–31. CB does not qualify as a service-disabled veteran-owned business. Id. at ¶ 48. In 2010,

CB’s business operations were relocated to OST’s corporate office. Id. at ¶ 42. Many of the

factual allegations in the Complaint surrounding CB are related to its relationship with CSG. It

alleges that Neil Parekh transferred money from the CSG checking account into the CB checking

account which was controlled by Neil and Dilip Parekh. Id. at ¶¶ 70, 78. It alleges that the day to

day management and oversight of CSG’s SDVOSB construction contracts was performed in part

by CB. Id. at ¶ 72. It alleges that CSG used credit cards issued to CB to conduct CSG business,

that the primary cardholder on the CB account was Dilip Parekh, and that the CB cards used to

conduct CSG business were in part issued in the name of Dilip Parekh. Id. at ¶ 79. It alleges that

a credit card issued to Dilip Parekh was used to bill CSG costs, and a card in the name of CB was

used to conduct CSG business. Id. at ¶ 80. Regarding CB only, the Complaint alleges that the

CSG bids falsely claimed that CSG employed individuals who were actually employed by CB. Id.

at ¶¶ 113–14. It also discusses apparent payments from CSG to CB. Id. at ¶¶ 133–35. Regarding

Dilip Parekh only, it alleges that domination and control of Citibuilders was in the hands on Neil



2
 OST, Narula, and Madan are also mentioned in the section of the Complaint regarding fraud in the name of KCGI.
Since plaintiff-relator has voluntarily dismissed his claims against KCGI, the Court will not address those
allegations.

                                                       6
and Dilip Parekh, not defendant Goodweather, and that government contracting funds awarded to

Citibuilders were funneled into accounts controlled by Neil and/or Dilip Parekh. Id. at ¶¶ 122,

127.

       C.      Melvin G. Goodweather

       Defendant Goodweather is a service disabled veteran allegedly falsely identified as the sole

owner and CEO of Citibuilders, although he was subservient to Neil Parekh. Id. at ¶ 19. He is

alleged to be an alter ego of Neil Parekh and Citibuilders. Id. at ¶ 32. The Complaint claims that

Parekh utilized Goodweather’s service disabled veteran status to establish Citibuilders as a

SDVOSB entity, but that Citibuilders was under the direct control of Parekh who was the de facto

owner. Id. at ¶ 119, 122–126.

       D.      Shobha N. Mehta, MD

       Dr. Mehta is the aunt of Neil Parekh. Id. at ¶ 21. The Complaint alleges that, as part of

the scheme, the defendants falsified past performances of CSG. Specifically, it claims that

defendants used a renovation project at Dr. Mehta’s office as a credential of past performance that

was necessary to bid and win contracts for medical centers. Id. at ¶¶ 96–97. Plaintiff-relator

alleges that Dr. Mehta’s office was never renovated and that “[t]he defendants manufactured the

Mehta Project and cut and pasted reference to the Mehta Project in various solicitations and bid

proposals with differing size and costs of that project to fit the particular contract requirements

under bid.” Id. at ¶¶ 99–100. He claims that the defendants conspired with Dr. Mehta to allow

them to identify her office as an example of CSG’s past performance and that Dr. Mehta “would

provide past performance survey information to the government falsely attesting to work CSG

never performed.” Id. at ¶ 105.




                                                7
       E.      The Insurance Defendants: Centennial Surety Associates, Michael Schendel,
               Hudson Insurance Co., Hanover Insurance Co.

       Plaintiff-relator has also brought claims against several insurance related entities and one

individual: Centennial Surety Associates, Michael Schendel, Hudson Insurance Co., and Hanover

Insurance Co. (the “insurance defendants”). Under the Miller Act, contractors bidding for

government construction contracts are required to post bid bonds, performance bonds, and

payment bonds, and the bid bond company is required to ensure that the contractor will perform

the work. Id. at ¶ 148. Centennial is an insurance broker, Schendel is the president of Centennial,

and Hudson and Hanover are insurance companies that provided surety bonds to the defendants.

Id. at ¶¶ 22–25.

       The bid proposals submitted here were dependent upon the issuance of surety bonds and

performance bonds by Centennial, “as the agent and attorney-in-fact for Hudson Insurance

Company and Hanover Insurance Company.” Id. at ¶ 151. Plaintiff-relator claims that Centennial

and Schendel were the lawful agents of and attorneys-in-fact for Hanover and Hudson and that

Schendel was responsible for causing Hudson and Hanover to issue bid and performance bonds to

CSG and Citibuilders. Id. at ¶¶ 152–53. Plaintiff-relator claims that Schendel had a long-standing

relationship with Neil Parekh and that Centennial knew that OST, CSG, and CB Construction

shared a single office and that Parekh and Narula were in functional control of CSG. Id. at ¶¶ 154–

55.

       Plaintiff-relator alleges that the contracts at issue required Citibuilders and CSG to obtain

bid bonds and performance bonds, without which the fraudulent activity could not be carried out.

Id. at ¶ 156. He claims that Schendel and Centennial knew the details of the bid proposals

submitted by OST, CSG, and CB. Id. at ¶ 158. He also claims that Hudson and Hanover “by and

through its agent and attorneys-in-fact Centennial” understood that OST, CSG, and CB shared


                                                8
common ownership, requiring Narula, Parekh, and Gogia to execute corporate resolutions

acknowledging this fact. Id. at ¶ 160. In addition, Schendel and Centennial allegedly “understood

that Parekh, Narula, and Madan had ownership interests in CSG and deliberately disregarded this

fact when issuing bonds in connections with the false certifications contained in the bidding

proposals submitted to the government.” Id. at ¶ 163. Finally, the Complaint alleges that Hudson

and Hanover knew that bonds were required for the contracts at issue and “[b]ut for Defendant

Schendel, Centennial Surety Associates, Inc., acting as agents and attorney-in fact to Hudson

Insurance Company and Hanover Insurance Company for the purpose of issuing bid bonds and

performance bonds, the fraudulent bid submissions made by CSG and Citibuilders would not have

been awarded.” Id. at ¶¶ 164–65.

III.   Legal Standard

       A.      Motion to Dismiss

       To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), “a

complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is

plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). A plaintiff must furnish “more than labels and conclusions”

or “a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555. Instead,

the complaint’s “[f]actual allegations must be enough to raise a right to relief above the speculative

level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).”

Id. (internal citations omitted). When considering a motion to dismiss under Rule 12(b)(6), “the

court must assume ‘all the allegations in the complaint are true (even if doubtful in fact),’ and the

court must give the plaintiff ‘the benefit of all reasonable inferences derived from the facts

alleged.’” Aktieselskabet AF 21. Nov. 2001 v. Fame Jeans Inc., 525 F.3d 8, 17 (D.C. Cir. 2008)

(internal citations omitted).
                                                   9
       Federal Rule of Civil Procedure 9(b) applies to FCA actions. United States v. Toyobo Co.,

Ltd., 811 F. Supp. 2d 37, 44 (D.D.C. 2011) (citing United States ex rel. Totten v. Bombardier

Corp., 286 F.3d 542, 551–52 (D.C. Cir. 2002)). An FCA plaintiff “must state with particularity

the circumstances surrounding the defendants’ allegedly false claims, as required by Rule 9(b) of

the Federal Rules of Civil Procedure.” Totten, 286 F.3d at 544. The “time, place, and contents of

the false representations” must be pleaded with specificity, as these are the “element[s] of fraud

about which the rule is chiefly concerned.” Id. “[A]n FCA plaintiff must identify the ‘who, what,

when, where, and how of the alleged fraud.’” United States v. Kellogg Brown & Root Servs., Inc.,

800 F. Supp. 2d 143, 153 (D.D.C. 2011). In sum, “[c]ombining Rules 8 and 9(b), we require that

‘the pleader . . . state the time, place and content of the false misrepresentations, the fact

misrepresented and what was retained or given up as a consequence of the fraud,” and that he

“identify individuals allegedly involved in the fraud.” U.S. ex rel. Williams v. Martin-Baker

Aircraft Co., 389 F.3d 1251, 1256 (D.C. Cir. 2004)

       B.      Elements of FCA Claims

       Plaintiff here has alleged four causes of action against all defendants: (1) submitting or

causing to be submitted false or fraudulent claims to the United States in violation of 31 U.S.C.

§ 3729(a)(1)(A) (presentment claims); (2) making or causing to be made or used false statements

or records material to false or fraudulent claims in violation of 31 U.S.C. § 3729(a)(1)(B) (false

statement claims); knowingly avoiding or decreasing obligations to the United States in violation

of 31 U.S.C. § 3729(a)(1)(G) (reverse false claims); and (4) conspiracy to violate the FCA in

violation of 31 U.S.C. § 3729(a)(1)(C).

       The elements of presentment claims are as follows: “(1) the defendant submitted a claim

to the government, (2) the claim was false, and (3) the defendant knew the claim was false.”

Pencheng Si v. Laogai Research Found., 71 F. Supp. 3d 73, 91 (D.D.C. 2014) (internal quotation
                                               10
marks omitted). The elements of a false statement claim are nearly the same as those for a

presentment claim, with the exception that a false statement claim “requires evidence that the

defendant made a false statement to the government, as opposed to the submission of a false claim

for payment.” Id. at 87. Defendants must make these claims or statements “knowingly,” that is,

“by (1) having actual knowledge, (2) acting in deliberate ignorance, or (3) acting in reckless

disregard.” U.S. ex rel. K & R Ltd. P’ship v. Massachusetts Hous. Fin. Agency, 530 F.3d 980, 983

(D.C. Cir. 2008).

       A reverse false claim occurs when a person “knowingly makes, uses, or causes to be made

or used, a false record or statement material to an obligation to pay or transmit money or property

to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an

obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G).

In contrast to the claims described above, “[a] reverse false claim is any fraudulent conduct that

‘results in no payment to the government when a payment is obligated.’” Pencheng Si, 71 F. Supp.

3d at 88. “Whereas a traditional false claim action involves a false or fraudulent statement made

to the government to support a claim for money from the government, a typical reverse false claim

action involves a defendant knowingly making a false statement in order to avoid having to pay

the government when payment is otherwise due.” Id.

       Finally, to state a claim for conspiracy under the FCA, the plaintiff-relator must allege “(1)

that ‘an agreement existed to have false or fraudulent claims allowed or paid’ to the government,

(2) that each alleged member of the conspiracy ‘joined that agreement,’ and (3) that ‘one or more

conspirators knowingly committed one or more overt acts in furtherance of the object of the

conspiracy.’” Id. at 89 (quoting United States ex rel. Miller v. Bill Harbert Int’l Constr., Inc., 608

F.3d 871, 899 (D.C. Cir. 2010)). An action for conspiracy cannot exist absent underlying tortious



                                                 11
conduct, and therefore “there can be no liability for conspiracy where there is no underlying

violation of the FCA.” Id.

IV.    APPLICATION

       Plaintiff-relator largely fails to state claims against the defendants who have filed motions

to dismiss.   Plaintiff-relator fails to state a claim for reverse FCA violations (31 U.S.C.

§ 3729(a)(1)(G)) against any of the defendants. It also fails to state claims against defendants

Hudson, Hanover, Centennial, Schendel, CB Construction, Dilip Parekh, Mehta, Goodweather,

and OST for presenting false claims in violation of 31 U.S.C. § 3729(a)(1)(A), making false

statements in violation of 31 U.S.C. § 3729(a)(1)(B), and conspiracy in violation of 31 U.S.C.

§ 3729(a)(1)(C) (Counts I, II, IV). However, plaintiff-relator has sufficiently stated claims against

defendants Citibuilders, Narula, and Madan for presenting false claims in violation of 31 U.S.C.

§ 3729(a)(1)(A), making false statements in violation of 31 U.S.C. § 3729(a)(1)(B), and

conspiracy in violation of 31 U.S.C. § 3729(a)(1)(C) (Counts I, II, IV). The Court will first address

plaintiff-relator’s reliance on the alter ego doctrine, then will address the claims against the

defendants.

       A.      Alter Ego Doctrine

       Plaintiff-relator’s Complaint paints a picture of an intricate and interconnected scheme to

defraud the government based on bids and proposals submitted by defendants CSG, Citibuilders,

and KCGI. In an apparent attempt to hold some of the defendants liable for the actions of CSG,

Citibuilders, and KCGI, plaintiff-relator alleges that many of the defendants are alter egos of each

other and are therefore jointly and severally liable for each other’s conduct. See Compl. ¶¶ 29–

32. However, Plaintiff-relator has failed to sufficiently allege facts showing that the alter ego

doctrine applies.



                                                 12
       In certain circumstances—“when the incentive value of limited liability is outweighed by

the competing value of basic fairness to parties dealing with the corporation”—courts may pierce

the veil of a corporation to hold shareholders individually liable for corporate actions. Labadie

Coal Co. v. Black, 672 F.2d 92, 96 (D.C. Cir. 1982). Courts must ask the following two questions

in determining whether to pierce the corporate veil: “(1) is there such unity of interest and

ownership that the separate personalities of the corporation and the individual no longer exist?;

and (2) if the acts are treated as those of the corporation alone, will an inequitable result follow?”

Id. Under the first prong, courts may consider the following factors: the nature of the corporate

ownership and control, i.e., whether the corporation is the alter ego of the individual who controls

it; failure to maintain corporate records; failure to maintain corporate formalities necessary for the

issuance or subscription to stock; commingling of funds or assets; diversion of corporate funds or

assets for personal use; and use of the same office by the corporation and by the individuals. Id.

at 97–99. With regard to the second prong, “[t]he essence of the fairness test is simply that an

individual businessman cannot hide from the normal consequences of carefree entrepreneuring by

doing so through a corporate shell.” Id. at 100. “The equities of reliance on corporate form are

generally analyzed in terms of the adequacy of a corporation’s capitalization.” I.A.M. Nat. Pension

Fund v. Wakefield Indus., Inc., No. CIV. A. 82-2187, 1991 WL 511071, at *6 (D.D.C. Oct. 18,

1991); see also Labadie, 672 F.2d at 99–100.

       Here, plaintiff-relator has failed to sufficiently allege facts showing that the alter ego

doctrine applies. With regard to all the alleged alter ego relationships, plaintiff relator states that

the defendants “have such a unity of interest and ownership that the individuality of each entity

ceased and they functioned as a single entity.” Compl. ¶¶ 29–32. This is a legal conclusion

insufficient to state a claim for relief. See Twombly, 550 U.S. at 555. Plaintiff also claims that the



                                                  13
“defendants participated in, controlled, and had an ownership interest in, and control of, various

partnerships and/or joint ventures to obtain and profit from government contracts” and that the

defendants took profits from these partnerships and joint ventures. Compl. ¶ 33. Plaintiff-relator

argues that “the specific facts alleged concerning the nature of the ownership and control of CSG,

CB, and Citibulders [sic] companies created by Defendants, and the commingling and

manipulation of assets and funds of one entity, and the diversion of funds and assets by and for the

benefit of other Defendants, as the result of a scheme to defraud the government, satisfy the

‘formalities’ and ‘fairness’ test.” Pl.’s Opp. To Mots. To Dismiss 22 n.8, ECF No. 111.

       There are several issues with this assertion—plaintiff-relator fails to identify the specific

factual allegations in the Complaint that show commingling, manipulation, and diversion; the

allegations regarding the individuals’ relationships with the corporations (e.g., as owner, CEO, or

COO) do not appear to indicate a lack of formalities; and plaintiff-relator fails to explain how two

individual people can be alter egos of each other. The dispositive issue, however, is that plaintiff-

relator has failed to allege any facts showing that an inequitable result would follow if the corporate

veil remains unpierced. Plaintiff-relator has not alleged that any of the corporations named in the

Complaint are undercapitalized or that he would be unable to recover from them if successful in

this action. Claims against both CSG and Citibuilders remain pending in this action. Plaintiff-

relator, in its opposition to the defendants’ motions to dismiss, merely stated that he had satisfied

the “fairness” test with virtually no explanation. Therefore, because plaintiff-relator has failed to

allege facts showing that an inequitable result would follow if the Court did not pierce the corporate

veil and hold the defendants liable for the actions of each other, plaintiff has failed to sufficiently

allege that the defendants are alter egos of each other and are jointly and severally liable. To the

extent that plaintiff-relator bases any of the following claims against any defendants on their



                                                  14
alleged status as an alter ego of a defendant who is alleged to have submitted a false claim or made

a false statement—e.g., CSG—those claims fail and plaintiff-relator has failed to state a cause of

action.

          B.     Defendants Hudson, Hanover, Centennial, Schendel, CB Construction, Dilip
                 Parekh, Mehta, and Goodweather

          Plaintiff-relator has failed to state claims against defendants Hudson, Hanover,

Centennial, Schendel, CB Construction, Dilip Parekh, Mehta, or Goodweather for any of the

alleged FCA violations.

                 1.      Presentment and False Statement Claims

          Plaintiff-relator has failed to state a claim against the above listed defendants for presenting

false claims or making false statements. Under these provisions of the statute, a defendant may be

liable for knowingly presenting or causing to be presented a false claim for payment, or for

knowingly making or causing to be made a false record or statement material to the false claim.

31 U.S.C. § 3729(a)(1)(A)–(B).            Plaintiff-relator has failed to sufficiently allege that the

defendants identified above either directly presented a false claim or made a false statement, or

that they caused a false claim to be presented or a false statement to be made.

                         a.      Direct Presentment

          None of the defendants at issue are alleged to have directly presented a false claim to the

government. Although the Complaint alleges the conclusory statement that “defendants conspired

with one another to knowingly present, and/or cause to be presented false claims to the government

related to past performance, employee knowledge and skills, experience, education, hours worked,

work completed, business relationships, false certification as to service-disabled veteran status,

false certification as to small business status, false certification as to HUBZone status, and

ownership and control of Narula and Parekh,” Compl. ¶ 34, the only actually presentment was


                                                    15
committed by CSG, Citibuilders, or KCGI in connection with the alleged scheme to bid on and

obtain government contracts when they did not have the requisite status to bid on or obtain such

contracts. As the Court has held that plaintiff-relator has failed to sufficiently allege application

of the alter ego doctrine, the defendants are not liable under the FCA for the presentments of CSG,

Citibuilders, or KCGI.

                         b.    Direct False Statements

       Regarding direct false statements, the Court similarly finds that plaintiff has failed to show

that the defendants directly made false statements to the government. Again, the false statements

alleged to have been made were made by CSG, Citibuilders, or KCGI in the process of submitting

bids. None of the other defendants listed above—with the exception noted below—are alleged to

have made false statements or records material to the false or fraudulent claims to the government.

       In one instance, plaintiff-relator does allege that an individual defendant did make a false

statement to the government apparently not on behalf of CSG, Citibuilders, or KCGI. He alleges

that “Dr. Mehta would provide past performance survey information to the government falsely

attesting to work CSG never performed.” Compl. ¶ 105. This allegation, however, fails to meet

the heightened pleading standard under Rule 9(b). It includes who made the statement and to

whom the statement was made, but it does not identify with specificity when these statements were

made, how they were made, or what facts were misrepresented. See Martin-Baker Aircraft Co.,

389 F.3d at 1256 (finding that plaintiff failed to satisfy Rule 9(b)’s particularity requirement

because the complaint failed to allege a start date of the fraudulent activity and it was unclear what

facts were misrepresented). Although plaintiff-relator, earlier in the Complaint, lists the allegedly

false square footage and costs of the Mehta Project, all of these statements were made in either the

“CSG technical submission,” “the CSG response,” or “the CSG proposal.” Compl. ¶ 100. Thus,



                                                 16
these statements were made by CSG, not Dr. Mehta, and it remains unclear what specific false

statements Dr. Mehta herself made.

                       c.      Indirect Presentment and False Statements

       Because plaintiff-relator cannot claim that the defendants directly presented false claims

or made false statements or records, he rests his claims on the argument that the defendants caused

a false claim to be presented or caused a false statement to be made. See Pl.’s Opp. 10–13. The

FCA provides for liability in those circumstances. To determine whether a defendant who did not

actually submit a claim or make a false statement “has ‘caused’ the submission of a false claim or

false statement, a court must look at the degree to which that party was involved in the scheme

that results in the actual submission.” United States ex rel. Tran v. Computer Scis. Corp., 53 F.

Supp. 3d 104, 127 (D.D.C. 2014). Courts should therefore consider whether the plaintiff has

alleged that the defendant’s conduct was “at least a substantial factor in causing, if not the but-for

cause of, submission of false claims.” Toyobo, 811 F. Supp. 2d at 48 (finding that the causation

requirement was satisfied by allegations that the non-submitting defendant, a fiber manufacturer,

marketed the fiber to vest manufacturers for use and “induced with the prospect of refunds, rebates,

and reimbursements . . . manufacturers and other companies in the [fiber] supply chain to continue

producing [fiber-related] products—and selling them to the government—when questions arose”

regarding the fiber’s suitability). Courts have credited indirect presentment and false statement

claims in the following circumstances: “when the non-submitting party takes advantage of an

unwitting intermediary, thereby causing that party to submit a false claim;” when “the non-

submitter was the driving force behind an allegedly fraudulent scheme;” when “they had agreed

to take certain critical actions in furtherance of the fraud;” and when the “non-submitter continued

to do business with an entity upon becoming aware that that entity was submitting false claims.”

Tran, 53 F. Supp. 3d at 126–27. Because the FCA “penalizes a person for his own acts, not for
                                                 17
the acts of someone else,” United States v. Bornstein, 423 U.S. 303, 312 (1976), failure to act is

insufficient. “Courts generally require that the defendant affirmatively act in order to impose

liability under the FCA, particularly when a plaintiff alleges that the defendant ‘caused’ the

submission of false claims.” United States ex rel. Landis v. Tailwind Sports Corp., 51 F. Supp. 3d

9, 50 (D.D.C. 2014).

       The Court finds that plaintiff-relator has failed to sufficiently allege presentment or false

statements claims based on a theory of causation against defendants Mehta, Dilip Parekh, CB

Construction, and Goodweather, or against the insurance defendants—Hudson, Hanover,

Centennial, and Schendel.

                               i.    Defendants Mehta, Dilip Parekh, CB Construction, and
                                     Goodweather

       Dr. Mehta, Dilip Parekh, and CB Construction all had relatively minor roles in the alleged

scheme. Dr. Mehta is alleged to have allowed CSG to use false information regarding the

renovation of her office in solicitations and bid proposals and to have provided false information

to the government regarding this project. Dilip Parekh is alleged to have “provided resources from

his construction company, CB Construction, and allowed his credit card and company bank

account to be used to funnel CSG proceeds into his company’s account.” Pl.’s Opp. 23. CB

Construction is similarly alleged to have allowed CSG to use its credit card. In addition, the

Complaint alleges that money was transferred from CSG to CB, and that the management and

oversight of CSG’s SDVOSB construction contracts was performed in part by CB. Finally,

defendant Goodweather is alleged to be the service disabled veteran who was falsely identified as

the owner of Citibuilders, when in fact he never controlled Citibuilders, which was under the

control of defendant Parekh.




                                                18
       This conduct, although allegedly part of the larger scheme, does not rise to being a

substantial factor in the submission of false claims, and is certainly not the “but for” cause of the

submission of the claims. The other defendants did not need Dr. Mehta, Dilip Parekh, or CB

Construction to take the actions they are alleged to have taken in order to accomplish their alleged

goal of submitting false claims and making false statements to the government. The facts alleged

against defendant Goodweather also do not support the inference that he caused the submission of

claims or the making of false statements. For example, nothing in the Complaint indicates that

defendant Goodweather asked or directed defendant Parekh to make the claims or statements, that

he prepared such claims or statements, or that he otherwise had any role in the submission of claims

or statements. Defendant Goodweather is not alleged to have affirmatively acted in any way that

would cause the submission of the false claims or statements. See Landis v. Tailwind Sports Corp.,

51 F. Supp. 3d at 50. The Court finds that plaintiff-relator has failed to allege that the roles played

by these defendants were a substantial factor in causing the submission of false claims or

statements—at most they played periphery roles in the alleged scheme. See Toyobo, 811 F. Supp.

2d at 48. Therefore, plaintiff-relator has failed to state a claim for relief under 31 U.S.C.

§ 3729(a)(1)(A) (Count I) or 31 U.S.C. § 3729(a)(1)(B) (Count II) against defendants Mehta, Dilip

Parekh, CB Construction, and Goodweather.

                               ii.     Insurance Defendants

       The Complaint also does not show that the insurance defendants caused any of the other

defendants to submit false claims or make false statements. While it is true that bonding is a

necessary step in bidding for government construction contracts, this does not mean that the

issuance of bonds caused the submission of false claims or statements. None of the insurance

defendants played roles similar to those identified above where courts have found that plaintiffs

have pled indirect presentment or false statement claims. First, they did not take advantage of
                                                  19
unwitting submitters (CSG, Citibuilders, and KCGI). Cf. United States v. Honeywell Int’l Inc.,

798 F. Supp. 2d 12, 24 (D.D.C. 2011) (“[A] subcontractor violates § 3729(a)(2) if the subcontractor

submits a false statement to the prime contractor intending for the statement to be used by the

prime contractor to get the government to pay its claim.”). Second, the Complaint clearly alleges

that CSG, Citibuilders, and KCGI, as well as the Parekh, Narula, and Madan, were the driving

forces behind the scheme—the insurance defendants did not envision the scheme or push the other

defendants to enact it. Cf. Toyobo, 811 F. Supp. 2d at 48 (finding that plaintiff alleged cause of

action against non-submitter who induced submitters to continue manufacturing and selling to the

government the non-submitter’s product).

       Third, although bonding was a necessary step in submitting the bids at issue, no facts are

alleged that would allow the inference that the insurance defendants agreed to bonding in

furtherance of the fraud alleged. The Complaint merely alleges that Centennial knew that OST,

CSG, and CB shared an office, that Parekh and Narula were in functional control of CSG, that

Parekh, Narula, and Madan had ownership interests in CSG and disregarded this fact, that Schendel

had a relationship with Parekh, and that Schendel and Centennial knew of the details of each bid

proposal submitted by OST, CSG, and CB. It also alleges that Hudson and Hanover knew that

OST, CSG, and CB shared common ownership and therefore required Narula, Parekh, and Gogia

to execute corporate resolutions acknowledging this fact, and that they knew that surety bid bonds

were required. None of these allegation show that the insurance defendants were acting in

furtherance of fraud; the Complaint does not even allege that the insurance defendants had an

interest in the scheme’s success. Cf. U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of

Utah, 472 F.3d 702, 715 (10th Cir. 2006) (finding that plaintiff adequately alleged a “causing to




                                                20
be presented claim” by alleging that the non-submitter “‘agree[d] to circumvent’ contractual and

statutory requirements, and ‘assur[ed]’” a laboratory that it would continue to accept false claims).

       Finally, there is no allegation that the insurance defendants continued to do business with

the other defendants upon becoming aware that the other defendants were submitting false claims.

The allegation that the insurance defendants knew the contents of the bid proposals does not mean

the insurance defendants knew the content included false claims. Cf. United States v. President &

Fellows of Harvard Coll., 323 F.Supp.2d 151, 187 (D. Mass. 2004) (“Where a defendant has an

ongoing business relationship with a repeated false claimant, and the defendant knows of the false

claims, yet does not cease doing business with the claimant or disclose the false claims to the

United States, the defendant’s ostrich-like behavior itself becomes a course of conduct that allowed

fraudulent claims to be presented to the government.” (internal quotation marks and citations

omitted)). Therefore, plaintiff-relator has failed to state a claim for relief under 31 U.S.C. §

3729(a)(1)(A) (Count I) or 31 U.S.C. § 3729(a)(1)(B) (Count II) against defendants Hudson,

Hanover, Centennial, and Schendel.

               2.      Reverse False Claims

       Plaintiff-relator has also failed to state a claim for reverse false claims. Reverse false

claims occur when “the defendant’s alleged deception ‘results in no payment to the government

when a payment is obligated.’” Hoyte v. Am. Nat. Red Cross, 518 F.3d 61, 67 (D.C. Cir. 2008).

In contrast to typical false claims actions, “a typical reverse false claim action involves a defendant

knowingly making a false statement in order to avoid having to pay the government when payment

is otherwise due.” Pencheng Si, 71 F. Supp. 3d at 88. A reverse false claim may not rest, however,

on the argument “that an obligation arose out of Defendants’ concealment of their allegedly

fraudulent activity,” because “by this logic, just about any traditional false statement or

presentment action would give rise to a reverse false claim action; after all, presumably any false
                                                  21
statement actionable under sections 3729(a)(1)(A) or 3729(a)(1)(B) could theoretically trigger an

obligation to repay the fraudulently obtained money.” Id. at 97.

       Plaintiff-relator alleges that reverse FCA violations occurred because “(a) Defendants

Centennial Surety Associates, Inc., Michael Schendel, Hudson Insurance Co. and Hanover

Insurance Co. [i.e., the insurance defendants] have knowingly concealed, and knowingly and

improperly avoided or decreased their obligation to pay money to the government as a result of

their roles facilitating the fraudulent scheme and by knowingly assisting other Defendants in

defrauding the government; and (b) when all Defendants knowingly retained government funds

that [they] knew were obtained as a result of the contracting fraud.” Pl.’s Opp. 38–39. He argues

that the insurance defendants had a duty to review the bids and ensure that CSG, CB, and

Citibuilders would perform the contract, but that they knew that the bid proposals were fraudulent

and issued bonds anyway, when they had a duty to deny issuance of the bonds. Id. at 39. He

argues that the insurance defendants “also knowingly and improperly avoided or decreased their

obligations to pay the government the full amount of the bonds for each government contract that

was fraudulently bid or performed by the other Defendants.” Id. at 40. Regarding the rest of the

defendants, plaintiff-relator argues that all those “who received government funds or benefits

under the contracts at issue have committed ‘reverse’ FCA violations by retaining government

funds that were fraudulently obtained and are, therefore, overpayments,” and they have an

obligation to repay funds or benefits obtained as a result of the fraud. Id.

       Plaintiff-relator’s arguments with regard to the insurance defendants fail to state a claim

for reverse FCA violations. The allegation that the insurance defendants should have denied

issuance of the surety bonds does not equate to an allegation that the defendants actually owed any

payment to the government in connection with the bonds. Moreover, the Complaint contains no



                                                 22
allegations that the insurance defendants knew the bids were fraudulent—it merely states that they

knew the details of the bid proposals and that Parekh, Narula, and Madan had ownership interests

in CSG. Furthermore, although the Complaint states that under the Miller Act, bid bond companies

are required to ensure that the contractor will undertake the contract, that the contractor will

complete the project in accordance with the specifications, and will ensure that those who furnish

labor and materials will be paid, there are no allegations that any of those actions were not taken

here. The Complaint does not state with any particularity what obligations were owed by which

insurance defendants, and how such obligations were avoided or decreased. Cf. Pencheng Si, 71

F. Supp. 3d at 96 (“In addition to failing to provide any details about the source of the alleged

obligation, Relator also fails to specify the parameters of that obligation, such as what triggers the

duty to repay and what sort of repayment it requires.”). There is simply no allegation in the

Complaint that the insurance defendants had an obligation to pay the government the full amount

of the bonds. See id. at 97–98 (“Relator cannot now claim that there is a general obligation to

repay all instances of misuse of grant funds when the amended complaint does not state as much.”).

         Plaintiff-relator also fails to state a claim for reverse false claims with respect to the rest of

the defendants. His argument that those who benefitted from the fraudulently obtained contracts

had an obligation to repay those funds is the same as that which was rejected in Pencheng Si, where

the relator “attempt[ed] to argue that an obligation arose out of Defendants’ concealment of their

allegedly fraudulent activity.” Id. at 97. Like the court in Pencheng Si, this Court finds that the

fraudulent actions alleged here do not trigger an obligation to repay the fraudulently obtained

money. See id. Therefore, plaintiff-relator has failed to state a claim for reverse false claims under

31 U.S.C. § 3279(a)(1)(G) (Count III).3


3
 Based on the Court’s reasoning above, it also finds that it is “patently obvious” that plaintiff-relator cannot prevail
on its reverse false claims count against any of the defendants, including those who have not moved to dismiss. See

                                                          23
                 3.       Conspiracy

        Plaintiff has failed to state a claim for conspiracy. There can be no conspiracy when there

is no underlying FCA violation. Pencheng Si, 71 F. Supp. 3d at 89. As the Court has found that

plaintiff-relator failed to state claims under the FCA for the presentment of false claims, for making

false statements, and for reverse false claims, these allegations cannot qualify as the underlying

tortious act necessary for a conspiracy to exist. Therefore, plaintiff-relator has failed to state a

claim for conspiracy under 31 U.S.C. § 3279(a)(1)(C) (Count IV).

        C.       Defendant Citibuilders

        Defendant Citibuilders is one of three companies (along with CSG and KCGI) at the center

of the alleged scheme to defraud the government through bidding and fraudulently obtaining

SDOVSB government contracts. According to the Complaint, defendant Neil Parekh created

Citibuilders and used defendant Goodweather’s service-disabled veteran status to establish

Citibuilders as an SDVOSB entity, and then “utilized Citibuilders as the vehicle to obtain

SDVOSB set-aside contracts by falsely certifying Citibuilders as a service-disabled veteran-owned

entity, and by materially misrepresenting Citibuilders’ past performance and project personnel that

were necessary to qualify for the contract award.” Compl. ¶ 120.

        Plaintiff-relator has sufficiently stated claims for the presentment of false claims, making

false statements, and conspiracy in violation of the FCA, but has failed to state a claim for reverse

false claims.

                 1.       Presentment and False Statements

        The court first finds that plaintiff-relator has sufficiently stated a claim against defendant

Citibuilders for the presentment of false claims and the making of false statements. Citibuilders



Fields v. Bellamy, No. 93-52741994 WL 549470, at *1 (D.C. Cir. Sept. 14, 1994). Therefore, the Court will sua
sponte dismiss Count III against defendants CSG, Neil Parekh, and Gogia.

                                                       24
argues that the allegations against it are conclusory and devoid of the necessary specificity under

Rule 9(b). Def. Citibuilders’ Mot. Dismiss 4–5, ECF No. 105. It argues that the Complaint “fails

to allege the time place, and content of each false certification or to whom the false certification

was made,” and that it “fails to allege the time, place, content, and recipient of the

misrepresentation. Id. Construing the facts in favor of the plaintiff-relator, however, the Court

finds that the Complaint does in fact allege the time, place, content, and recipients of the false

certifications and misrepresentations.     The Complaint, after explaining the formation of

Citibuilders and the alleged use of defendant Goodweather’s service disabled veteran status,

alleges that the Citibuilders proposals are “cookie cutter” versions of the CSG proposals, just

issued in the name of Citibuilders instead of CSG. Compl. ¶ 120; see also Pl.’s Opp. 9 (“Parekh

prepared ‘cookie cutter’ versions of the exact same proposals that were being prepared in the name

of CSG.”). A reasonable inference construed in favor of plaintiff-relator is that the content of the

Citibuilders proposals was identical to the content of the CSG proposals, which are described

earlier in the Complaint. See, e.g., Compl. ¶ 68 (describing false statements made in the CSG

proposals); ¶¶ 86–106 (describing the falsification of CSG’s past performance); ¶¶ 107–115

(describing false representations concerning CSG’s employees).

       The Complaint then lists the false statements made by Parekh in connection with the

submission of Citibuilders’ solicitations. Compl. ¶ 121. Finally, the Complaint lists nine of the

specific contracts allegedly fraudulently awarded to Citibuilders between 2010 and 2014. Id. at

¶ 129. It includes the department or agency to whom the contract was submitted, a description of

the contract, the date the contract was awarded, and the program source number, the solicitation

number, or the contract number. Id. This information is enough to satisfy the particular pleading

requirements of Rule 9(b)—plaintiff-relator may not have “allege[d] every fact pertaining to every



                                                25
instance of fraud,” but, on the basis of the facts alleged, Citibuilders is “able to ‘defend against the

charge and not just deny that they have done anything wrong.’” Martin-Baker Aircraft Co., 389

F.3d at 1259. Therefore plaintiff-relator has sufficiently stated a plausible claim for relief against

Citibuilders for the presentment of false claims and for making false statements in violation of 31

U.S.C. § 3729(a)(1)(A) (Count I) and 31 U.S.C. § 3729(a)(1)(B) (Count II).

                   2.      Reverse False Claims

           Plaintiff-relator has not, however, stated a plausible claim for relief for reverse false claims.

Plaintiff-relator rests its reverse false claims argument on the assertion that the defendants retained

government funds that they knew were obtained as a result of fraud—ostensibly, the contract

profits.     As explained above, plaintiff-relator may not argue that an obligation to pay the

government arose solely of the concealment of fraudulent activity. See Pencheng Si, 71 F. Supp.

3d at 97 (“[I]f the conduct that gives rise to a traditional presentment or false statement action also

satisfies the demands of section 3729(a)(1)(G), then there would be nothing ‘reverse’ about an

action brought under that latter section of the FCA.”). Therefore, plaintiff-relator has failed to

state a claim under 31 U.S.C. § 3729(a)(1)(G) (Count III).

                   3.      Conspiracy

           Defendant Citibuilders argues that the conspiracy count against it should be dismissed on

the basis of the intracorporate conspiracy doctrine, pursuant to which “there is no conspiracy if the

conspiratorial conduct challenged is essentially a single act by a single corporation acting

exclusively through its own directors, officers, and employees.” Kelley v. D.C., 893 F. Supp. 2d

115, 119–20 (D.D.C. 2012) (internal quotation marks omitted). It argues that Citibuilders is only

alleged to have acted through its officer/employee Neil Parekh and that Citibuilders cannot

conspire with Parekh. Def. Citibuilders’ Mot. Dismiss 3–4. Plaintiff-relator responds that the

conspiracy commenced prior to the formation of Citibuilders and that the conspiracy extended to

                                                      26
non-Citibuilders employees, so the intracorporate conspiracy doctrine does not apply. Pl.’s Opp.

25.

       The Court finds that defendant Citibuilders’ reliance on the intracorporate conspiracy

doctrine is unavailing. As plaintiff-relator argues, all of the defendants are alleged to have

participated in the conspiracy, not just Neil Parekh and Citibuilders. For example, CSG—a

separate entity from Citibuilders—as well as defendants Narula and Madan are at the center of the

alleged scheme here and are alleged to have participated in the conspiracy. In addition, “the

intracorporate conspiracy doctrine only applies if the individual defendants were acting within the

scope of their shared employment.” Kelley, 893 F. Supp. 2d at 120. Neil Parekh is alleged to

have committed acts apparently outside the scope of his Citibuilders employment in furtherance

of the alleged scheme, for example in his capacity as an officer of CSG. Therefore, defendant

Citibuilders’ intracorporate conspiracy doctrine argument is misplaced and plaintiff-relator has

stated a claim for conspiracy in violation of 31 U.S.C. § 3729(a)(1)(C) (Count IV).

       D.      OST Defendants

       The Complaint shows that the OST defendants—OST, Narula, and Madan—had varying

levels of involvement in the alleged scheme. As summarized above, Narula and Madan are officers

of OST. The Complaint alleges that CB and CSG, as well as Narula, Madan, and Parekh, worked

and operated out of OST’s office space, and that CSG’s bid proposals included false information

regarding work completed at OST’s headquarters. Narula and Madan were involved in the creation

of CSG with defendant Parekh and were involved in the submission of CSG bid proposals—which

allegedly contained false and fraudulent information. Based on the facts alleged in the Complaint,

plaintiff-relator has failed to state a claim against defendant OST for any of the alleged FCA

violations, and has failed to state a claim for reverse false claims against defendants Narula and



                                                27
Madan, but he has sufficiently stated a claim for relief against defendants Narula and Madan for

the presentment of false claims, for making false statements, and for conspiracy.

                 1.       Presentment and False Statements

        Plaintiff has stated a claim against defendants Narula and Madan for the presentment of

false claims and the making of false statements, but has failed to state a claim against defendant

OST. First, it is important to note that none of the defendants are alleged to have directly presented

false claims or made false statements to the government—all claims presented and statements

made were in the name of CSG, Citibuilders, or KCGI. 4 Therefore, plaintiff-relator’s claims rest

on the argument that the defendants caused a false claim to be presented or caused a false statement

to be made. See Pl.’s Opp. 10–13. The Court must therefore look at the degree of involvement of

each defendant in the scheme, considering whether the plaintiff has alleged that the defendant’s

conduct was “at least a substantial factor in causing, if not the but-for cause of, submission of false

claims.” Toyobo, 811 F. Supp. 2d at 48; Tran, 53 F. Supp. 3d at 127.

        The Complaint fails to allege any facts showing that OST’s conduct (as an entity) was a

substantial factor in causing the submission of fraudulent claims or in making false statements.

OST’s role was limited to the following: CSG relocated its business to OST’s offices, out of which

Parekh, Narula, and Madan worked, Compl. ¶ 84; OST staff employees supported Parekh, Narula,

and Madan in the preparation of bids and proposals submitted in the name of CSG, id. at ¶ 68; and

CSG’s responses to solicitations included false statements pertaining to work alleged to have




4
  Although plaintiff-relator states “Narula would personally provide past performance survey responses to the
government,” this statement is included in a paragraph that starts with the assertion that “[t]he CSG response to
solicitations and bid proposals also include material false statements pertaining to work alleged to have been
completed at defendant OST’s corporate headquarters.” Compl. ¶ 102. The statements made by Narula appear to
have been on behalf of CSG.

                                                        28
completed at OST’s headquarters, id. at ¶ 102. Nothing indicates that OST was so involved in the

scheme so as to have effectively caused the submission of claims or false statements.

       The Complaint does sufficiently allege, however, that the roles played by Narula and

Madan were substantial factors in causing the submission of false claims and false statements. It

states that Parekh, Narula, and Madan established CSG as a front company for the purpose of

allowing them to bid on and obtain SDVOSB set-aside contracts, that they established CSG with

the intent to falsely identify it as SDVOSB by falsely identifying Gogia as the owner, and that they

falsely identified that CSG operated out of a HUBZone. Compl. ¶¶ 43, 50, 51. It also alleges that

Parekh, Narula, and Madan “controlled the likeness of Gogia’s signature which they affix[ed] to

documents to their liking,” that they “were directly responsible for preparing all of the CSG bid

proposals transmitted to the government,” and that they determined the content of the proposals

and when and what contracts would be solicited. Id. at ¶¶ 65–67. It also alleges in various places

that CSG was under the control of Parekh, Narula, and Madan and that Gogia—the purported

owner of CSG—was subservient to them and under their control, and provides examples

evidencing such control. Id. at ¶¶ 74–77. The Complaint then goes on to describe in detail the

false and fraudulent contents of the bid proposals, which Parekh, Narula, and Madan are alleged

to have prepared, and lists the specific contracts awarded as a result. Id. at ¶¶ 86–116.

       United States ex rel. Tran v. Computer Sciences Corp. is instructive. In Tran the court

found that the defendant’s (Modis) “participation in the scheme was sufficient to constitute a

‘substantial factor in causing’ CSC’s submission of the false claims.’” Tran, 53 F. Supp. 3d at

128. In Tran, defendant CSC agreed to serve as a prime contractor and to subcontract a certain

percentage of work to qualified small businesses. Id. at 109. Instead, CSC set up a pass-through

scheme in which “it would subcontract work to qualified small businesses, such as Defendant



                                                 29
Sagent Partners, LLC (‘Sagent’), and as a condition of the subcontract, those small businesses

would agree to further subcontract the work to large businesses that CSC trusted, such as

Defendant Modis, Inc. (‘Modis’), in exchange for a small fee.” Id. This violated the FCA because

“it permitted CSC to report to the government that the company had met its small business

subcontracting goals when, in reality, large businesses were performing the substantive work under

the contract.” Id. The court found that the complaint was “replete with allegations regarding

Modis’s role in the pass-through scheme, such that there is no doubt that Modis was fully aware

of, and an active participant in, the arrangement that facilitated CSC’s eventual submission of

allegedly false claims and false statements.” Id. at 128. It specifically found that allegations that

Modis’s sales director stated “Modis’s goal in implementing the pass-through scheme was to

‘support [CSC’s] needs to increase its small business spend within its subcontract community,’

and that he ‘worked with other small business vendors . . . to assist CSC in obtaining it small

business spend,’” and that he “suggested using [a certain subcontractor] as ‘a conduit for Modis in

the provision of services to CSC for the purpose of expanding its small business spend.’” Id.

(internal citations omitted). Thus, the court concluded that “these allegations would be sufficient

to establish that Modis was well aware that its actions in implementing the pass-through scheme

would cause CSC’s eventual submission of allegedly false claims and false statements about its

compliance with the small-business subcontracting requirements, and that Modis’s actions were

in fact a substantial factor in causing those submissions.” Id.

       Similarly here, the Court finds that, based on allegations against Narula and Madan in the

Complaint, they were well aware that their actions would result in the submission of false claims

by CSG. Narula and Madan are alleged to have actually decided the content of and prepared the

false claims themselves. They are alleged to have falsely identified Gogia as the owner of the



                                                 30
company that they formed (with Parekh) for the purpose of fraudulently obtained SDVOSB status,

and to have used Gogia’s signature on documents. It is clear that their actions were a substantial

factor in, if not the driving force behind, the submission of false claims and the making of false

statements to the government in violation of the FCA. See Tran, 53 F. Supp. 3d at 126–27; Toyobo,

811 F. Supp. 2d at 48. Therefore, plaintiff-relator has sufficiently stated a claim against defendants

Madan and Narula under 31 U.S.C. § 3729(a)(1)(A) (Count I) and 31 U.S.C. § 3729(a)(1)(B)

(Count II), but has failed to state a claim against defendant OST under these provisions.

               2.      Reverse False Claims

       Again, however, plaintiff-relator has not stated a plausible claim for relief against any of

the OST defendants for reverse false claims. Like all of the defendants listed above, plaintiff-

relator rests its reverse false claims argument against the OST defendants on the assertion that they

retained government funds that they knew were obtained as a result of fraud. This is insufficient

to show the existence of an obligation to pay the government and plaintiff-relator has failed to state

a claim under 31 U.S.C. § 3729(a)(1)(G) (Count III). See Pencheng Si, 71 F. Supp. 3d at 97.

               3.      Conspiracy

       The OST defendants claim that the Complaint fails to allege a conspiracy to violate the

FCA because it fails to sufficiently allege the underlying FCA violations. OST Defs.’ Mot.

Dismiss 18, ECF No. 86-1. Because plaintiff-relator has failed to sufficiently claim an underlying

FCA violation against defendant OST, plaintiff-relator’s claim against OST for conspiracy fails.

With respect to defendants Narula and Madan, however, the Court has found that plaintiff-relator

sufficiently stated a claim for the presentment of false claims and for making false statements in

violation of 31 U.S.C. § 3729(a)(1)(A) and 31 U.S.C. § 3729(a)(1)(B). Therefore, because

plaintiff-relator has sufficiently stated underlying FCA violations against defendants Narula and



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Madan, their argument with respect to the conspiracy claim fails and plaintiff-relator has stated a

claim for conspiracy against them.

V.     CONCLUSION

       In sum, plaintiff-relator has failed to state a claim against all defendants for reverse false

claims in violation of 31 U.S.C. § 3729(a)(1)(G) (Count III). Plaintiff-relator has also failed to

state a claim against defendants Hudson Insurance Co., Hanover Insurance Co., Centennial Surety

Associates, Inc., Michael Schendel, CB Construction Group, Inc., Dilip Parekh, Shobha N. Mehta,

Melvin G. Goodweather, and OST for presenting false claims in violation of 31 U.S.C.

§ 3729(a)(1)(A), making false statements in violation of 31 U.S.C. § 3729(a)(1)(B), and

conspiracy in violation of 31 U.S.C. § 3729(a)(1)(C) (Counts I, II, IV). Defendants Hudson

Insurance Co., Hanover Insurance Co., Centennial Surety Associates, Inc., Michael Schendel, CB

Construction Group, Inc., Dilip Parekh, Shobha N. Mehta, Melvin G. Goodweather, and OST’s

motions to dismiss have therefore been granted. Upon further review, the Court finds that plaintiff-

relator has, however, sufficiently stated a claim against defendants Citibuilders, Ajay K. Madan,

and Vijay Narula for presenting false claims in violation of 31 U.S.C. § 3729(a)(1)(A), making

false statements in violation of 31 U.S.C. § 3729(a)(1)(B), and conspiracy in violation of 31 U.S.C.

§ 3729(a)(1)(C) (Counts I, II, IV). The Order granting defendant Citibuilders’ and defendants

Ajay K. Madan and Vijay Narula’s motions to dismiss will be vacated and their motions to dismiss

will be denied in part. Defendants KCGI, Anita Chitnis, and Guatam Chitnis will be dismissed

from this action in accordance with plaintiff-relator’s notice of voluntary dismissal. Counts I–IV

remain pending against defendants CSG, Neil Parekh, and Gogia, and Counts I, II, and IV remain

pending against defendants Citibuilders, Madan, and Narula. A separate order accompanies this

memorandum opinion.



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