Opposing Memorandum of Law FINAL Signed

8/8/2019 Opposing Memorandum of Law FINAL Signed

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

---------------------------------------------------------------

UNITED STATES OF AMERICA,

Plaintiff,

- v.

DANIEL B. KARRON,

Defendant.

08 Civ. 10223 (NRB) (DFE)

---------------------------------------------------------------

MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFFS MOTION FOR

SUMMARY JUDGEMENT

D B KarronPro Se

348 East Fulton StreetLong Beach, NY 11561Voice: 212 686 8748Cell: 917 674 0828Email: [email protected]


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a) KarronsSalary................................................................................................................................ 14

b) Karronscontribution...................................................................................................................... 14

c) OverfundingandFCA...................................................................................................................... 14

Point II. No Common Law Fraud Basis................................................................................................ 15

A. Elementsoffraud............................................................................................................................ 15

i. DefinitionsofFraud.................................................................................................................... 15

ii. TheparticularsofCommonLawfraudconsistofnineelements............................................... 16

B. PlaintiffdoesnotspecifyrequiredelementsoffraudtoallegeCommonFraud........................... 16

i. CommonLawEstoppelcannotapplywithoutfullparticulars.................................................... 16

ii. BenefitoftheBargainfrauddamages..................................................................................... 17

C. CUNYCISDDSubcontract:OptionorObligation?........................................................................... 19

1.

CUNYCISDD

NYUMC

and

KEY

CASI

TEAM

MEMBERS

.................................................................

21

Point III. IncongruentMens Rea Elements between Criminal and Civil Statutes Preclude Collateral

Estoppel and Summary Judgment............................................................................................................... 21

a) TakingrefugeinALLISONWonderland........................................................................................... 22

b) FERARetroactivelyAmendsFCA2009............................................................................................ 22

c) FERARetroactivityUnconstitutional............................................................................................... 23

d) FERAretroactivityAppliestoClaims,NotCases............................................................................. 23

e) Retroactivity,LegallyFalsefromKirkv.Schindleralsofalse.......................................................... 24

f)

FCA Claims Disputed.....................................................................................................................

25

g) 31 USCS 3731 (e) FCA Statutory CE Procedure......................................................................... 25

h) The Mickman and Lamanna Limitation.......................................................................................... 26

i) Liability Does Not Equal Damages................................................................................................ 27

j) TheDefendantsConvictionunder18U.S.C.666(a)(1)(A)[BEA].................................................. 28

a) 2.IntenttoDefraudIsNotAnElementOfSection666(a)(1)(A)............................................. 29

b) Section666(a)(1)(A)prohibitsembezzling,stealing,obtainingbyfraud,converting,or

intentionallymisapplyingfunds.Thefirstfourprohibitionscoveranypossibletakingofmoneyfor

onesown

use

or

benefit.

Intentional

misapplication,

in

order

to

avoid

redundancy,

must

mean

intentionalmisapplicationforotherwiselegitimatepurposes.......................................................... 30

Point IV. Monstrous Civil Penalties and Damages Unconstitutional..................................................... 31

1. A42timesdamagesandpunitiveratio.......................................................................................... 32

2. DoubleJeopardyandtheBEAandtheFCA.................................................................................... 32

3. ForensicAccountingdoesnotsupportthePlaintiffslosscontention........................................... 33


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4. TheTENENBAUMprecedent........................................................................................................... 34

5. LargePunitiveDamagesandFinesCASELAW................................................................................ 34

Point V. Other Issues Raised and Answered......................................................................................... 35

s) OMB Circulars advice to Agencies................................................................................................ 35

t) Revisionofbudgetandprogramplans:15CFR14.25.................................................................. 35

u) ATP was tacitly or minimally responsive....................................................................................... 36

1. Cooperative Agreement requires CASI Substantial Involvement................................................... 36

a) KickoffMemofromOrthwein(KarronDeclarationExhibit5)showsearlysignificantinvolvement........................................................................................................................................ 36

Point VI. No grounds for Summary Judgment....................................................................................... 37

1) No Uncontested Material Issues for Partial Summary Judgment................................................... 38

TheauditorsconspiredtomakemateriallyfalseauditinignoringKarronscontribution.................39

InventoryofFacts,Claims,RefutationsofFacts,ArgumentstoClaims............................................. 40

4) Conclusion; No grounds for Civil or FCA Statutory Estoppel, Full or Part Summary Judgment......40

Table of Authorities

Cases

31U.S.C.3729.......................................................................................................................................... 25

AllisonEngineCo.v.USEx.rel.Sanders,No.07214,553U.S.(2008)....................................................... 22

AllisonEngineCo.v.USex.rel.Sanders,No.95cv9706thCir(2009........................................................ 23

AllisonEngineCo.v.USex.rel.Sander(No.07214)471F.3d610............................................................ 38

Andersonv.LibertyLobby,Inc.,477U.S.242,24748(1986).................................................................... 37

Andersonv.LibertyLobby,Inc.,477U.S.242,252(1986)......................................................................... 37

Barrettv.Holland&Hart(1993),845P.2d714,717.................................................................................. 16

Battenv.WattsCycle&Marine(1989),783P.2d378,381,cert.denied,494U.S.1087,110S.Ct.1826,

108L.Ed.2d955(1990)........................................................................................................................... 16

BMW

of

North

America,

Inc.

v.

Gore

(1996)

...............................................................................................

33

CelotexCorp.v.Catrett,477U.S.317(1986)............................................................................................. 37

FirstNationalBankofArizonav.CitiesServiceCo.391US253,391US289(1968).................................... 37

Hopperv.SolvayPharms,588F.3d1318,1327n.3,2009cert.petnfiled,78U.S.L.W.3531(U.S.Mar.3,

2010)(No.091065);............................................................................................................................... 23

Leev.Armstrong798P.2d84,87;Batten,783P.2dat38081.(1990)..................................................... 16

Matsushita,475U.S.at586,(1986)............................................................................................................ 37


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Mikesv.Straus,274F.3d687 CourtofAppeals,2ndCircuit2001.......................................................... 24

Morlanv.Kelly,No.2009UP002,SCSupremeCourt,2009..................................................................... 16

Schnellmannv.Roettger,373S.C.379,382,645S.E.2d239,241(2007................................................... 16

Simonv.SanPaoloU.S.HoldingCo.,Inc.(2005)35Cal.4th111182......................................................... 33

SIMONv.SanPaolo,35Cal.4that1182.................................................................................................... 10

SONYv.

TENENBAUM

,03

cv

11661

NG,

2010

US

District

Court

Massachusetts.

.....................................

34

STATEFARMMUT.AUTOMOBILEINS.CO.V.CAMPBELL(011289) 538U.S.408(2003)P.3d..................33

Taylorv.StateCompensationInsuranceFund,175Mont.432,913P.2d1242(1996)............................. 16

TROPvDULLES356U.S.86(1958)............................................................................................................. 34

USvKarronBRIEFFORTHEUSOFAMERICAJuly21,2009KarronsDeclarationExhibit6........................ 6

USv.KarronUNITEDSTATESCOURTOFAPPEALSFORTHESECONDCIRCUIT085287crofOctober7,

2009.......................................................................................................................................................... 7

US.v.Sazama,88F.Supp.2d1270(D.Utah2000)..................................................................................... 25

US.v.Kanelos,1994WL148655(N.D.Ill.April20,1994).......................................................................... 25

U.S.Ex.rel.Longhiv.LithiumPowerTechs.Inc.,513F.Supp.2d866(S.D.Tex.2007),2008WL62207(S.D.

Tex.Jan.

3,

2008).....................................................................................................................................

21

USexrel.Paratov.UnadillaHealthCare,No.5:07CV76(HL),2010WL146877,at*4n.4(M.D.Ga.),

2010)....................................................................................................................................................... 23

USexrel.ROGERL.SANDERS,etal., v ALLISONENGINECOMPANY,INC.,etal.,,CaseNo.1:95cv970

(USDISTRICTCOURTSOUTHERNDISTRICTOFOHIOWESTERNDIVISIONATDAYTONOctober27,2009)

................................................................................................................................................................ 23

USex.rel.Kirkv.SchindlerElevator601F.3d94(2dCir.2010)................................................................ 24

USv.Bajakajian,524U.S.321(1998)......................................................................................................... 10

USv.Bajakajian,524U.S.321(1998),........................................................................................................ 34

USv.Halper,490U.S.435,44849(1989).143........................................................................................... 32

USv.Karron(2008)AmendedJudgmentinaCriminalCase.KarronDeclarationExhibit65..................... 40

USv.KARRONCivilComplaint,08CV10223USSDNY,November24,2008............................................. 24

USv.Karron,OnAppeal,BrieffortheUnitedStates(2009)atPoint1(B)(2)............................................. 38

USv.Lamanna,114F.Supp.2d193(E.D.N.Y.Sept.26,2000)................................................................... 26

USv.Mickman,1993WL541683(E.D.Pa.Dec.22,1993),52F.3d318(1995)......................................... 26

USv.Aguillon,628F.Supp.2d542Dist.Court,D.Delaware,June24,2009.............................................. 23

USv.ScienceApplicationsInternationalCorp.,2009WL2929250,D.D.C.Sept.14,2009......................... 23

Statutes

15278n.................................................................................................................................................... 33

15CFR14.25.............................................................................................................................................. 7

15CFR14.25(4)....................................................................................................................................... 36

15CFR14.25(m)........................................................................................................................................ 37

18U.S.C.666............................................................................................................................................ 30

18U.S.C.666(a)(1)(A)............................................................................................................................... 30

18U.S.C.666(a)(1)(A).................................................................................................................................. 6

18USC666(a)(1)(A)..................................................................................................................................... 8


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31U.S.C3729(a)(1).................................................................................................................................... 8

31U.S.C3729(a)(2).................................................................................................................................... 8

31U.S.C3731(e)....................................................................................................................................... 26

31U.S.C.3731(e)................................................................................................................................ 22,23

31U.S.C.3729etseq.................................................................................................................................. 23

31USC

3731

(e)

..........................................................................................................................................

8

31USC3731(e)........................................................................................................................................... 8

31USCS3729AsAmended1986............................................................................................................... 8

31USCS3729(a)(2)................................................................................................................................... 22

OtherAuthoritiesATPProposalEx.14Instructions,2001....................................................................................................... 37

OMBCircularA122.................................................................................................................................... 36

OMBCircularsA21..................................................................................................................................... 36

PublicLawNo:11121................................................................................................................................ 23

PublicLawNo:11121,Section4(f)(2)........................................................................................................ 24

Treatises

Cooper,NealA. (19951996)ThirdPartyLiabilityortheFalseClaimsAct:ItIsTimeforConsultantsto

PaythePriceforTheirBadAdvice29J.MarshallL.Rev.923................................................................ 12

FederalSummaryJudgmentDoctrine:ACriticalAnalysis;Louis,MartinB.83YaleL.J.745(19731974).16

Smith,LionelD.;(1997)ThelawoftracingCLARENDONPRESSOXFORD................................................ 39

1)

Preliminary Statement

The Defendant opposes the Plaintiffs motion for a summary judgment based on

significant issues of specific material fact in the Defendants Opposing 56.1 Statement of

Material Fact and relevant statutes and case law.

The law of conviction here are not vague: a conviction under 18 U.S.C. 666(a)(1)(A)

(Bribery, Embezzlement Act or BEA) does not require a finding of fraud as convincingly

argued by the Government in its opposing brief to Karrons Appeal1. The US Court of Appeals

for the Second Circuit has spoken as well: The element of conviction under BEA is one of

1U S v. Karron BRIEF FOR THE US OF AMERICA July 21, 2009 Karrons Declaration

Exhibit 6


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Knowing Misapplication of Funds outside of authority to do so. The Defendant is not claiming

innocence in this criminal matter, and has accepted the final Judgment of the Courts2.

The total spending on the project, direct and indirect, federal and non-federal share, was

$1,524,264, of which the Defendant contributed $178,764. Dunlevy Decl. Ex.AA001C, AAC109,

BAC227, CAC221, If the project is restarted tomorrow, no budget changes would be required to

complete the project. 15 CFR 14.25 Karron Decl. Ex. 309, The Prosecution also could not

have said it better Your Honor, because almost every single expenditure has some benefit to the

research 3 then there would be no loss at all, 4

The allegation of common law fraud because the Defendant did not subcontract in the

first year of the project with CUNY CISDD is preposterous; there was no contractual obligation

to do so. Karron Decl. Exhibit Group 4. The cooperative agreement does not specify a

subcontract start date, duration, or any details that could be remotely make it an obligation: it is

permission to do so, not a specification to do so. Karron Decl. Ex. 28. When CASI won the

award, to everyones surprise, (Karron Decl. Ex. 9) The CUNY faculty rejected working through

CUNY CISDD; there was no economic incentive. Karron Decl. LEGAL ARTICLES Ex. 522.

They would not have earned an increment to work for CASIs ATP project. ibid. ATP frowns

on excessive subcontracting. Eisen Decl. Ex. 124, ATP Proposers Conference Video at 2:28:27.

Instead they consulted directly with CASI, with full agreement of CUNY, and NIST, directly

with CASI. Karron Declaration Exhibit Group 4, Ex. 31 through 38.

2U S v. Karron US COURT OF APPEALS FOR THE SECOND CIRCUIT 08-5287-cr ofOctober 7, 2009.3Sentencing Transcript Page 22 Line 22.

4Sentencing Transcript Page 23, Line 10-22


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A 18 USC 666(a)(1)(A) BEA misapplication of funds conviction is not a qualifying 31

U.S.C 3729(a)(1) and 31 U.S.C 3729(a)(2) False Claims Act [FCA] fraudulent false

transaction as defined by the version of the statute effective at the date of the alleged claims. A

BEA conviction does not, prima facie, guarantee that all, or any, of the requisite elements for a

FCA conviction are met5. In the Defendants conviction, the Jury did not specify any particular

specific transactions on which to base its finding of a restitution amount; only ill-defined classes

of transactions taken from GX1146, without specific reference back to a schedule revealing

individual transactions: therefore there are no transactions identified as requisite element for

FCA liability. GX114 has problems. The Criminal Court complained bitterly about the lack of

definition, precision, and accuracy of the numbers and their classification on GX114, including

and the lack of backup schedules showing specific transactions used for each class. That is

because there is no backup. There is no way to reverse engineer these numbers. There is no

way to identify the transactions on which these sums are totaled. The Court could not have said

it better: Look at that [GX 114]. This is a mess7.

31 USC 3731(e)8 False Claims procedure for invoking the statutory bar of Estoppel is

not automatically triggered because of the lack of any specific transaction element cited as

531 USCS 3729 As Amended 1986, Karron Decl. LAW Ex. 335.

6Karron Decl. Ex. 46

7Sentencing Transcript Page 16 Line 14-15, Karron Decl. Ex. 46, 82

831 USC 3731 (e) [Pre FERA] Notwithstanding any other provision of law, the Federal Rules

of Criminal Procedure, or the Federal Rules of Evidence, a final judgment rendered in favor ofthe US in any criminal proceeding charging fraud or false statements, whether upon a verdictafter trial or upon a plea of guilty or nolo contendere, shall estop the defendant from denying theessential elements of the offense in any action which involves the same transaction as in thecriminal proceeding and which is brought under subsection (a) or (b) of section 3730. [EmphasisAdded]. Karron Decl.LAW Ex. 337.


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fraudulent in the criminal case. The Plaintiff here brings forward some at least twenty9, not

previously alleged as fraudulent in the criminal case10

. The Defendant disputes, as a matter of

fact, that the SF 269A short form, or SF270 submitted are knowingly false. Dunlevy Decl.

Ex. AA-001-A. The documents are as fraught with uncaught technical errors, and other mistakes,

despite being vetted, redacted and initialed by HS. Karron Decl. Ex. 134. Therefore, the

documents, amongst other reasons, are meaningless. Ibid. The Defendant clearly did not know

what he was doing, and HS, or whoever was reviewing the forms, did not care enough to bounce

them back for revision and correction. Indeed, there are enough arithmetic and math errors on

every step of the procedure on both sides to obviate anyone knowing anything at all. Clearly,

ATP did not think these important enough to hold up progress. Karron Decl. Ex. 307. The

Defendant submits ground truth verified figures prepared by the Defense forensic bookkeeper

who has thoroughly and completely analyzed CASI spending. Dunlevy Decl. The Defendant

disavows the unauthorized revisions of the SF269 Long Form made in good faith by her then

business managers Bob Benedict and auditor Hayes, who made exculpatory affirmations about

Karron as they submitted yet even more erroneous and a different replacement forms on

Karrons behalf. Karron Decl. Ex. 59

Finally, the forms in question, SF 269A and SF27011, are not unique qualifying fraud

claims, but rather quarterly financial forms and requests for advances that are a cash machine

receipt, showing balances remaining and spent, rather than forged checks or fraudulent invoices

9The SF272 forms were voided in Amendment 4, and 4 SF269. See Defendants 56.1 response to

Plaintiffs Paragraph #24 regarding counting unique and qualifying claim documents. 10

Some 4 SF269 documents being unauthorized revisions of previous submitted SF269(a) formsby possibly well-meaning CASI business staff while Karron was in Canada. Karron Decl. Ex. 59and Trial Transcript Pages 1313 et seq. starting at line 8.11

Form SF272 was voided by Cooperative Agreement 4. Karron Decl. Ex. 15.


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or reimbursement demands. The money was in the bank, it was already allocated, and it was

already sequestered for the project. There was no quid-pro-quo claim for payment, no sine-qua-

non signature for any particular cash advance or drawdown12. Karron spent the money to the

best of her knowledge and ability, with the full knowledge, explicit and implicit and tacit

blessing of the ATP management. Karron Decl. Exhibit Group 3, Karron Decl. Ex. 500, 503.

The Defendants main evidence is forensic analysis of hard numbers taken from the criminal

trial. Karron Decl. Ex. 72,73. Dunlevy Decl. The Plaintiffs exhibits are innumerate. Karron

Decl. Ex. 46, 47,48, 82, 505 . The numbers do not add up, are made up, and it took until now to

prove it. Dunlevy Decl. Ex. AA001A.

Plaintiff seeks punitive damages that are so enormous being 42 times ratio of punitive

fines to restitution, so clearly and significantly greater than the Campbell standard for Single

Digits Ratio Rule the Constitutional issues cannot be avoided by Summary Judgment. Karron

Decl. Ex.517, 519. US v. Bajakajian, 524 U.S. 321 (1998), SIMON v. San Paolo, 35 Cal. 4th at

1182 STATE FARM MUT. AUTOMOBILE INS. CO.V. CAMPBELL (01-1289) 538 U.S. 408

(2003)P.3d

The Defendant has raised significant matters of material fact in opposition to the

Plaintiffs Statement of Material Facts. If the Plaintiff wishes to challenge these facts, then it is

the job of the jury, as finders of fact. Without Mistake of Fact (obviated by correct fiscal facts,

Dunlevy Decl.), and full allegation of Fraud, no remaining unchallenged matters that can be

summarily judged without trial. FRCP 9(b). Karron Decl. LEGAL ARTICLES Ex. 512, 530, 533,

534.

12For a counter example, consider a construction loan payable, where a payment is contingent on

submission of invoices and proof of work done.


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2) Background

In May 18 2001, the Defendant, then an adjunct faculty member at the City College of

the City University of New York (CCNY), and Founder/President of Computer Aided Surgery,

Inc. (CASI) attended a faculty solicitation for ATP proposals given my Marc Stanley, ATP

Program Director, at the CUNY Graduate Center on 34 th Street and 5th Avenue. Karron Decl.

Ex. 6, 39. Stanley suggested to Karron that he attend the 2001 NIST ATP Annual Meeting in

Baltimore. He (then) actively participated in the June 3rd convention and he had extensive

discussion with various ATP personnel about how to win and manage an ATP grant for CASI.

Karron Decl. Ex. 114.

Karron wrote and submitted a winning four Gate proposal to ATP that resulted in the

October 1 2001 award of a cooperative agreement for 2 million dollars direct funding for

Karrons DMT image analysis algorithm. Karron Decl. Ex. 136. The novel concept was to do a

definitive map, much like the Human Genome Project map, of the Visible Human Project

Data, and to develop the idea of computer anatomy and surgery a goal to which Karron is

committed to even to this day. Karron Decl. Exhibit Group 21.

The 9/11/2001 attacks here in NYC caused many people to rethink their lives. Longtime

Karron / CASI accountant Jill Feldman C.P.A. decided to retire from accountancy and sold her

practice to Joan Hayes C.P.A in the winter of 2001. Hayes thought she had much experience

with audit, corporate accountancy, and the federal cost principles. Karron Decl. Ex. 41, 52, 61,

62, 111,112,113. As it turned out, Hayes was perhaps the worst accountant ever to meddle in a

business and government project. Karron Decl. Ex. 40 ,54, 56, 121, 127, 128. She wore too

many hats; she lacked even a pretense of auditor independence. Karron Decl. Ex. 61,62, 505.


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She gained the confidence of Karron and the Department of Commerce and then proceeded to

make a train wreck of an otherwise promising research project and career13

. Hayes lied to

Karron, lied in her audit of CASI, lied to the ATP, OIG, and IRS Special Agents investigating

ATP payroll taxes from which all that remains are IRS tax liens on Karron. Ibid. Dunlevy Decl.

3) ArgumentOverview of Complaint Claims

The central allegation of the government six claims made November 24, 200914 are

founded in elements of common law Fraud and Benefit of the Bargain theory.

1st Claim: FALSE CLAIMS ACT, 31 U.S.C. 3729(a)(l)[Pre-FERA False Claim]

2nd Claim: FALSE CLAIMS ACT, 31 U.S.C. 3729(a)(2)[Pre-FERA False Record]

3rd Claim: CONVERSION [of misappropriated funds to personal gain]

4th Claim: UNJUST ENRICHMENT

5th Claim: FRAUD

6th Claim: PAYMENT MADE UNDER MISTAKE OF FACT

The central element of fraud in First, Second and Fifth Claim above requires the Plaintiff

to aver full FRCP 9(b) particulars and all of the nine elements of each instance of alleged fraud.

Claims Fraud targeted by the False Claims Act (FCA) requires establishment of which version of

the statute the alleged claim violates. KarronDeclaration Exhibits 136, 170, 207, 208, 209.

Conversion requires funds tracing ibid Ex. 215, as does Unjust Enrichment. ibid Ex. 214

Mistake of fact requires identification of the exact facts relied upon by ATP are actually proven

false.Ibid Ex. 210.

13Cooper, Neal A. (1995-1996) Third Party Liability or the False Claims Act: It Is Time for

Consultants to Pay the Price for Their Bad Advice 29 J. Marshall L. Rev. 923 14

KarronDeclarationExhibit69


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Overview of Opposing Points of Argument

Point I. Karron Overfunding and Cofounding render moot Plaintiffs claims.Declaration

of Dunlevy Exhibit 1. In main part the governments underlying accounting is false; being

copied from Hayes, and or being made up. Karrons bona fide tax paid salary and project

funding vitiate the allegations of fraud.

Point II. There exists no Common Law Fraud elements in the BEA conviction; The

Plaintiff fails to aver the full particulars in the Complaint or Memorandum of Law.

Point III. Incongruent Mens Rea Elements of 666 BEA conviction and 3729 FCA

precludes 3731 FCA Procedure for Statutory Collateral Estoppel. Summary Judgment by Res

Judicata and Civil Collateral Estoppel are impossible. The single element of conviction,

knowing misapplication of grant funds, without a finding of fraud, for purposes otherwise

benefiting the Plaintiff are not the same issues, elements, allegations, or claims, or transactions

required by the law.

Point IV. Monstrous Civil Penalties and Damages demanded (as much as $5M+) are 42 X

the criminal restitution, significantly greater than the Campbell rule. The civil penalty is

criminal. This is a constitutional challenge because it infringes on the Defendants rights under

the 5th

Double Jeopardy and Due Process (Summary Judgment short circuits Due Process) ,

Eminent Domain (failure to Just Compensate Defendant for seized real and intellectual

property), 8th Amendment (Cruel and unusual punishment s)

Point V.

Other issues raised by Plaintiff and answered as space permits.

Point VI. Non Movants evidence is admissible at trial, must be considered as true for

deciding eligibility of summary judgment, and, interpretation of law must be considered in light

most beneficial to non-movant; there is no remaining basis for Summary Judgment.


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Point I. Karron Funding of Project makes all fiscal reporting errors harmless to Plaintiff.a) KarronsSalary

The ATP project was co-funded and over funded by the Defendant The total cost of the

project is $1,524,264, of which the Federal Share is $1,345,500 and the CASI contribution was

$178,764. Dunlevy Decl., Karron Decl. Ex. 17. The Government cites salary figures ranging

from a low of $35,293.58. 1516, $175,000 (Hayes audit), $200,488(OIG), to $253,913 from the

CASI Payroll Tax Returns prepared by Hayes. Hayes prepared the Defendants 2002 Tax return,

but abruptly quit and it was completed by Solomon and Schwartz17 Finally, completed forensic

analysis shows Karrons total Tax Paid salary for the entire project period of $334,004.12 in the

Declaration of Dunlevy Ex. CAC 291, mid page right.

b) KarronscontributionKarron has the right to fund her grant out of her tax paid salary. This is not double

dipping18

. because it is bona fide after tax paid funds.Dunlevy Decl.

c) OverfundingandFCA

15THE COURT: She[RILEY] has got a salary category. She shows it. Go on a couple of pages.

Payroll, next page, $35,293.58.Sentencing Transcript Page 9 Line 18-19.16

MR. RUBINSTEIN: and you see his payroll checks which I put into evidence as P-1 throughP-6, where his total amount for the year is about $35,000. Ask yourself, he gets $175,000, howdoes he only have $35,000?Trial Transcript Page 1293 Lines 20-2417

Hayes completed Karrons 2002 tax return in July 2003, but refused to file it; she returned it toKarron but signed the extension request and completed the W2 forms before she submitted theATP audit report in August 2003.Karron Declaration Exhibit 110.18

Trial Transcript Page 1066 Line 22et seq. Benedict Cross, See Karron Declaration Exhibit57.


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Because the project was overfunded, the government sponsor cannot be harmed. The

funding reports that contains harmless errors to NIST but could only harm Karron by

understating Karrons contribution. Clearly, if Karron had not contributed to the project, then

the first dollar of indirect costs might be problematic.Dunlevy Decl. Ex. BAC-301 shows Karron

made significant contributions, out of after tax salary. By Karrons turning back so much after

tax salary, there is no liability for NIST being harmed by understated total grant spending. There

is adequate slop in the gears benefiting NIST, such that the errors in the false statements do

not materially harm the government sponsor in any way. The alleged 56.1 claims of Paragraph

#30 reflect GX114. The issues raised are matters of fact and math, not law. GX114 reclassified

rent as Salary by ATP.

Point II. No Common Law Fraud Basis

A.Elementsoffraudi. Definitions of Fraud

Fraud19 isA knowing misrepresentation of the truth or concealment of a material fact to

induce another to act to his or her detriment.2021

Federal Rules of Civil Procedure, Rule 9(b)

states in relevant part: In all averments of fraud or mistake, the circumstances constituting

fraud or mistake shall be stated with particularity. The rule states that to allege a fraud or

mistake, a party must state "with particularity" the circumstances which would constitute the

fraud or mistake, failure to do so explicitly is grounds for dismissal of the charge despite

overwhelming evidence.

19BlacksLawDictionary,5thed.,byHenryCampbellBlack,WestPublishingCo.,St.Paul,Minnesota,1979.

20BlacksLawDictionary,7thed.,byBryanA.Garner,editor,WestGroup,1999

21Law.comDictionaryhttp://dictionary.law.com/Default.aspx?selected=785.RetrievedAug13,2010


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ii. The particulars of Common Law fraud consist of nine elements2223242526

1. a representation of an existing fact;2. its materiality;

3.

its falsity;4. the speaker's knowledge of its falsity;5. the speaker's intent that it shall be acted upon by the plaintiff;6. plaintiff's ignorance of its falsity;7. plaintiff's reliance on the truth of the representation;8. plaintiff's right to rely upon it; and9. consequent damages suffered by plaintiff.

Fraud can never be presumed but must be proved by a preponderance of the evidence.27

FRCP Rule 9(b) requires that each element be pled with particularity and be proved with clear,

cogent, and convincing, very probable evidence to establish a claim of fraud. This includes False

Claims Act (FCA) liability, as derived from common law fraud, as a specialized kind of fraud.

B. Plaintiff does not specify required elements of fraud to allege Common Fraud.

Fraud can never be blithely presumed; even in the shadow of the Defendants criminal

conviction. Failure of the Plaintiff to meet their burden of proof in all particulars is grounds to

deny Summary Judgment28. The single element of the BEA conviction is not the same as

particular nine requisite elements required for civil fraudulent liability.

i. Common Law Estoppel cannot apply without full particulars.

22http://en.wikipedia.org/wiki/Fraud

23Morlanv.Kelly,No.2009UP002,SCSupremeCourt,2009

24Schnellmannv.Roettger,373S.C.379,382,645S.E.2d239,241(2007)

25Taylorv.StateCompensationInsuranceFund,175Mont.432,913P.2d1242(1996)

26Leev.Armstrong798P.2d84,87;Batten,783P.2dat38081.(1990),

27Barrettv.Holland&Hart(1993),845P.2d714,717(citingBattenv.WattsCycle&Marine(1989),783P.2d378,

381,cert.denied,494U.S.1087,110S.Ct.1826,108L.Ed.2d955(1990)).28

FederalSummaryJudgmentDoctrine:ACriticalAnalysis;Louis,MartinB.83YaleL.J.745(19731974)


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Without a complete allegation of the full nine particulars, enumerated for each claim of

fraud, Common Law Estoppel cannot be applied. Even if a allegation of full particulars been

provided in the preceding criminal case, any non-movant answer that raises substantive issues of

fact would be sufficient to overcome Estoppel.

The Third Circuit Court of Appeals has adopted the following test for civil collateral

estoppel from the first Restatement of Judgments:

(1)the issue sought to be precluded must be the same as that involved in the prioraction;

(2)

that issue must have been actually litigated;(3)it must have been determined by a valid and final judgment; and(4)the determination must have been essential to the prior judgment.29 [emphasis

rearranged]

This standard fails in the Plaintiffs civil case here because it contradicts the Plaintiffs

own argument against the Defendants criminal appeal specifically that Fraud was not proved or a

required element for the Defendants criminal BEA conviction. The Plaintiff cannot have it both

ways, especially now that the second circuit court of appeals have made a final ruling. If the

Plaintiff has argued, and the courts agreed and upheld the Defendants conviction without a

finding of Fraud, then the Plaintiff it themselves are estopped from referring to the criminal case

for elements of Fraud to estop. It was not an element in the criminal trial and, at the very least,

must be proven de novo, not by Summary Judgment

ii. Benefit of the Bargain fraud damages.

The measure of damages in fraud can be computed by the "benefit of bargain" rule,

which is the difference between the value of the property had it been as represented, and its

29Bowerv.O'Hara,759F.2d1117,1125(3dCir.1985)


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actual value. Karron Decl. Ex. 514, 537. The Plaintiff attempts to argues here that because the

defendants acts had not resulted in a tangible benefit to the government and the intangible

benefit is impossible to calculate. a full refund is due.Ibid Ex. 70, See Longhi below. This is not

true in this case because the Cooperative Agreement explicitly prices out incremental milestones.

Karron Decl. Ex. 8,14. Because all of the milestones in progress were achieved prior to funding

suspension and beyond, the 5th circuit argument of intangible product does not hold. Six

detailed quarterly technical reports were submitted and accepted. Karron Decl. Exhibit Group 3.

The work product was a quarterly technical report and a tangible milestone, achievement of

which was never questioned, reported in the quarterly technical reports, and make concrete the

abstract nature of the research. Therefore for each milestone payment was due and duly paid, as

opposed to a grant activity with no deliverable product, for which only costs are reimbursed.

Additional benefit accrued to the government with each paper research published. Karron Decl.

Statements. The state of the art was advanced, and other colleagues around the world built on the

research foundation laid here. Karron Decl. Exhibit Group 21, Ex. 103 in particular.

TheLonghi30 District court identifying what it considered a novel issue of law,

addressed for the proper way to calculate damages for a fraudulently induced research grant.

Only there is no fraud proven in the Defendants case. See Point III Below. Without a finding of

fraud, theLonghi analysis fails here, despite the Plaintiffs criminal conviction.

The FCA Relator, Alfred Longhi, left the company 2002 because of his observations

pertaining to duplicative research and work, and the fraudulent billing related to that duplicative

research and work. Ultimately, the U.S. Attorneys Office elected not to pursue criminal

30U.S.ex.rel.Longhiv.LithiumPowerTechs.Inc.,513F.Supp.2d866(S.D.Tex.2007),2008WL62207(S.D.Tex.

Jan.3,2008),certgranted


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charges against LPT or any of its employees. If the government wishes to pursue its theory of

damages, it must do so in a civil trial, and not attempt to make a cheap win of monumental

punitive damages by Summary Judgment. Implication of unlimited culpability for all the myriad

allegations is unwarranted and unfounded by the fact found at the criminal trial.

The Plaintiff alleges that because agency anticipates substantial involvement, the agency

is to use a cooperative agreement. They imply Karron lied and hid substantial issues from ATP

management. The only issue that Karron hid was her transsexuality, because it was not an

appropriate matter for a research sponsor. However, ATP seemed interested in many matters

of CASI business that the PI felt were not its business. The evidentiary trail shows Karron

discussing each and every material issue with the ATP management team, starting with the Gate

III oral examination, Gate IV cooperative agreement vetting, the Kickoff Orthwein Agenda

memo, and the Gurfein conversion to contractor request denial being honored. Problems started

when Hayes started interfacing with ATP and meddling with both sides.

C. CUNYCISDDSubcontract:OptionorObligation?The Plaintiff seems imply that because the cover sheet 3 of the proposal Gate 1 cited

CUNY CISDD as subcontractor, CASI was obligated to subcontract with CUNY CISDD as a

material specification for the project. The justifications cited on the form are the Key Faculty

and mathematical and software talent that such a subcontract would bring to bear on the project,

to the benefit of the government. That CASI did not, in the first 18 months of the project,

execute a subcontract with CISDD might conceivably be taken as evidence of a material false

statement in its Gate 1 proposal. Further, conceivably it might be that the ATP SEB evaluators

materially relied on CASI suggestion of a subcontract with CUNY to induce it to fund CASI. By


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CASI not fulfilling its implied promise of a CISDD subcontract, an observer ignorant of the

facts of the situation might conclude that CASI deprived the project of the mathematical and

software talent only available from CISDD as a sole source of this resource. Because of this, the

plaintiff argues that the entire funding for the ATP project would be better spent on a more

trustworthy steward, and that CASI, by its fraud, deprived a more worthy recipient from doing

the research on DMT ATP desired funded. Like ex. rel Longi, the implication is you lie, you

lose- it all.

However, there was no lie; the proposal cover sheet was not a specification to CASI, it

was an option. ATP was apprised of the issue, and gave consent. CUNY CISDD was not sine

qui non to the project, the key people were. CISDD was immaterial to the project. The venue

was immaterial. It was the involvement of the key faculty and students who participated directly

with CASI, some paid, many not. Karron was CUNY faculty and had full access to CUNY

without CISDD, and the CUNY faculty and students made use of ATP funding and computer

resources through CASI. The government got the better of the bargain for less cost as there was

no CISDD overhead to be paid.

The ATP proposal cover sheet page 3 calls out a subcontract with CISDD for $420,000.

It does not specify a start date or duration or other actionable details. It does not say not to

exceed $240,000, nor does it obligate that amount to CISDD in the approved budget(s). In the

Defendants 56.1 response to Paragraph #31, it becomes clear from theprima facie facts that

there was no contractual obligation to engage CUNY CISDD at the onset of the project, and that

the key CUNY faculty did in fact replace CUNY CISDD by consulting directly for CASI.


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1. CUNY CISDD NYUMC and KEY CASI TEAM MEMBERS

As soon as the project was funded, the CUNY and NYUMC faculty team members

clamored to contract directly with CASI. This issue was presented at the Kickoff meeting at

NIST in November. Karron Decl. Ex.10. All of the Key CASI Team Members were engaged

directly to CASI, instead of as CUNY chattel. Both Cox and Wolberg obtained requisite

departmental and institutional permissions.Ibid Exhibit Group 4. There was no change in the

budget line item assignment, and key team members were unchanged except for the mitigation of

CUNY overhead. There was no need to remove the subcontractor proposal cover page to limit

future subcontract options.

In U.S. Ex. rel. Longhi v. Lithium Power Techs. Inc.,513 F.Supp.2d 866 (S.D. Tex. 2007),

2008 WL 62207(S.D. Tex. Jan. 3, 2008),,Defendant had multiple simultaneous SBIR grants and

conducted billing fraud. It also misrepresented cooperative arrangements that it claimed to

have for lab space, a material misrepresentation. They were doing electrochemical research and

needed wet lab space. Their research could not be done in a home office. CASIs could. CUNY

CISDD was not material to the conduct of the research; it was not material in the cooperative

agreement award, it was not a secret, it was approved by ATP, and was not an inducement to

ATP to fund CASI. Karron Decl. Exhibit Group 4.

Point III. IncongruentMens Rea Elements between Criminal and Civil Statutes

Preclude Collateral Estoppel and Summary JudgmentThe underlying elements of the Defendants criminal conviction under 18 U.S.C.

666(a)(1)(A) [BEA] for knowing misapplication offunds are different and distinct from the

31 USCS 3729(a)(2) [FCA] application standard for false claims, precluding 31 U.S.C.

3731(e) statutory Collateral Estoppel (CE) for same transactions.


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The criminal conviction did not identify a required element of specific transactions, only a

derived category of spending31

without explicit reference to specific identifiable candidate

same transactions 31 U.S.C. 3731(e). Because no specific knowing fraudulent claim was

identified at least one material false claim would have to be proven in a trial. Finally the

court must examine the contradictions between the applicable FCA, BEA and ATP statutes

and their legislative intents .

a) TakingrefugeinALLISONWonderlandTheAllison Engine Co. v. US Ex. rel. Sanders, No. 07-214, 553 U.S. (2008) by the

Supreme Court of the United States challenged previously accepted broad reach of the elements

of the FCA as unconstitutional. The Supreme Court held that plaintiffs under the ALLISON case

ruling of FCA must prove that the false claim made specifically intended to defraud the

Government. . Additionally a plaintiff must prove that the defendant intended that the false

statement be material to the Governments decision to pay or approve the false claim. a

defendant is not answerable for anything beyond the natural, ordinary, and reasonable

consequences of his conduct. ibid.

b) FERARetroactivelyAmendsFCA2009Subsequent to the governments Complaint of November 24, 2008, Congress enacted

Public Law No: 111-21 Fraud Enforcement and Recovery Act of 2009 (FERA) on March 23,

2009. Karron Declaration Exhibit 69, 12. In an unusual effort to re-broaden the reach of the

FCA, Congress attempted to make the FERA retroactive take effect as if enacted on June 7,

2008, and apply to all claims under the False Claims Act (31 U.S.C. 3729 et seq.) that are

31$120,000waslostthroughinappropriateexpenses,SentencingTranscriptPage90Line1314.


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The Plaintiff was served with the Civil Complaint on this action on November 24, 2009,

and refers to allegedly false claims made in 2001-2002, some 9 years past. All references to 31

U.S.C. 3729 refer to the version of the FCA in force at the time of the putative false claim(s),

not this case. US v. KARRON Civil Complaint, 08 CV 10223 US SDNY, November 24, 2008..

e) Retroactivity,LegallyFalsefromKirkv.SchindleralsofalseOne cannot automatically assume, even in the dim light ofUS ex. rel. Kirk v. Schindler

Elevator 601 F. 3d 94 (2d Cir. 2010) that the present case falls under the dark shadow of FERA.

Using the second circuits analysis of liability under Mikes v. Straus, 274 F. 3d 687 -

Court of Appeals, 2nd Circuit 2001 the Kirk court found the Materiality element hinged on the

issues of FERA retroactivity

This case regards conduct from 1997 to 2004, and the government has not identified any

claims for payment pending in 2008. Alleged false claims must satisfy the Allison Engine

materiality standard which calls for non-statutory language finding of fraud. In any event, they

must satisfy FERA or ALLISON, but not both. Karron Decl. Ex. 502, If the Plaintiff desires to

argue its complaint under FERA, it must restate its claims in a new complaint using the post

FERA FCA statute numbers explicitly, not en passantby footnote in the Plaintiffs Memorandum

of Law. Karron Decl. Ex. 93

Kirkalso hinges on the issues of implied false certification is based on the express

clauses of the applicable statute to deny payment for vendors not in compliance. This stricture is

simply not in place with the ATP and other statutes. Karron Decl. Ex. 303 ATP simply does not

cut off awardees for technical issues of non-compliance, they work with awardees to bring them


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into compliance. Karron Decl. Ex. 301,307. They hate to say no, they are always willing to work

with awardees to fix problems, not impales them on it. Eisen Decl.119. That function seems to

be for the OIG. Karron Decl. Ex. 312.

f) FCA Claims DisputedThe Plaintiff asserts that ...there is no dispute that the FCA claims here meet the

threshold requirements of 31 U.S.C. 3729. 38. This is incorrect. Additionally, there is no way

31 U.S.C 3731(e) FCA Procedure Collateral Estoppel can be applied to Same Transactions if

they are not identified in the criminal case. The Defendants conviction was based on events that

occurred after the alleged claims were made and paid. The conviction was based on intentionally

misapplying amounts already received to categories of expenditure that were unallocable,

incorrect, or unauthorized, as discussed in detail below. See Plaintiffs Rule 56.1 Statement,

28-31.

g) 31 USCS 3731 (e) FCA Statutory CE ProcedureThe CE bar issue arises when the government moves for summary judgment. The

statutory CE standard are typically more stringent than the application of civil CE without the

statutory standard of same transaction in ibid. The typical case scenario is modeled by U S. v.

Sazama,88 F. Supp.2d 1270 (D. Utah 2000) with these steps:

1) First the court discusses the factual background on the criminal conviction or plea.

2)

The court then moves on to outline the criteria for granting summary judgment underRule 56,i.e., the typically the absence of any genuine issue of material fact.

3) Next, the court juxtaposes the factual predicate of the criminal FCA complaint's

allegations to determine whether the same transaction is involved. U S.v. Kanelos, 1994

WL 148655 (N.D. Ill. April 20, 1994)

38MemorandumofLawInSupportOfPlaintiffsMotionforSummaryJudgmentat13


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4) The court then concludes that the collateral estoppel bar has been triggered.

5) Summary judgment must be granted if the Defendant if estopped from denying all of the

allegations of the FCA complaint.

US v. Sazamaibiddoes not apply here because Sazama pled guilty to Medicaid fraud,

which is what the FCA combats. Application of FCA collateral attack to a BEA finding of

misapplication of funds, not claims, clearly do not apply.

h)The Mickman and Lamanna LimitationThe reach of FCA CE, however, is not without boundaries, recognized most prominently

in US v. Mickman, 1993 WL 541683 (E.D. Pa. Dec. 22, 1993), 52 F.3d 318 (1995) The

government argued that the nonjury findings of fact made by the district judge for sentencing

purposes should be included in the essential elements of the underlying offense to which the

guilty plea was entered. The FCA court rejected this interpretation:

[T]he preclusive effect of Section 3731(d) of the False Claims Act with respect to guilty

pleas extends only so far as the conduct described in the count or counts to which the

guilty plea applies. Section 3731(d) does not apply to conduct or counts alleged in theindictment to which no plea of guilty or judgment of conviction is entered and to which

the charges are dismissed.

Another example is US v. Lamanna, 114 F. Supp. 2d 193 (E.D.N.Y. Sept. 26,

2000),where the government unsuccessfully argued that an additional 15 purportedly fraudulent

disability checks in addition to the check that served as the basis for the plea should be included

within the reach of the collateral estoppel bar. However, because the defendant was convicted of

making a false statement on only one compensation form, summary judgment could not be

granted as to the other 14 forms.


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i) Liability Does Not Equal DamagesThe False Claims Act Collateral Estoppel bar does not obviate the government obligation

to bring forward proof of damages in the FCA action.

Thus, it is incumbent on the United States to come forward with evidence of theamount of damages to which it claims entitlement, and the fact that the issue of damageswas not before the jury in the criminal trial does not preclude the government fromintroducing an affidavit in support of [its] motion. 39

Conversely, even should the criminal sentencing court order restitution, that does not as a

matter of law establish the extent of FCA damages that could be awarded in a later civil

proceeding. A finding of criminal restitution does not limit, cap, or set a floor for FCA damages.

This indicates that the two systems of calculation of damages are separate and

independent. Therefore, it is incumbent in a FCA trial to establish its own finding of damages,

and not rely exclusively, or independently on the criminal trial findings. This works against CE,

in that CE would have to automatically find maximal damages and run into the Double Jeopardy

Limit of damages. In USv. Heart Trace of Nashua,40

defense counsel successfully argued that

the government could not claim greater FCA single damages than it had admitted in sentencing

stipulations regarding the amount of loss occasioned by the offenses underlying the conviction.

The greater amount sought in the FCA case would have to be proved by the government and

could be contested by defendants. Only the facts absolutely material and necessary to the

criminal conviction are embraced within the FCA CE ban all other facts have to be proven by

the government at trial.41

In U.S. v. Emergency & Patrol Air Services, the defendant is estopped

only from arguing facts related to the same transaction as was the basis for the criminal

39US v. Nardone, 782 F. Supp. 996, 998 (M.D. Pa. 1990)40

USv.HeartTraceofNashua,Inc.,2001WL274804(D.N.H.Jan.10,2001)41

USv.Boutte,907F.Supp.239,241(E.D.Tex.1995),aff'd,108F.3d332(5thCir.1997).


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conviction42. That said, Seiffert v. Green found the purported criminal court finding must be

directly at issue and essential to the criminal judgment.43

Allegations to which the government

seeks to apply the CE bar must be part of the same transaction as that recounted in the

conviction44. If the criminal conviction is for the general crime of conspiracy, without a finding

of specific actions taken in pursuance of the conspiracy, then CE can be invoked only for

specific acts of conspiracy45

The Plaintiff cannot bring forward a schedule of individual criminal transactions

proffered and accepted by the court in the criminal trial. There are none. The only evidence as

to improper spending in project year 1 was GX114, and it does not point to any individual

transaction. The Plaintiffs 56.1 Statement, Paragraph 30 Response and the Declaration of

Dunlevy delve into a detailed analysis of GX114. From the analysis we must raise significant

questions as to the validity of the audit.

j) TheDefendantsConvictionunder18U.S.C.666(a)(1)(A)[BEA]While 18 666 [BEA] covers a wide swath of territory, the Defendant was convicted

specifically under subsection (a)(1)(A) above, and specifically the clause that prohibits

intentional misappl[ication] of funds46

.

42USv.Emergency&PatrolAirServices,Inc.,1988WL107576(E.D.Pa.Oct.13,1988).

43Seiffertv.Green,1987WL26670(E.D.Pa.Dec.8,1987).

44USv.Ford,19F.3d20(6thCir.1994).

45.USex.rel.Millerv.BillHarbertInternationalConstruction,Inc.,2007WL851857(D.D.C.March14,2007)

46GovernmentsRule56.1Statement,1.


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Indeed, in its brief to the Second Circuit on the appeal from the criminal verdict47, the

Government specifically argued that fraud was no part of the elements of 18 U.S.C. 666. The

only relevant point, according to the prosecution, was whether she knew that the monies were

applied incorrectly to categories of expenditure not authorized by the Government, even without

intent to defraud, and even if used for otherwise legitimate purposes. Here is the pertinent

portion of the argument on which the criminal prosecution was based:

a) 2. Intent to Defraud Is Not An Element Of Section 666(a)(1)(A) In contrast to the bank embezzlement statute, 18 U.S.C. 656, which requires the

Government to prove the additional element that the defendant intended to injure ordefraud the bank, see United States v. Docherty, 468 F.2d 989 (1972); Sand, Instr. 24-2,there is no legal authority of which the Government is aware and none that Karron hascited imposing an analogous specific intent-to-defraud element for Section666(a)(1)(A).48

Thus, in the above section of the U.S. Criminal Appeal Brief, the Government argues that

Karrons conviction under 18 U.S.C. 666(a)(1)(A) BEA do not have as an element any intent

to commit fraud. In addition, the Government also argued that Karrons conviction does not

have as an element an improper purpose49

.

In US v. Urlacher50

the Court defined the term intentional misapplication to encompass

misuse of federal funds for otherwise legitimate purposes. The Court explained its reasoning

as follows:

47KarronDeclarationExhibit68.t

48U.S. v. Karron, US Court of Appeals For The Second Circuit, Brief for the U. S, No. 08-5287-

Cr, U.S. Criminal Appeal Brief (2009), Karron Declaration Ex 68, at 25.49 US v. Urlacher, 979 F.2d at 938 Otherwise Lawful purpose, Karron Declaration Exhibit 17250 US v. Urlacher, 979 F.2d at 938


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the falsity of her claims. The first, i.e., knowledge that monies were incorrectly categorized, was

a required element of the criminal offense under which Karron was convicted. The second, i.e.,

knowledge that a claim was false, was not an element of the BEA offense, but is an element of

an FCA suit. That difference creates a large gulf between the criminal verdict and the present

lawsuit.

The Government is required to prove the element ofscienteras to the claims that were

not part of the criminal case. The Defendant disputes that the element ofscienteras to the

claims exists in this case, and is entitled to bring evidence to demonstrate the non-existence of

that fact.

Significantly, in its Rule 56.1 Statement submitted in support of this motion, the

Government nowhere makes specific reference to anything indicating that Karron did, in fact,

have knowledge of the falsity of claims. Indeed, Benedict clearly knew what he meant by what

he wrote when he exonerated Karron in submitting restated SF270s. Karron Decl. Ex. 59.

Rather, the Governments Rule 56.1 Statement states that expenditures are allegedly

personal, unallowable, unallocable or [in excess of] budget limitations, and unauthorized.

Nowhere is there any statement that claims submitted by Karron to the Government for the

purpose of drawing down funds were false and that Karron knew them to be false. With the

forensic proof that Karron had significant personal funding in play, Karrons funding of

overhead and otherwise necessary disallowed costs out of pocket does not imply

misappropriation, but responsible stewardship.Dunlevy Decl.

Point IV. Monstrous Civil Penalties and Damages Unconstitutional


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Even assuming arguendo that Karron is liable for damages, the full amount CASI

received from the ATP under the Cooperative Agreement is not the appropriate basis

The court ultimately arrived at the $120,000 amount by totaling categories ofexpenditures that did not appear on the approved budget, an alternative calculationproposed by the Government Prosecution Memorandum of Law at 9.

This implies that all other costs did appear on the budget. How can the government be

damaged by its own court approved budget?

1. A42timesdamagesandpunitiveratioThe summary judgment in this case, as demanded by the Plaintiff, would result in a

monumental civil fine, which, if left uncontested by a trial, would amount as much as 5 million

dollars and go to the [defendants] grave. Given collapse of the Defendants income earning

ability, this would amount would be uncollectable to the Government. This is especially cruel

and unusual punishment without a deterrent effect; it has a chilling effect on creative researchers

seeking federal funding, the opposite of the intentions of the ATP statute. 15 278n.. A civil

punitive judgment of 5 million dollars on an already criminal judgment of 120 thousand dollars

restitution is a whopping 42 times increase.

2. Double Jeopardy and the BEA and the FCA

US v. Halper53 raised the issue of Double Jeopardy in FCA collateral attacks after

criminal convictions. When does a monumental civil fine approach Constitutional borders of

cruel and unusual punishment?

The CAMPBELL Punitive The Single Digit Ratio Rule

53USv.Halper,490U.S.435,44849(1989).143DeclarationofKarronExhibit189.


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In response to judges and juries which award high punitive damages verdicts, the

Supreme Court of the United States has made several decisions which limit awards of punitive

damages through the due process of law clauses of the Fifth and Fourteenth Amendments to the

United States Constitution. In a number of cases, the Court has indicated that a 4:1 ratio between

criminal (punitive and) compensatory damages is broad enough to lead to a finding of

constitutional impropriety (The Single Digit Ratio Rule)and that any ratio of 10:1 or higher is

almost certainly unconstitutionalBMW v. Gore54

the Court ruled that punitive damages must be

reasonable, as determined based on the degree of reprehensibility of the conduct, the ratio of

punitive damages to compensatory damages, and any criminal or civil penalties applicable to the

conduct. In CAMPBELL55, the Court held that punitive damages may only be based on the acts

of the defendants which harmed the plaintiffs. In Simon v. San Paolo 56, the California Supreme

Court addressed Campbell [T]hat "few awards" significantlyexceeding a [A] single-digit ratio

will satisfy due process .

3.Forensic

Accounting

does

not

support

the

Plaintiffs

loss

contention

What is the purpose of the Plaintiffs pursuit of this FCA collateral attack against the

plaintiff? It is punitive or compensatory The defense never proffered forensic evidence to the

contrary in a form suitable for countering GX114. Karron Decl. Ex. 46

54BMWofNorthAmerica,Inc.v.Gore(1996)

55STATEFARMMUT.AUTOMOBILEINS.CO.V.CAMPBELL(011289) 538U.S.408(2003)P.3d

56Simonv.SanPaoloU.S.HoldingCo.,Inc.(2005)35Cal.4th111182


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4. TheTENENBAUMprecedentMost recently, SONY v. TENENBAUM , 03-cv-11661-NG, 2010 US District Court

Massachusetts. Karron Decl. Ex 130. the court accepted the Constitutional challenge to a

monstrous jury award for the relatively minor crime of downloading songs from the internet.

5. LargePunitiveDamagesandFinesCASELAWIn U.S. v. Bajakajian

57the Supreme Court ruled that it was unconstitutional to take

$357,144 from a person who failed to report his taking of more than $10,000 in U.S. currency

out of the U.S. In what was the first case in which the Supreme Court ruled a fine violated the

Excessive Fines Clause, the Court ruled that it was "grossly disproportional" to take all of the

money which Bajakajian attempted to take out of the U.S. without reporting trying to do so. In

describing what constituted "gross disproportionality," the Court could not find any guidance

from the history of the Excessive Fines Clause and so relied on Cruel and Unusual Punishment

Clause case law. The Supreme Court has used the Evolving Standards of Decency standard

not only to say what punishments are inherently cruel, but also to say what punishments that are

not inherently cruel are nevertheless cruelly disproportionate to the offense in question 58 The

crime is not reprehensible. The damages are Draconian and do not serve the purpose of

deterrence; that is the criminal courts job.Ibid.

Perhaps had the ATP program had known that Karron was going to be convicted of a

felony, or that Karron was a Transsexual, perhaps they would have passed over her(then him) for

the award to a more responsible and eligible recipient. Karron Decl. Ex. 515. However, the

standards of the ATP award not based on the awardee, but on the quality of the proposal.Eisen

57US v. Bajakajian, 524 U.S. 321 (1998),

58TROP v. DULLES 356 U.S. 86 (1958)


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Decl. Ex.122 Karron did not lie during the awardee vetting process. Karron Decl. Ex. 3; ATP

knew who (but not what) they were getting into bed with in this award.

Point V.

Other Issues Raised and Answered

s) OMB Circulars advice to AgenciesOMB Circulars A-21 and OMB Circular A-122 intentions are Federal Government

bear its fair share of total costs, determined in accordance with generally accepted

accounting principles, Agencies are not expected to place additional restrictions on

individual items of cost. ., such cost sharing or matching shall not be accomplished

through arbitrary limitations on individual cost elements by Federal agencies.

t) Revision of budget and program plans: 15 CFR 14.25

Permission is not required for many budget and program plans : 15 CFR 14.25 (4) the

prior approval requirements described in paragraph (e) of this section are automatically waived

(i.e., recipients need not obtain such prior approvals) . (f) The recipient may not transfer

funds among direct cost categories [if the] cumulative amount of such transfers exceeds or is

expected to exceed 10 % of the total Federal and non-Federal funds authorized This does

not prohibit the recipient from requesting Grants Officer approval for revisions to the

budget (g) do not require prior approval. . revision is still under consideration

at the end of 30 calendar days, the Grants Officer shall inform the recipient in writing of

the date when the recipient may expect the decision. ATP does not care about the budget

except to be assured that the public money it is entrusted with is spent wisely, not wasted, and

for the purpose intended, not slavish adherence to budgets just to expend money with no benefit

to anyone. Karron Decl. Ex. 307.


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u) ATP was tacitly or minimally responsive.The ATP project management were required to respond to budget amendment requests in

30 days. If the ATP representative was unable to respond in 30 days then it she was obligated by

under 15 CFR 14.25(m) to make written commitment for a definitive answer date. At no point

during the grant was a written response made on this topic. At all times, the ATP program

management, to their credit, was working toward find a way to say Yes. Eisen Decl. Because

of this lack of an affirmative negative, and given Karrons overfunding of the project, Karron

had in fact justification to continue. Karron Decl. Ex. 17. The only risk would be that Karron

would have to pay for some activities instead of ATP; the justification was there from the

program management proud of how un bureaucratic an agency it was.Eisen Decl. Ex.119.

1. Cooperative Agreement requires CASI Substantial Involvementa) Kickoff Memo from Orthwein (Karron Declaration Exhibit 5) shows early significant

involvement.

Karron Declaration Exhibit 1-6shows, quarterly technical reports were submitted and

accepted. These reports not only detail the technical progress and scientific difficulties, but also

the contractual and business issues faced by the CASI startup. Ex. 14 (ATP Proposal Ex. 14

Instructions, 2001), Karron Decl. Ex. 98, has a cover instruction page that contains this

disclaimer:

We recognize that unexpected events occur frequently in R&D projects, and thatbudgets may need to be changed as a project proceeds. Dont fear that by providing amulti-year budget beyond the first year, you will be locked into those details. ATPallows a certain amount of flexibility in moving funds from one line item to another ascircumstances change. [Emphasis Added]


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Lide, in direct examination apparently incorrectly answers the question of which Rule

rules: A. "Regardless of whether they are allowable under the federal cost principles, the

following are unallowable under ATP:" Q. What does the first of that phrase mean, "Regardless

of whether they are allowable under the federal cost principles."? A. It means what's stated here

overrules any other federal cost principles. Trial Transcript Pages 232 et seq. Lines 16-et seq.

But the federal cost principles say that they cannot be arbitrarily overruled; they rule, not the

agencies. See above.

Point VI. No grounds for Summary Judgment59

"[T]he mere existence of some alleged factual dispute between the parties will not defeat

an otherwise properly supported motion for summary judgment; the requirement is that there be

no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)

[emphasis removed]. A dispute is considered to be genuine only if "the evidence is such that a

reasonable jury could return a verdict for the nonmoving party."Id. Celotex Corp. v. Catrett,

477 U.S. 317 (1986).First National Bank of Arizona v. Cities Service Co.391 US 253,391 US

289(1968)To avoid summary judgment, the nonmoving party "must do more than simply show

that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586,

(1986)

A District Court may not resolve disputed factual issues on Summary Judgment if the

nonmoving party presents more than a Scintilla of Evidence.Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 252 (1986). In this case, thepro se Defendant Karron has refuted or shown moot

31 of 31 of the movants 56.1 statements of material fact. The Defendant presents Karron

59Karron Decl. Ex. 512.


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Decl. Ex. 17, and theDunlevy Declaration Exhibits provides comprehensive forensic analysis.

The moving party cannot now show conclusively that there is no genuine issue of material fact;

except by a finding of fact at trial. Karron Decl. Ex. 530.

The Plaintiff has failed to show an undisputed qualifying fraud transaction , the sine qua

non for a FCA conviction. Karron Decl. Ex. 501, 513. There was no fraud transaction proven in

the Defendants BEA criminal conviction. This lack of a fraud requirement was sustained on

appeal. US v. Karron, On Appeal, Brief for the United States(2009) at Point 1(B)(2). Summary

Judgment cannot be granted in this case because theFraudulent Transaction standard required

for a FCA summary conviction is not established. Karron Decl. Ex. 510.Allison Engine Co. v.

US ex. rel.Sanders (No. 07-214) 471 F. 3d 610,(vacated and remanded). . At the very least, a

jury is required to establish knowing fraud transaction de novo. Karron Decl. Ex. 512, 530,514,

515.

1) No Uncontested Material Issues for Partial Summary Judgment.Should the Defendants 56.1 Counterstatement and Opposing Memorandum of Law

leave any alleged genuine undisputed issues of material undisputed, the court may invoke FRCP

56(d) Case Not Fully Adjudicated on the Motion, (1) Establishing Facts and (2)

Establishing Liability. All 6 Claims are addressed above, and all 31 Items in the Movants

56.1 statement are answered. Because the Defendant has presented full panoply of counter

evidence, and argument, there do not exist gaps of agreed no material dispute, into which a

partial summary judgment may be driven.

(1) With respect to Establishing Facts, The Defendant has rebutted, with copious

specific citation to evidence admissible at trial, each and every material fact[s] [are not]


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genuinely at issue of those raised by the Movant. Rule 56(d)(1) advises The court should so

determine by examining the pleadings and evidence and by interrogating the attorneys. The

court should then issue an order specifying what facts [if any remain] including items of

damages or other relief are not genuinely at issue The surviving facts so specified must be

treated as established in the action [Emphasis and editorialization added]. Therefore, it is

extremely important that the Non Movant not leave any material facts at issue uncontested, and

those that are contested with references to evidence that would be admitted at trial. This

effectively means that the Non Movant case-in-chief must be successfully argued such that the

court is convinced that there exists a significant probability of success at a trial. Karron Decl. Ex.

512, 530,533.

(2) With respect to Establishing Liability, The Defendant is in a situation whereby they

are estopped from arguing no liability, yet in (1) above the Defendant will introduce convincing

material evidence, necessary for evaluating damages, yet also revealing Plain Error in the

Criminal Trial.Dunlevy Decl.

The auditors conspired to make materially false audit in ignoring Karrons contribution.

The governments audits were copied from the CASI hostile audit, ignoring basic

principles of Auditing: Completeness, Independence, and OMB Cost Principles. Karron Decl.

Ex. 61,62, 135, 505. The defendants tax paid salary, turned back to the project, was willfully

ignored, by refusing to trace funds60. Karron Decl. Exhibit Group 22. The Defendants criminal

liability was for spending funds that were her property with which to spend as she pleased,

60Smith, Lionel D.; (1997)The law of tracing CLARENDON PRESS OXFORD

http://www.questia.com/read/55471201


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obviating all of the testimony that the Defendant willfully ignored ATP spending rules: because

she was spending her own money to pay program and non-program bills. Dunlevy Decl.

Inventory of Facts, Claims, Refutations of Facts, Arguments to Claims

The Movants complaint raised 6 claims in its initial complain. The Movants 56.1

statement raised 31 items with issues of alleged uncontested fact that the Defendant has

assiduously rebutted with references to evidence admissible at trial. Complaint 6 claims are

argued in 6 points of argument.

The Defendant has raised significant issue with the governments evidence used to

convict the Defendant in the Criminal Trial withprima facie evidence that the audit numbers

alleging misappropriation just dont add up, are made up, and otherwise just in themselves

mistakes of fact by the Plaintiff. Karron Decl. Ex. 17, 82. The only fact found by the jury was

some amount of funds greater than five thousand dollars, unspecified in detail, was misapplied.

US v. Karron (2008) Amended Judgment in a Criminal Case. Karron Declaration Exhibit 65

4) Conclusion; No grounds for Civil or FCA Statutory Estoppel, Full or Part

Summary Judgment.

(1)No grounds for Common Law Estoppel;

(a) no elements of fraud to estop by res judicata.

ii) There are no grounds for FCA Statutory Collateral Estoppel;

(1)no Same Transactions

iii)Summary Judgment cannot be granted;

(1)no common elements from prior trial.

(2)all elements require findings of fact and adjudication.

(a)No partial Summary Judgment;


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iv)42x penalty is second punishment;

(1)Is there a new crime from same events?

v) New trial required to evaluate benefit of bargain losses and damages.

(1)Will prove they are negative.

CASILLC

Digitally signed

by CASI LLC

DN: c=US, st=NY,l=Long Beach,

o=CASI LLC,

cn=CASI LLC

Date: 2010.09.29

16:35:51 04'00'

Opposing Memorandum of Law FINAL Signed

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Transcript of Opposing Memorandum of Law FINAL Signed