United States ex rel. John v. Hastert

82 F.Supp.3d 750

United States of America, ex rel. J. David John, Plaintiff and Relator

v.J. Dennis Hastert, Defendant.

13 C 5014

United States District Court, N.D. Illinois, Eastern Division.

Signed March 4, 2015

Michael Kevin Goldberg, Goldberg Law Group, LLC, John Joseph Muldoon, III, Muldoon & Muldoon LLC, Chicago, IL, for Plaintiff and Relator.

Justin A. Chiarodo, Dickstein Shapiro LLP, Washington, DC, Ethan Allen Hastert, Mayer Brown LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION

CHARLES P. KOCORAS, District Judge:

This matter comes before the Court on the motion of Defendant J. Dennis Hastert (“Hastert”) to dismiss the amended complaint brought by Plaintiff J. David John (“John”) pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6) and 9(b). For the reasons set forth below, the motion is granted.

BACKGROUND

I. Facts

The following are allegations in John's amended complaint, many of which were recited in the Court's previous opinion. See U.S. ex rel. John v. Hastert, No. 13 C 5014, 2014 WL 4652662 (N.D.Ill. Sept. 18, 2014). John is a resident of Burr Ridge, Illinois. Hastert is a resident of Yorkville, Illinois (“Yorkville”). Both former college wrestlers, John and Hastert knew each other from their student athlete days at Wheaton College.

A. The Former Speaker Statute and the MRA Handbook

Hastert is the former speaker (the “Former Speaker”) of the United States House of Representatives (the “House”). Upon his retirement from the House, Hastert opened an office in Yorkville (the “Office”) as is permitted under 2 U.S.C. § 31b–1 to 31b–7 (reclassified as 2 U.S.C. §§ 5125 –29 ) (the “Former Speaker Statute”). The Former Speaker Statute, 2 U.S.C. § 31b–2, states that upon retirement the former Speaker of the House is permitted:

“an allowance equal to the Members' Representational Allowance (to be paid in the same manner as such Allowance) for the office and other expenses incurred in connection with the administration, settlement, and conclusion of matters pertaining to or arising out of his incumbency in office as a Representative in Congress and as Speaker of the House of Representatives.”

Hastert kept the Office for exactly five years as permissible by the House rules. Hastert was given an allowance for the Office equal to a Congressional Member's Representational Allowance (“MRA”) for the Office's expenses. See 2 U.S.C. § 31b–2. He was provided with staff, including an administrative assistant and two secretaries. See 2 U.S.C. § 31b–5. John attaches 144 pages of disbursement statements to the amended complaint, compiled by the Chief Administrative Office and sent to Hastert (the “Disbursement Statements”).

According to the Members' Representation Allowance Handbook (the “MRA Handbook”):

“Ordinary and necessary expenses incurred by the Member or the Member's employees ... are reimbursable in accordance with the regulations contained in [the] Members' Congressional Handbook ... [d]isbursements from the MRA are made on a reimbursement or direct payment basis and require specific documentation and Member certification as to accuracy and compliance with applicable federal laws, House Rules, and Committee regulations.”

“Ordinary and necessary” expenses are defined as:

“reasonable expenditures in support of official and representational duties to the district from which he or she is elected that are consistent with all applicable federal laws, Rules of the House of Representatives and regulations of the Committee on House Administration.”

Hastert allegedly submitted vouchers to the House every fiscal quarter from 2008 through 2012 for reimbursement of various expenses, including the Office's rent, the Office's equipment and supplies, the salaries of his three employees, the lease and expenses of the GMC Yukon (the “Yukon”), consulting and legal fees, and other miscellaneous expenses. These vouchers supposedly contained supporting documentation (receipt, lease, bills, etc.) and Hastert's signature.

B. Allegations of Private Business Dealings

1. The Office

From 2008 to 2012, John engaged in a variety of business ventures with companies, including ESPN and Interstate, to organize a professional golf tournament in the Middle East and to develop a Formula One racetrack and technology park in California.

John alleges that he worked with Hastert on these private business ventures. John claims that he worked with Hastert on the Wheaton College wrestling team, fundraising for the J. Dennis Hastert Center for Economics, Government and Public Policy (the “Hastert Center”), other personal projects, and social affairs. All John's interactions with Hastert were coordinated through the Office's phone, mail, email, (sent to either the Office or through the domain @formerspeaker.org) and Hastert's mobile phone issued from the Office. John attaches seven emails from one of Hastert's employees, sent between October 2008 and February 2009. These emails discussed, among other things, directions to the Office for a meeting with Hastert, scheduling meetings between John and Hastert, travel arrangements for Hastert, and a meeting with an Ambassador regarding the golf tournament in the Middle East.

At the same time he ran the Office, Hastert was also employed by the lobbying firm, Dickstein Shapiro, which lobbies for companies, including the Chicago Mercantile Exchange, The Servicemaster Company, HR Green, Polybrite and Centerpoint. John alleges that he hired Hastert to perform consulting and lobbying services for various existing and future projects.

2. The Employees

The Office employed three employees, Lisa Post (“Post”), Bryan Harbin (“Harbin”), and Thomas Jarman (“Jarman”). John claims that Hastert regularly used his employees to make arrangements for, do research for, and coordinate with third parties concerning Hastert's private business dealings. For instance, John claims that Jarman was primarily involved with the Hastert Center. John attaches a House “Report of the Committee on Standards of Official Conduct The Matter of Representative Charles B. Rangel” (“Rangel Report”), which states that activities regarding the establishment and development of such establishments like the Hastert Center are not a legitimate use of MRA funds. John also alleges that he observed Hastert's employees working on Hastert's lobbying business and other personal business ventures. Providing no specific details, John alleges that Hastert's employees reported to him that all business-related matters pertaining to the Former Speaker were completed in 2008.

3. The Yukon

John asserts that Hastert's Yukon was mainly used for Hastert's personal use and private business deals. John alleges that Hastert and Jarman used the Yukon to drive to St. Louis to attend the NCAA Division I Wrestling championships held March 19th to the 21st of 2009. John also claims that Post or Harbin would drive Hastert in the Yukon to private business matters, including to deals John was involved with. John alleges that Hastert submitted quarterly vouchers to the House for reimbursement of the full expenses of the Yukon, including lease and fuel payments.

4. Other Alleged Violations

Because of his business and social relationship with Hastert, John alleges that he was in a position to observe how Hastert conducted business at the Office. For example, John states that in September 2010, Hastert asked John to contact brokers on his behalf to obtain bids on purchasing an annuity, which would create $70,000 in annual income for Hastert. John and his partners also paid airfare, transfers, hotels, meals and other expenses for Hastert when he traveled with them to work on special deals in Singapore, Montreal, California, Florida, Washington, D.C., Chicago and Saudi Arabia. Although Hastert occasionally used stationary with the heading “Hastert & Associates,” John alleges that the address on the letters was linked to Hastert's client, HR Green, and Hastert did not have a phone, email access or staff at that location. Hastert used his official Office letterhead to correspond with potential business partners and for personal letters on behalf of John. Furthermore, when Hastert attended these meetings with John, he used his business cards from the Office to provide contact information. John claims that Hastert submitted reimbursement for consulting and legal fees that were not permitted under the Former Speaker Statute.

II. Procedural History

On November 20, 2014, John filed an amended two-count complaint alleging that Hastert: (i) violated the Federal False Claims Act (“FCA”), 31 U.S.C. § 3729, et seq. when he submitted false signed and certified vouchers for reimbursement of expenses (Count I); and (ii) caused violations of the FCA by certifying each voucher while knowing that they were false (Count II). John asks this Court to enter judgment against Hastert: (i) in favor of the United States of America for the Office, operational expenses and salaries paid for the Office during 2008, 2009, 2010, 2011, and 2012, and triple the amount of the judgment pursuant to the FCA; (ii) in favor of the United States of America, for $5,000 to $11,000 for each monthly claim or claims submitted for expenses and salaries relating to the Office in violation of the FCA; (iii) in favor of John for a percentage of the total amount of the judgment against Hastert pursuant to 31 U.S.C. § 3730, et seq. (“Section 3730 ”); and (iv) any other appropriate relief.

On January 6, 2015, Hastert moved to dismiss the amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) (“Rule 12(b)(1) ”), 12(b)(6) (“Rule 12(b)(6) ”) and 9(b) (“Rule 9(b)”).

LEGAL STANDARDS

A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the complaint and not the merits of the case. McReynolds v. Merrill Lynch & Co., Inc., 694 F.3d 873, 878 (7th Cir.2012). The allegations in a complaint must set forth a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A plaintiff need not...