United States District Court, D. Massachusetts
UNITED STATES OF AMERICA EX REL. TIMOTHY J. GOULDEN, Plaintiffs,
BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION, INC. and BAE SYSTEMS, INC. Defendants.
MEMORANDUM & ORDER
NATHANIEL M. GORTON, District Judge.
Relator Timothy Goulden ("relator" or "Goulden") brings this qui tam False Claims Act action against his former employer, BAE Systems Information and Electronic Systems Integration, Inc. ("BAE"), and its parent company, BAE Systems, Inc. His claims relate to the manufacture and testing of thermal weapon sights pursuant to several contracts between BAE and the United States Army. Goulden maintains that the subject contracts required BAE to test its thermal weapon sights using "military standard or military-spec" machine guns and that BAE falsely certified that it had performed the testing under those conditions when it submitted claims for payment. He also maintains that he was terminated from his position at BAE as a result of his investigation into such violations. The United States has declined to intervene in the action.
Pending before the Court are a motion to dismiss by the defendants and a motion for leave to file a second amended complaint by Goulden. For the reasons that follow, both motions will be allowed, in part, and denied, in part.
A. Contracts between BAE and the U.S. Army
BAE is a defense contractor that used to make "thermal weapon sights" for the U.S. Army. Thermal weapon sights are infra-red imaging sensors that allow soldiers to observe images on the battlefield notwithstanding darkness or smoky conditions.
BAE entered into at least three contracts with the government for the manufacture and testing of thermal weapon sights: an initial contract entered into in or about 2003 ("the 2003 contract"), a second entered into in mid-2007 ("the 2007 contract") and a third entered in April, 2011 ("the 2011 contract"). The 2007 contract resulted in a purchase order worth approximately $183 million and the 2011 contract resulted or will result in an order of approximately $56 million.
According to the terms of the contracts, BAE was required to perform "live fire weapons testing" on the sights under simulated battlefield conditions. It performed the testing by shipping thermal weapon sights from its production facility in Lexington, Massachusetts to its "Firing Range Services and Support Group" ("FRSS Group") in New Hampshire. The FRSS Group would test the sights before returning them to Lexington for shipment to the Army. Relator supervised the FRSS Group testing between November, 2008 and July, 2011.
According to Goulden, the 2003 contract called for the live fire weapons testing to be performed with "military standard and military-spec machine guns" being used by soldiers in combat. He admits that he has not seen a complete copy of any of the contracts but submits three documents to substantiate his claim.
First, Table 18.104.22.168.2-1 of the 2007 contract lists different weapons but does not specify that those weapons are considered "military standard" or "military-spec" by either of the parties. In the Proposed Second Amended Complaint, Goulden notes that all of the listed weapons begin with the letter "M" and explains that it is "well known" in the firearms industry and the U.S. Army that the "M" identifies the weapon as a military standard or military-spec machine gun.
Second, a 2008 PowerPoint presentation by Paul Kling, the Vice President of Operations at BAE, stated that Section 22.214.171.124.2 of the contract "details the weapon configuration" and explained that "[w]eapons firing is the best check on how the system is working in the soldier's hands."
Third, Kenneth Gatto ("Gatto"), the manager of the FRSS Group, stated that the firearms specified by contract were "Milspec machineguns" in a memorandum titled "BAE Systems Proposed Change to Bills S. 941 and H.R. 2296" dated May 22, 2009 ("the BAE Lobbying Memorandum"). The memorandum adds that "[o]btaining these machineguns has been very problematical for BAE Systems...."
After the award of the 2003 contract, BAE requested and the Army agreed to modify that provision to state that BAE could perform the testing using "military standard and military-spec machine guns or their equivalent." Goulden asserts that the Army did not have the legal authority to permit BAE to possess or manufacture "equivalents" to military standard or militaryspec machine guns because the ATF has exclusive authority to enforce and oversee the implementation of federal firearms laws.
B. Efforts by BAE to Obtain Machine Guns for Testing
BAE purchased machine guns from several entities between 2003 and 2004. Goulden asserts that those purchases were unlawful according to the ATF National Firearms Act Handbook because the ATF understands 18 U.S.C. § 922(o) to permit transfer of machine guns to government contractors only for export or as "sales samples" and does not permit transfer for research or testing purposes. Gatto's BAE Lobbying Memorandum acknowledges that
[18 U.S.C. § 922(o)] does not allow machineguns to be lawfully transferred to, or possessed by, government contractors for use in testing, research, design, or other work in fulfilling government contracts....
The memorandum recommends that the language of § 922(o) be modified to permit government contractors to obtain machine guns for purposes relating to their government contracts.
At or around the time the government awarded the 2003 contract, BAE obtained federal "Type 10" and "Type 11" firearms licenses. An entity with a Type 10 license is permitted to manufacture "Title 1" firearms and various types of ammunition whereas an entity with a Type 11 license may import the same. Goulden asserts that BAE is not "in the business of manufacturing" firearms or ammunition and therefore is not a "manufacturer" according to Alcohol, Tobacco and Firearms ("ATF") regulations. See 27 C.F.R. 478.11. He therefore concludes that the license was obtained by fraud.
In order to obtain machine guns for use in testing, BAE contracted with a commercial gun manufacturer, Ohio Ordnance Works ("Ohio Ordnance"), to carry out what Goulden calls an "Assisted Manufacture Scheme". Under that scheme, BAE would obtain only the "restricted" parts of weapons and send them to Ohio Ordnance under the pretense that they were weapons in need of "repairs". Ohio Ordnance would assemble complete machine guns and return them to BAE. When the guns would break apart in the field after use, BAE employees would repair them with replacement parts.
As a result, according to Goulden, the machine guns used to test thermal weapon sights were not "equivalent" to military standard or military-spec machine guns and instead were "cobbled together weapons with non-standard, untested, mismatched parts of unknown quality." Notwithstanding that fact, Goulden contends that BAE falsely certified to the government in its claims for payment that it had tested thermal weapon sights using weapons that were the equivalent of military standard or military-spec machine guns. He contends that the government relied upon the subject misrepresentations or omissions in issuing payments pursuant to the contracts and would not have paid BAE if it had known about the true testing conditions.
C. Termination of Goulden
While employed by BAE, Goulden became concerned about the "Assisted Manufacture Scheme." At some point he contacted the ATF about those concerns. Goulden told BAE's Legal Counsel, Jody Grimolizzi ("Grimolizzi"), that he had relayed his concerns to the ATF. According to Goulden, she asked him not to contact the ATF in the future.
In April, 2010, Gatto informed Goulden that BAE was considering outsourcing its live fire testing. Shortly thereafter, Goulden told Gatto that he was concerned that BAE was illegally manufacturing machine guns. In August, 2010, following a meeting with Gatto and Grimolizzi, he voiced the same concerns to Frank Henderson, an employee of the Safety, Health and Environment Department of BAE, who told the director of his Department.
In February, 2011, Goulden learned that BAE was outsourcing future live fire testing of thermal weapon sights. Goulden maintains that Gatto told him that the reason for outsourcing the testing was to avoid negative publicity. Goulden and the other employees of the FRSS Group concluded the remaining testing and were terminated or reassigned.
Goulden was initially reassigned. In June, 2011, however, he was called to a meeting with Gatto, Human Resources Manager Beth Bursey and Director of Ethics Michael Levin. At the meeting, he was asked whether he permitted former FRSS Group employees to keep BAE property such as tools, helmets and body armor and whether he had failed to wear a respirator during live fire testing. He answered all of the questions truthfully. About a week later, he asked Gatto if he was being investigated in retaliation for his raising the issue of the illegal manufacture of weapons by BAE but received no response.
The following month, Goulden met with Bursey, Levin and Grimolizzi about the missing property. During the meeting, he asked Bursey why his complaints about the illegal manufacture of weapons had never been addressed. She denied any knowledge of the complaints and said she would get back to him.
One week later, Bursey informed Goulden that he was terminated from his position with BAE. His termination letter stated that he had engaged in misconduct of a "serious nature" by not wearing a respirator during live fire weapons testing and by allowing members of the FRSS Group to keep BAE property. Goulden believes that the ...