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United States v. Rivera

United States Court of Appeals for the First Circuit

June 6, 1995, Decided

No. 94-1081, No. 94-1082

Opinion

 [*705]  CAMPBELL, Senior Circuit Judge. The United States filed this civil action in the district court against defendants Guillermo Alemany Rivera ("Alemany") and Edgar Stella Perez ("Stella"). Seeking damages under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733 (1982), the government alleged that defendants had caused a false claim for mortgage loan insurance benefits to be presented to the Department of Housing and Urban Development ("HUD"). The district court denied defendants' motion to dismiss [**2]  and granted summary judgment in favor of the government, awarding it $ 1,966,592. United States v. Stella Perez, 839 F. Supp. 92, 97-98 (D. P.R. 1993). We hold that the government filed this suit after the applicable limitations period had expired. We therefore reverse.

During the 1970s, Alemany and Stella engaged in a scheme to defraud HUD and the Department of Health and Human Services ("HHS") in connection with a federally-insured $ 12.46 million mortgage loan. At that time, Stella was president, chairman of the board of directors, and medical director of Hospital Nuestra Senora de la Guadalupe, a hospital in Puerto Rico; defendant Alemany was a former comptroller of the hospital. The hospital had obtained the mortgage loan in 1974 from a private lender, Merrill, Lynch, Hubbard, Inc. ("Merrill Lynch"), for the purpose of renovating and expanding its facilities. HUD had agreed to insure the hospital's loan pursuant to the National Housing Act, 12 U.S.C. § 1715z-7 (1982).

During the course of the renovation project, loan proceeds were periodically disbursed to the hospital according to the following procedure. Stella, as president of the hospital, filled out a portion [**3]  of a HUD "Form 2403," listing various items of completed construction and attaching corresponding invoices. Stella then forwarded the form to Merrill Lynch, which filled out a portion of the form and forwarded it to HUD. After approving the disbursement, HUD sent a Certificate of Mortgage Insurance to Merrill Lynch. Merrill Lynch then released loan funds to the hospital or directly to the suppliers and contractors. Occasionally, loan funds were also disbursed from a separate equipment escrow account, upon HUD's receipt of a letter from Stella with attached invoices for purchased equipment.

Defendants siphoned off a portion of the loan proceeds through their control of a furniture company, Casa Cardona, Inc., and its subsidiary, an equipment company called AAA Hospital Supply, Inc., which they incorporated soon after the hospital secured the loan. Through these two companies, Stella and Alemany sold equipment and furnishings to the hospital at substantially inflated prices and charged the hospital for equipment that the companies never provided. The hospital paid for the equipment with the loan proceeds, which were disbursed to the companies by Merrill Lynch pursuant to the procedure [**4]  described above. In all, defendants submitted 20 separate fraudulent requests for loan proceeds between 1974 and 1978, as to which HUD, upon paperwork furnished by defendants, issued certificates of insurance.

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55 F.3d 703 *; 1995 U.S. App. LEXIS 13730 **; 139 A.L.R. Fed. 813

UNITED STATES, Appellee, v. GUILLERMO ALEMANY RIVERA, Defendant, Appellant. UNITED STATES, Appellee, v. EDGAR M. STELLA PEREZ Defendant, Appellant.

Subsequent History:  [**1]  As Amended August 1, 1995.

Prior History: APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO.

CORE TERMS

mortgage, fraudulent, district court, inducing, default, insurance contract, disbursed, funds, government funds, inflated, statute of limitations, demand for payment, loan proceeds, false claim, Mortgagee's, defendants', invoice, amount of payment, summary judgment, mortgage loan, reimbursement, contractors, lender, notice, terms

Labor & Employment Law, Employer Liability, False Claims Act, General Overview, Public Contracts Law, Voiding Contracts, Misrepresentation, Civil Procedure, Defenses, Demurrers & Objections, Affirmative Defenses, Governments, Legislation, Statute of Limitations, Time Limitations, Banking Law, Public Enforcement, Criminal Offenses, False Statements in Credit Applications, Business & Corporate Compliance, Remedies, Civil Penalties, Contracts Law, Fraud & Misrepresentation