Trading Company Seeks SCOTUS Review of Sanctions Violations FCA Suit Gov't Ditched

A whistleblower in a False Claims Act challenge, Brutus Trading, petitioned the U.S. Supreme Court to take up its case so the court can clear up its own 2023 decision that found the government can voluntarily dismiss a qui tam FCA case brought by a whistleblower after not initially intervening in the case, and that the dismissal would be carried out under Rule 41(a) (Brutus Trading v. Standard Chartered, Sup. Ct. # 23-813).

The courts have "no adjudicatory role" under Rule 41(a), but the statute allowing the government to dismiss an FCA settlement requires courts to give the whistleblower an opportunity for a hearing, the petition noted. Brutus argued that review of its FCA case can give "lower courts much-needed practical direction" in applying the Supreme Court's command in U.S. ex rel. Polansky v. Executive Health Resources "to balance Rule 41's deferential ethic with the FCA's and the Constitution's due process values when confronted by a record sharply contesting the facts" allegedly supporting the government's dismissal.

"The continued viability of qui tam lawsuits depends on the practical working out of this balance sought by Polansky," the petition said.

In Polansky, the government didn't participate in the FCA action, only stepping in seven years after the proceedings started to dismiss the case. Dr. Jesse Polansky, the relator in the case, argued that the U.S. can only dismiss if it intervenes during the period the case is under seal, though this claim was rejected by the high court. The government can intervene either during this period or "at a later date upon a showing of good cause" under the FCA's Section 3730(c)(3), the court said. If intervention is successful, the U.S. becomes a party with the right to dismiss as established under Rule 41(a).

Brutus said its case arose from its efforts to alert the government that Standard Chartered Bank and its affiliates were allegedly engaging in "systematic and massive violations" of U.S. sanctions in Iran beyond what the U.S. knew when it entered into a deferred prosecution agreement with the British bank in 2012 to settle prior sanctions violations. Brutus said that two insiders -- Robert Marcellus, global currency trader, and Julian Knight, former Standard Chartered executive -- learned of many sanctions violations beyond those captured by the DPA.

Brutus, an entity formed by Marcellus and Knight to file the case, gave the U.S. "tens of thousands of documents" documenting sanctions violations by Standard Chartered. In 2019, the U.S. and the British bank amended the DPA to account for further violations, but the government didn't give Brutus any of the additional $20 million forfeiture offered by Standard Chartered as part of the settlement.

The government declined to intervene in the subsequent False Claims Act case filed by Brutus but appeared eight months later to dismiss the action. The district court didn't hold a hearing on the motion to dismiss, relying on "untested witness declarations from the Government," Brutus said. The whistleblower said that the district court ignored a wealth of information on further sanctions violations ignored by the government and so what was before it wasn't just a "subjective disagreement, as the court put it."

After again being rejected by the circuit court, Brutus now takes to the Supreme Court to claim that the "refusal" of the government "and the courts below to give the appropriate attention to Petitioner's allegations and rejection of its argument that it was entitled to an evidentiary hearing, as required by the Due Process Clause and the FCA, is a demonstration of an inexplicable and unjustified failure to perform their obligations under the Constitution and the FCA." This illustrates a "critical lapse in protecting the national security interests of the United States," the petition said.