DOD enjoined from debarring owner/CEO of convicted shipper

by bvernia | November 15th, 2009

On October 29, District Judge Ricardo Urbina granted a preliminary injunction to Christopher Alf, the founder, former CEO and owner of National Air Cargo, Inc. (NAC). NAC was a DOD contractor for shipping military and other freight for the Air Force. NAC had been the subject of a qui tam suit and, following an investigation by DOD, it pleaded guilty to a single count of making a false statement to the DOD. The company also settled the qui tam’s allegations, but the Air Force debarred Alf and four other employees for three years, after finding that the company carried out a scheme to defraud the US by billing late shipments as if they were on-time.

Judge Urbina rejected the debarring official’s conclusion that as NAC’s CEO and sole shareholder, Alf failed to exercise managerial oversight of his company. The Court relied upon an analysis of the record which indicated that there existed evidence sufficient to establish late delivery of only a small number of shipments; on this basis, the Court reasoned, the CEO was likely to persuade the Court ultimately that the debarring official had failed to articulate a rational connection between the facts found and the choice made. The Court likewise rejected the Air Force’s conclusion that the CEO was liable on the basis of imputing the company’s conduct; the decision, the Court observed, failed to identify specific information which gave the CEO a reason to know of the misconduct.

Judge Urbina adopted a “flexible” approach to assessing the irreparable harm needed to impose a preliminary injunction, based on his conclusion of the likelihood of the CEO’s success on the merits.

W. Jay DeVecchio of DC’s Jenner & Block represents Alf. Representing the US are AUSAs Laurie Weinstein and Jennifer Zachary.

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