Sunday, January 15, 2017

Whistleblowers’ 2013 suit ground Grand Junction Regional Airport to halt: Original complaint alleging fraud appears headed for settlement, with a whimper

The central claim of a lawsuit brought by two whistleblowers against Grand Junction Regional Airport focused on its perimeter-security fence, which Dave Shepard and Bill Marvel said was fraudulently funded because it was originally described as being needed to keep out wildlife. A settlement of the suit could happen at a Feb. 2 hearing. 

Sordid airport story ends with a whimper

We now have a missing piece of the puzzle of alleged — never substantiated — malfeasance at the Grand Junction Regional Airport.

It was a secret lawsuit filed by two vociferous critics of the airport board and the airport’s former general manager that upended what had been a staid organization.

As The Sentinel’s Gary Harmon reported on today’s front page, the suit, filed under seal March 20, 2013, by David Shepard and Bill Marvel, triggered an FBI raid at the airport that put the operation into a tailspin. The FBI wrapped up its criminal investigation having found no wrongdoing, but by then, the damage was done.

Reputations were sullied, airport employees were fired and projects critical to the long-term success of the airport were derailed. The investigation gave the airport a black eye, complicating the board’s search for a new airport manager qualified to turn things around.

All of this damage inflicted for what? Shepard and Marvel filed a “qui tam” lawsuit, a type of civil suit whistleblowers bring under the False Claims Act — a federal law that rewards whistleblowers if their allegations recover funds for the government.

The law also provides job protection to whistleblowers. Marvel and Shepard weren’t airport employees. They weren’t privy to “insider” information. They merely ascribed bad intentions to actions the airport board had made openly and publicly.

In other words, Shepard and Marvel hardly fit the textbook definition of whistleblowers. Yet, they chose a legal tool that would reward them financially for exposing fraud in connection with an airport perimeter fence project they opposed. They could just have easily shared their concerns with federal authorities without seeking a stake in the alleged ill-gotten gains, which, if proven, would have been borne by taxpayers.

Two birds, one stone. The lawsuit threw the airport into a state of chaos — retribution for a fence the general aviation community despised? — with the added bonus of a handsome potential payday.

Under the False Claims Act, private citizens may sue an entity that is defrauding the government and recover funds on the government’s behalf. The qui tam lawsuit is filed “under seal,” meaning that it is kept secret from everyone but the government to give the Justice Department time to investigate the allegations.

The government investigates and decides whether it will join, or “intervene,” in the case. That’s what happened here. The Office of the Inspector General for the U.S. Department of Transportation spent two years looking at claims of deceptive conduct and did, in fact, determine that certain representations in Categorical Exclusion Forms submitted to the Federal Aviation Administration were “actionable” under the FCA.

As Harmon explained in his story, the government dinged airport officials for certifying that the airport perimeter fence would have no siginficant effect on the general aviation business at the airport.

But the government said it would have a hard time proving any damages from the mispresentations. “In particular, the United States found no evidence that more timely disclosures of the fulsom (Categorical Exclusion) Forms would have stopped the fence project, nor led to its significant modification,” lawyers for the U.S. Attorney’s office wrote in a motion to settle all claims with the Airport Authority. “The United States also concluded that there is insufficient evidence to support the balance of (Shepard’s and Marvel’s) claims against the Airport Authority.”

What the government found was that some irregularities regarding paperwork ocurred, warranting a $16,500 penalty. But even if these problems had been uncovered earlier, they wouldn’t have had a significant bearing on completion of the project. That’s a far cry from the picture of institutional fraud and corruption painted by Shepard and Marvel.

Next month, a federal judge will decide whether to accept the government’s settlement proposal. Shepard and Marvel are objecting to the proposed settlement. They contend in recently unsealed court papers that the government’s determination of no provable fraud is incorrect. They want the court to find the airport and a contractor liable for a $5 million fraud in the construction of the airport perimeter fence.

Defendants found liable under the False Claims Act may have to pay as much as three times the government’s losses plus penalties for each false claim. As “relators” in the case, Shepard and Marvel stand to receive 15 to 25 percent of any amount awarded to the government. Since the government is only seeking a $16,500 penalty, Shepard and Marvel only stand to receive a few thousand dollars. But they say they are due $2.45 million to $5 million under the treble damages award on the full cost of the project, which they maintain went forward fraudulently.

Obviously, there is a financial motive for the relators to object to the government’s findings. But imagine if the court agreed with the objections. That could be as much as $16.5 million to be paid from one government entity to another in spite of a government investigation — at yet another cost to taxpayers — that found no fraud resulting in damages to the federal government.

Shepard and Marvel contend the findings are a miscarriage of justice. One could easily argue that the miscarriage has already occurred. The airport has weathered a massive disruption at considerable expense based on their allegations — the merits of which federal investigators largely dismissed.

We agree with one issue raised by Shepard and Marvel. The small penalty contemplated in the settlement would do “further damage” to their reputations, they said. “Extensive publicity has been given to (Shepard and Marvel) as troublemakers and provocateurs. Resolution with a mere slap on the hand (for the Airport Authority) will confirm and rebroadcast that publicity.”

The court will determine if this shoe fits. 


The administration of Grand Junction Regional Airport is just now beginning to recover from years of uncertainty and legal limbo, caused by sweeping federal investigations that were prompted by a complaint from airport tenants Dave Shepard and Bill Marvel. Fallout included the halting of construction on a $6.2 million building, derailment of a new terminal project, and a sullying of the airport’s reputation nationally. The FBI concluded its investigation having found no wrongdoing at the airport. 

The ill-fated federal investigation that sent Grand Junction Regional Airport into a two-year tailspin was launched by a secret lawsuit that two airport critics say should result in payments of as much as $5 million to them as whistleblowers.

The lawsuit — filed under seal March 20, 2013, by David Shepard and Bill Marvel, who claim whistleblower status despite having never worked inside the airport — shines new light on the beginning of a series of events that became public with an FBI raid. Fallout from the raid included halted construction midway on a $6.2 million building, cost the airport chief his job, derailed a new terminal project, roiled the airport’s relationship with the building contractor, and fouled the airport’s reputation nationally. The FBI concluded its investigation having found no wrongdoing at the airport.

A federal judge has set a Feb. 2 hearing in Denver on the fairness of a settlement of the suit backed by the airport and U.S. government. The government, which stepped into the shoes of Shepard and Marvel to prosecute the case, determined that there was no fraud as alleged by Shepard and Marvel and that the airport should be liable for just $16,500 in penalties. The airport agreed to pay that amount in settlement.

Shepard and Marvel contend in court papers recently unsealed that the government determination of no fraud is incorrect and its penalty number is too low. Rather, they say, the airport and a contractor should be on the hook for a $5 million fraud in the construction of the airport perimeter fence, which, with costs and interest, should be tripled, to about $16.5 million.

If Shepard and Marvel are truly whistleblowers under federal law, they would stand to receive 15 percent to 25 percent of any amount sought by and awarded to the federal government. That would come out at $2,475 to $4,125 of the $16,500 penalty determined by the government.

Shepard and Marvel, however, say in court papers that they are due $2.45 million to 
$5 million under the treble damages award on the full cost of the project, which they maintain went forward fraudulently.

Their shares of any reward would pay their attorney fees and other costs, with any amounts left over to be “used for charitable purposes focused on general aviation,” Shepard and Marvel, both hangar owners at the airport, said in court papers.

Shepard and Marvel and their Telluride attorney, John H. Steel, didn’t respond to requests for comment. Other parties to the case also declined to comment.


Shepard and Marvel, who claim to be whistleblowers, filed suit setting off a series of events that began Nov. 16, 2013, with the FBI raid on the airport offices.

Papers filed in connection with the lawsuit also show that the U.S. Department of Transportation’s inspector general conducted an extensive, two-year investigation into the airport.

“This investigation was thorough,” the U.S. Attorney’s Office for Colorado said in filings. “It involved review of thousands of documents and interviews of dozens of witnesses.”

The Airport Authority terminated three members of its management team after the inspector general’s investigation began, the government said.

The authority fired its director of aviation, Rex Tippetts, in January 2014, soon after suspending him in the wake of the FBI raid.

The FBI investigation was dropped in 2015 with no charges filed.

Fallout from the investigation included halting work on the airport administration building at the halfway point. The skeleton of the building still stands, awaiting developments that might lead to its completion — or demolition.

Eight months before the raid, Shepard and Marvel filed the their case under a whistleblower statute in Denver federal court, alleging that the airport and Tippetts, along with an airport contractor, Jviation, Inc., misled federal officials about the installation of a fence around much of the airport.

Shepard and Marvel are represented by Steel, a Telluride attorney who also represented an airport employee, Donna Vanlandingham, who claimed she was fired because she threatened to expose corruption in connection with the airport perimeter fence.

A former airport employee who wasn’t identified in the suit met with the FBI on Feb. 27, 2013, “through contact” with Shepard, court papers said.

Vanlandingham filed suit against the airport in December 2013, a month after the raid. Her case, however, was dismissed when an appellate panel upheld a trial court ruling that Vanlandingham had signed a release of all claims against the airport.


Shepard’s and Marvel’s lawsuit focuses on the airport’s perimeter fence, which has long been a barbed subject for them and other general aviation tenants at the airport.

The heart of the claim by Shepard and Marvel — sharply denied by a member of the airport board that approved it in a public hearing — is that the airport fraudulently sought Federal Aviation Administration funding for the perimeter-security fence by describing it as being needed to protect the airport from wandering coyotes, foxes and badgers.

“The wildlife control aspect was from the beginning a scheme to obtain otherwise unobtainable federal funds from the FAA,” Shepard and Marvel said in their original complaint, noting that the fence “as designed and built does not prevent the incursion of wildlife onto the airport. It is located where there is no wildlife — only human traffic — which it does inhibit.”

The 8-foot security fence girdles the west, south and east borders of the airport, but the north side is protected by a three-strand barbed-wire fence commonly used in ranching.

“There was no fraud,” countered Doug Simons, who served on the board that approved the fence.

Plans approved by the airport board for the security fence called for it to encircle the airport once it could complete acquisition of Bureau of Land Management property needed for the construction of a new runway to the north, Simons said.

The agreement with the BLM remains to be completed and work on a new runway is expected to continue well into the next decade.

The airport board last year agreed to surrender $500,000 in future grants to the FAA in response to the agency’s demand that it be repaid that amount from the fence funding it provided.

The investigation performed by the U.S. Attorney’s Office determined that there was no fraud associated with the application for FAA funding for the fence, but did find that airport officials violated the National Environmental Policy Act by certifying that the airport perimeter fence would have no significant effect on the general aviation businesses at the airport.

In its filings, the government said that it would likely “encounter significant issues in proving damages from these misrepresentations.”

At the time the certifications were made, the airport “knew that the fence project was likely to have a substantial negative impact on the existing business at the airport due to the restrictions on entry by the public to the businesses located within the boundaries of the fence,” the settlement agreement says, noting that it is not an admission of liability by the airport nor a concession that the federal government’s claims are not well-founded.

The airport and the FAA are separately negotiating issues related to billing the agency to electrify the fence, the settlement said. Issues about electrifying the fence aren’t covered under the False Claims Act, the government said, something Shepard and Marvel dispute.

Shepard and Marvel strenuously objected in court papers to the settlement, saying it “is not in the public interest. It is not justice. It should not be approved.”

The proposed settlement “squelches any possibility of recovery” from Jviation, Shepard and Marvel said.

Jviation was “essential to the fraud” because of its status as a firm with professional engineers and because of its relationship with the FAA, the suit says.

The minimal award contemplated in the settlement would do “further damage” to Shepard and Marvel’s reputations, they said. “Extensive publicity has been given to (Shepard and Marvel) as trouble-makers and provocateurs. Resolution with a mere slap on the hand will confirm and rebroadcast that publicity.”

Shepard and Marvel would also lose their already spent out-of-court costs and be unable to pay their attorney, Steel, their filings say.

“Years of hard work and considerable personal and legal expenditures will go unreimbursed and will thwart the purpose of the False Claims Act to encourage those with knowledge of wrongdoing to expose it,” Shepard and Marvel said.

Jviation, however, would remain exposed to legal action by Shepard and Marvel, the government noted in its filings.

Jviation last year filed a still-unresolved suit against the airport, contending that it hadn’t been paid $225,000 for work at the airport, including work on the unfinished administration building.

The airport board and its contractor, Shaw Construction, reached agreement on the value of Shaw’s work only after Shaw removed its name from the project and sued the airport.

In her order setting the fairness hearing on Feb. 2, U.S. District Judge Christine Arguello stressed in boldface lettering that the hearing “is not the same as a trial on the underlying merits of this case.” 


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