Eyaktek Novadatacom Settlement Transcript

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

1

UNITED STATES DISTRICT COURTEASTERN DISTRICT OF VIRGINIA

ALEXANDRIA DIVISION

NOVA DATACOM, LLC )))

VS. ) 1:11-CV-1210 TSE)) ALEXANDRIA, VIRGINIA) NOVEMBER 17, 2011)

EYAK TECHNOLOGY, LLC )_______________________________)

_______________________________________________________________

TRANSCRIPT OF MOTIONS HEARINGBEFORE THE HONORABLE T. S. ELLIS, III

UNITED STATES DISTRICT JUDGE_______________________________________________________________

Proceedings reported by stenotype, transcript produced by

Julie A. Goodwin.

Case 1:11-cv-01210-TSE-JFA Document 31 Filed 12/12/11 of 69 PageID# 387

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

2

A P P E A R A N C E S

FOR THE PLAINTIFF:DICKSTEIN SHAPIRO LLP (DC)By: MS. BARBARA VAN GELDER

-AND-MR. JUSTIN ANSELM CHIARODO1825 Eye Street NWWashington, DC [email protected]@dicksteinshapiro.com

FOR THE DEFENDANT:WILEY REIN LLP (DC)By: MR. ATTISON LEONARD BARNES, III

-AND-MR. PAUL F. KHOURY1776 K Street, NWWashington, DC [email protected]@wileyrein.com

OFFICIAL U.S. COURT REPORTER:MS. JULIE A. GOODWIN, CSRUnited States District Court401 Courthouse SquareTenth FloorAlexandria, Virginia 22314512.689.7587

ALSO PRESENT:MR. PHILIP LIVINGSTONGeneral Counsel


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

3

(NOVEMBER 17, 2011, 4:30 P.M., OPEN COURT.)

THE COURT: All right. Good afternoon. You may call

the case.

COURTROOM DEPUTY: Case number 11-Civil-1210, Nova

Datacom LLC versus Eyak Technology, LLC.

Will counsel please state your appearance for the

record.

THE COURT: All right. I can -- counsel are present

and prepared to proceed.

Let me take up one matter first. It's not a big

deal, but I want to be unmistakably clear about it. You-all

e-mailed to each other some cases, and you copied my clerks.

That's a no-no. I'm curious, though. How did you get my

clerks' e-mail addresses?

MS. VAN GELDER: Your Honor, I think I'll take

responsibility for that.

THE COURT: I beg your pardon?

MS. VAN GELDER: I think I'll take responsibility. It

was a reply to all that we had I believe from the court

reporter and the transcript.

THE COURT: All right.

MS. VAN GELDER: So -- so --

THE COURT: Oh, you got the e-mails from the court

reporter's transcript?

MS. VAN GELDER: Right. He sent us a transcript this


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

4

morning, and so we sent it back. And I apologize.

THE COURT: Well, no, it's not a big deal, and there's

no reason to be too concerned about it. But my immutable rule

is never, never, never contact any of my law clerks about

anything. Now then you would point out, Well, gee whiz. We

just had an argument yesterday, and there are new cases. And

then we would show up here today and you'd be upset because you

didn't get the cases beforehand.

Well, there are two answers to that. One is, you

should have found them in the first place and thought about it.

But that's a bit harsh. I've done what you-all are doing, and

I didn't always find everything. The second answer is you copy

them for me, put them in an envelope, tell your opposing

counsel, and bring them -- and have someone deliver it.

But I am old-fashioned. I don't use e-mail. I

don't have e-mail. I don't permit contact by e-mail. So I

would ask that in order to -- to cleanse yourself -- selves of

this very, very minor sin, erase their e-mail addresses and

don't use them again.

MS. VAN GELDER: I will, Your Honor. And I think my

past practice with this Court is to give it to the security

guard who would then deliver it to chambers.

THE COURT: Yes. Or you can leave it in the clerk's

office. They get it right up here.

MS. VAN GELDER: I don't --


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

5

THE COURT: But I don't want to make it -- it isn't a

big deal. And I did have a chance as a result to look at the

cases, but I would have had that chance if you had put them in

your original briefs or if you had sent them up here earlier.

In any event, not a big deal.

Here's how I want to proceed today. Mr. Rodriguez

did produce a transcript. I've glanced at it. I haven't

studied it, but I have clearly in mind some of the things that

were said. And I think the best way to proceed today is this:

I need to give Mr. Khoury an opportunity to make

something like a complete argument so that he can respond.

Then I need to give Ms. Van Gelder, since her client has the

burden, the final word on this. And I need to let you-all do

it in a fairly unfettered way so that you can get said what you

want to say. And then I'm going to resolve it after I think

about it a bit.

All right. Mr. Khoury.

MR. KHOURY: Thank you, Your Honor.

Your Honor, I --

THE COURT: And I don't need to leave by 6:30,

although the court reporter wants me to leave before then.

MR. KHOURY: I'll try to do this as sufficiently as I

can, Your Honor.

I would like to start with some facts before I get

into the argument --


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

6


MR. KHOURY: -- because there were a number of facts

that were discussed yesterday. And can I provide an exhibit?

THE COURT: Well, give it to Ms. Van Gelder first.

MR. KHOURY: She -- she has it. It's really just the

last three pages of Exhibit 1 of their complaint as well as

Exhibit 1 of their affidavit.


MR. KHOURY: And Your Honor, what I'm showing you are

the two task orders that Ms. Van Gelder said are the only two

task orders that are before this Court. The first one is if

you look at the -- the top of it, right under where it says the

purchase order, it says P0005205. That's...

THE COURT: Go ahead.

MR. KHOURY: That's the first purchase order that Ms.

Van Gelder was -- was talking about yesterday. And one of the

things that I want to point out by going through this exercise

is to show you that the employees that she's concerned about

have already been paid for the work under these two task

orders. I also want to show you that --

THE COURT: How does this show that?

MR. KHOURY: Well, I'm about to show you. But I -- I

want to tell you what I'm --

THE COURT: All right. Go ahead.

MR. KHOURY: -- what the point of this is before I --


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

7

and I also want to show you that this -- this is going to

show it doesn't matter when the bribes actually happened. The

over-inflation of invoices happened prior to that and impacted

each and every one of -- of the invoices going forward. So

those are the --

THE COURT: In other words, to be sure that I

understand what you're saying, I'm going to state it more

generally. If someone paid a bribe or a kickback of 10,000

initially upfront, then there was a series of invoice, that

$10,000 infects all of those invoices.

MR. KHOURY: No --

THE COURT: Not what you're saying?

MR. KHOURY: No. I've said it poorly, Your Honor.

Let me try -- let me try it this way, by just walking through

and -- what I'm try -- I'm going to try to show you is that Ms.

Van Gelder's statement that we're only talking about 40,000 in

bribes in the relevant time period is completely wrong.

So, the first task order that we're talking about,

5205, is a -- one, is a task order, or a purchase order, for

one year's worth of effort. And you can see that. It says PO

period -- P, period of performance. It's from September 28,

2010, to September 27, 2011, work that has been done.

By the way, the employees have been paid for that

work because NDC has indicated, they've made payroll up until

now.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

8

Now, the way the scheme worked, according to the

indictment, was that Nova Datacom would provide inflated quotes

that would make up for the pricing of this invoice -- of this

purchase order. So the pricing in this purchase order -- and

if you look at the bottom line figure total is $9.2 million.

That pricing was inflated.

THE COURT: Say the first sentence again that you

said.

MR. KHOURY: The pricing for this purchase order --

THE COURT: That's the 9 million?

MR. KHOURY: Is the 9 million.

THE COURT: Right.

MR. KHOURY: That 9 million is -- is based on quotes

that were inflated by Alex Cho at the direction and with the

consent of Kerry Khan.

The pricing for this purchase order for 12 months'

worth of work was established prior to September 28, 2010, well

before any cooperation by Ms. Cho.

Ms. Cho.

The invoices that we're talking about that were

submitted to EyakTek based on this inflated pricing were simply

monthly invoices taking 1/12th of that 9.2 million and

invoicing that 1/12th amount. So each and every invoice was

inflated, and each invoice was simply billing for 1/12th of an

amount that overall was inflated.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

9

All of the services that alleged -- and products

that allegedly were to be provided -- and if you look at the

descriptions they're very generic, vague. These are the

contract line item numbers: Field force engineering, capacity

development. If you look further down, COOP portal

application. COOP is continued operations. And it has to do

with keeping operations in an IT environment functioning even

in -- in certain instances where there may be --

THE COURT: Just to be sure I understand it, your two

points are: One, the employees have already been paid.

MR. KHOURY: Right.

THE COURT: And two, the amounts of the two invoices

are 1/12th each, 1/12th each of the 9 million. And the

9 million was established prior to the period of performance,

and that included the inflated amounts attributable to

the -- to the bad actions.

MR. KHOURY: Right. Exactly, Your Honor. So

therefore, when the bribery --

THE COURT: But, let me ask this, because I'm sure Ms.

Van Gelder will point this out if it's true, and you will let

me know if you don't think it is. But this -- this 9 million

was established, you're telling me, prior to 9-28-2010.

MR. KHOURY: Exactly, Your Honor. As a part of the

conspiracy.

THE COURT: Now, was -- as a part of the conspiracy,


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

10

as you say. But was -- not that it may be ultimately material;

I don't know whether it is yet. Was the cooperation by Cho

underway at that time?

MR. KHOURY: No, it was not, Your Honor. According

to -- according to what Ms. Van Gelder has told us - and all we

know is what she's told us - it began in June of 2010. And

what she was told is business as usual. There -- there were no

new -- with respect to these --

THE COURT: Oh, June --

MR. KHOURY: -- two purchase orders.

THE COURT: -- 2010 would be --

MR. KHOURY: I mean 2011. I'm sorry.


MR. KHOURY: 2011. My fault, Your Honor. Thank you

for correcting me.

THE COURT: I just did it to demonstrate that I do

listen.

Go ahead.

MR. KHOURY: So, whether or not there were bribes

before or after, the point is the inflation was in those

invoices from the beginning.

Now, I wanted to just show you the second -- so the

second and the third relate to the second purchase order,

5208 C. So the second page you'll see there purchase order

5208 C, and you'll see a total of --


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

11

THE COURT: So wait just a moment. This first one --

MR. KHOURY: Yes.

THE COURT: -- purchase order 5205 --

MR. KHOURY: Right.

THE COURT: -- what we're really here on today is a

twelfth of this.

MR. KHOURY: Well, what we're here on -- and it's a

little more complicated. We're here on -- there -- there

are -- there is --

THE COURT: Issue monthly state --

MR. KHOURY: One invoice. One invoice. One invoice

that's 1/12th of this is -- is part of the 900,000 that Ms. Van

Gelder is seeking in her lawsuit. The 1/12th of the other

purchase order, which -- which EyakTek has been paid for but

has not provided to Nova Datacom is -- if you add those two up,

you get to the -- to the 900,000. That's -- that's what

we're -- that's what we're here talking about.

THE COURT: All right. And so what were you going to

tell me now about --

MR. KHOURY: Okay.

THE COURT: -- the second invoice --

MR. KHOURY: So the second invoice --

THE COURT: Wait. She can only get one of us at a

time, so --

MR. KHOURY: I apologize.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

12

THE COURT: So it's arguable that I speak only because

I like the sound of my own voice. You still have to give me

the opportunity to finish and then you can start.

It's very difficult for her to get both of us at

the same time.

This one is number -- looking for the number

here -- 5208.

MR. KHOURY: Right.

THE COURT: All right. Go on. Now what does this

one --

MR. KHOURY: Now --

THE COURT: -- show?

MR. KHOURY: So 5208 C, I want to show you that this

is also -- the period of performance is the same, 9-28-2010

through 9-27-2011, so the same point that the -- the fraud that

we're talking about occurred prior to 9-28-2010. And the total

value there is 2.3 million.

Now, if you turn the page to the third page, you'll

see the same purchase order, 5208 C, now has been modified and

has a revised -- it has additional tasks as of 1-1-11 through

9-27-11, and so the total now becomes $2.9 million.

But again --

THE COURT: Where is the 1-1-11?

MR. KHOURY: It's halfway down, Your Honor.

THE COURT: Oh, I see, revised.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

13

All right. Go on.

MR. KHOURY: And again, 1-1-11 is before any

cooperation by Ms. Cho.

So the point is, the way the conspiracy is alleged

to have worked, these -- this dollar amount, these total bottom

line dollar amounts, were inflated. And according to the

Government, as we were saying yesterday, according to what the

AUSA has told us, with respect to these two invoices, the total

amount of inflation over the course of these -- of -- of

this -- if you add it up it's about $12 million between the

two. The total amount of inflation was $4 million.

Now another point is, with respect to these two

purchase orders.

THE COURT: Well, that's what the indictment says?

MR. KHOURY: Well, the indictment doesn't say that.

The indictment speaks in broader terms. But Ms. Van Gelder I

think mentioned --

MS. VAN GELDER: No, I -- 4 million is for a lot of

other things other than this.

MR. KHOURY: Well --

MS. VAN GELDER: But I don't know what the Government

told you, but I -- I'm not saying that 4 million is the

over-inflation for these two purchase orders.

THE COURT: All right. That's important for her to

correct that and --


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

14

MR. KHOURY: Okay.

THE COURT: I'll wait -- let's wait until you have

your opportunity, but I'm glad you corrected that because I can

appreciate Ms. Van Gelder that you want to be very careful

about what you concede.

MS. VAN GELDER: Yes.

THE COURT: Because what's at issue is not just the

TRO but other things. So that's all right with me that you did

that.

All right. Go on, Mr. Khoury.

MR. KHOURY: Nonetheless, Your Honor, on the whole we

have 20 million dollars' worth of alleged inflation. And

again, it's -- the amount here was inflated pursuant to

the conspiracy --

THE COURT: Total amount of inflation is 20 million,

according to --

MR. KHOURY: Total amount for all -- all of the

invoices that Nova Datacom inflated, the total amount --

THE COURT: According to the indictment.

MR. KHOURY: According to the indictment is 20

million.


MR. KHOURY: Now, EyakTek has already paid Nova

Datacom 10 million, with respect to these two invoices. So it

very well may have already paid more than the value of the


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

15

services received.

THE COURT: How do I know that?

MR. KHOURY: Well, again, assuming that the -- that

the inflation is -- is at the level of -- of what the

indictment indicated or -- and again --

THE COURT: No. I'm asking, how do I know that

they've already paid 10 million?

MR. KHOURY: Well, we -- we've submitted a declaration

that we -- we submitted it with respect to more than just these

invoices, because at the time we thought that Ms. Van Gelder

was --

THE COURT: I understand.

MR. KHOURY: And the declaration of Mr. Elmquest that

we submitted indicates that for all of the purchase orders

that -- that she was complaining about -- let me find it for

Your Honor.

It's -- it's at paragraph -- let's see.

THE COURT: What does Elmquest say?

MR. KHOURY: I'm -- I'm looking for it right now.

He -- he says that EyakTek of the total of 29

million of invoices in connection with all the purchase orders

that were submitted by Nova Datacom, EyakTek has paid 27.2

million.

So, again, there's about a $2 million difference

there between -- between the -- the amounts of the invoices and


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

16

the amounts paid.

But -- so my point is simply that this notion that,

Oh, we're just talking about $40,000 that happened in bribes

after a certain point is irrelevant to how much inflation went

on.

Now, with that sort of factual background --

THE COURT: What you're really saying is that it's

unclear how much inflation exists that's attributable to the

two invoices in issue.

MR. KHOURY: Right.

So with that as background, Your Honor, I would

like to quickly state our position with respect to the TRO.

And we talked yesterday about our position that Nova Datacom

has come forward with unclean hands, so shouldn't be entitled

to equitable relief at all. And I believe that the Court

articulated our -- our under -- our positions clearly and

doesn't need more assistance from us on that.

So I would like to turn, then, to the -- the four

elements of the Winter standard. And of course, plaintiff

bears the burden of establishing a clear showing of each of

those four under -- under Winter.

THE COURT: Well, I -- as I saw the quote in Truth

About Obama, and I only looked at it briefly a moment ago. I

think it was page 355 or something. It's clear that Real Truth

About Obama in quoting from Winter, says that there must be a


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

17

clear showing of irreparable harm.

Does Winter say there has to be a clear showing of

all four? I don't have any doubt that there has to be a clear

showing of irreparable harm. I just want to know whether clear

applies to the other -- the other three factors.

MR. KHOURY: I -- I can't say with certainty, Your

Honor.

THE COURT: All right. Well, let's go on.

MR. KHOURY: With respect to likelihood of success on

the merits, our -- our position is that they cannot

contractually -- we're not contractually obligated to pay

invoices that were fraudulent.

THE COURT: And you submitted a couple of Illinois

cases --

MR. KHOURY: Correct --

THE COURT: -- that seemed to point in that direction.

MR. KHOURY: Does the Court have those case?

THE COURT: Yes, I've seen them.

MR. KHOURY: So what I'd like to do is just quickly

sort of run through that argument for you, Your Honor.

THE COURT: What's there to run through? What those

two cases say in effect is that a fraudulent invoice is a

material breach.

MR. KHOURY: Right.

THE COURT: And then the next case says if there's a


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

18

material breach, you don't have to perform.

MR. KHOURY: Correct.

THE DEFENDANT: That's your position.

MR. KHOURY: That is my position, Your Honor.

THE COURT: The -- the one thing that we haven't

focused on is -- I would assume these invoices would be

governed by Virginia law or what law?

MR. KHOURY: They would be governed by Virginia -- I

believe they would be governed by Virginia law. But the

reason --

THE COURT: So --

MR. KHOURY: -- Your Honor --

THE COURT: -- we have to guess about Virginia law on

this because these two Illinois cases are not Virginia law.

MR. KHOURY: Well, we have provided a Virginia case to

Horton v. Horton, Your Honor.

THE COURT: Yes.

MR. KHOURY: And that's -- that's for the

straightforward proposition that once a breach has occurred

there's no further obligation under the contract.

THE COURT: Yes.

MR. KHOURY: But the reason --

THE COURT: But that's not a fraudulent invoice case.

MR. KHOURY: No, that's true, Your Honor.

But the reason that it was so difficult to find a


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

19

case, I believe, is this is -- usually, first of all, you have

a contract that says, We need a valid invoice. But second of

all, this is sort of standard contract law.

If you -- if I were just to read the city of --

actually, I'd prefer to read the Aetna case.

THE REPORTER: Aetna?

MR. KHOURY: Aetna, A-E-T-N-A.

A claimant in making a fraudulent claim in that

case -- and this is at page 32 of the -- of the case that I --

that I provided to you, Your Honor.

THE COURT: Yes.

MR. KHOURY: -- (Continuing) was committing a material

breach, indeed a most fundamental breach of the contract. A

breach as fundamental as this is a bar to the assertion of any

further rights under the contract by the party guilty of the

breach. This is a basic rule of contract law citing

Farnsworth. It is so basic that you cannot --

THE COURT: What page are you on?

MR. KHOURY: On page 32 of the Aetna case.

THE COURT: All right. Go on.

MR. KHOURY: And so, Your Honor, our position is

that --

THE COURT: What page number?

MR. KHOURY: Page -- well, it's page 32 at the top.

It's...


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

20

THE COURT: I don't have those page numbers.

MR. KHOURY: Well, 43 F.3d at 1569.


MR. KHOURY: And so our point is it was difficult to

find a case on this because it's -- it's a basic fundamental

principle of law that if you -- if you submit a fraudulent

claim or a fraudulent invoice, that is a breach.

THE COURT: And what was the breach in Aetna?

MR. KHOURY: The breach in Aetna, Aetna involved a

Rico case where auto body shops were submitting fraudulent

claims to claim adjustors -- well, fraudulent claims. And the

defendants argued on appeal that they needed a jury trial to

show their damages because they had in fact incurred damages.

It's -- it's just they had exaggerated those damages. And the

answer in response was once this was a breach.

And now we have something very similar from Nova

Datacom here where they're saying, Well, we clearly did do some

work, so we're entitled to you paying the invoices.

THE COURT: Well, this principle wouldn't bar the

quantum meruit, would it?

MR. KHOURY: Well, I think it would, Your Honor, based

on the cases that we cited indicating that if there is a valid

contract you don't get to quantum meruit.

THE COURT: But it's an invalid contract, isn't it?

MR. KHOURY: Well, it's -- I'm not -- we're not -- I'm


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

21

not sure that the contract is invalid.

THE COURT: Well, but you see this principle you're

citing in Aetna -- and I realize I'm violating my unfettered

opportunity here, but.

This case that you're citing, I think you say

correctly stands for the proposition that if you submit a

fraudulent claim, that's a breach. And it's a breach as

fundamental as that, as they say, is -- let's see. A breach as

fundamental as this is a bar to the assertion of any further

rights under the contract. Well, then there isn't a contract.

MR. KHOURY: Right. Then, Your Honor --

THE COURT: Then you're on to quantum meruit.

MR. KHOURY: Which is an equitable remedy for which

there are unclean hands.

THE COURT: Well, I think that's a possible answer,

but I think your more prudent answer would be, you can't

determine in a TRO what amount should be paid if it's quantum

meruit --

MR. KHOURY: That is --

THE COURT: -- on this record.

MR. KHOURY: Yes, Your Honor, you're right. I

apologize.

THE COURT: I used to do this.

MR. KHOURY: So, our position is they cannot show

likelihood of success on the merits.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

22

On irreparable harm -- and I'll pull up some of

their cases as well.

We pointed out to the Court before, and we think

that the standard being that they have to -- they have to

show -- well, first of all, let me start, as the Court

recognized, it's a very rare case that an injunction can issue

in a breach of contract situation where the damages are

available. And they're seeking a mandatory injunction here.

One of the things they have to do, as we indicated

in -- in the Microsoft case is show that the damage was -- the

harm is created by the defendant. Here, they indicated they

have plenty of assets. That the harm that they were referring

to, Oh, well, we're not going to be able to pay these

employees.

They've already paid them for the work that was --

that is the subject before the -- before the Court. And to the

extent that they are indicating that they're likely to go out

of business, that was not caused by the nonpayment of this

$900,000.

THE COURT: What is going to cause that?

MR. KHOURY: Well, probably the debarment is going to

cause that. And by the way, one of the cases that they cite,

Turnage were -- there was a finding of irreparable harm,

although ultimately the -- the request for equitable relief was

denied, involved a situation where the plaintiff was


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

23

disqualified from participating in the federal food stamp

program.

And it was found, Well, yeah, given -- given that

retailer's function, that -- that might be -- that's

irreparable harm.

THE COURT: Well, that's what they cited it for.

MR. KHOURY: Beg your pardon?

THE COURT: That's what they cited it for.

MR. KHOURY: Well --

THE COURT: That's what the plaintiff cited it for, is

the proposition that going out of business could in some

circumstances amount to irreparable harm.

MR. KHOURY: But in that -- in that circumstance --

and I apologize, Your Honor, if I cut you off.

In that circumstance, Your Honor, the -- the

cause --

THE COURT: But didn't that case founder on failure to

show likelihood of --

MR. KHOURY: Yes, it --

THE COURT: -- on the merits?

MR. KHOURY: It did, Your Honor.

THE COURT: All right. So all they're citing it for

is -- is the fact that -- well, they're citing it for the

proposition on 232, I think, that -- it contemplates -- well,

they've got 7 U.S.C. 2033 which is not pertinent here. But


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

24

they do say that in the case it barred, it's clear that the

loss of the food stamp business to B and J Mart may result in

its closure. Such result clearly can be classified as

irreparable harm. That's what they cited it for.

Now, whether that's persuasive to me or not is

another matter. But that's what they cite it for.

I'm aware of the fact that they denied the

preliminary injunction on failure to show a likelihood of

success.

MR. KHOURY: But my point, Your Honor, is that there

was a tie, a direct tie, between the action that was the

subject of the injunction and the harm. Here, there is not.

There is no direct tie between our nonpayment and the fact that

this company, because its -- its chief technology officer has

been indicted and --

MS. VAN GELDER: No.

MR. KHOURY: Well -- I'm sorry. Has been included as

a cooperating co -- a CC1 in an indictment, and they have

acknowledged that they are required to repay the Government

inflated amounts that that individual was involved in. It's

because their executive vice president of operations has pled

guilty to a conspiracy to defraud the Government, and as a

result they have received a notice of debarment. And they are

suspended from doing business with the Government, which is

very similar to what happened in Turnage.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

25

And those -- those are reasons that they are having

cash flow problems. Not the nonpayment of this 900,000, which

again, has not prevented those employees for being paid for the

work under these two purchase orders that are at issue.

And then finally, Your Honor, on the public

interest, we don't believe the public interest is served by

having a court consummate the -- this conspiracy to inflate

purchase orders and invoices.

THE COURT: This part of it -- well, I see. This part

you say took place before the cooperation commenced in June.

MR. KHOURY: All of the pricing that we are talking

about, all of that took place before the cooperation in June.

And so what happened in June where they say, Keep

doing business as usual, well, they kept sending me invoices

with respect to these purchase orders. There were no new

purchase orders. There was nothing new with respect -- there

were no new pricing afterwards.

The pricing had been inflated prior to this. And

1/12th, 1/12th, 1/12th all along. And the Government has

alleged, you know, significant inflation with respect to those

invoices.

THE COURT: You made some remark earlier about the

financial situation of the plaintiff, either its assets or

something else. What did you have in mind there?

MR. KHOURY: Well, I just -- I was recalling from the


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

transcript yesterday that Ms. Van Gelder indicated that there

were substantial assets of the company.

THE COURT: Found in this record?

MR. KHOURY: In this record, yeah. I think she

mentioned 23 million, or I...

And so all I was --

THE COURT: But you've looked at this record. What

does it say about the assets?

MR. KHOURY: I'm trying -- Court's indulgence.

THE COURT: All right, yes.

I'm focused not on Ms. Van Gelder's remark, but on

yours.

MR. KHOURY: I'm sorry. It's at page 10, Your Honor,

of the transcript. And I apologize I miss -- I misremembered.

This is ten months prior to October 31st, and it's

31 mil -- 13,150,000 in assets.

THE COURT: Speaking, who's speaking?

MR. KHOURY: That was Ms. Van Gelder speaking.

THE COURT: And before October of when?

MR. KHOURY: 31st.

I assume of 2011?


MR. KHOURY: Okay.


MR. KHOURY: So for those reasons, Your Honor, we --


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

27

we would urge the Court to -- to deny the TR -- this equitable

relief that we don't believe NDC has come to the Court with

clean hands to seek.

THE COURT: All right. Ms. Van Gelder.

MS. VAN GELDER: Thank you, Your Honor.

MR. KHOURY: Oh, Your Honor, can -- I apologize.

THE COURT: Yes.

MR. KHOURY: One other thing.


MR. KHOURY: On the -- on the clear showing issue, I'm

looking at Real Truth About Obama.

THE COURT: Yes.

MR. KHOURY: There is a requirement for clear showing,

that among other things -- and this is at 345 and 346. It is

likely to succeed on the merits at trial. And then also,

again, Winter rejected a standard, the prior standard. And let

me just...

And it reiterated that it was inconsistent with the

Court's characterization of injunctive relief as extraordinary

remedy that may only be awarded upon a clear showing that

plaintiff is entitled to such relief.

So, in two places they talk about a clear showing

beyond just the -- the irreparable harm, Your Honor.

THE COURT: All right. Ms. Van Gelder.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

28

Your Honor, I'll try to do this as orderly as

possible and address, first, Mr. Khoury's remarks.

The -- our position is that Nova Datacom should

have a right to wind down its affairs in an orderly fashion to

protect its employees, to protect its customers. And it

shouldn't be forced to close its doors prematurely because of

the cash flow problems created by EyakTek's failure to pay on

their contract.

With respect to the document that Mr. Khoury showed

you, I would like to just address a few issues with that.

First of all, the document clearly states that

payment will be 30 days after the invoice. That is the

agreement at issue. Each time a purchase order is sent in,

that's the agreement. We will pay you within 30 days.

THE COURT: That's each of the 1/12th things.

MS. VAN GELDER: Right.

THE COURT: That's not this purchase order. It's just

a part of the purchase order.

MS. VAN GELDER: Each purchase order has the same

statement on it.


MS. VAN GELDER: And the purchase order, what the

overarching number that he showed you is what I would call --

and I could stand to be corrected by Mr. Khoury who really is a

Government contracts expert. I would call it as a blanket


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

29

purchase agreement.

You have a license. The Corps of Engineers has

allocated a certain amount of money. You can go up to that

amount of money, but each allocation is a task order. And in

this case each purchase order has to be submitted. And once

EyakTek gets the purchase order, they have to pay within 30

days.

There is no master agreement. There is nothing

else that controls this. When -- they have agreed when they

receive this, they pay it.

The second issue -- and I want to go to this

quickly. The fact of the matter is, is that separately and

distinctly from the allegations that are in the indictment of

Mr. Babb and Mr. Alexander and Mr. Khan is a separate plea

agreement by Mr. Hallas. And I have already provided this

to -- to the defendant, but I will provide this again to the

Court --


MS. VAN GELDER: -- and to the defendant.

We were the ones -- actually, my predecessor, Mr.

Brownlee, who was the former U.S. Attorney here -- were the

ones who disclosed Mr. Hallas' --

THE COURT: Who was this? Who was former U.S.

Attorney?

MS. VAN GELDER: Mr. Brownlee, John Brownlee who is


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

30

now with Holland & Knight.

THE REPORTER: What firm?

THE COURT: Former U.S. --

MS. VAN GELDER: The west -- he was in the Western

District of Virginia.


MS. VAN GELDER: Not the eastern.

That matter that Mr. Hallas pled guilty to was

disclosed to the GSA in January of 2010. The fact that the SBA

gave us a notice of debarment, to me -- and we will respond to

that notice of debarment, and we said that in our affidavit --

is an example of one part of the Government not knowing that we

are working with another part of the Government.

The fact is, though we will have to fight that

suspension and debarment, we also know that Mr. Cho's actions

are going to cause yet another notice of suspension. So I --

this suspension and debarment is something that we believe that

we can address, but it also comes to the fact that Nova

Datacom's president realizes that it has to wind down. That

the -- and I'm going to get to just the crush of what we know,

the onslaught of litigation and administrative sanctions and

what -- what will ever happen to Mr. Cho.

The other correction I want to make to you, Your

Honor, is I don't believe -- and I am the worst at math. But

looking at the documents that Mr. Khoury gave you, they are not


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

31

a 1/12th value of the POs.

PO 5205 has a $9.2 million overall value. And the

invoice, 117-93, was only for $547,410. If it was exactly

1/12, according to my brain's Mr. Chiarodo's math, it would

have been 736,000.

Similarly, in the other PO, which is a $2.9 million

value, if it was 1/12th, it would have been $232,000. And the

invoice 11794 was for 359,000. So they're not exact 1/12ths,

from my math.

THE COURT: But does that change his basic point?

MS. VAN GELDER: I think it does because I --

THE COURT: How?

MS. VAN GELDER: Because I think that the fact that

there were different invoices with different amounts means that

this is not just a 1/12th, we're not doing anything. That

there were things going on with each purchase order that would

cause different amounts to go.


MS. VAN GELDER: Your Honor, with respect to -- and

this goes to -- I'm going -- I started to do this yesterday,

and I'll do it again. I'm passing to Mr. Khoury, one for the

Court -- this is the balance sheet for the ten months prior

to -- to October 31st.

THE COURT: Is this the one that goes to the $13

million?


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

32

MS. VAN GELDER: Exactly, Your Honor.


MS. VAN GELDER: And I think as a fair reading of

the -- of the transcript would say was that I started talking

about this and then I took myself down a --


MS. VAN GELDER: -- detour.

Your Honor, let me first of all explain. And I do

not understand Mr. Khoury's argument that they have -- the

employees have already been paid. I didn't follow that. But I

do know this.

THE COURT: Well, what he's saying is that the

employees have already been paid for the work that was -- that

they did. I'm not saying Nova Datacom has been paid, but the

employees during that period of time have already been paid.

There's nothing in this record saying that employees were not

paid for the period of time that they did the work.

So in other words, all he's doing is countering

something that probably isn't material anyway, but it certainly

tugged at my heart strings that people had already done work

for which they, individually, had not been paid.

And what I think Mr. Khoury was arguing is, Yeah,

they've been paid for that time period. Nova Datacom may not

have been paid for that particular invoice, but those people

have been paid for that work that they did during that time


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

33

period.

Do I have it right, Mr. Khoury?

MR. KHOURY: That's it, Your Honor.

MS. VAN GELDER: Your Honor, for the time period of

the two purchase orders that are at issue, Nova Datacom has

paid its employees. To do that, it has -- had to forego other

payments, vendors or other things. So if I can go through our

balance statement --

THE COURT: Yes.

MS. VAN GELDER: -- this will --


MS. VAN GELDER: -- this may help.

Your Honor, if you look -- and of course, Nova

Datacom is a small 8A business. But if you look at the balance

sheet, the accounts receivable line and under the assets is

$7.8 million. Out of that $7.8 million, approximately 3.6 of

that are pending invoices for Eyak services. So, the account

receivables that we will be -- coming in from our other

contracts is approximately $4.3 million.

When you look at the accounts payable, you have to

add first the 2.6, which is the first line, and then going to

the second page, you'll see the notes payable for GE Capital

and Microsoft.

GE Capital finances the products that we buy for

the USACE contract. So, we buy them on financing. When we get


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

34

paid, we pay GE.

When you add the accounts payable on top of the GE

Capital, you get approximately $4.27 million.

I should tell you that our payroll to our employees

is not included on this balance sheet.

But when you take the accounts payable of 4.27 with

the account receivables but minus EyakTek of 4.3, we have a

$30,000 difference that we're operating on.

The payroll for Nova Datacom on a monthly figure is

approximately $450,000?

MR. KHOURY: Half a month.

MS. VAN GELDER: Half a month.

So, by continuing to pay people because they're on

the job, we have to go into the hole. So continuing the USACE

contract without payment, draws all the resources from the

other payments. So without the payment, we're going into

deeper and deeper financial distress, which is already

affecting money that we have to pay for GE and for other

issues.

With respect to the two purchase orders at issue,

we have paid, and I'm talking just straight out payments, not

profit, not inflation, not even general overhead, we have paid

for the two purchase orders at issue $451,000 in payroll,

700 -- God bless you.

THE COURT: Excuse me. Go ahead. I'm sorry.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

35

MS. VAN GELDER: -- (Continuing) $730,000 in product.

And approximately 40- or $50,000 for travel for these people to

get to their remote locations.

So, they're holding 900,000, and we can show

payments out of 1.12 for this time period, that we're not

getting paid for. Yes, we are trying to pay our employees, and

that's why we're here because we will not be able to pay for

them for the next payroll. We just are -- we have no cash to

pay them.

So, the other thing I want to make clear -- and I

think the indictment makes this very clear -- Nova Datacom

didn't retain the inflations that were in the prior POs. The

indictment is very clear, and I will direct the Court's --

THE COURT: Well, they weren't the beneficiaries. It

was EyakTek or somebody else who got the inflation out of it.

MS. VAN GELDER: Your Honor, EyakTek got a 12,000 -- a

12 percent on every PO.

THE COURT: Routine was that EyakTek would subcontract

with Nova Datacom if Nova Datacom would give them a kickback.


THE COURT: Isn't that --


THE COURT: So Nova Datacom isn't getting anything

other than the contract as a whole.

MS. VAN GELDER: Correct.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

36

THE COURT: The subcontract.

MS. VAN GELDER: Your Honor, if the -- I direct --

THE COURT: And that's a lot.

MS. VAN GELDER: I direct the Court to the -- to the

indictment, particularly pages 11, 12, and 13. The $20 million

inflation, which I believe is noted on page 11, and that would

be 11 paragraph C, is followed on page 12 that 18 million of

that 20 million went to Kerry Khan.

THE COURT: EyakTek.

MS. VAN GELDER: No. Kerry Khan is the Corps of

Engineers.

THE COURT: Oh, Corps of Engineers. Oh, yes. Okay.

MS. VAN GELDER: So Mr. Khan got 18 million.


MS. VAN GELDER: Mr. Alexander got 1 million, and

Mr. Khan -- Mr. Babb of EyakTek got $700,000.

THE COURT: And what you-all got was the contract.

MS. VAN GELDER: Correct. So it's not that we have

this extra money hanging around --

THE COURT: Worth a lot of money.

MS. VAN GELDER: Your Honor, I have no doubt that this

was worth a lot of money. I -- I will stipulate to that. But

I will also stipulate that -- that even when this happened and

when these POs were -- were put in, we were working. We were

servicing the United States Corps of Engineers. And the real


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

37

problem that I believe that EyakTek has is not only has the

Corps of Engineers claimed back any money -- and as I briefly

stated yesterday, they're holding $2.5 million which would

cover any inflation that they have. But they haven't directed

him to pay or not to pay, and they haven't kicked us off the

job. They haven't renegotiated us. They haven't terminated us

for cause. They have a plethora of procedures that they could

punish us if we were really the bad actors. There were bad

actors in this contract on both sides. But for the quantum

meruit claims, for the unjust enrichment, without any claim by

the Government we can show that we have $1.12 million in hard

payments to personnel and to vendors and to travel, and that

900,000 is less than what we would even show for that.

So we're not even claiming right now for the TRO

for the contract. We're saying even under quantum meruit, they

don't have enough in the bank to even cover that.

So, yes, our people were being paid for the time

period, but that has caused the -- the cash flow. And we do

have contracts with other Government agencies that will be

ongoing, despite as you know the suspension and debarment

because we can complete those.

We would like to be able to complete them, but

we -- we're going to have to start winding down. We're going

to have to start selling off. We would like to do that in an

orderly fashion. We want our people to get jobs. We want to


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

38

renegotiate contracts so those employees will migrate or novate

over to them.

But the fact of the matter is, with this balance

sheet, with the 30,000 difference, and most of the money in our

accounts receivable being held either by the Government or

EyakTek, then we will not be able to stay in business. And

that we believe -- and I don't have to repeat the cases that

we've unfortunately given you in the wrong way -- but that

would be irreparable harm.

With respect to the Microsoft case, I read the

Microsoft case differently. The harm that we are saying is

being caused in this action is because of the retention of the

money by the defendant. The harm is being caused by the

defendant. And it is clear that in this case both of us have

unclean hands. And that's -- maybe that's why there's a

deafening silence from the Government. But --

THE COURT: Well, the Government has unclean hands

too. The Corps of Engineers.

MS. VAN GELDER: Clearly. But the Government will do

what the Government will do. And well, it may be at first

blush admirable that EyakTek is trying to protect the

Government's interest, but the Government isn't asking them to

do it. And in the absence of their requested direction, then

the money should go to who it is owed. And by the contract, it

was owed to us months ago.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

39

And that is really simply the case. And there is

no doubt our -- our affidavit sets forth -- now, we included

the October amount which was taken out for the PO, but

Mr. Livingston's affidavit plus this balance sheet clearly show

that we are in no position to continue paying for USACE

contractors if we aren't being paid. Which goes back to also

the e-mail that I showed you yesterday, Your Honor, in which

EyakTek even after the indictment, the date of that e-mail was

after the indictment.

And they are telling USACE, We're going to make

sure EyakTek's people are there. You know, they're going to

replace that PM. They're -- our job is to keep the mission in

mind.

So, Government's getting the benefit. EyakTek's

getting the benefit. I do not know and I don't mean to be

smarmy by saying this, I don't know if they put their 12

percent in escrow. But they're getting paid. They will

continue to be getting paid. They have the benefit of their 12

percent, and they don't have the right to retain ours. And

that is about as simply as I can say it, Your Honor.

THE COURT: All right. Mr. Khoury, let me ask you.

Has EyakTek been debarred?

MR. KHOURY: No, it has not, Your Honor.

THE COURT: Why not?

MR. KHOURY: Because --


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

40

THE COURT: I think the right answer is you don't

know.

MR. KHOURY: Well, unfortunately, I do know, Your

Honor.

THE COURT: Oh.

MR. KHOURY: Or I -- in fact today, we met with the

suspension and debarment official to discuss after we had

submitted a -- a substantial pleading to him in essence

demonstrating what the company has -- has done to assure its

present responsibility, providing information about all that's

gone on here from -- from what the company knows. And the

suspension and debarment official told us that he was -- he was

at this point not going to suspend the company, but that it was

subject to obviously what may or may not happen in the

investigation.

THE COURT: So what happens if -- if Nova Datacom has

to shut down and leave the work it's doing under the

subcontract?

MR. KHOURY: Well, then, EyakTek will have to find

somebody else to do that. And in fact, Your Honor, we have

learned today that they've walked off the job at the Corps.

And so EyakTek is -- is --

THE COURT: What do you mean walked off the job?

MR. KHOURY: The employees -- there were eight

employees who were -- and this has nothing to do with the two


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

41

task orders that -- or the two purchase orders that are before

the Court. But the employ -- there were eight employees who

were currently working under a different EyakTek purchase

order, and we have been told at USACE headquarters that they

have walked off the job. Which gets to the point here, Ms. Van

Gelder has made it quite clear. They're going out of business

anyway. Asking for an injunction --

THE COURT: Well, I -- I just asked you a question.

You've answered it. I don't need any further argument.

MR. KHOURY: All right. Sorry. Sorry.

THE COURT: All right. I'm going to recess and

consider.

Did you want to say anything more, Ms. Van Gelder,

based on what he's just said? I don't --

MS. VAN GELDER: No, Your Honor.

THE COURT: -- think it calls for anything, but I

didn't want to deprive you of that opportunity.

MS. VAN GELDER: No, Your Honor.

THE COURT: All right. We'll recess. It will be

about 15 minutes.

The Court stands in recess for 15 minutes.

THE LAW CLERK: All rise.

(5:26 P.M. TO 5:45 P.M. RECESS TAKEN ~ OFF THE RECORD.)


THE COURT: All right. I want to begin with the


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

42

non-merits matter. I want to begin by complimenting counsel

because your briefs and arguments have been helpful, and I

appreciate that.

The matter is before the Court on a request for

temporary restraining order pursuant to rule 65. The standard

to be applied in examining this request changed recently with

the Winter case in the Supreme Court followed by Real Truth

About Obama in the Fourth Circuit.

The parties are not in dispute about -- about that

standard. In essence, Winter swept aside Blackwelder or

actually Real Truth in Obama issued the final coup de grâce,

and it's no longer the sliding scale. It's now very simply

that there must be a clear showing of irreparable harm, a clear

showing of likelihood of success on the merits, issuance of an

injunction should be in the public interest, and the

fourth -- the fourth factor --

What is the --

MR. KHOURY: Balance of hardships, Your Honor.

THE COURT: Balance of hardships is still in there,

but it's -- the balance of hardships. For a moment there all I

could think of was, my heavens, another Herman Cain moment.

Not Herman Cain. Who's the guy.

MS. VAN GELDER: Rick Perry.

THE COURT: Oh, Perry. Perry, yes.

In any event, as it turns out, balance of hardships


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

43

is not a significant factor in this -- in this calculus.

The facts are spread out in a fairly extensive

record, and it's -- the compliment I paid counsel is that they

in the end explained that fairly clearly.

The dispute is over two invoices that are for work

that has already been done by Nova Datacom, Nova Datacom, on a

subcontract with Eyak Technology for work for the Army Corps of

Engineers.

The work's already been done. These two invoices

have not been paid. They have not been paid because this

entire process has been disrupted by the discovery by the

Department of Justice of a conspiracy to commit fraud and

bribery in connection with this contract.

There is an indictment, and a number of persons

have been indicted. The U.S. Corps -- the U.S. Army Corps of

Engineers person has been indicted, and some others. And the

indictment speaks about essentially a conspiracy that resulted

in overpayment of about $20 million, is the allegation. And we

don't know with any great specificity what amount of inflation

in the invoices is attributable to the two invoices in

question.

By inflation, what I mean is that these were

kickbacks. What happened is that -- what happened allegedly is

that Novacom or -- Data -- Nova Datacom, in order to obtain

this subcontractor -- subcontract from Eyak Technology agreed


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

44

to pay money to Eyak Technology, a person, and U.S. Army Corps

of Engineer persons in order to ensure that they got the

contract. So they would inflate the invoice to reflect that.

We don't know what the precise amount of inflation

is attributable to the two invoices in question. We do know

the period of time for which the invoices are involved.

The invoices are -- the two invoices are for the

period -- or one of them, which is 5205, is for the period

9-30 -- I beg your pardon -- 9-28-2010 to 9-27-2011.

The period for the second one, which is 5208 C, is

9-28-2010 to 9-27-2011. So it's the same period for both of

the invoices, but the -- the 9 -- the 5208 C had a modification

for the period 1-1-11 to 9-27-11.

Now, the case is complicated in some ways because

a -- I think it's the -- the Government persuaded the owner of

Nova Datacom to cooperate by continuing to participate in the

conspiracy so that the Government could net the co-conspirators

it was seeking to get. This cooperation generally began in

June of 2011.

What the Government didn't do and what Nova Datacom

didn't do is to ask, Well, if we continue and we keep doing

this work, how are we going to get paid? I think to put it

bluntly, the Government didn't care about that. This is

different from the usual Government cooperation where all the

money that's involved or all the drugs that are involved come


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

45

from the Government. And the Government doesn't lose anything.

They get the drugs back and they get the money back.

But here, what the Government was asking is for

Nova Datacom to go ahead and continue in the conspiracy so that

they could net other people. And it doesn't appear on this

record, and I'm not sure it's material even so whether anybody

gave any consideration to how Nova Datacom was going to get

paid. But Nova Datacom went ahead and did cooperate.

Now, the argument for a -- an injunction, for a

temporary restraining order to issue at this time, the precise

temporary restraining order that is sought is a requirement

that Eyak Technology pay these two invoices, totalling I think

about 900 and some thousand dollars. And the argument is that

if Eyak Technology does not pay these invoices, then the

continued existence -- not so much the continued existence of

Nova Datacom, but the way in which it ceases to exist will be

severely impacted.

Ms. Van Gelder, as she always does, was very can --

very straightforward and lucid and candid. And she said that

what's at stake is not whether Nova Datacom ceases to do

business, but rather how they cease to do business. Whether

they cease to do it in an orderly fashion and pay their

employees, have their employees have time to get other jobs and

the like. That's an important point.

Nova Datacom has been debarred. Of course, Nova


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

46

Datacom will -- will I'm sure resist that and try to get it

turned around. Perhaps they will succeed. But at the present

time, according to this record, I think it is clear that Nova

Datacom will go out of business. And the question is, will

they do it in an orderly fashion or will they have to close up

the doors more quickly.

Now, those are some facts. There were some other

facts brought out today, one by Mr. Khoury in which he pointed

out that the employees have already been paid for this work.

Well, there was some suggestion yesterday that they

might not have been paid for this work, but I think the real

suggestion that Ms. Van Gelder was making is not that. She

wasn't suggesting that.

What she was really suggesting is that they won't

be paid in the future. And I think I injected the fact that

it's Thanksgiving and Christmas, and it tugged at my heart

strings, as I'm sure it would tug at anyone's heart strings.

But in the end it's not really material because irreparable

harm is not based on whether certain employees will receive

compensation at Thanksgiving and Christmas. The real issue I

think is -- is whether this injunction should issue in order to

allow Nova Datacom to wind down its business in an orderly

fashion. But in any event, I think it is clear that for these

two invoices, they've -- the employees who did that work

already received their salaries for that period of time.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

47

But the more important point that Mr. Khoury made

is that there is no way to tell on this record whether there is

any inflation or how much inflation is attributable to these

two invoices. I think he'd be prepared to say there's

certainly some inflation, because what EyakTek has done is to

escrow the amounts owed under these two purchase orders and

seek guidance from the Army as to whether -- and how much they

should pay. The Army's silence on this has been deafening. Of

course, the Army's not a clean hand situation either because

their person is the person who solicited the bribes, I expect.

That's I think what's suggested in the indictment. And he

certainly received the lion's share of the profits from this

illegal operation.

But in any event, I think it is clear that we

cannot determine on this record with any accuracy or certainty

what amount, if any, of inflation is attributable to these two

purchase orders.

Now, let's look at the legal principles a little

more closely.

Yesterday I expressed the view that in a contract

case for which damages are sought, it is extremely rare for

there to be a basis for an equitable remedy of a TRO because it

is axiomatic that damages are an adequate remedy. The

argument, however, made by the plaintiff, or the petitioner in

this case, is that they're going to go out of business if they


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

48

don't get this. They'll go out of business anyway, but they're

going to go out of business in a very disorderly fashion that

will disrupt the work and everything else.

And I might point out, there's nothing in this

record -- I don't have anything from the Army that says, Oh,

please, don't have these people run away from the job because

this is national security or some other kind of work and we

desperately need them. That's not present here. I don't see

any evidence of that.

But in any event, it is true that a mandatory

injunction, which is what is sought here, requiring action by a

party is appropriate in exigent circumstances where it is

necessary both to protect against irreparable harm in a

deteriorated circumstance created by the defendant and to

preserve the Court's ability to render effective relief on the

merits. That's right out of the Microsoft case.

And in Microsoft, the Court reversed a District

Court's mandatory preliminary injunction requiring Microsoft to

distribute the plaintiff's software with its operating system

and web browser. In other words, it was an injunction

requiring them to distribute that together.

The District Court justified the injunction as

necessary to prevent Microsoft from obtaining a future

advantage in the marketplace based on past wrongs. The Fourth

Circuit held that future harm in the marketplace was not


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

49

sufficient irreparable harm. Any present harm identified was

defined to generally in the injunction did not aid or protect

the Court's ability to enter final relief.

Of course, on the facts that case is not apposite

at all, but the principle is.

A mandatory preliminary injunction in any

circumstance is disfavored and warranted only in the most

extraordinary circumstances. Taylor against Freeman at 34 F.3d

266 makes that point. And it is true that the authority of any

District Court to issue such a preliminary injunction should be

sparingly exercised. Mandatory preliminary injunctions do not

preserve the status quo, and normally should be granted only in

circumstances when the exigencies of the situation demand such

a relief. And here the argument is that they do. Without this

relief the result will be that there will be a disorderly

winding down of business.

Now, the parties argued about whether the relief

here would alter the status quo or would not alter the status

quo. There are some cases that I think are illustrative in

that regard, but in the end that's not what really is decisive

in this case. I think what's decisive in this case is the

harm. What harm counts for irreparable harm.

In my view, the source of the irreparable harm in

these cases is not the absence of an immediate damages remedy,

that is it's not the failure to pay these invoices. It's the


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

50

debarment. That's the problem. Because there would be other

revenues coming in if they could continue to do that, and the

matter would shake out after that. And in Blackwelder and

Statesville against -- not Blackwelder. Blackwelder and the

Federal Leasing cases, those were cited by the plaintiff. I

looked at those. And there, the preliminary injunction -- in

fact, if I look at the facts again, they do stand -- one, the

Federal Leasing case does say that the possibility that

adequate compensatory or other corrective relief will be

available at a later date in the ordinary course of litigation

does weigh against the claim of irreparable harm. But they

also said in that case that going out of destroying a business

would be a possibility.

In Federal Leasing, the plaintiff sought a

preliminary injunction that would require the insurance --

insurer, defendants, to process the plaintiff's claims on a

rolling basis rather than at the expiration of each sales

agreement into which the plaintiff had entered.

In other words, the preliminary injunction that the

District Court ultimately granted in that case required the

acceleration of claims processing, not claims payment. And in

Blackwelder, which of course is now been consigned of the dust

bin of legal history -- that makes me feel old because

Blackwelder was -- has been in existence for a long time. And

actually, I've lasted longer than Blackwelder. That gives me


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

51

some concern.

But in Blackwelder, the plaintiff sought a

preliminary injunction that the defendant, which was a

furniture manufacturer, restore the plaintiff, a furniture

dealer, to its status as authorized dealer of a defendant's

product. So in this respect, the Fourth Circuit held that an

injunction should have been granted. That would require the

plaintiff and the defendant to continue the business

relationship that had existed before defendant terminated it.

So the source of the irreparable harm in those

cases was not the absence of an immediate damages remedy, but

rather interruption of the parties' established prior course of

business, of conduct. And each injunction required resuming

that course of conduct, which in neither case required the

payment of potentially disputable sums of money.

Now, whether the data -- or whether the harm is

irreparable, as I indicated, Blackwelder and Federal Leasing,

careful reading of those cases reveals that the irreparable

harm was the imminent loss of customer goodwill caused by the

plaintiff's inability to honor purchase orders. In other

words, the harm to the plaintiff was primarily derivative of

the harm to its customers. What made the harm irreparable is

that reputation can be easily damaged. And these people would

buy furniture elsewhere and they'd never come back. It's only

with difficulty repair. And that's not the goodwill harm that


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

52

is presented here.

So, in both Blackwelder and Federal Leasing, the

harm that was incalculable and irreparable was the loss of

goodwill attributable to the plaintiff's inability to satisfy

their customer's demands. And that's not the case here, so I

think those cases are not very persuasive here.

The plaintiff in each of these cases identified

specifically how continuation of the status quo would harm its

reputation among customers, and that's not the case here. It's

the absence of customers and preexisting harm to Nova Datacom's

reputation caused by the chief technology officer's

malfeasance, neither of which would be redressed by any

preliminary injunction that continues to harm Nova Datacom.

Well, Datacom -- Nova Datacom contends that Eyak's

withholding of the funds and putting them in escrow is

responsible for its current cash flow problems. Nova Datacom

has not succeeded, though, in my view in demonstrating that

whatever irreparable harm currently befalls Nova Datacom is

attributable to EyakTek's withholding of these sums.

First, the party submissions strongly suggest that

the sum that Nova Datacom seeks is only a fraction of its

operating revenue, but that's not really decisive here. But it

does appear plainly from this record the debarment and the harm

to the company's reputation and financial viability are the

primary sources of Nova Datacom's cash flow problems. Neither


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

53

of these sources is attributable to EyakTek's withholding of

payment with respect to the two invoices in issue.

And as is clear, Nova Datacom is going to go out of

business at some point in time. An injunction here would

merely delay the inevitable and make it more orderly to be

sure, and people would be paid some, which they might not

otherwise get. That's true. They might have to be laid off

sooner.

But although EyakTek's withholding of the funds in

escrow has undoubtedly harmed the financial health of Nova

Datacom, I don't doubt that point at all. Nova Datacom cannot

make a clear showing that the harm it has presented is

irreparable; i.e., that going out of business is attributable

even primarily to EyakTek's withholding. It's attributable to

that person's engaging in this illegal conduct and resulting

disbar -- debarment.

So, this request for a temporary restraining order

founders on the first requirement, that is a clear showing of

irreparable harm. That showing, in my view, cannot be made.

And as I said, the purpose of a mandatory

injunction would be to protect against irreparable harm in

deteriorating circumstances created by the defendant. I'm not

sure it's created by the defendant. In fact, I'm finding to

the contrary on this record. And to preserve the Court's

ability to render effective relief on the merits.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

54

Well, it's unclear what the courts mean by

effective relief on the merits. But certainly the

injunction -- the failure to issue the injunction isn't going

to affect this Court's ability to hold a trial on the complaint

that's been filed, and if the plaintiff succeeds, to issue a --

an appropriate judgment.

I don't need to address -- I don't need to reach or

address public interest or balance of equities. I will say

briefly on the -- on the likelihood of success on the merits, I

can't say there's a clear showing of a likelihood of success on

the merits. I can say without any lack of confidence that it

is clear - Ms. Van Gelder has made this point emphatically and

clearly - that they -- that Nova Datacom did the work, and that

everyone was satisfied with the work. And that's the work that

is attributable to these two invoices, and that they should be

paid for it.

The problem I'm having with the clear showing of

likelihood of success on the merits is it is unclear whether,

as the defendants argued today -- defendant argued today,

whether the plaintiff can prevail on a breach of contract claim

where the invoice is fraudulent.

Well, the invoice is fraudulent perhaps, but if it

is, it's the -- the defendant was a joint tortfeasor in that

regard, was a co-conspirator in the fraud. And I don't know

under Virginia law and I don't know of any authorities that


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

55

have been cited that address this, whether that impairs the

ability of the plaintiff to recover on a quantum meruit basis.

I suspect in the circumstances it may not. But I don't have a

clear showing of that now, and it seems to be a novel issue.

And as I said, I don't reach the other -- I don't need to reach

and decide the public interest and the balance of the equities.

I should state briefly that the defendant argued

clearly that the plaintiff has unclean hands, and that's the

end of the -- that's the first step, and that's the end of the

inquiry.

The reason I don't think that is, in my view, is

because I don't think the defendant's hands are any cleaner

than the plaintiff's. So if the plaintiff has unclean hands

and the defendant has unclean hands, it's not clear to me that

defendant -- and they did it together, that the plaintiff's

unclean hands would be a bar to it. So I passed over that.

There aren't any authorities that address that issue.

But I think, as I said, the issue of a temporary

restraining order is decided on the basis of the fact that the

harm is not irreparable, doesn't qualify as irreparable harm in

these circumstances, and it isn't a clear showing of that. And

also there's no clear showing of likelihood of success on the

merits, even though I take -- I take Ms. Van Gelder's point

that the work was done. The U.S. Army Corps of Engineers and

EyakTek were happy with the work that was done, and they


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

56

haven't been paid for that work that was done.

So the motion for a temporary restraining order

must be denied. And I don't do that -- I haven't done it

quickly or easily because I took seriously the argument, even

though it was a very novel argument. It's always novel. It's

now been more than -- well, 25 years, and the number of times

that I have granted a mandatory injunction to remedy a breach

of contract is zero. I've never done it before, but what Ms.

Van Gelder did is to make me stop and look at this thing much,

much, much closer. She made a very appealing argument.

But in the end, as I said, I don't think that the

claim that we need the money to help us go out of business in a

more orderly way qualifies as irreparable harm, especially when

the going out of business isn't attributable to the unpaid two

invoices. It's really attributable to the bad acts of the

plaintiff itself, or this -- not the plaintiff -- well, yes,

the person at the plaintiff who engaged in this bad conduct.

And so -- but I am denying the TRO for the reasons stated.

Now, I am willing to consider a somewhat expedited

trial, but I'm not sure it helps at all. And I'll tell you

why, and I'll let you think about it, and you can file

something. I can make time for you, maybe in later January or

sometime in February, and we can do this.

However, let's face it. Some of these witnesses

are going to take the Fifth Amendment, probably. And matters


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

57

are still very volatile, I can tell. And even if I held such a

trial, and even if a judgment were then entered in favor of the

plaintiffs, let's stay on quantum meruit for a substantial

amount of money, let's say for $800,000 or so, that judgment

would I think, because lawyers are lawyers, would be appealed.

I don't think it would be successful. I think my

one lost record is not bad. But it would delay payment of the

money.

And I'm not sure that an expedited trial, Ms. Van

Gelder, would help your client anymore, but I want to give you

that opportunity to think about it and talk about it. I don't

know what effect a trial on breach of contract, quantum meruit,

unjust enrichment -- you know, there would be -- first, there

would be battles about, can you have unjust enrichment when you

have a contract? Can you have quantum meruit when you have a

contract?

Well, the answer is going to be, well, ordinarily

not, but in this case it's pled in the alternative because the

contract may not be valid because of the -- may have been in

some way invalidated by this general principle that fraud was

committed. But there will be some opening skirmishes in that

regard.

So in any event, that's my ruling to date. And

I'll enter an order saying for the reasons stated from the

bench. I'm not going to write on this. But I think my reasons


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

58

have been adequately elucidated here from the bench.

But I want to give the parties an opportunity to

discuss this. Now of course, there's always the opportunity to

resolve this by some other means.

MS. VAN GELDER: May I address that, Your Honor?

THE COURT: Yes.

MS. VAN GELDER: Your Honor, first, I would say that

we have thought about this. We have made a settlement offer

today to the -- to the defendants. I'm not sure this will help

bring them to the table, but we did make it and will continue

to make it, and perhaps we can go to the magistrate and --

THE COURT: Yes, I would be happy to make those

arrangements.

MS. VAN GELDER: So I would like to set a trial. I do

believe that we can make our case without anybody --

THE COURT: Bring me the red book, please.

MS. VAN GELDER: -- anybody taking the fifth, because

it would be the people who are working there. Now Alex Cho was

just -- if we're doing a quantum meruit, we're going to bring

in the people who say, I was there and I did this and -- and so

that's a very simple case for us to bring.

I do believe that we have sort of seen this before,

the Harrison case, SAIC, all of the false claims cases where

there is that fraud ab initio argument --

THE COURT: I see them all the time that's pled in the


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

59

alternative.

MS. VAN GELDER: Right. And the courts have said,

even if this fraud ab initio --

THE COURT: But I'm sure Mr. Khoury will raise the

issue. It will be fully briefed. I'll have to think about it

and I'll read the cases and decide it.

MS. VAN GELDER: Your Honor, I --

THE COURT: Now, the point is that -- and the reason I

say that is that Voltaire said he was ruined twice in life,

once when he lost the litigation and a second time when he won

one. In other words, for the client, litigation is at best a

pyrrhic victory. The only people who profit from litigation

are lawyers. They can educate their kids in private schools

and ivy league universities.

I know. I did that. Not that my kids -- my kids

are now through school. One of them in an ivy league

university, but I can't say he's educated. I can only say I

paid for a lot of money for him to spend time there.

I was just reminiscing. He's a doctor now, but he

named his children Jacob and Sarah, and he hasn't the slightest

idea who Jacob and Sarah were in the Old Testament. And for

that I paid Princeton $100,000. But he's a pediatric

cardiologist, and he doesn't care about knowing about Jacob and

Sarah. So I'm telling his children about Jacob and Sarah

because I don't want them not to know it, although it's going


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

60

to come as a shock to both of them when they get to be that

age.

In any event, the point I'm making is settlement is

the best for both.

MS. VAN GELDER: I totally agree. But I believe

without specter of a trial, that -- that settlement will just

be a delay tactic.

THE COURT: All right. I -- I think your point is a

sound one.

Mr. Khoury.

MR. KHOURY: Yes, Your Honor. Your Honor, we -- we --

if we are going to go to trial we're going to need some

discovery here because all of these facts have been kept --

THE COURT: Well, you're doing all these things in a

hurry.

MR. KHOURY: -- kept from us. And as -- as the Court

has said --

THE COURT: Just think how profitable it will be for

your firm. You'll do all these depositions in a hurry, and

you'll do all this stuff. It will be -- and then you'll go to

the magistrate because you'll argue a bunch of things. I mean,

this is -- you'll just make a lot of money in a short period of

time.

MR. KHOURY: And that's -- that might be wonderful

for --


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

61

THE COURT: And let me ask the question. You filed a

complaint?

MS. VAN GELDER: Yes, Your Honor.

THE COURT: You didn't ask for a jury.

MS. VAN GELDER: No, I didn't, and I would not ask for

one.

THE COURT: I couldn't imagine that you would.

And you didn't ask for a jury. Or you won't ask.

You haven't had a chance to ask. You want to --

MR. KHOURY: We have yet --

THE COURT: -- discuss that with --

MR. KHOURY: -- to answer, Your Honor, and I'm not

sure what the answer is to that.

THE COURT: Well, since you participated in the fraud,

I'm not sure you would want that.

MR. KHOURY: Well, be that as it may, Your Honor, the

suggestion that witnesses will not have to take the fifth, we

are looking --

THE COURT: I think you're probably right. Some of

them may take the fifth, but we'll cross that bridge when we

come to it. In the meantime, you can earn some money. Because

I think Ms. Van Gelder is exactly right. Unless I show that

I'm going to try this case -- and you know the Eastern

District, if I set a trial, then absent an asteroid hitting

Alexandria, we're going to have that trial. And that will be


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

62

like the -- remember Sam Johnson, what he said about the man

who was about to be hanged? He said it wonderfully

concentrates his mind.

Well, I want to wonderfully concentrate your

client's mind. That's what Ms. Van Gelder was getting at.

Am I right, Ms. Van Gelder?

MS. VAN GELDER: Yes, Your Honor. And in deference to

the Court's time, I am willing to say we will go to the

magistrate, and then we will come back and ask for the -- for

the Court's time so that he will have an opportunity to talk to

his client --

THE COURT: Well, who is --

MS. VAN GELDER: -- about the --

THE COURT: -- the magistrate judge assigned to this

case?

MS. VAN GELDER: Judge Anderson.

THE COURT: All right. I saw him today. He looked

harried, so -- but I will ask him to see you-all. But I'm

going to pick time now because my docket fills up pretty

quickly.

MS. VAN GELDER: That would be fine.

THE COURT: And what I have in mind is beginning this

case at 10:00 a.m. on the 7th of February.

MS. VAN GELDER: Hampered as I am as a person totally

devoted to a BlackBerry, I believe I'm open, but I don't have


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

63

anything at this moment to -- to know.

MR. KHOURY: Your Honor, just -- at this point, we

would just want to reserve our objection to setting it that

soon because we do believe that trying to -- trying to get the

information that we're going to need to get from the

Government, which actually received a lot of these products

or -- or may have received a lot of these products and the

services, especially given the nature of the conspiracy here

where the Government folks were telling EyakTek --

THE COURT: Well, you know they did some work, and you

know the Government was satisfied with it, and you know that

you set aside a bunch of money.

MR. KHOURY: I don't know that the Government was

satisfied with it. And the reason I don't know that, Your

Honor, is that --

THE COURT: Well, you'll have to find out by February

7th.

MR. KHOURY: Finding that out from the Government

while a criminal investigation is going on is going to be near

impossible, Your Honor, filing the --

THE COURT: Well, were you in the Corps?

MR. KHOURY: I was not, Your Honor.

THE COURT: Ah. Well, you know what they say in the

Corps, the difficult we do immediately. The impossible takes a

little longer. But February 7th is the man about to be hanged.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

64

And I -- I do that because I really believe this can be done.

In any event, in the normal course of events, Mr.

Khoury, this case would probably be set no later than May or

June anyway. And I don't think there's going to be any fraud

trial and everything mopped up by then, and we don't wait for

criminal matters. And if somebody comes to trial in a civil

case and takes the fifth, that's an inference that can be drawn

in favor or against that whoever offered that -- well, it isn't

against that party. But if somebody comes in here, the Army,

let's say, and says, I take the Fifth Amendment; I'm not going

to testify, I give the jury an instruction that says, You may

draw the inference that the answer to that question would have

been unfavorable to the person calling that witness, or to the

party calling that witness.

Now, I'm not saying I'll definitely do that in this

case, but that's what I've done in the past and I'll hear from

you at the time.

And, of course, there have been asteroids that have

hit the earth in various places. And I'm not saying that

I've -- that there aren't circumstances where I wouldn't set a

later date. I'm just -- I want you to walk out of here, Mr.

Khoury, with very little assurance that that's going to happen

so that you can wonderfully concentrate your client's mind.

Your client knows what services were performed.

Your clients paid lots of -- how many -- you told me yourself.


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

65

Here it is. They paid $10 million on -- with respect to

portions of these -- of this invoice. You didn't pay $10

million because you didn't know what was being done.

MR. KHOURY: Well, Your Honor, we paid $10 million

because we were deceived as to what was being done and what

was --

THE COURT: Well, didn't you go and look?

MR. KHOURY: What was being done was -- we tried to,

Your Honor. We tried to get documentation, and the Government

folks who are involved in this conspiracy immediately pushed

back and said, We have signed DD-250 forms. Those are the

forms that the Government signs when they approve and accept

services and products. They say, We have these signed DD-250s.

You don't need any other documentation. And they -- it's -- it

was Mr. Khan, Mr. Alexander --

THE COURT: Well, you know --

MR. KHOURY: -- and they got the contract --

THE COURT: -- I'm not foreclosing. I take your

point. It's not an invalid point. I understand what you're

saying, but I don't think it's going to be, in the end, an

obstacle.

I don't think there is a dispute about what was

done and whether it was satisfactory. That's not why we're

here. You paid $10 million for other stuff. The fact -- I

mean, maybe it is true that you don't know what they did and


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

66

you just did it on the basis of signed DD-2, whatever they are.

Maybe that's true. But it seems to me your -- well, I don't

know the facts and I won't say more, but I doubt that this

is -- that the fact that they didn't do the work or they didn't

do the work to your satisfaction or to the Army's satisfaction,

I doubt that's going to be a factor. But, I don't foreclose

it.

MR. KHOURY: Well, we respectfully --

THE COURT: You don't know either. Right?

MR. KHOURY: We -- we would need to get discovery

from --

THE COURT: You don't know --

MR. KHOURY: -- the Government --

THE COURT: -- do you?

MR. KHOURY: We don't know at this point.

THE COURT: All right. That's what I said.

And you would want to go into all these things. By

all means, do it. Charge your client a fortune, then ask your

client -- send them bills every week and then ask them whether

it wouldn't make better sense to settle this. You might get a

better deal out of the settlement in the end. I don't know.

We'll see.

But again, I say to you, Mr. Khoury, I think the

points you raise are not invalid. I hear you, but I'm of a

different view right now. Maybe in the future you'll change my


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

67

mind, but in the meantime, you've got a big task ahead of you.

You're going to have to spend a lot of money -- your client's

going to have to spend a lot of money, and that's the message I

want you to take to your client in connection with the

settlement.

Now, do you want me to call and to communicate with

Judge Anderson about a settlement conference? I won't do

that -- I won't do that, Mr. Khoury, unless you and Ms. Van

Gelder assure me that there's some prospect -- I'm not going to

waste Magistrate Judge Anderson's time unless there's some

potential for -- for success.

MR. KHOURY: Your Honor, I would like to talk to my

client before doing that --

THE COURT: That's appropriate. That's appropriate.

So if you will let me know. I don't want you to call. Just --

do a little joint præcipe or something that you can file by

computer saying, The parties are in agreement, or the parties

are not in agreement about whether there are any substantial

prospects for settlement. If I get an affirmative answer, I

will call Judge Anderson and urge him to move on it very

promptly.


THE COURT: Anything further this evening on behalf of

the plaintiff, Ms. Van Gelder?

MS. VAN GELDER: No, Your Honor. Thank you for your


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

68

time.

THE COURT: Mr. Khoury?

MR. KHOURY: No, Your Honor. Thank you.

THE COURT: All right. I thank counsel for your

cooperation, and I reiterate that I found your arguments very

helpful.

I really do need to understand things, and it's not

like when I sit by designation on various courts of appeal

where the issue is very sharply defined, thought about for

months in advance and that's all there is. Here, it comes in a

sort of moving target fashion. Lots of new things are

presented, so oral advocacy makes a big difference in the

district court.

I've sat by designation in the Federal Circuit, the

Fourth Circuit, the Third Circuit, the Second Circuit, and I

can't remember the number of times -- I can't remember any

times when the judges who came to hear argument were pretty

clear about the result. Here, that's not the case. What you

do and what you say and what you write is very important.

Thank you.


MR. KHOURY: Thank you, Your Honor.


(PROCEEDINGS CONCLUDED AT 6:33 P.M.)

-oOo-


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

69

UNITED STATES DISTRICT COURT )

EASTERN DISTRICT OF VIRGINIA )

I, JULIE A. GOODWIN, Official Court Reporter for

the United States District Court, Eastern District of Virginia,

do hereby certify that the foregoing is a correct transcript

from the record of proceedings in the above matter, to the best

of my ability.

I further certify that I am neither counsel for,

related to, nor employed by any of the parties to the action in

which this proceeding was taken, and further that I am not

financially nor otherwise interested in the outcome of the

action.

Certified to by me this 11TH day of DECEMBER, 2011.

__/s/___________________________JULIE A. GOODWIN, RPRCSR #5221Official U.S. Court Reporter401 Courthouse SquareTenth FloorAlexandria, Virginia 22314


Eyaktek Novadatacom Settlement Transcript

Documents

Transcript of Eyaktek Novadatacom Settlement Transcript