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Selected docket entries for case 111924

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05/14/2012

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05/16/2012 84 Corrected Brief FILED (c)

Page

Docket Text
CASE CALENDARING, on submission for 06/26/2012,
SET.[609008] [111924]
CORRECTED REPLY BRIEF, on behalf of Appellant
Daniel B. Karron, FILED. Service date 04/12/2012 by
email. [610838] [111924]

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ATTENTION
MS. JENIFER

THOMPSON
CASE MANAGER

11-1924
(212) 857 8613
second corrected version
(remove this page before submission
GREY COVER)

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11-1924
To be argued by:
D. B. KARRON

FOR THE SECOND CIRCUIT


Docket No. 11-1924

UNITED STATES OF AMERICA,


Plaintiff-Appellee,
v.
DANIEL B. KARRON,
Defendant-Appellant.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
REPLY BRIEF FOR THE DEFENDANT-APPELLANT
DANIEL B. KARRON
pro se
348 East Fulton Street
Long Beach, New York 11561
(516) 515- 1474
drdbkarron@gmail.com

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11-1924
To be argued by:
D. B. KARRON

FOR THE SECOND CIRCUIT


Docket No. 11-1924

UNITED STATES OF AMERICA,


Plaintiff-Appellee,
v.
DANIEL B. KARRON,
Defendant-Appellant.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
REPLY BRIEF FOR THE DEFENDANT-APPELLANT
DANIEL B. KARRON
pro se
348 East Fulton Street
Long Beach, New York 11561
(516) 515- 1474
drdbkarron@gmail.com

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Table of Contents

Contents
Table of Contents .......................................................................................... i
Table of Authorities .................................................................................... iii
Cases ....................................................................................................... iii
Statutes .................................................................................................... iii
Regulations .............................................................................................. iii
Other Authorities ..................................................................................... iv
Reply Preliminary Statement ....................................................................... 1
Issue Presented for Review .......................................................................... 1
Statement of the Case................................................................................... 2
ISSUE: The Claim is not false. .............................................................. 2
a) The Patterson Court never even cited, much less adjudicated, The
Claim as a source of misapplied funds. .......................................................... 2
b) The $75,000 Payroll Advance (The 75K Advance), made to Karron
from the first (and only) $150,000 working capital advance from The Claim
was well recognized by the Patterson Court and OIG as bona fide tax paid
salary. ............................................................................................................ 3
c) The balance of working capital advance proceeds from The Claim
was used as affirmed by Karrons signature. .................................................... 3
e) Because of the above, The Claim as affirmed, was not a False
Claim Act claim on the United States Treasury. ............................................... 3
f) Arguments on The Claim are not estopped because it was never
even cited by the Patterson Court as fraudulent or false. The Claim was not
even an exhibit in The Patterson Court. Because of this, the Claim is not an
eligible FCA Same Transaction subject to FCA Statutory Collateral
Estoppel. .......................................................................................................... 3
i

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Reply Statement of Facts ............................................................................. 3


The Advanced Technology Program ......................................................... 3
Karron Salary............................................................................................ 4
Karron was required to Co-Funds Project Direct Costs, Indirect Costs. . 4
Karrons Salary Figures ......................................................................... 5
Karrons Salary funded contribution and overhead ................................ 5
Summary of Argument ................................................................................ 5
Argument ..................................................................................................... 5
Standard of Review ...................................................................................... 6
Reply Argument .......................................................................................... 6
The Claim is not false ............................................................................ 6
Point 1: The 75K Advance was classified as Salary............................... 7
The 75K Advance payments are salary earned but not paid by check . 8
Point 2: The 30 Day Float Rule does not apply...................................... 8
Point 3: Working capital advance ............................................................. 9
Point 4: Tracing The 75K Advance ..................................................... 10
Point 5: Amortizing The 75K Advance ............................................... 11
Point 6: The Rent: Reclassified and/or Offset ......................................... 12
Point 7: Budget Flexibility 10% Change Rule base: Annual or Total ? 13
Point 8: Challenge to Karron contribution figures fails ........................... 15
Conclusion ................................................................................................. 15
Appendix ..................................................................................................... 1
CERTIFICATE OF COMPLIANCE ........................................................ 2
Certificate of Service ................................................................................ 3
Cross reference ......................................................................................... 1
Karron Appendix Table of Contents ......................................................... 3
Index......................................................................................................... 8
ii

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Table of Authorities
Cases
Cases

Decl. of Dunlevy............................................................................... 6, 8, 13, 14, 19


U.S. v. Harloff, 815 F.Supp. 618 (W.D.N.Y.1993) ................................................ 9
U.S. v. LaHue, 170 F. 3d 1026 (10th Cir., 1999).................................................. 9
U.S. v. Mills, 140 F.3d 630 (6th Cir., 1998) ........................................................6, 9

Statutes
Statutes

15 U.S.C. 278n (2001) ...................................................................................... 17


18 U.S.C. 666(c) .......................................................................................... 1, 2, 9
31 U.S.C. 3729(a)(1) (2000) ............................................................................1, 7
31 U.S.C. 3729(b)(1) (2000). .............................................................................. 7
31 U.S.C. 3729(c) ............................................................................................... 1
31 U.S.C. 3729(c) (2000) .................................................................................1, 2
31 U.S.C. 3731(d) ............................................................................................... 4
31 U.S.C. 3731(e) ............................................................................................... 4
35 U.S.C. 123 ................................................................................................... 13

Regulations
Regulations

15 C.F.R. (1101 Edition) 14.25 (d)................................................................ 14


15 C.F.R. (1101 Edition) 14.25 (f) ................................................................ 14
iii

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15 C.F.R. (1101 Edition) 24.30 Changes. (c)................................................ 14


15 C.F.R. 14.2(rr).............................................................................................3, 9
15 C.F.R. 14.22(b) ............................................................................................ 10
15 C.F.R. 14.22(f) ..........................................................................................9, 12
15 C.F.R. 14.25 ................................................................................................... 5
15 C.F.R. 24...................................................................................................... 14
15 C.F.R. 295 (2001) ........................................................................................ 13
15 C.F.R. Subtitle B, Ch. II (1101 Edition) 295.8(a)(2)................................... 4
15 C.F.R. 278n (d)(11)(A) ................................................................................... 3
37 C.F.R. 1.27(a) .............................................................................................. 10
Other Authorities
NOTE ABOUT FORMAT OF CITATIONS
A-nnn refers to the Government Appendix; SPA-nnn refers to the
Government Special Appendix, and is cited in this manner.
KA-nnn refers to the Karron Appendix, submitted with this Reply Brief.
A cross reference table for citations in the Karron Brief to these later
submitted appendices is included in this submission.
GXnnn refers to Government eXhibit nnn from the Patterson Court criminal
trial exhibits.
DXnnn refers to Defense eXhibit nnn from the Patterson Court criminal trial
exhibits.
G. Br. at nnn refers to the Government Brief in this Appeal.
Karron Br at nnn refers to Karrons Brief in this Appeal.
Sentencing Tr at nnn refers to the Patterson Court Criminal Trial sentencing
transcript, included here in the Government Appendix.
Trial Tr at nnn refers to the Patterson Court Criminal Trial transcript,
included here in the Karron Appendix.
Karron 56.1 Counterstatement at nnn refers to the Buchwald Court Rule 56.1
Karron Counter Statement of Material Facts in Summary Judgement Motion
practice.
Other Authorities

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A-137................................................................................................................... 15
A-138................................................................................................................... 12
A-167................................................................................................................... 11
A-169................................................................................................................... 13
A-171 3 ............................................................................................................. 13
A-193................................................................................................................... 11
A-205................................................................................................................... 14
A-218..................................................................................................................... 3
A-22....................................................................................................................... 4
A-220..................................................................................................................... 3
A-233.............................................................................................................. 13, 16
A-259................................................................................................................... 16
A-261................................................................................................................... 16
A-262.......................................................................................................... 8, 11, 16
A-263..................................................................................................................... 3
A-264..................................................................................................................... 3
A-265.......................................................................................................... 3, 7, 8, 9
A-271................................................................................................................... 13
A-272................................................................................................................... 16
A-285................................................................................................................... 15
A-290................................................................................................................... 16
A-292..................................................................................................................... 3
A-316.......................................................................................................... 3, 7, 8, 9
A-325.......................................................................................................... 3, 7, 8, 9
A-35..................................................................................................................... 10
A-358................................................................................................................... 13
A-361 footnote ..................................................................................................7, 16
A-364..................................................................................................................... 3
A-368................................................................................................................... 13
A-37................................................................................................................ 10, 14
A-380................................................................................................................... 15
A-384..................................................................................................................... 3
A-389................................................................................................................... 13
A-390................................................................................................................... 13
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A-391..................................................................................................................... 6
A-394.............................................................................................................. 13, 16
A-397.............................................................................................................. 13, 18
A-397ff ................................................................................................................ 18
A-40..................................................................................................................... 14
A-41..................................................................................................................... 14
A-415................................................................................................................... 18
A-427..................................................................................................................... 6
A-434................................................................................................................8, 13
A-437................................................................................................................... 12
A-438................................................................................................................... 18
A-447..................................................................................................................... 6
A-452................................................................................................................... 18
A-453................................................................................................................... 18
A-455................................................................................................................... 18
A-480..................................................................................................................... 7
A-489..................................................................................................................... 4
A-492..................................................................................................................... 7
A-58................................................................................................................ 1, 2, 3
A-65..................................................................................................................... 18
A-66..................................................................................................................... 18
A-67..................................................................................................................... 18
A-68..................................................................................................................... 18
A-70..................................................................................................................7, 16
A-72..................................................................................................................4, 10
A-75....................................................................................................................... 4
A-90....................................................................................................................... 8
A-92....................................................................................................................... 5
A-94ff .................................................................................................................... 4
Buchwald Judgment against Karron ...................................................................... 2
Buchwald Court Memorandum and Order at 27 ..................................................... 2
Buchwald Court Memorandum and Order at 27 2 ............................................... 3
Buchwald Court Memorandum and Order at 27 footnote 13 .................................. 6
Chukran Decl. Ex. C, at 1 ...................................................................................... 3
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Decl. of Chukran Ex. C .......................................................................................... 1


Decl. of Chukran Ex. C, at 1 .................................................................................. 2
Eisen Decl.........................................................................................................4, 12
Exhibit E Certified Audio Tr................................................................................ 12
Final Audit Report August 2004 ................................................... 10, 11, 13, 14, 15
Final Audit Report August 2004, at 10 6 ........................................................... 10
G. Br. at 10 .......................................................................................................... 10
G. Br. at 10, 1 ...................................................................................................... 2
G. Br. at 11 footnote .........................................................................................8, 15
G. Br. at 13 footnote ............................................................................................ 18
G. Br. at 14 2....................................................................................................... 2
G. Br. at 29 3....................................................................................................... 9
G. Br. at 42 .......................................................................................................... 10
G. Br. at 42 2..................................................................................................... 14
G. Br. at 44 1..................................................................................................... 14
G. Br. at 5 1......................................................................................................... 2
G.Br. at 41 1, line 2 ........................................................................................... 15
GX1 .............................................................................................................. 4, 5, 15
GX10 ..................................................................................................................... 5
GX110 ...................................................................................................... 14, 15, 16
GX114 ...................................................................................................... 13, 15, 16
GX12 .............................................................................................................. 11, 16
GX13 ................................................................................................................... 15
GX22 ................................................................................................................... 12
GX3 ..................................................................................................................... 17
GX-61 .................................................................................................................. 13
GX62 .............................................................................................................. 11, 13
KA-1 .................................................................................................................3, 14
KA-10 ...............................................................................................................5, 16
KA-1114 ................................................................................................................ 2
KA-1122 ................................................................................................................ 8
KA-1124 .............................................................................................................. 16
KA-134 .................................................................................................................. 5
KA-142 .............................................................................................................4, 17
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KA-15 .................................................................................................................4, 5
KA-161 .................................................................................................................. 4
KA-1699 .............................................................................................................. 16
KA-1718 .............................................................................................................. 12
KA-1719 .............................................................................................................. 12
KA-1731 .............................................................................................................. 12
KA-1735 .............................................................................................................. 17
KA-1771 ......................................................................................................... 11, 13
KA-1777 ......................................................................................................... 11, 13
KA-185 ................................................................................................................ 17
KA-20 .................................................................................................................... 4
KA-204 .................................................................................................................. 5
KA-206 ................................................................................................................ 17
KA-245 ................................................................................................................ 16
KA-247 ................................................................................................................ 14
KA-282ff ............................................................................................................. 16
KA-289 ................................................................................................................ 13
KA-29 ...............................................................................................................4, 12
KA-290 ................................................................................................................ 13
KA-2920 .............................................................................................................. 13
KA-2978 ................................................................................................................ 7
KA-299 ...............................................................................................................6, 7
KA-314 .................................................................................................................. 4
KA-319 .................................................................................................................. 3
KA-355 .................................................................................................................. 2
KA-379 ........................................................................................................... 16, 17
KA-42 ...............................................................................................................3, 11
KA-446ff ............................................................................................................. 12
KA-49 .................................................................................................................... 5
KA-5 .................................................................................................................... 16
KA-50 ...............................................................................................................5, 17
KA-56 .................................................................................................................... 4
KA-618ff ............................................................................................................. 17
KA-66 ...............................................................................................................5, 15
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KA-670 .................................................................................................................. 8
KA-701 .................................................................................................................. 8
KA-703 .................................................................................................................. 8
KA-706 .................................................................................................................. 9
KA-707 .............................................................................................................8, 14
KA-76 .................................................................................................................. 15
KA-776ff ............................................................................................................. 17
KA-89 .................................................................................................................... 4
KA-92 .................................................................................................................... 4
KA-958 .................................................................................................................. 2
KA-977 .................................................................................................................. 9
KA-985 .................................................................................................................. 9
KA-987 .................................................................................................................. 2
Karron 56.1 Counterstatement at 28 3 ............................................................... 13
Karron 56.1 Counterstatement at 29 ....................................................................... 6
Karron 56.1 Counterstatement at 35 ................................................................ 13, 18
Karron Br. at 10, 24 ............................................................................................... 2
Karron Br. at 13 1 ............................................................................................... 1
Karron Br. at 16 ..................................................................................................... 8
Karron Br. at 18 ..................................................................................................... 3
Karron Br. at 22 2 ............................................................................................... 6
Karron Br. at 33 ................................................................................................... 15
Karron Br. at 7 1 ................................................................................................. 1
Karron Oral Argument at 15, Line 17 et seq .......................................................... 7
Karron Oral Argument at 3, Line 12 ...................................................................... 7
Karron Oral Argument before Buchwald Court Tr. Line 8 ..................................... 4
Sentencing Tr. at 10 Line 23 ....................................................................... 3, 7, 8, 9
Sentencing Tr. at 16 Line 15 ................................................................................ 13
Sentencing Tr. at 35 Line 20 ................................................................................ 16
Sentencing Tr. at 5 Lines 3-6 ............................................................................... 16
Sentencing Tr. at 6 Line 18 .................................................................................. 16
Sentencing Tr. at 6 Line 3 .................................................................................... 16
Sentencing Tr. at 61 Line 19 ....................................................................... 3, 7, 8, 9
Sentencing Tr. at 61 Line 23 ....................................................................... 3, 7, 8, 9
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Sentencing Tr. at 7 ............................................................................................... 16


Sentencing Tr. at 7 Line 18 19 ............................................................................ 8
SPA 27................................................................................................................2, 3
SPA-180 .............................................................................................................. 15
SPA-19 ................................................................................................................ 18
SPA-27 ..................................................................................................... 1, 2, 6, 15
SPA-30 .................................................................................................................. 2
SPA-32 ...............................................................................................................1, 2
SPA-35 .................................................................................................................. 1
SPA-36 .................................................................................................................. 4
Trial Tr. at 1066 Line 22 et seq .............................................................................. 6
Trial Tr. at 127 Line 25: ....................................................................................... 12
Trial Tr. at 298 Line 17 ........................................................................................ 17
Trial Tr. at 350 Line 5 ............................................................................................ 8
Trial Tr. at 381 Line 15 .......................................................................................... 8
Trial Tr. at 383 Line 5 ............................................................................................ 8
Trial Tr. at 386 Line 19 .......................................................................................... 9
Trial Tr. at 387 Line 4 ............................................................................................ 8
Trial Tr. at 456 Line 14 ........................................................................................ 17
Trial Tr. at 60 Line 10 .......................................................................................... 17
Trial Tr. at 61 Line 1 ............................................................................................ 16
Trial Tr. at 656 Line 1 ............................................................................................ 9
Trial Tr. at 664 Line 15 .......................................................................................... 9
Trial Tr. at 800 Line 3 ............................................................................................ 8
Trial Tr. at 803 Line 19 ........................................................................................ 16
Trial Tr. at 87 Line 1 ............................................................................................ 17
U.S.A. v. Karron, 08-cv-10223 Docket 30 ............................................................. 6
Wang, Andrew J.(1998) Key Concepts in Evaluating Outcomes of ATP Funding of
Medical Technologies. Journal of Technology Transfer Vol. 23 (2): 6165. ..... 4
Wessner, Charles W., ed., The Advanced Technology Program: Assessing
Outcomes ........................................................................................................... 4

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FOR THE SECOND CIRCUIT


Docket No. 11-1924
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
DANIEL B. KARRON,
Defendant-Appellant.
REPLY BRIEF FOR DEFENDANT-APPELLANT
Reply Preliminary Statement
This honorable Courts main, or possibly only, task in this Appeal is to deny
(or affirm) the District Courts finding that the sole surviving1 SF-272 Cash
Transactions Report of December 19, 20012 (The Claim) is a False Claims Act
(FCA) claim.3 4 This Court should reject the Buchwald District Court finding
that the $75,000 advance payment (The 75K Advance) was not a bona fide5
program personnel cost.6 After reviewing the evidence and arguments, if this
Court agrees with the affirmation7 on The Claim, and agrees that it is not false,
but true, then all other issues in this Appeal are mooted. The Summary Judgment
of the District Court must then be vacated.
Issue Presented for Review
There are two issues presented to this Court. The second issue depends on
the first issue. That is because if there is no Claim there are no damages. The
purpose of this appeal is to review the District Courts determination that The

SPA-27 Buchwald Court Memorandum and Order at 27 2


A-58,A-58, Decl. of Chukran Ex. C,, FEDERAL CASH TRANSACTIONS REPORT SF-272, Signed Dec. 19,
2001.
3
SPA-35, 31 U.S.C. 3729(c) (2000) (c) Claim Defined.
4
SPA-35, 31 U.S.C. 3729(a)(1) (2000). Current 3729(a)(1)(B) Liability for Certain Acts
5
SPA-32, 18 U.S.C. 666(c) Safe Harbor provision( This does not apply to bona fide salary, wages, fees, or
other compensation paid, or expenses paid or reimbursed, in the usual course of business)
6
Karron Br. at 7 1
7
A-58, Karron Br. at 13 1, quoting from the SF-272 of Dec. 19, 2001 signed by Karron, Box 15
2

1
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Claim is a valid FCA false claim8. Should this Court find any residual culpability
in first issue, the second issue is to review the District Courts determination of
monumental $4,042,000 (Four Million Forty Two Thousand dollar) damages9 on
the entire project arising from The Claim.
Statement of the Case
Of the twenty putative false claims submitted by the Plaintiff to the
Buchwald District Court as FCA false and state law fraud claims, the Judge
expressed reservation about all of those twenty claims10 and disposed of all but one
document we have dubbed The Claim11.
Karrons tax paid personal salary was used to pay project direct, project
indirect, non-project corporate and personal costs13, as these funds were Karrons
personal property to with whatever she pleased to spend it on, or was required to
pay to support the project. Therefore, any payment for these unallocable costs,
as the sina qui non for culpability, must be paid from Government funds and not
from Karron funds. Culpability due to misappropriation of funds cannot attach to
payments from Karrons own bona fide salary, wages, [] or expenses paid or
reimbursed, in the usual course of business.14 Because of the restricted scope
of Appeal review, tracing funds is easily demonstrated from the record for the first
project quarter of The Claim. The District court tacitly recognized these issues15
when it expressed reservations on all of the twenty claims proffered by the
Government16 and declined to grant summary judgment on nineteen of the twenty
certifications sought by the Government.17
ISSUE: The Claim is not false.
a) The Patterson Court never even cited19, much less adjudicated, The Claim as
18

31 U.S.C. 3729(c) (2000) (Claim defined)


SPA-30, Buchwald Judgment against Karron
10
SPA -27, Buchwald Court Memorandum and Order at 27 2
11 A-58, Decl. of Chukran Ex. C, at 1, SF-272 Dec. 19, 2001 signed by Karron.
13 KA-355, KA-987, KA-958, KA-1114, Mischaracterized as debtsdebts by the prosecution (G. Br. at 5 1, "G.
Br. at 10, 1, 1, "G. Br. at 14 2). Karron Br. at 10, 24
14
SPA-32, 18 U.S.C. 666(c).
15
SPA-27, Buchwald Court Memorandum and Order at 27 What the Buchwald Court termed a lack of specificity
on the part of the Government Plaintiff.
16
SPA 27, Buchwald Court Memorandum and Order at 27 2
17
Karron Br. at 18
18
The District Court Judges Trial foundational findings, are hereafter referred to as the Patterson Court District
Court case USA v. Karron 1:2007-cr-00541, to distinguish it from the Buchwald Court District Court case
9

2
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a source of misapplied funds.


b) The $75,000 Payroll Advance (The 75K Advance), made to Karron from the
first (and only) $150,000 working capital advance20 from The Claim was well
recognized by the Patterson Court and OIG as bona fide tax paid salary.21 22 23
c) The balance of working capital advance proceeds24 from The Claim was used
as affirmed by Karrons signature.
e) Because of the above, The Claim as affirmed, was not a False Claim Act
claim on the United States Treasury.
f) Arguments on The Claim are not estopped25 because it was never even cited
by the Patterson Court as fraudulent or false. The Claim was not even an exhibit
in The Patterson Court.26 Because of this, the Claim is not an eligible FCA Same
Transaction27 subject to FCA Statutory Collateral Estoppel.28
Reply Statement of Facts
The Advanced Technology Program
The ATP program invested public money in high risk, high reward
technologies.29 In return, the public acquired paid up30 government rights to

1:2008-cv-10223, from which this Appeal arises from.


19
The Claim is not even an exhibit in the Patterson Court Criminal Trial and cannot be a 31 U.S.C. 3731(d)
same transaction. cf KA-319
20
KA-42, 15 C.F.R. 14.2(rr) defines Working capital advance as a procedure where by funds are advanced to
the recipient to cover its estimated disbursement needs for a given initial period. cf KA-46
21
A-316, Sentencing Tr. at 61 Line 19 (THE COURT: He got it [Salary] in the form of loans.)
22
A-325, Sentencing Tr. at 61 Line 23 (THE COURT: He got it [Salary] in the form of loans. It's very simple) cf
A-364, A-384, A-292
23
A-265,A-265 Sentencing Tr. at 10 Line 23 (THE COURT: There are documents appended to the defendant's
papers which indicate that the withholding was taken timely.) cf A-218, A-220, A-263, A-264,A-265,
24
KA-1, The $75,000 balance of the $150,000 proceeds out of The Claim. cf KA-1
25
31 U.S.C. 3731(e) [statutory collateral estoppel]
26
A-58,Chukran Decl. Ex. C, at 1, STANDARD FORM 272 Dec 19, 2001 signed by Karron. The Claim was not
even an exhibit in the Karron Criminal Casecriminal case in the Patterson Court..
27
SPA-36, 31 U.S.C. 3731(e) False Claims Procedure ([]final judgment rendered in favor of the United States
in any criminal proceeding [shall][] estop the defendant from denying the essential elements of the offense in
any action which involves the same transaction criminal proceeding charging fraud or false statements. [statutory
collateral estoppel]
28
A-489, Karron Oral Argument before Buchwald Court Tr. Line 8 et seq 2-3 (The oral citation to 3731(d) should
be 3731(e).(cf A-22, (a))
29
KA-314, Wang, Andrew J.(1998) Key Concepts in Evaluating Outcomes of ATP Funding of Medical
Technologies.. Journal of Technology Transfer Vol. 23 (2): 6165. cf A-94ff,, KA-29,, KA-92 (Potential for
Broad-Based Economic Benefits.)
30
A-72, GX2 GENERAL TERMS AND CONDITIONS ATP August 2001 25. INTELLECTUAL PROPERTY a.
cf KA-142, KA-161 (October 2001 revision) [A-75 (Aug),

3
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patents31 as well as march-in rights and the statutory ATP Patent Procedure
32.33
As program director Marc Stanley has said [] we have obviously
determined that it[an ATP project] has great value to our country. 34 35
Karron Salary
Karron was required to Co-Funds Project Direct Costs, Indirect Costs.
The ATP budget calls out not only for the application of government funds. The
original budget form36 and Amendment #337 calls out a Recipient Share of Cost.
This is further broken down in the Estimated Multi-Year Budget into three
categories of cost, specifically Part 1, OBJECT CLASS CATEGORY Lines I,
Total Direct Costs Requested from ATP; J, Total Direct Costs Shared by Proposer;
K, Total Indirect Costs Absorbed by Proposer. These are re-iterated the form at
Part 2.; SOURCES OF FUNDS; A. ATP (Same as Line I); B. PI (Karron CoFunding); C. PI Indirect Costs absorbed
In addition, there are non-project overhead costs due to CASI, unfunded
project mandates such patent lawyer costs38. The payment of these costs is
supposed to be quite flexible, and they can be made up over the three years the
project was to have run.39 40

31

KA-15, 15 C.F.R. 278n (d)(11)(A) The United States may reserve a nonexclusive, nontransferable, irrevocable
paid-up license, to have practiced for or on behalf of the United States, in connection with any such intellectual
property,
32
KA-15, 15 C.F.R. Subtitle B, Ch. II (1101 Edition) 295.8(a)(2) Intellectual property rights;. (a)( (2) Patent
procedures
33
KA-314, Wessner, Charles W., ed., The Advanced Technology Program: Assessing Outcomes (Washington, DC:
National Academy Press, 2000). cf A-94ff, , KA-29
34
KA-29, Eisen Decl. Tr. of Marc Stanley KA-20 Q and A session 2:45:35 Tr. atTranscript Page 8.
35
KA-56, GX1 KA-89 The89The ATP Proposal kit calls out for These annual accomplishments should briefly (23 sentences maximum) define how the project would have benefits to the taxpayer by funding year should additional
out-year funding not become available (i.e., severability statements).
36
A-92, GX10, The original Cooperative Agreement (NIST-1252) contains an ESTIMATED MULTI-YEAR
BUDGET - SINGLE COMPANY. This Budget was later revised in an AMENDMENT TO FINANCIAL
ASSISTANCE AWARD Amendment 4, July 16, 2002.
37
KA-204, GX23, Amendment #3
38
KA-10, 15 C.F.R. Subtitle B, Ch. II (1101 Edition) 295.8 Intellectual property rights;;. (a)( (2) Patent
procedures KA-15
39
KA-66, GX1, ATP Proposal Preparation Kit for 2000. Exhibit 14, KA-134 (We recognize that unexpected
events occur frequently in R&D projects, and that budgets may need to be changed as a project proceeds. Don't fear
that by providing a multi-year budget beyond the first year, you will be locked into those details. ATP allows a
certain amount of flexibility in moving funds from one line item to another as circumstances change. By stating an

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Karrons Salary Figures


Karron Salary was $253,91342 Dunlevy shows Karrons tax paid salary for
the entire project period of $334,004.1243
Karrons Salary funded contribution and overhead
The total cost of the project is $1,524,264, of which the Federal Share was
$1,345,500 and the CASI contribution was $178,764.44 This contribution came
directly from Karrons after tax Salary. Karrons contribution is not double
dipping45 because it is bona fide46 after tax paid funds. As government grant
specialist Snowden testified at trial, you could do whatever you want with it [the
after tax salary funds] 47.
41

Summary of Argument
The Buchwald District Court erred in The Claim because of the $75,000
payment (The 75K Advance) to Karron was 1) not false 2) not identified by the
Patterson Court to be a misapplication of government funds under 18 U.S.C.
666(a)(1)(A) (Bribery, Embezzlement Act).
Argument
The Buchwald Court assignment of falsity to The Claim is incorrect as a
matter of record and fact. The Court specified that The 75K Advance from the
The Claim $150,000 cash advance was misapplied and falsely affirmed to by the

amount for a given task, you will not be required to spend precisely that amount on that task. For example, if, in the
second or third year of your project, you find that you need to spend more on one task and less on another than
anticipated, that can be accommodated.)
40
KA-49, 15 C.F.R. 14.25 (63 FR 47156, Sept. 4, 1998, as amended at 66 FR 49828, Oct. 1, 2001) KA-50
Revision50Revision of budget and program plans. (f) The recipient may not transfer funds among direct cost
categories [] the cumulative amount of such transfers exceeds or is expected to exceed 10 percent of the total
Federal and non-Federal funds authorized [] (g) All other changes [] do not require prior approval. (m) Within
30 calendar days from the date of receipt of the request for budget revisions, DoC shall review the request and the
Grants Officer shall notify the recipient in writing whether the budget revisions have been approved. If the revision
is still under consideration at the end of 30 calendar days, the Grants Officer shall inform the recipient in writing of
the date when the recipient may expect the decision.
41
Karron Br. at 22 2 2
42
KA-299, U.S.A. v. Karron, 08-cv-10223 Docket 30, Decl. of Karron Exhibits Part 2, Ex. Group 22, DBK Personal
Taxes at 26, Ex. 108 at 28, Ex. 109 at 34, Ex. 110 at 40
43
A-447, Decl. of Dunlevy. CAC292, mid-page.
44
ibid.
45
A-427, Trial Tr. at 1066 Line 22 et seq (Benedict Cross).
46
U.S. v. Mills, 140 F.3d 630 (6th Cir., 1998)
47
A-391, Karron 56.1 Counterstatement at 29 Trial Tr. at 381 Line 15

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Appellant Karron. 48 The Patterson court specifically and explicitly recognized this
to be bona fide tax paid salary.49 50 51 As to the disposition of the balance of The
Claim $150,000 advance, or the other 75,000 of this first advance, the Buchwald
Court declined to assign specific linkage to any other misapplied funds and
specific culpability. Therefore, by establishing that The 75K Advance was bona
fide The Claim is not false and the Buchwald Court Judgment cannot be
sustained. Further, by showing (below) that the there are no misapplied funds that
can be connected to The Claim, the Buchwald Court Judgment must be vacated.
Standard of Review
False Claim Act culpability requires, at the very least, one specific claim on
the treasury of the U.S. that is proven false52, and that the person who presented
that claim53 knew it is false.54 If no specific false claim can be identified, there is
no culpability. The Patterson Court only looked at Check and American Express
Credit Card disbursements.55 The Buchwald Court only admitted The Claim on
the U. S. Treasury. There are no common elements or exhibits between The
Claim and the Patterson Court findings.56 If this Court finds no common basis
between culpable checks and credit card receipts made with funds from The
Claim, this judgment must be vacated.
Reply Argument
The Claim is not false
The Claim as signed by Karron is not false because The 75 K Advance
was bona fide Personnel Cost, as specified in the original budget.57 At this early
stage first quarter (The First Quarter) in the project, there are no issues of
overrunning any budget categories; all budget categories are under run. At the end
of the first quarter, there are three remaining quarters of project time with which to
make midcourse corrections and amendments based on retrospective spending

48

SPA-27, Buchwald Court Memorandum and Order at 27 footnote 13


A-316, Sentencing Tr. at 61 Line 19 (THE COURT: He got it [Salary] in the form of loans.)
50
A-325, Sentencing Tr. at 61 Line 23 (THE COURT: [] It's very simple)
51
A-265,A-265 Sentencing Tr. at 10 Line 23 (THE COURT: [] withholding was taken timely.) cf KA-2962
(Baker, J.S. () THE USE OF SENTENCING FINDINGS AS A COLLATERAL ESTOPPEL WEAPON IN
SUBSEQUENT CIVIL LITIGATION, Notre Dame Law Review), specifically KA-2978 and KA-299 (conclusion)
52
A-480, Karron Oral Argument at 3, Line 12
53
31 U.S.C. 3729(a)(1) (2000). False Claims Liability
54
31 U.S.C. 3729(b)(1) (2000). False Claims definitions knowing and knowingly
55
A-70, A-361 footnote
56
A-492, Karron Oral Argument at 15, Line 17 et seq.
57
A-90, BUDGET OBJECT CLASS CATEGORY A, Personnel and B. Personnel Fringe Benefits (34%)
49

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experience. By the end of the first quarter Dunlevy58 shows that almost the entire
75 K Advance was turned back to pay Project costs. This offsets the rent59
question raised by the Buchwald Court in its decision,, and that question is
mooted for that reason (among others), but it is addressed never the less below.
Point 1: The 75K Advance was classified as Salary
The 75K Advance was well accepted as salary60 by three auditors61 and
the Patterson Court .62 63 64 65 The Government grant specialist Snowden grudging
agreed it was salary and could be used for any purpose Karron wanted .66 67 68 69
Riley agreed it was salary.70 71 Gurfein acknowledged it was salary.72 73 74 It is
beyond the scope of this Appeal to re-open this well settled matter. In its final and
sentencing analysis, the Patterson District Court found and established as fact that
this $75,000 transaction was classified as legitimate bona fide salary, as allowed
under the Safe Harbor provision 18 U.S.C. 666(c)75 and derivative case law.76

58

A-434, Decl. of Dunlevy Decl..


G. Br. at 11 footnote
60
Karron Br. at 16
61
Hayes, Spitz, Riley, Dunlevy
62
A-316A-316 Sentencing Tr. at 61 Line 19 (THE COURT: He got it [Salary] in the form of loans.)
63
A-325, Sentencing Tr. at 61 Line 23 (THE COURT: [] It's very simple)
64
A-265, Sentencing Tr. at 10 Line 23 (THE COURT: []the withholding was taken timely.)
65
A-262,A-262 Sentencing Tr. at 7 Line 18 19.( THE COURT: It's denominated salary.)
66
KA-670, Trial Tr. at 350 Line 5 et seq
67
KA-701, Trial Tr. at 381 Line 15 (Rubinstein cross Snowden )
68
KA-703, Trial Tr. at 383 Line 5 (Rubinstein cross Snowden)
69
KA-707 Trial Tr. at 387 Line 4 (Rubinstein Cross of Snowden: Q. Are you aware that the money was paid back
in August? [] THE WITNESS: Yeah.)
70
KA-1122, Trial Tr. at 800 Line 3 (Rubinstein cross Riley Q. And is it fair to say that on a $175,000 salary, Dr.
Karron would be paid approximately $14,000 a month gross? A. Correct. Q. And so if he borrowed $75,000 in
October, within five months he basically would pay that back, correct? THE COURT: Answer, please. Q. 14 times
five is 70, correct? A. Yes. Q. And October, November, December, January, February, by the end of February he
would have basically paid back the 75,000, correct? A. For the gross, correct. Q. And in May he got a net check for
$5,019.84, right? A. Correct. Q. For a pay period April 1, '02 to April 30, '02, correct? A. Correct.)
71
KA-706, Trial Tr. at 386 Line 19 (Rubinstein cross Snowden Q. And did you tell the agent that you spoke to Dr.
Karron and requested the return of funds, of the $75,000? A. I made the statement, yes.)
72
KA-985, Trial Tr. at 664 Line 15 (Rubinstein Cross Gurfein) Q. You are aware, sir, that Dr. Karron paid back
that $75,000 in that first year; you're aware of that? A. I am.
73
KA-977, Trial Tr. at 656 Line 1 (Rubinstein Cross of Gurfein Q. Now, you told us about Dr. Karron in the first
month of the grant he took $75,000 for as a loan for his personal use, correct? A. Correct. Q. Now, he was earning
$175,000 for the year, correct? A. Correct. Q. And that comes out to about $14,000 and change a month? A.
Correct) cf 75K Amortization table KA-1
74
G. Br. at 29 3
75
18 U.S.C. 666(c) (Safe Harbor Provision)
76
U.S. v. Mills, 140 F.3d 630 (6th Cir., 1998)
59

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77 78

The prior Patterson Court findings of fact can stand without this Court reassessing the supporting evidence.
In order to give this Court confidence in these prior findings of fact, the
following additional points of fact should dispel any shadows of doubt that the
Government Appellee attempts to cast.
The 75K Advance payments are salary earned but not paid by check
Both the Patterson Court79 80 81 and The OIG Auditor concurred that The
75K Advance was a loan credited toward salary. The OIG could not have said it
better (even though they have problems with addition82): viz:
[] loan account balances have been offset with legitimate loan reducing payments such
as the salary not paid to the ChiefTechnica1 Officer and retained by Computer Aided
Surgery to reduce the amount owed to NIST.83

Point 2: The 30 Day Float Rule does not apply


The Government makes the incorrect arguments that the cooperative
agreement also incorporated certain standard terms and conditions including the
following limitation on the amount of disbursements:[citation omitted] 84
Karron argues [] that her November 2001 certification was true because this
amount purportedly was properly advanced to her as salary i.e., funds that she could
spend as she pleased. []
This argument fails as a matter of law, as the terms and conditions of the
cooperative agreement prohibit such advances of ATP funds. The agreement provides
that ATP funding shall be for periods not to exceed 30 days [citations omitted].85

This argument is incorrect because of three misstatements of fact: The 30


Day Float Rule (defined below) was not specified in the Cooperative Agreement
via reference to the General Terms and Conditions. 86 Secondly, the this rule was
not law, a matter of law, or even part of the Cooperative Agreement until
Amendment #4 in 2002, which enabled overnight electronic payments by ASAP.87

77

U.S. v. Harloff, 815 F.Supp. 618 (W.D.N.Y.1993)


U.S. v. LaHue, 170 F. 3d 1026 (10th Cir., 1999)
79
A-316, Sentencing Tr. at 61 Line 19 (THE COURT: He got it [Salary] in the form of loans.)
80
A-325, Sentencing Tr. at 61 Line 23 (THE COURT: He got it [Salary] in the form of loans. It's very simple)
81
A-265, Sentencing Tr. at 10 Line 23 (THE COURT: the withholding was taken timely.)
82
A-390 footnote (They cant add, but they love to subtract.)
83
A-180 Final Audit Report August 2004, at 10 6
84
G. Br. at 10 A-136
85
G. Br. at 42 1.Original Citations: A-180, A-37
86
A-72, GX2, GENERAL TERMS AND CONDITIONS ATP August 2001
87
A-35, GX24, Page 2. AMENDMENT NO. 04 [] REASON(S) FOR AMENDMENT This cooperative
agreement is being amended to (l) incorporate a special award condition on the " Automated Standard Application
78

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88

Thirdly, The Claim was on December 19, 2001, not November. The OIG
Audit states:
the ATP Special Award Conditions Section 9.c [emphasis added, italics as in original]. states

Advances . . . shall be limited to the minimum amounts necessary to meet immediate


disbursement needs. Advanced funds not disbursed in a timely manner must be
promptly returned . . . . Advances shall be for periods not to exceed 30 days.89 90

We dub this (above) the 30 Day Float Rule. The OIGs two Audit Report
citations to the ATP Special Award Conditions Section 9.c never existed for this
project in 200191. This clause was misquoted by the OIG Auditors. This misquote
was propagated by Prosecution in the Buchwald Court and again here. The Rule
did not become effective until Special Award Conditions Amendment 4 signed
2002 enabled overnight grant advance payment electronically by ASAP.92
Point 3: Working capital advance
The working capital advance is defined93 as a procedure whereby funds
are advanced to the recipient to cover its estimated disbursement needs for a given
initial period. If [] the recipient lacks sufficient working capital94, the Grants
Officer may authorize payment on a working capital advance basis. Under this
procedure, the Grants Officer shall provide for advancing funds to the recipient to
cover its estimated disbursement needs for an initial period []95

Recipients are to be paid in advance []. Advances of funds to a recipient organization


shall be limited to the minimum amounts needed and be timed to be in accordance with

for Payments," System; and (2) indicate on the attached, those terms and conditions affected by any administrative
or statutory requirements. [ ] THE FOLLOWING SPECIAL AWARD CONDITIONS ARE AMENED: 11.c. [
4] Advances taken through the ASAP shall be limited to the minimum amounts necessary to meet immediate
disbursement needs. Advanced funds not disbursed in a timely manner must be promptly returned, via an ASAP
credit, to the account from which the advanced funding was withdrawn. Advances shall be for periods not to exceed
30 days. EFFECTIVE DATE JUL 23, 2002, SIGNED 7/29/2002
88
A-35, GX24 AMENDMENT TO FINANCIAL ASSISTANCE AWARD #4 Effective July 23, 2002
89
A-180, refers to a quote from GX62 Final Audit Report August 2004 (A-167)) and Invitation for Audit
Resolution (A-262)) Dated Aug 25, 2004.
90
A-180, part of GX62 Final Audit Report ATL AT~16095-4-0002 August 2004) [Also this quote appears in A193,, GX62 Draft Audit Report Audit Report No. ATL-16095-3-0001 /July 2003, GX62 Appendix II Page 5 of 6]
91
A-136, GX12 signed September 28, 2001 by Grants Officer Marilyn Goldstein and countersigned by Karron on
.October 5, 2001 cf , KA-1771, KA-1777KA-1771, KA-1777
92
Automated Standard Application for Payments (ASAP) is a web-based electronic payment and information
system []. ASAP allows recipient organizations receiving federal funds to draw from accounts preauthorized by
federal agencies. http://www.fms.treas.gov/asap/.
93
KA-42, 15 C.F.R. 14.2(rr)
94
A-180, Final Audit Report August 2004 (This money was put into an existing checking account with a balance
of less than $5,000.) [the actual CASI checkbook balance that day of October 26,2001 was negative $1,024.24 and
the bank balance was $24.61]
95
KA-46, 15 C.F.R. 14.22(f)

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the actual, immediate cash requirements of the recipient organization in carrying out the
purpose of the approved program or project. The timing and amount of advances of
funds shall be as close as is administratively feasible to the actual disbursements by the
recipient organization for direct program or project costs and the proportionate share of
any allowable indirect costs.96

The requirement of 14.21 was satisfied and reflected in Amendment #297


The Accounting system requirement was satisfied and the special condition was
specifically removed.98 Later on sometime in 2003 the successor accountant and
auditor Hayes trashed the CASI accounting system and led to the continuing
mayhem.99 The ATP program had indeed accommodated100 Karron.101
Point 4: Tracing The 75K Advance
The float is the time between the deposit of cash advance funds in the
grantees bank and payment of project obligations. A small entity102 (or what is
now recognized as a micro-entity103) such as CASI did not have the cash on hand
to pay program costs out of pocket and then apply to the program for
reimbursement. NIST ATP, as a matter of policy, gave small entities advance
payment status and made Working Capital Advances (above). Because there was
no 30 Day Float Rule in effect, we can review the cash position of the grant by
the first quarter SF-269a reconciliation.

96

KA-46, 15 C.F.R. 14.22(b) cf A-437, KA-1718, A-437, KA-1718,KA-1719


KA-1718, GX22: Grant Amendment REASON(S) FOR AMENDMENT [#2]: This cooperative agreement is
being amended to (1) revise administrative contact's name; (2) correct total estimated cost for budgeted year; (3)
approve and incorporated revised budget dated 12/27/01; (4) remove Special Award Condition #9; and (5) and
indicate on the attached those terms and conditions that affected by these actions.)
98
KA-1718, GX22 (Condition #9: REQUIREMENT OF ACCOUNTING SYSTEM CERTIFICATION The above
Special Award Condition placed in the original award document is removed, as the requirement has been satisfied)
cf A-437
99
A-437, Decl. of Dunlevy Decl.: (I believe that Karron had a rudimentary accounting system that was destroyed
by Hayes unsuccessful attempt to implement an overambitious and expensive quad entry fund accounting system off
site) cf KA-1731
100
KA-446ff, Trial Tr. at 127 Line 25: (Lide - direct [KWOK] Q. What did you hope to accomplish going back the
second time? A. What we hoped to accomplish was to have a discussion to try to iron out the budget differences,
because that had become a major issue in this grant, was to get a budget that the awardee could live with, and yet
met the government rules and regulations.)[N.B. There were never any human subjects in this project and a human
subjects waver was granted on that basis, but that is out of scope for this appeal. cf A-138, Section 10]
101
KA-29, Eisen Decl Exhibit E Certified Audio Tr.... April 13, 2007 ATP Proposers' Conferences NIST Red
Auditorium, 100 Bureau Drive, Gaithersburg, MD 20899 A[nswer]: [MARC STANLEY, ATP PROGRAM
DIRECTOR] One of the things I pride myself on in this program and with my colleagues is that: We try not to be
too bureaucratic. We are very supportive of the companies that win awards from us,
102
37 C.F.R. 1.27(a)(1)(person),(2)(small business concern)
103
35 U.S.C. 123 The Leahy-Smith America Invents Act (AIA) created a new micro entity class for the DoC
97

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Dunlevy104 shows that almost the entire 75 K Advance was turned back to
pay Project costs. The First Quarter spending is summarized as follows 105: Total
Outlays for 2001 are $258,320 , with the Recipient Share of Outlays $41,682, The
Federal Share of Outlays are $210,000, The total un-liquidated obligations $5,538.
The first quarter is over co-funded by $48,320.
The only counter exhibit offered by the Government at the Patterson Court
was GX114106, at which the Judge exclaimed: Look at that. [GX114] This
mess.107 This mess is worse than any one recognized at the time. CASI received
a letter from Grant Specialist Browning in 2007 offering to close out the second
year project residual funds of $54,500.108 Reconciling that figure with the OIG
Audits revealed that the two OIG audit reports gave the wrong second year Federal
disbursement.109 110 The mess gets even worse. The two audit reports quote a
Special Award Conditions Section 9.c that does not exist.111 There was no 30
Day Rule in effect during the first project quarter.
Point 5: Amortizing The 75K Advance
The Government argues that if Karron had unilaterally increased her salary
by the maximum amount permitted without authorization from ATP [] Karron at
best would have been entitled to $21,250[ of The 75K Advance].112 This
argument fails as matters of law, fact and a little math. Let us do the math.
On the day the funding arrived, October 26, 2001113, Karron was already
owed approximately one-months salary (1/3 of a quarter salary). At the middle of
The Claim first quarter in November, the salary due would be 2 /3 of a quarters
salary. A daily amortization for The 75K Advance is compiled here. 115 With

104

A-434, Decl. of Dunlevy Decl. .


A-397, Karron 56.1 Counterstatement at 35
106
A-233, and see discussion about the issues with GX114 at A-394
107
A-271, Sentencing Tr. at 16 Line 15
108
A-389, KA-289, KA-290, KA-2920
109
A-390 Karron 56.1 Counterstatement at 28 3 (But this error was not made here by the Plaintiff; the error is
propagated from the U.S. Department of Commerce Office of Inspector General August 2004 Report ATL-16095-40002, GX 62, at 10 and 12) at KA-1777, also cf GX-61 at KA-1771
110
A-169 and A-171 3, 3, second line down, first number on the line, Final Audit Report August 2004 (A-358, ,
A-368 ) The $545,000 should be $545,500 cf KA-1771, KA-1777
111
A-180 . See section The 30 Day RuleRules does not apply. cf GX-61 at KA-1771, GX62 at KA-1777
112
G. Br. at 44 1
113
A-40, A-180, KA-247 (GX110)
115
KA-1 The 75K Advance Amortization table, referencing only numbers already in evidence with citations .
105

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the timely inclusion of $6,860.65 in OoP116 expenses as expended on a weekly


basis, the 75K Advance is paid off on January 3, 2002, just shy of the end of the
First Quarter in 69 days. Because the 30 Day Float Rule was not yet in effect,
this is not against the Rule and clearly not against the law as a matter of
Law117 or math.
A large initial Working capital advance requires approval.118 The request
for funds119 was approved by the grants management team. Prior to ASAP
implementation in Amendment #4 in 2002, cash advances had to be forwarded to
the ATP management team to be approved for payment. Amendment #4, enabling
ASAP payments, retroactively obviated that requirement by deleting the clause in
the original special conditions document120, removing project management
approval requirement from the ASAP cash advance method and initiated The 30
Day Float Rule.
Point 6: The Rent: Reclassified and/or Offset
The Government cites121 122 the impeached123 OIG Audit report citation of
$18,000124 attributed to rent paid with The Claim125 funds. The Patterson Court

116

A-205 Final Audit Report August 2004 Appendix III at 11 5: Out of Pocket OOP, which includes such things
as travel to NIST for the ATP Kickoff Meeting in November and Program computer purchases made on personal
credit cards because the cards had all of the available credit for CASI as Karrons available credit.
117
G. Br. at 42 2 (This argument fails as a matter of law, as the terms [of ] ATP funding [] shall be for
periods not to exceed 30 days. (A-180; see also A-37).)
118
KA-46 15 C.F.R. 14.22(f) (1101 Edition)
119
A-40, SF 270, there is the approver initials HS handwritten in the upper right hand corner. Hope Snowden was
the Grant Specialist. One can only assume that she personally approved this initial advance and counter-initialed it
with her initials, H.S. . The form is signed by Karron on the reverse at A-41 on October 19, 2001. This form was
never even entered into evidence in the Patterson Court.. Snowden would not have approved such a large initial
advance without full knowledge of what she was funding. Her testimony at trial showed she grudgingly admitted
she did. cf KA-707
120
A-137, GX13 SPECIAL AWARD CONDITIONS (acronym SAC)
121
G. Br. at 11 footnote (A Commerce audit found that the improper rent charges included $18,000 from Karrons
first drawdown of funds from the ATP. (A- 180).
122
G. Br. at 41 1, line 2, line 2 (from the bottom of paragraph 1 going up) (Karron was clearly not entitled to
use ATP payments for rent (A-285), and yet rent undisputedly was paid from the first $150,000 draw-down (A180).)
123
A-180, Final Audit Report August 2004 is an unreliable evidence, impeached because 1) misquotes the total
second year spending (A-380) 2) mis cites special conditions Section 9.c which falsely incorrectly invoked the 30
Day Float Rule(cf Point 2), 3) was not used at the Patterson Court criminal trial, (The Patterson Court Relied
Exclusively on GX110 and GX114) 4) was not mentioned by the Buchwald Court.
124
SPA-180, Final Audit Report of Aug 2004. 3, Line 5 (the Chief Technical Officer wrote himself nine checks
$2,000 each for rent of office space covering the period January 2000 through September 2000.)
125
SPA-180, (Karrons first drawdown of funds from the ATP.)

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only gave a total amount as a general matter without specifying the transactions
that misappropriated Government Funds as rent. It is well beyond the scope of this
Appeal to re-litigate the of the Patterson Court findings. As the Buchwald Court
astutely observed the Government has failed to specify the precise aspect of
each of the twenty documents that is false.126 The rent was paid from The
75K Advance, and/or reclassified as salary. However, the Buchwald Court
declined to affirm, and therefore denied that issue by dismissing almost all of the
charges.
The Rent was not allowed.127 It was never allowed.128 The rent was
reclassified into salary129. GX114 includes rent checks (buried) in the salary line.
GX114130 is dissected at length in Karrons 56.1 counterstatement131. It was
prepared by Riley using canceled checks and American Express statements [as]
the main source documents,132 As such, it ignored Karron OoP, checks, credit
card and cash payments made on behalf of the ATP project for such things as
Travel. The Patterson Court Judge described it best.133 134 135 136 137 Simply put,
there are just not enough checks to and from Karron to make up the denominated
salary138 without including the rent checks and using the CASI personnel fringe
rate.139
Point 7: Budget Flexibility 10% Change Rule base: Annual or Total ?
126

SPA-27
KA-66 GX1 Chapter 1, Sections C.4 and C.5 of the November 2000 ATP Proposal Preparation Kit cf KA-76 (5.
What types of costs are unallowable?) Based on the assumption that it is an indirect or overhead cost, and is
allocable to multiple projects and applications.
128
It was never allowed as rent per se. The re-class was done un-heralded and unnoticed by the prosecution.
129
Karron Br. at 33. 10. The Explanation for the Karron Salary Line is to include Rent Checks
130
A-233
131
A-394
132
A-70, A-361 footnote
133
A-259, Sentencing Tr. at 5 Lines 3-6. COURT It seems to me this is just a rough calculation and not something
that a Court could rely on in a criminal case [N.B. but it was. This was recalled by the Jury in its deliberations at
KA-1699 and again in this Appeal A-233]
134
A-290, Sentencing Tr. at 35 Line 20 (MR. RUBINSTEIN: I submit to your Honor, that nobody from that
chart[GX114] or from the [GX]110 [GX110] backup could say how they ever arrived at this number.) cf GX114 at
A-233 and GX110 at KA-245 and at KA-282ff
135
A-261, Sentencing Tr. at 6 Line 3 (THE COURT: [] She has no tabulation putting [Exhibit] 114 into context
with her [] Exhibit 110. ) cf GX114 at A-233 and GX110 at KA-245 and at KA-282ff
136
A-262, Sentencing Tr. at 6 Line 18( It's a table saying salary. I don't care how she got the number [] Its
[]Salary)
137
A-272, Sentencing Tr. at 7 (COURT: It's denominated salary.)
138
A-272, Sentencing Tr. at 7 (COURT: It's denominated salary.)
139
KA-1124, Trial Tr. at 803 Line 19.
127

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NIST ATP program specific budgets change practices were not part of the
ATP statute140 and ATP rule141. The authority of these practices is unclear142 .
They were made part of ATP cooperative agreements by reference143. As of 2001,
ATP practices appear to have conflicted with superior general Department of
Commerce and National Institute of Science and Technology C.F.R. statutes
concerning the change base upon which to apply the 10% variation allowance.
ATP believed its change base was 10% of the last approved total annual
budget as Lide144 and Snowden testified145, and both the Defense and Prosecution
believed. In the GX2146 budget, it permits a change of plus and minus $83,650147
on the annual base without approval. Snowden testified that Program Specific
rules overrode regulations that are more general.148
However, governing rules15 C.F.R. 24.30149, 15 C.F.R. 14.25(f)150, and
GX3151, calls out a percentage base on the entire budget. In this instance that is
plus and minus $211,450, for a total swing of $422,900. Further, 15 C.F.R.
14.25(e)(4)152 claims it is the superior statute and specifies it may not be
overridden without approval from the OMB.153

140

KA-5, 15 U.S.C. 278n (2001)


KA-10, 15 C.F.R. 295 (2001)
142
KA-379, Trial Tr. at 61 Line 1: (Lide Direct A. I helped prepare them, I used them, and they were given to me
as project manager.) cf KA-2994, KA-2942
143
A-136, through GX12 Cooperative Agreement Award
144
KA-379, Trial Tr. at 60 Line 10 Lide - Direct, Trial Tr. at 87 Line 1, Trial Tr. at 191 Line 1.
145
KA-776ff, Trial Tr. at 456 Line 14
146
KA-142 GX2: (9. PRIOR APPROVAL REQUIREMENTS
147
KA-206 GX23: TOTAL ESTIMATED COST and OBJECT CLASS CATEGORY H. Total Direct Cost. (Line. A
thru G) of $836,500.
148
KA-618ff Trial Tr. at 298 Line 17
149
KA-1735 15 C.F.R. (1101 Edition) 24.30 Changes. (c) Budget changes(1) (ii) []exceed or are
expected to exceed ten percent of the current total approved budget[][require approvals][emphasis added]
150
KA-50 15 C.F.R. (1101 Edition) 14.25 (f) The recipient may not transfer funds [] in which the cumulative
amount of such transfers exceeds or is expected to exceed 10 percent of the total budget [][emphasis added]
151
KA-185 GX3 OCTOBER 1998 DoC FINANCIAL ASSISTANCE STANDARD TERMS AND CONDITIONS,
..04 b. [KA-189 ]Unless the Recipient is subject to 15 C.F.R. 24 [] (cumulative transfers of funds of an amount
above 10 percent of the total award must be approved [] This allows the Recipient to transfer funds among
approved direct cost categories when the cumulative amount of such transfers does not exceed 10 percent of the
current (last approved) total budget.)
152
KA-50 C.F.R. (1101 Edition) 14.25 (d) ([] (For nonconstruction awards, no other prior approval
requirements for specific items may be imposed unless a deviation has been approved by OMB.)[emphasis
added, no derogation clause]
153
KA-2942, KA-2946, KA-2997
141

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Point 8: Challenge to Karron contribution figures fails


The Government seeks to impugn that Karron submitted two contradictory
revisions for B. Recipient Share of Outlays 154 to the Buchwald Court and
impeach these figures. This Table155 was a comparison of the four, first year SF269a (Quarterly reconciliation) original forms as submitted to ATP against ground
truth figures in evidence at the Buchwald Court.156 The original figures were
prepared by CASI Accountant Hayes for submission by Karron.157 The
Government cited these original forms158 as part of its proffered twenty
documents. These document claims were rejected by the Buchwald Court.159 The
incorrect low contribution figure was restated with the correct contribution of
$78,204160, larger than originally submitted to the government in 2002. The
understatement only harms Karron, not the Government161
Conclusion
The district courts summary judgment must be vacated because the District
Court determination of the only instance of a False Claim is not false, and is true,
as a matter of the record and a little arithmetic.
Signature

D. B. Karron, pro se Dated: April 12, 2012 in Long Beach, New York

154

G. Br. at 13 footnote
A-397 Karron 56.1 Counterstatement at 35: GROUND TRUTH QUARTERLY SPENDING BY REVISED
SF269A. Table 1 Ground Truth Grant Spending.
156
A-65 (line B is $9,573.40), A-66 ($8,213.64), A-67($($8,728.84), A-68($($8,726.84). The sum is $29,493.83
157
A-438 Decl. of Dunlevy Decl.
158
A-65 FINANCIAL STATUS REPORT A-269A Ex. C CHUKRAN Decl. Line B. $9,573.40.
159
A-397 The restated corrected line B for the first year as $78,204. Discussion is at SPA-19,, A-397ff
160
A-415 (SF-269a This is a corrected and revised final Statement for this 4th project Quarter.), A-452 ( Declaration
of Dunlevy, Section J, Discrepancies), A-453 ( (Decl. of Dunlevy Decl.,, Amended SF 269 A Report of Spending),
A-455 ( (Decl. of Dunlevy Decl., Co-Funding and Co-Funding discrepancies),
161
A-398 (GROUND TRUTH QUARTERLY SPENDING BY REVISED SF269A)
155

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Appendix

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CERTIFICATE OF COMPLIANCE

Pursuant to Rule 32(a)(7)(C) of the Federal Rules of Appellate Procedure,


the undersigned hereby certifies that this brief complies with the type-volume
limitation of Rule 32(a)(7)(B)(ii)
(7) Length.
(A) Page limitation.
A principal brief may not exceed 30 pages, or a reply brief 15 pages, unless it complies with Rule
32(a)(7)(B) and (C).
(B) Type-volume limitation.
(i) A principal brief is acceptable if:
it contains no more than 14,000 words; or
it uses a monospaced face and contains no more than 1,300 lines of text
(ii) A reply brief is acceptable if it contains no more than half of the type volume specified in Rule
32(a)(7)(B)(i).
(iii) Headings, footnotes, and quotations count toward the word and line limitations. The corporate
disclosure statement, table of contents, table of citations, statement with respect to oral argument, any addendum
containing statutes, rules or regulations, and any certificates of counsel do not count toward the limitation.

As measured by the word processing system used to prepare this brief, there
are no more than 15 pages or at most 7,000 words.
There are 6,884 words in this reply brief, exclusive of table of contents, table
of citations, statement with respect to oral argument, and certifications of do not
count toward the limitation.

D. B. KARRON
pro se

April 12, 2012


Long Beach, New York

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Certificate of Service

Daniel B. Karron,
Defendant-Appellant,

CERTIFICATE OF SERVICE
11-1924-civ

v.
United States of America,
Plaintiff-Appellees.

I, D. B. Karron hereby certify under penalty of perjury that on April 12, 2012, I
served a copy of the Corrected Appeal Reply Brief by
___ United States Mail
___ Federal Express
___ Overnight Mail
___ Facsimile
_X_ E-mail to michael.byars@usdoj.gov
_X_ Hand delivery
on the following parties
For the United States of America
Michael J. Byars, Assistant United States Attorney
United States Attorney's Office, Southern District of New York
86 Chambers Street, 3rd Floor, New York, New York 10007
Signed, April 12, 2012 in Long Beach, New York

/s/__________________________
D B. Karron,
pro se
348 East Fulton Street
Long Beach, NY 11561

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Cross reference
Case: 11-1924 Document: 36
Karron Brief
Table of Authorities, Other Authorities
Cross reference to
Government Appendix (A-nnn),
Government Special Appendix (SPA-nnn) and
Karron Appendix (KA-nnn),
where nnn is an appendix Bates Stamp Page Number
Document and Ref
Appendix Ref
Karron Brief Ref
DXFFF ......................................KA-1737..... ......... 17
DXP-6.KA-1753...................................17
GXl KA-66.12
GX23..................................................KA-204.................................... 11
GX114..............................................A-233........................................... 21
GX2..................................................A-72................................... 25, 26
GX50................................................KA-1754....................................... 21
GX61................................................KA-1777...................................... 17
GX62................................................A-160...........................................,.25
Sentencing Tr. at 10 Line 23 ...............A-265..................17
Sentencing Tr. at 19 Line 10 ...............A-274.........................................10
Sentencing Tr. at 61 Line 19 ...............A-316.................................17
Sentencing Tr. at 61 Line 23 ...............A-316............................. 18, 23
Sentencing Tr. at 8 Line 2 ...................A-263........................................17
Sentencing Tr. at 9 Line 18 .................A-264........................................21
Sentencing Tr. at 9 Line 21 .................A-264........................................17
Trial Tr. at 1057 Line 9 .......................KA-1380...................................10
Trial Tr. at 1293 Lines 20-24 ...............KA-1619...................................21
Trial Tr. at 350 Line 5 ........................KA-670......................................18
Trial Tr. at 381 Line 15 .......................KA-701......................... 18, 22, 23
Trial Tr. at 383 Line 5 ........................KA-703...................................... 23
Cross reference to
A
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Government Appendix (A-nnn),


Government Special Appendix (SPA-nnn) and
Karron Appendix (KA-nnn),
where nnn is an appendix Bates Stamp Page Number
(continued)
Document and Ref
Appendix Ref
Karron Brief Ref
Trial Tr. at 383 Line 5 ..............................KA-703..........................18
Trial Tr. at 386 Line 19.............................KA-706............ 18, 23
Trial Tr. at 387 Line 4 ..............................KA-707.................... 18, 22
Trial Tr. at 388 Line 21 ............................KA-708.......................... 22
Trial Tr. at 513 Line 19.............................KA-834.......................... 23
Trial Tr. at 656 Line 1...............................KA-977.................... 18, 23
Trial Tr. at 664 Line 15.............................KA-985.................... 18, 22
Trial Tr. at 800 Line 3 ..............................KA-1122........................ 18
Trial Tr. at 1271 Line 23 to 1272 Line 8...KA-1596........................ 17
UB-04 ........................KA-1809.......19

B
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Karron Appendix Table of Contents

VOLUME 1. (KA 1 through 313)


75K Amortization Schedule (with references into This Appendix)..KA-1
15 278n. Advanced Technology Program ..KA-5
DECLARATION OF ERIC A. EISEN. ESQ. IN RE OPPOSITIO TO
PLAINTIFFS MOTION FOR SUMMARY JUDGMENT....KA-204
15 CFR Subtitle A (1101 Edition) 14UNIFORM ADMINISTRATIVE
REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH
INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, OTHER NONPROFIT, AND COMMERCIAL ORGANIZATIONS Subpart AGeneral
.KA-38
GX1, ATP Proposal Preparation Kit (Kit)all the necessary guidelines for
developing an ATP proposal during fiscal year 2001
KA-66
GX2, GENERAL TERMS AND CONDITIONS ADVANCED TECHNOLOGY
PROGRAM August 2001
KA-142
DEPARTMENT OF COMMERCE FINANCIAL ASSISTANCE STANDARD
TERMS AND CONDITIONS October 2001
KA-161
GX3, DEPARTMENT OF COMMERCE FINANCIAL ASSISTANCE
STANDARD TERMS AND CONDITIONS October 1998
KA-185
GX23, FORM CD-451, U.S. DoC AMENDMENT TO FINANCIAL
ASSISTANCE AWARD Amendment #3.KA-204
GX110, OIG Auditor Spreadsheet by Payee Between 10/11/2002 and 6/30/2003
(second year, 37 pages).. KA-208
C
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GX110, OIG Auditor Spreadsheet by Payee Between 10/1/2001 and 10/10/2002


(first year, 44 pages)
KA-245
Browning Letter to CASI November 5, 2007 regarding disposition of un-liquidated
project funds..KA-290
Excluded Parties List lookup..KA-291
Letter F.R.C.P. 16 (a) (1) (G), May 16, 2008 Admission of expert testimony of
Certified Public Accountants 1) Joan Hayes and 2) Belinda RileyKA-292
Hazel Belinda Riley Expert Resume..KA-296
Karron Taxes, IRS Form 1040 for 2001, 2002, redacted, as prepared by Hayes
(2002 W-2 by Hayes, 1090 by Solomon) KA-299
Karron Taxes IRS Form 1040 for 2001, KA-299
Karron Taxes IRS Form 1040 for 2002 KA-304

VOLUME 2 (KA-314 through 610)


Wang, A. J. Key Concepts in Evaluating Outcomes of ATP Funding of Medical

Technologies................................................................................................ KA-314
PATTERSON COURT CRIMINAL TRIAL TRANSCRIPT

KA-319

VOLUME 3 (KA-611 through 910)


PATTERSON COURT CRIMINAL TRIAL TRANSCRIPT (all Volume 3)

VOLUME 4 ..(KA 911 through 1210)


PATTERSON COURT CRIMINAL TRIAL TRANSCRIPT (all Volume 4)

VOLUME 5.. (KA-1211 through 1511)


PATTERSON COURT CRIMINAL TRIAL TRANSCRIPT (all Volume 5)

D
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VOLUME 6 ....(KA-1512 through 1809)


GX22 Amendment #2.KA-1718
15 CFR Subtitle A (1101 Edition) 24.30....KA-1735
DX FFF-1 (Year 1 Checks to Karron)..........KA-1737
DX FFF-1 (Payroll Journal Entry for 75K Advance..KA-1752
DX P-6.(Year 1 Payroll Checks).......KA-1753
GX-50 (Hayes Audit Report).KA-1754
GX-50 (Rent Checks found)(Cf DBK Taxes)...KA-1764
GX-60 (Flash Audit Report, July 2003)...KA-1771
GX-61 (Draft audit Report, March 2004) ..KA-1777
UB04 (Medicaid Reimbursement Form FCA Warning) .. KA-1808

VOLUME 7 .....(KA-1810 through 2108)


DECLARATION OF DUNLEVY, Continued
DUNLEVY E1 Co-Funding BAC301 BAC400 ... KA-1968
BANK RECONCILATIONS... KA-2089

VOLUME 8 (KA-2109 through 2407)


DECLARATION OF DUNLEVY, Continued
CASI ENTITIES General Leger 10/1/01 12/31/03
Income and Expense Accounts CAC

VOLUME 9 ..(KA-2408 through 2720)

E
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DECLARATION OF DUNLEVY, Continued


DUNLEVY F G/L Balance Sheets CAC 101 to CAC 178 ...KA-2510
CASI ENTITIES G/L 10/1/01 -12/31/03 Balance Sheet Accounts KA-2501
DUNLEVY G G/L Income & Expenses KA-2589
CASI ENTITIES General Ledger 10/01/01 - 12/31/03
Income & Expense Accounts CAC 191 to CAC 321KA-2590

VOLUME 10. (KA-2721 through 2955)


DECLARATION OF DUNLEVY . KA-2721
Amex, Mastercard, and Payroll Accounting Analysis CAC-322 to 426KA2721
AMEX Detail From October 1. 2001through December 31, 2003.KA-2722
Stock Certificates HABAC 555 ...KA-2883
DBK Mastercard Statements DXZZZ-1..KA-2893
DBK Mastercard Analysis DXZZZ-1..KA-2912
DBK Letter to CASI Staff Re AWARD Conditions ..KA-2916
KICKOFF MEETING AGENDA LETTER....KA-2917
FELDMAN ACCOUNTING CERTIFICATION LETTER... KA-2919
BROWNING LETTERKA-2920
KARRON SALARY ADVANCE AND RENT BAR GRAPH...KA-2921
KARRON PAYROLL LOANS RENT FRINGE PIE GRAPH..............KA-2922
SECOND YEAR PAYROLL TAX LIENS.KA-2923
DECLARATION OF KARRON IN OPPOSITION ...KA-2924
F
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KARRON EXHIBITS VOLUME 1 CONTENTS...KA-2929


KARRON EXHIBITS VOLUME 2 CONTENTS ..KA-2932
EXHIBITS VOLUME 3 LAW, STATUTES, RULES, REPORTS ...KA-2939
Its The LawVol 6, November 3, 1995KA-2942
Its The Law Vol 16, May 19, 2004...KA-2945
Buchwald Court Order May 5, 2011......KA-2948
Karron Letter to Buchwald Court April 17, 2011..KA-2952
DX-P1(Payroll Check 1)......KA-2956
DX-P2(Payroll Check 2).....KA-2957
DX-P3(Payroll Check 3).....KA-2958
DX-P4(Payroll Check 4).....KA-2959
DX-P5(Payroll Check 5).....KA-2960
DX-P6(Payroll Check 6).KA-2961
Baker, JS (2010) THE USE OF SENTENCING FINDINGS AS A COLLATERAL
ESTOPPEL WEAPON IN SUBSEQUENT CIVIL LITIGATION Notre Dame
Law Review vol. 85:2 (February, 2010 issue 2), at 713
..KA-2962
Institute for Technology Development v. Brown, 63 F.3d 445 (C.A.5 (Miss.),
1995).KA-2994

G
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Index

30 Day Float Rule ............................................................................................ 14


The 75K Advance............................................................................ 1, 6, 9, 14, 15
The Claim...................................................................... 1, 2, 3, 4, 6, 7, 10, 14, 15
bona fide ................................................................................................. 1, 2, 6, 7, 9
Buchwald Court ................................................................ 2, 3, 4, 6, 7, 8, 11, 15, 18
Patterson Court ............................................................ 3, 4, 6, 7, 8, 9, 13, 14, 15, 16
same transaction..................................................................................................... 4
severability ............................................................................................................ 4

H
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