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11th Circuit shoots down $3 million fraud case over assault rifle deal

A Czech arms dealer lost an appeal over what it said was a fraud scheme involving a multimillion-dollar shipment of AK-47 assault rifles to a U.S. military contractor.

(CN) — Stomping out the appeal of a Czech Republic-based weapons supplier that said a major military contractor had cheated it out of a nearly $3 million payday, the 11th Circuit on Tuesday upheld a district court’s dismissal of its fraud and racketeering suit.

The 18-page opinion written by Senior U.S. Circuit Judge Gerald Tjoflat, a Gerald Ford appointee, affirmed a ruling from the Middle District of Florida that had found the supplier’s complaint — even after being amended — to be speculative and lacking in detail. 

Tjoflat wrote that the allegations “do not support an inference of an agreement to violate the substantive provisions of RICO.” 

The case dates back to 2019 when the Czech arms dealer, Omnipol, sued Tampa-based military contractor Purple Shovel, its executives and three civilian contracting officers employed by U.S. Special Operations Command, or SOCom, alleging they stole millions owed to Omnipol for a delivery of 7,500 AK-47 assault rifles — splitting the money instead amongst themselves.

At oral arguments before the 11th Circuit last year, attorneys for Omnipol said Purple Shovel purposefully “induced” their client into providing the weapons “fully intending that they would receive the arms and armaments to induce SOCom to issue the funds… knowing that they were going to convert those funds to their own use.”

The supplier further alleged in its complaint that Purple Shovel had targeted SOCom by providing defective weapons and paid kickbacks to SOCom officers to get them through inspections. After Purple Shovel’s license to engage in international arms transactions was revoked, it allegedly looped unsuspecting subcontractors into its scheme to deliver weapons.

Dismissing Omnipol’s complaint, a Florida federal judge ruled the supplier failed to show that the federal employees were acting outside the scope of their employment and that its claims were not barred by sovereign immunity.

Tjoflat agreed with the lower court Tuesday that there was insufficient detail to support the supplier’s unjust enrichment claims.

“As the district court noted, the amended complaint is silent as to when SOCom transferred the relevant funds to Purple Shovel, when Purple Shovel transferred the funds to unnamed co-conspirators, and when the co-conspirators transferred the funds to the defendants. Without these ‘key details,’ the complaint is unable to make out a claim,” the judge wrote.

The supplier likewise failed to support its civil theft and fraud claims, Tjoflat said.

“As the district court noted, the amended complaint contains only one statement made by [former Purple Shovel executive Christopher] Worrell to Omnipol and Elmex—a statement by Worrell that Purple Shovel would pay a portion of the contract price prior to delivery and acceptance of the weapons—but this statement is contained in a RICO claim, not the fraud claim and even if it had been properly alleged in the fraud claim, it would still be insufficient because the complaint does not allege that Worrell knew the statement was false when he made it — nor does the complaint allege that the plaintiffs relied on this statement,” the ruling states.

Omnipol attorney Dallas LaPierre of Nexus Derechos Humanos did not respond to a request for comment, nor did Purple Shovel’s attorney Brian Calciano, who represented Worrell.

Department of Justice attorney Benjamin Schultz, who represents SOCom civilian contracting officers Bryan Siedel, Amy Strother, and Kirk Bristol, had told the panel at last year's arguments that the complaint failed to establish that his clients ever acted outside the scope of their employment. Under Florida law, an employee is considered to be acting within the scope of their employment as long as an action is undertaken at least partially to serve the employer.

Representatives from the Department of Justice did not respond to request for comment Tuesday on the ruling.

Tjoflat’s fellow panelists U.S. Circuit Judges Kevin Newsom, a Donald Trump appointee,  and Adalberto Jordan, a Barack Obama appointee, joined his opinion, with Jordan penning a concurring opinion alongside the majority ruling that addressed his concerns over what rules circuit courts are bound to regarding discovery in such cases.

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Categories / Appeals, Business, Government

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