WASHINGTON (CN) - An attorney who used secret Navy documents to file a whistleblower lawsuit against defense contractors acted unethically and has no right to pursue the litigation, a federal judge ruled.
U.S. District Judge James Boasberg said attorney Donald Holmes "played fast and loose with the court," and violated a protective order guarding sensitive military documents in his quest to prove defense contractor fraud.
Boasberg's Dec. 9 order says Holmes also may have violated the will of his client, Munich Re, in a separate arbitration.
"Holmes wants to resolve his noncompliance with the protective order because it has complicated his qui tam action," Boasberg's order states. "Munich Re, on the other hand, may not want to assist Holmes in pursuing the qui tam claim."
Holmes was representing Munich Re in 2010 in a foreign reinsurance arbitration with Northrop Grumman and Huntington Ingalls, when he separately filed a $2.5 billion whistleblower lawsuit against the defense contractors, alleging fraud.
According to the qui tam lawsuit, the contractors used $835 million in government funds earmarked for Hurricane Katrina expenses to cover cost overruns on shipbuilding projects.
Holmes sought sensitive military documents to make his case, and the Navy agreed to release the documents - which the Navy said would include data "vital to the national defense" - if a protective order limited the use of the documents to the arbitration.
Northrop fought discovery, saying the documents would "jeopardize its competitive edge."
Holmes received the Navy documents in late 2010 and then shared them with the Justice Department's civil fraud division, a violation of the protective order, Boasberg ruled.
The Munich-Northrop arbitration was settled in 2011, but Holmes continue to pursue the whistleblower lawsuit in U.S. District Court in Mississippi. The qui tam case faltered as federal investigators dropped out as co-plaintiffs, and the case was dismissed in June this year.
The scathing June 3 opinion , by U.S. District Judge Halil Suleyman Ozerden, disqualified Holmes from acting as relator in the whistleblower lawsuit and lambasted him for ethical violations, including misrepresenting his motives for obtaining the Navy documents and not keeping Munich's information confidential.
"The accompanying public suspicion arising from Holmes' conduct outweighs any social interest in permitting him to continue participating as a relator," Suleyman Ozerden wrote in the June opinion.
Undeterred, Holmes appealed to the Fifth Circuit and filed a motion in District of Columbia Federal Court, suggesting a $1,000 fine, which he would donate to a legal aid society, in exchange for releasing the Navy documents and allowing his whistleblower lawsuit to proceed.
Boasberg said no. Calling Holmes' motion "both unconvincing and misleading," he said the qui tam lawsuit "pales in comparison" to protecting contractors' trade secrets and the Navy's own operations. "Even if the defense contractors did defraud the Navy, the Navy's interest in protecting the integrity of its contract operations still prevails."
In addition, Holmes should have negotiated the use of the protected Navy documents outside arbitration when he had the chance - five years ago - and he should have understood that any use of the documents since would be wrong, Boasberg wrote.
"The court does not take lightly Holmes' repeated attempts to draw it into believing that his violation of the order was an 'inadvertent mistake' caused by his failure to read it. ... Given the facts on the record, this contention is disingenuous at best," the judge wrote.
Holmes, who runs his own law firm specializing in contract litigation and federal contractor disputes, could not immediately be reached for comment Thursday.