Can State Court Have Jurisdiction Over VA Fraud Case?

In 2011 and 2012, Mr. Amit Marshall, as the owner and director of the Alliance School of Trucking obtained approval from the California State Approving Agency for Veterans Education for Alliance to provide non-college degree trucking programs to veterans eligible for benefits under the “Post 9/11 GI Bill.”

This approval authorized Alliance to receive tuition and other payments from the VA.  In receiving such approval, Mr. Marshall and Alliance director Robert Waggoner falsely certified to the VA that they would truthfully report veteran students’ enrollment status and attendance records and maintain current knowledge of VA rules and benefits.

Between December 2011 and April 2015, Marshall, Waggoner and others, including Charles Yeager-Reiman, created and caused to be created fraudulent student files for purported students that contained false attendance records, false grades and false certificates of completion.  Through completion of a VA form, Marshall and Waggoner falsely and fraudulently certified that Mr. Yeager-Reiman and other veteran students had attended classes at Alliance.  

During this same time period, as a result of such certifications, the VA paid Alliance approximately $2,351,658.19 in tuition and other fees and approximately $1,957,715.89 in education benefits to veteran students, including Mr. Yeager-Reiman, who fraudulently claimed to have attended Alliance trucking programs.

In 2018, the California Department of Justice filed a felony complaint charging Mr. Yeager-Reiman and others with conspiracy to commit grand theft, identity theft, forgery, making a false and fraudulent claim, and preparing false evidence (Penal Code § 182(a)), grand theft of personal property and making false and fraudulent claims (Penal Code § 550(a)(5)).

Mr. Yeager-Reiman then entered into a plea bargain to grand theft as a misdemeanor.  It is unclear from the published opinion how the cases resolved against the other defendants.

Mr. Yeager-Reiman then filed a petition for a writ of prohibition in the California Court of Appeal for the Second District challenging the Los Angeles County Superior Court’s jurisdiction on federal preemption grounds.

The Attorney General argued that the appellate court should dismiss Mr. Yeager-Reiman’s appeal because he failed to obtain a certificate of probable cause as required under Penal Code § 1237.5.  The appellate court rejected this argument under People v. Loera (1984) 159 Cal. App. 3d 992, 997-998 (defendant was not precluded from raising his jurisdiction claim “by his failure to secure a certificate of probable cause ordinarily required by 1237.5).

The Second Appellate District denied the petition.  It explained that “[o]rdinarily, there is a presumption against preemption.”  The presumption is based on the recognition that states have a historic interest in their police powers to enforce their criminal laws to promote the safety of their citizens.

However, there are four types of preemption that the U.S. Supreme Court has identified. Solus Industrial Innovation, LLC v. Superior Court (2018) 4 Cal. 5th 316, 331.  There is express preemption when Congress defines the extent to which its enactments preempt state law.  Conflict preemption is found when it is impossible to comply with both state and federal law simultaneously.  Obstacle preemption occurs when state law stands as an obstacle to the full accomplishment and execution of congressional objectives.  Lastly, field preemption applies when federal regulation is comprehensive and leaves no room for state regulation.  People v. Salcido (2019) 42 Cal. App. 4th 529, 537.

Here, Mr. Yeager-Reiman argued that since there were multiple federal laws prohibiting a recipient of VA funds from making false or misleading statements as to education expenses or progress in any program receiving VA benefits, Congress must have intended to preempt this area of law.

The Second Appellate District responded to this by pointing out that such laws specifically delegated enforcement to the state level, this argument was meritless.

The appellate court therefore denied the petition for a writ of prohibition, affirming the trial court.