not named any specific objections as to why this information should not be discovered or if it is overly burdensome or any other legal reason for reversing my order. Reconsideration on this basis will be denied.
B. Is the discovery request based upon information derived from the illegal use of grand jury material?
The government is in possession of two audits conducted by the Defense Contract Audit Agency (DCAA). These audits were performed on the two contracts that are the subject of this civil action. The history of how the audit was conducted will be helpful in understanding why the defendants' contention must be rejected.
The DCAA is responsible for auditing defense contract projects as required by the Department of Defense. The two contracts which underlie this civil action for false claims were the subject of an audit in 1979. The agency conducts audits in accordance with legislative power delegated to it by 32 C.F.R. 7-104.41(A)-(C). Subsection (b)
authorizes the contracting officer or his representatives to examine the books and business records of the contractor to determine if they properly reflect all direct and indirect costs associated with performing it. The DCAA has the right to examine the records at all reasonable times.
The audits conducted by DCAA in 1979 were incomplete because the defendants withheld access to certain key records. As a result, the DCAA issued a "qualified audit" report noting that certain information was lacking.
In 1982 a grand jury indicted RDL, Inc. and Messrs. Rights and DiBona for, inter alia, submitting false and fictitious statements to the government along with obstructing the DCAA audit.
As part of the grand jury process, the business records detailing the labor and material costs of two defense projects were subpoenaed. A DCAA agent, at the request of the government, examined these records and based on their information he was able to complete the 1979 audits of RDL's contract work. The irregularities the audits revealed were instrumental in securing the convictions of Messrs. Rights and DiBona. The use of the business records in the antecedent criminal action is not challenged by the defendants. They do, however, object to the use of the audit in the subsequent civil action believing that it constitutes illegal use of grand jury material.
The Federal Rules of Criminal Procedure provide that matters occurring before the grand jury may not be disclosed unless otherwise provided for by the rules. Rule 6(e)(2). Rule 6(e)(3)(B) states that "grand jury material" shall not be utilized except to assist the attorney for the government in the performance of his duties to enforce federal criminal law. The rules do provide that grand jury material may be disclosed by court order.
It is the defendants' fervent contention that the audit was the product of the grand jury process; that it could not be used outside of the criminal proceeding and that since the government did not obtain a court order releasing the audit, its use is forbidden and the complaint must be dismissed. See United States v. Sells Engineering, Inc., 463 U.S. 418, 103 S. Ct. 3133, 77 L. Ed. 2d 743 (1983). In my memorandum of December 7, 1984, addressing a similar issue raised by the defendants, I discussed the Sells decision by noting:
. . . The Supreme Court held that attorneys in the Civil Division of the Justice Department may not have automatic access to and disclosure of grand jury materials in the possession of the prosecutors but must instead seek a court order for access to this evidence. Sells, 103 S. Ct. at 3147.