United States: Whistleblowers On Campus: DOJ Adds Research Universities To Its False Claims Act Focus

Last Updated: December 15 2016
Article by Kevin P. McCoy, John E. Clabby, Joseph W. Swanson and Erin J. Hoyle

Federal funding is the grand prize for higher education research institutions. Each year, the federal government pumps hundreds of millions of dollars in research grants and awards into the university system. These funds are intended to help cure disease, develop technology, and advance the public good.

They also attract the unscrupulous. While hard figures are difficult to obtain, publicly-announced settlements have demonstrated that whistleblower claims put hundreds of millions of university dollars at risk. Whistleblowers, whether right or wrong, seek their own cut of any award the government wins, and any penalties it imposes when clawing back fraudulent monies. The claims center on improprieties in the applications for the grant money and misuse after it is received. As discussed below, recent cases have awarded staggering amounts.

False Claims Act Overview

The False Claims Act, 31 U.S.C. §§ 3729-33, (FCA) prohibits the submission of false or fraudulent claims to the government. The statute imposes civil liability for knowingly (1) submitting a false or fraudulent claim for payment; (2) causing such a claim to be submitted for payment; (3) making, using, or causing to make or use a false record or statement material to a false or fraudulent claim; (4) conspiring to get such a claim paid or approved; or (5) making a false record or statement to conceal or avoid an obligation to pay money to the government.

The FCA allows an individual, known as a "relator," to bring a civil action on behalf of the United States under the Act's whistleblower, or qui tam, provisions. A relator files the complaint under seal in a federal district court and serves the government with a copy of the complaint, as well as a written statement of all material evidence supporting the allegations. The complaint may remain sealed for 60 days while the government investigates the allegations. This seal is frequently extended for months or years before the case proceeds.

Prior to unsealing the complaint, the government notifies the relator and the court of whether it will become formally involved, or "intervene," in the case. If the government intervenes, the relator generally receives 15 to 25 percent of the government's recovery in the event of settlement or judgment in favor of the United States. If the government declines to intervene, the relator may independently proceed with the action and may receive 25 to 30 percent of any recovery. In addition, the relator is entitled to a separate award for reasonable attorney's fees and costs.

Recent Cases

FCA cases related to health care and defense contractor fraud commonly make news. The caselaw in these two areas is widely developed, and the Department of Justice (DOJ) has well-trained teams that police the public treasury. Meanwhile, research-university false claims are emerging as an area of interest for the DOJ, which is still finding its voice and mission on the FCA. These universities should understand the risk posed by this growing area of the law.

Recent cases involve two general categories of claims: university liability based on a false certification of compliance with the applicable rules and restrictions placed on receiving taxpayer money; and misuse of federal funds.

1. False certification claims.

Education Management Corp. – In 2015, the DOJ announced a $95.5 million settlement with EMC over allegations that it falsely certified compliance with Title IX of the Higher Education Act and related state statutes. The government claimed EMC pressured admissions personnel to violate the law by unlawfully compensating them based on the number of students they enrolled in the nationwide system of post-secondary schools operating under the EMC brand. Those schools included Art Institutes, South University, Argosy University and Brown-Mackie College. At its peak, EMC's system-wide enrollment surpassed 100,000. The government claimed EMC engaged in false certification as part of its effort to boost its main source of revenue — federal and state student aid dollars awarded to the school.

Phoenix University – Similarly, a 2009 whistleblower action resulted in a $78.5 million settlement with Phoenix University to resolve FCA claims based on allegations that the university had provided false certifications of compliance with the Higher Education Act. Here again, the alleged motivation centered on financial incentives given to recruiters to drive up university enrollment.

2. Misuse of government funds.

Duke University – In 2013, the university became the focus of government scrutiny after learning that a research professor had falsified research data as part of federally-funded studies. The whistleblower in the case, a former research colleague of the professor, brought the claims alleging that the university had been confronted with red flags concerning the integrity of the research results, but took no action to correct the situation. All the while, the whistleblower claims, research dollars surpassing $80 million continued to flow in. The university denies the claims and contends that it did not understand the scope of the professor's misconduct. When it did learn of the claims, it took corrective action, and provided its own notice to the government. Litigation continues. Regardless of the outcome, the university's efforts to investigate and defend these claims will be costly.

University of Florida – In 2015, the DOJ announced a $19.875 million settlement with the University of Florida following claims that the university improperly charged the U.S. Department of Health and Human Services for salary and administrative costs on federal grants. The claims centered on the process used to pay for university equipment and personnel, and whether the use of federal dollars for such expenses complied with grant purposes.

Compliance and Response

Maintaining a culture of compliance is key to minimizing FCA exposure. Effective compliance efforts may (1) reduce activity that could potentially be alleged in an FCA suit; and (2) hinder a relator's ability to prove the FCA's knowledge requirement. Effective compliance policies and procedures include processes that assist in the discovery, investigation, and remediation of improper activity. Upon discovery of a potential FCA violation, time is critical in responding to the issue and marshalling the facts so a complete investigation can be done and remedial actions taken. Additional compliance efforts include offering regular compliance training at all levels of the university, as well as instituting compliance audits and tracking the representations made to the government through certification statements. Finally, having a well-documented whistleblower policy, and a neutral, independent reporting line for investigations into such complaints can catch problems as they occur, rather than when federal investigators are at the door. Such a policy can also help insulate a university from the worst penalties and consequences of such false claims.

Conclusion

Federal awards to universities are critical to funding their missions. These mission-critical dollars, however, often come with many strings attached. The FCA is, and will remain, one of the government's most powerful tools for enforcing the myriad rules and regulations imposed on those who accept government funding. A robust compliance program that tracks certification and compliance, and plans for a response in the wake of an FCA violation, is critical for any university that accepts government dollars.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.