A False Claims Act (FCA) suit has been revived for the second time in the Eighth Circuit Court of Appeals. The orginial complaint alleges that Heritage College, a for-profit health care training college, falsified their student records in order to receive federal money. The three-judge panel ruled the falsifications were material to the payment of financial aid by the government under the recent Supreme Court ruling in the Escobar case.
In Universal Health Care Services v. U.S. ex rel. Escobar, the Supreme Court found that false statements concerning records must be material to the payment of federal funds in order to establish FCA liability. This materiality is determined by the objective “reasonable person” standard. The question becomes whether or not a reasonable person would likely find the statement or records important in making a payment decision, or whether or not the defendant knew or should have known the statement or record would be important.
About 97 percent of Heritage College students receive federal aid, which accounts for about $32.8 million in disbursements. In order to receive this financial aid, the college was required to sign a program participation agreement with the Department of Education (DOE). The agreement required Heritage to maintain procedures and records ensuring “proper and efficient” administration of the federal funds.
The original complaint alleged that Heritage altered grade and attendance records of students to ensure the college remained eligible for federal funding, thereby fraudulently inducing the DOE to provide financial aid.
Heritage claims, and the district court agreed, that any false statements concerning the records are immaterial to the financial aid. However, following Escobar, the Eighth Circuit found that Heritage was aware of the importance of the records and that a reasonable jury could find that Heritage was required to maintain accurate student records in order to receive the financial aid. The panel further found that any false statements concerning the student records should be considered material to the government’s payment decision.
The whistleblowers (relators) in this case are former Heritage employees. The former employees filed their suit under the qui tam provision of the FCA, which allows individuals to file suit on behalf of the United States. The case will now proceed.
Sources: Law360.com and Universal Health Care Services v. U.S. ex rel. Escobar, 579 U.S. ___ (2016).
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