In the

United States Court of Appeals

For the Seventh Circuit

Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

DEBRA LEVESKI,

Plaintiff-Appellant,

v.

ITT EDUCATIONAL SERVICES, INCORPORATED,

Defendant-Appellee,

and

APPEALS OF:

MOTLEY RICE LLP, PLEWS SHADLEY RACHER &

BRAUN LLP, THE LAW OFFICES OF 

TIMOTHY J. MATUSHESKI and

TIMOTHY J. MATUSHESKI.

Appeals from the United States District Court 

for the Southern District of Indiana, Indianapolis Division.

No. 1:07-cv-00867-TWP-MJD—Tanya Walton Pratt, Judge.

ARGUED JANUARY 17, 2013—DECIDED JULY 8, 2013
2 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

The Honorable John Z. Lee of the Northern District of 

Illinois, sitting by designation.

Before MANION and TINDER, Circuit Judges, and LEE,

District Judge.

TINDER, Circuit Judge. Debra Leveski brings this lawsuit against ITT Educational Services, Inc. on behalf of the

United States, pursuant to the qui tam provision of the

False Claims Act (FCA), 31 U.S.C. § 3730(b). ITT is a forprofit institution with over 140 locations across the

United States that offers post-secondary educational

training, including associate’s, bachelor’s, and master’s

degrees. Leveski, who worked at the ITT campus in

Troy, Michigan, for more than a decade, alleges that ITT

knowingly submitted false claims to the Department of

Education in order to receive funding from federal

student financial assistance programs.

Four years after Leveski filed this lawsuit, the district

court dismissed it for want of jurisdiction, finding that

Leveski’s allegations had already been publicly disclosed

and that Leveski was not the original source of her allegations. In addition, the district court granted sanctions in the amount of $394,998.33 against all three

law firms representing Leveski and against one of

Leveski’s attorneys individually. Accusing Leveski’s

attorneys of “pluck[ing] a plaintiff out of thin air and

tr[ying] to manufacture a lucrative case,” the district

court found Leveski’s allegations wholly “frivolous.”

Contrary to the district court, we believe that Leveski’s

allegations merit further development, and more impor-
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 3

tantly, we believe they are sufficiently distinct from

prior public disclosures to give the federal district court

jurisdiction over Leveski’s lawsuit. Consequently, we

reverse both the dismissal and the sanctions, and

we remand the case back to the district court for further

proceedings.

I

Leveski’s FCA allegations turn on the restrictions

placed on schools that receive funding from federal

student financial assistance programs by the Higher

Education Act (HEA), 20 U.S.C. § 1001 et seq. Therefore,

before turning to the specifics of Leveski’s allegations,

we first review the specifics of the relevant HEA restrictions. The HEA was originally passed in 1965 “[t]o

strengthen the educational resources of our colleges

and universities and to provide financial assistance for

students in postsecondary and higher education.” Pub. L.

No. 89-329, 79 Stat. 1219. At issue in this case is Title IV

of the HEA, “Grants to Students in Attendance at Institutions of Higher Education,” codified at 20 U.S.C.

§ 1070 et seq. In passing Title IV, Congress had the best

of intentions:

to provide, through institutions of higher education, educational opportunity grants to assist in

making available the benefits of higher education

to qualified high school graduates of exceptional

financial need, who for lack of financial means

of their own or of their families would be unable

to obtain such benefits without such aid.
4 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

Pub. L. No. 89-329, 79 Stat. 1219, § 401(a). Today, Title IV

governs the administration of over $150 billion in

annual federal financial assistance awards for higher

education. U.S. Dept. of Educ., Federal Student Aid: About

Us, http://studentaid.ed.gov/about (last visited July 1,

2013).

Notwithstanding Congress’s good intentions in passing

Title IV, the colossal sums of money now administered

under Title IV have led to abuses. Specifically, Congress

became concerned in 1992 that “recruiters [of students

for institutions of higher education] paid by the head

are tempted to sign up poorly qualified students

who will derive little benefit . . . and may be unable or

unwilling to repay federal guaranteed loans.” United

States ex rel. Main v. Oakland City Univ., 426 F.3d 914, 916

(7th Cir. 2005). As a result, Congress amended Title IV

to prohibit institutions receiving federal financial assistance funding from “provid[ing] any commission, bonus,

or other incentive payment based directly or indirectly

on success in securing enrollments or financial aid to

any persons or entities engaged in any student

recruiting or admission activities or in making decisions

regarding the award of student financial assistance.”

20 U.S.C. § 1094(a)(20).

In 2002, the Department of Education issued regulations that softened the blow of the 1992 amendments for

institutions of higher education by declaring certain

types of activities and compensation schemes compliant

with 20 U.S.C. § 1094(a)(20). Known as “safe harbors,”

these twelve provisions allowed, among other things,
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 5

institutions receiving federal financial assistance award

money to pay student recruiters and financial aid

officers “fixed compensation, . . . as long as that compensation is not adjusted up or down more than twice during

any twelve month period, and any adjustment is not

based solely on the number of students recruited, admitted, enrolled, or awarded financial aid.” 34 C.F.R.

§ 668.14(b)(22)(ii)(A) (2002). These safe harbors remained

in effect for almost a decade, until the Department of

Education became concerned that they had failed to

curtail abusive recruiting practices. See, e.g., Department of Education, Program Integrity Issues: Incentive Compensation, 46-52, http://www2.ed.gov/policy/highered/

reg/hearulemaking/2009/integrity-session3-issues.pdf (last

visited July 1, 2013) (detailing common abuses and recommending that “the elimination of all of the regulatory ‘safe harbors’ would best serve to effectuate congressional intent”). Thus, the Department of Education

eliminated the safe harbor provisions from its regulations in 2011, and its current regulations now flatly prohibit institutions receiving federal award money from

adjusting the salaries of student recruiters and financial

aid officers “based in any part, directly or indirectly,

upon success in securing enrollments or the award of

financial aid.” 34 C.F.R. § 668.14(b)(22)(ii)(A) (2013).

Institutions of higher education must continually certify

their compliance with the current Department of Education regulations through program participation agreements (PPAs) in order to receive federal financial assistance award money. 20 U.S.C. § 1094(a).

With this brief history of HEA regulations in mind,

we turn back to the allegations in the case at hand.
6 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

Leveski’s decade-long employment with ITT began on

January 8, 1996, meaning that the 2002 safe harbor provisions were in effect during the latter half of her employment. ITT initially hired Leveski as an Inside Recruitment Representative (RR) for the Troy campus. (Dkt. 75, 2.)

As an Inside RR, Leveski was responsible for “contact[ing]

consumers via telephone through leads provided . . . by

ITT’s directors of recruitment at the Troy campus, . . .

persuad[ing] them to visit the Troy campus[, and] . . .

persuad[ing] them to enroll and start classes at ITT.”

(Dkt. 49-1, 1-2.) (Inside RRs did their recruiting inside

the ITT campus. Outside RRs, in contrast, visited high

schools to recruit students.) (Dkt. 141-6, 101.)

From the beginning of Leveski’s employment as an

Inside RR, ITT made the importance of her “numbers” very

clear. (Dkt. 75, 11.) According to Leveski, both Inside and

Outside RRs were directed to increase “applications,

enrollments, and starts” at every group meeting. (Dkt. 75,

10.) A prospective student who had filled out an ITT

application and paid a $100 fee (before ITT waived the fee

in 2001) was counted as an “application” for Leveski. A

prospective student who had additionally passed an

entrance exam and completed the financial aid process—basically, anyone who had “done everything but

sat in class”—counted as an “enrollment” for Leveski.

A prospective student who actually attended a class

counted as a “start” for Leveski. (Dkt. 141-6, 53-54.) By all

appearances, these applications, enrollments, and starts

had real ramifications for Leveski and the other RRs;

RRs were constantly reminded by the Troy campus director “that if they wanted an increase in pay, they must
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 7

increase applications, enrollments, and starts.” (Dkt. 75,

10.) To further incentivize them, ITT published each

RR’s sales goals in a quarterly memorandum distributed

throughout the corporate district (Dkt. 75, 10.)

Although ITT’s sole focus appeared to be on “numbers,”

it claimed to evaluate employees like Leveski on a multitude of criteria, including professional development,

the attrition rate of enrolled students, “being a team

player,” appearance, and attitude. (Dkt. 141-6, 106-07.) But

according to Leveski, these other criteria—which were

specifically listed on the employee’s annual evaluation

form—did not matter to ITT. Over time, Leveski came

to realize that her success in attaining applications, enrollments, and starts directly correlated with her

alleged success in ITT’s other job evaluation criteria. In

other words, when Leveski had a good numbers year,

she also had a good team player, appearance, and

attitude year. When Leveski had a bad numbers year,

she had similarly bad scores all around.

Of course, correlation does not prove causation, and it

is certainly plausible that Leveski had good years and

bad years all around. But Leveski offers evidence suggesting that the direct correlation between her “numbers”

evaluation and her other job criteria evaluations was

no coincidence. Rather, Leveski suggests that the other

job criteria listed on the employee evaluations were

simply a sham to cover up the only thing that truly mattered to ITT: the number of applications, enrollments,

and starts. In an affidavit, Leveski described the many

incidents that led her to believe that the other job

criteria were a sham:
8 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

ITT corporate employees and Troy campus directors continually reminded sales representatives to

meet sales targets to obtain raises and stay employed, but never discussed tactics to meet other

non-sales targets that were included in our

yearly review as sales representatives such as

assisting the school in meeting its attrition budget,

being a team player, appearance and attitude. 

(Dkt. 49-1, 12.)

During the review process as a sales representative, I questioned Steve Sorensen, Patricia Hyman

and Bob Martin regarding how my success in

helping ITT Troy Campus to obtain the attrition

rate set by ITT corporate was evaluated during

the review. I also asked them how ITT defined

attrition rate and calculated it. I was never given

a clear explanation of what attrition rate meant

or how it was calculated, nor how my rating for

appearance, attitude, and team player was evaluated. In fact, to my knowledge, ITT did not keep

track of any non-recruitment criteria during each

academic quarter.

(Dkt. 49-1, 12-13.)

[D]uring my reviews . . . when I did not significantly exceed my sales targets—the non-recruitment criteria on my reviews dropped from the

top performance level of “Very Exceptional Results” to “Results at Standard.” I asked my supervisor who conducted the review why my nonsales criteria decreased in unison with my sales
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 9

criteria. I was reassured that the score I received

in my review—the results of which determine

the percentage of my pay raise—were solely

based upon my sales targets.

(Dkt. 49-1, 13.) Similarly, when asked at her deposition

how she came to believe that ITT only considered

the number of applications, enrollments, and starts in

evaluating RRs, Leveski provided the following examples:

My first year there, 1996, I received a 1 [overall

evaluation score, which was the highest possible

score]. I did an exceptional job; I got a 1 in my

appearance. I wore the same suits the first day

I started to work at ITT and the last day I left

ITT. I didn’t get a 1 again in appearance. It doesn’t

make any sense. And when I questioned managers

about this, [they answered,] because, Debbie, they

don’t care. All they want you to do is make your

numbers. They want you to start students. It is

a number game.

(Dkt. 141-6, 88.)

You received your raises based on the students

that started. It didn’t matter how you dressed, it

didn’t matter what college courses you took. You

didn’t end up getting a raise because you got a

master’s degree in education. You didn’t get a 1

for doing that. I didn’t know what the criteria

was [sic]. . . . Look at [my professional development evaluation.] What more did I have to do to

get a 1 in that category? Go for a Ph.D.? I mean,

we . . . had representatives at that time taking
10 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

religious classes, because ITT didn’t define what

professional development was. So Joie Bowman

[another ITT employee] went and took something

at her church.

(Dkt. 141-6, 87.)

Q. Who told you you get paid based on your

starts?

A. [ITT managers] Patricia Hyman, Dave

McDaniel, Steve Sorensen, Bob Martin, [and]

representatives. If you want me to name them,

I will name them.

Q. Yes, what representatives also told you that?

A. Joie Bowman, Dave McKinnon . . . I can’t think

of any others.

Q. What specifically did Ms. Hyman tell you?

A. You know it’s a numbers game; you’re going to

get paid on the number of students you start.

(Dkt. 141-6, 73-74.)

Despite her concerns over how she was being evaluated,

for the most part, the evaluations turned out well for

Leveski. For four out of the six years that she was employed as an RR, Leveski met or exceeded her starts goal

number, and for five out the six years she received at

least the median rating for overall performance.

Moreover, Leveski received a salary increase after every

evaluation (although this increase was much higher in

years that she exceeded her numbers goal). (Dkt. 49-1, 14-
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 11

15.) Consequently, Leveski continued to work for ITT as

an Inside RR until a better opportunity arose.

That opportunity came in 2002, when ITT offered Leveski

the chance to move from the hourly position of Inside

RR to the salaried position of Financial Aid Administrator

(FAA). (Dkt. 141-6, 50.) Leveski began her new FAA job

on April 15, 2002, and quickly discovered it was a

new sort of “numbers game.” (Dkt. 49-1, 15.) Instead of

worrying about the numbers of applications, enrollments,

and starts, Leveski now had to worry about the numbers

of students she successfully “packaged.” Once a student

had completed ITT’s application process and had

passed the entrance exam, the student came to an FAA.

There, the FAA “packaged” the student—collecting

personal and demographic information on the student,

inquiring about personal and family income, and helping

the student complete the necessary forms to receive

financial aid. (Dkt. 141-6, 39-40.)

According to Leveski, the number of students successfully “packaged” directly impacted an FAA’s pay. Despite

the fact that FAAs were paid a salary, instead of being

paid by the hour, Leveski alleges that an FAA’s packaging numbers determined whether the FAA received

a raise in her salary. (Dkt. 49-1, 17.) Specifically, Leveski

came to believe over time that ITT only cared about

how much federal financial assistance award money

she could secure for the school, and how quickly she

could do it. As with her claims about ITT’s compensation

of RRs, Leveski did not arrive at this conclusion

through complete guesswork. Rather, she details specific
12 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

conversations that led her to reach this conclusion in

both her affidavit and her deposition testimony, including:

Liz Franck, Kim Zwierzchowski, Stephen

Goddard, Richard Zeeman, and Matt Diemling

[Leveski’s supervisors as an FAA] . . . stressed to

all financial aid administrators at frequent meetings that goals of securing financial aid for ITT

students must be met to get a raise. 

(Dkt. 49, 1, 18-19.)

Q. What did Mr. Diemling [the director of financial aid at the Troy campus] tell you?

A. That I would receive an increase in wages by

securing federal funding for students by getting

them repacked or packaged.

(Dkt. 141-6, 346.) Leveski also notes in her affidavit that

her yearly goals were always defined in terms of her

ability to secure the most federal award money “by the

first available date permitted by Federal law.” (Dkt. 49-1,

17.) Leveski’s success in meeting these yearly goals

directly determined how much of a raise she would

receive the following year. (Dkt. 49-1, 17-18.) In sum, it

did not take Leveski long in her new position as an FAA

to realize that ITT was “looking for the money, and [it]

want[ed] the money to come in on the first day it’s available.” (Dkt. 141-6, 192-93.) With the constant emphasis

on numbers throughout the FAA office, Leveski realized,

once again, that the only things that mattered to ITT were

the numbers. (Dkt. 141-6, 193.)

Although the numbers were important for both RRs

and FAAs, according to Leveski, the pressure to meet
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 13

number goals led to some particularly unsavory

behavior among the FAAs. The pressure to secure as

much federal award money for ITT as quickly as possible

led many managers and FAAs to underreport students’

incomes, to overlook discrepancies in the students’ applications, and even to falsify financial aid documents.

Again, Leveski provided specific examples of this

behavior in her deposition:

Q. Ms. Leveski, were you ever instructed by a

manager at ITT to falsify financial aid forms?

A. Yes.

Q. Who instructed you to falsify financial aid

forms?

A. Richard Zeeman.

. . .

Q. What did Mr. Zeeman instruct you to do in

2005 that you thought was improper?

A. He asked the financial aid advisors and myself

to falsify documents so that we could get the

students packaged.

. . . 

Q. . . . Why do you contend Mr. Zeeman instructed

you to falsify financial aid documents?

A. Because he called three of us in his office behind

closed doors and asked us to falsify documents

so that we could get our students packaged.

(Dkt. 141-6, 393-94.)
14 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

Q. Okay. You just testified that you’re aware of

other FAAs falsifying documents at ITT; is

that right? . . . Why do you contend that they

falsified documents, they being the unnamed

FAAs?

A. When you would meet with an individual, and

there were many individuals out there that work

under the table. They don’t put down the income

on the FAFSA [Free Application for Federal Student Aid]. And . . . I would say to them, How

much money did you make? Oh, I made $10,000,

but it was all under the table. I made them write

it on the FAFSA. Other FAAs just looked the

other way. They didn’t have it recorded. . . . At

that point I would say, Okay, . . . you were required by law to file federal income tax. Well,

the person would get very upset sometimes. I’d

end up calling my manager in, and . . . in some

instances the manager would either come back

and say to me, and possibly the Director of Finance, that the person made a mistake. He didn’t

mean he had made $10,000.

(Dkt. 141-6, 151-52.) Despite the less-than-honest atmosphere that prevailed throughout the financial aid office,

Leveski continued to work there for four more years. In

2005, she filed a sexual harassment lawsuit against

ITT, which settled on November 3, 2006. (Dkt. 49-1, 1;

Dkt. 141-6, 247.) As part of the settlement agreement,

Leveski agreed to end her employment with ITT, and

the parties appeared to part company forever.
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 15

But an express mail letter brought the parties back

into conflict only six months later. On May 17, 2007,

Leveski received a letter from private investigator

Davy Keith, informing Leveski that he worked for a

Mississippi attorney who would like to speak to her. (Dkt.

141-6, 239.) Leveski was not sure why a Mississippi

attorney would want to speak to someone in Michigan;

nonetheless, Leveski called Keith’s phone number and

left a message on his answering machine. Later that

day, Leveski received a phone call directly from the

Mississippi attorney, who turned out to be Timothy J.

Matusheski (one of the original attorneys who filed

the present lawsuit). Matusheski, it seems, had hired

Keith to find former ITT employees who had previously

filed lawsuits against the company. Apparently

assuming that they would be predisposed to think ill of

their former employer, Matusheski contacted these

former employees, with the hope of finding one who

had enough damaging information against the school

to bring an FCA lawsuit. (Dkt. 141-6, 240-43.)

Before talking to Matusheski, Leveski admittedly had

never considered filing an FCA suit against ITT. (Dkt. 141-

6, 244.) However, after learning about a potential FCA

claim from Matusheski, Leveski began conducting

some independent research, which included “t[aking] a

closer look at my own reviews . . . [and] doing searches on

the Internet in reference to Title IV funding and the rules

and regulations.” (Dkt. 141-6, 294.) During her research,

she also reviewed previous qui tam actions against ITT,

including United States ex rel. Graves v. ITT Educ. Servs.,

Inc., 284 F. Supp. 2d 487 (S.D. Tex. 2003) and U.S. ex rel.
16 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

Olson v. ITT Educ. Servs., Inc., No. 1:04-CV-0647-JDT-WTL,

2006 WL 64597 (S.D. Ind. Oct. 20, 2005). Leveski did not

limit her research to ITT; in fact, Leveski also

researched Matusheski—who had been completely unknown to her before the private investigator’s letter—looking up information about him on the internet

as well as contacting her previous attorney from the

sexual harassment suit. (Dkt. 141-6, 247.) After all this

research, Leveski decided that she wanted to bring a

qui tam action against ITT, and Matusheski was the attorney to file it.

Thus, Matusheski (along with another attorney who

has subsequently withdrawn) filed this case under seal

in the Southern District of Indiana (the location of ITT’s

corporate headquarters) on July 3, 2007, and the long

procedural history of this case began. The Department

of Justice declined to intervene in Leveski’s case on November 13, 2008, and the court unsealed Leveski’s case

shortly thereafter. (Dkt. 23, 1.) On January 30, 2009, ITT

filed its first motion to dismiss Leveski’s case pursuant

to Fed. R. Civ. P. 9(b), 12(b)(1), and 12(b)(6), claiming

that (1) the “ ‘fraudulent scheme’ alleged by Leveski in

this matter is identical” to the one alleged in Graves, 284

F. Supp. 2d at 490-93, so 31 U.S.C. § 3730(b)(5) barred

subject-matter jurisdiction over Leveski’s case in federal

court, (2) Leveski’s case was barred by a release she

signed after settling her sexual harassment suit with ITT,

(3) Leveski had failed to plead her allegations of fraud

with sufficient particularity, as required by Fed. R. Civ.

P. 9(b), and (4) Leveski had made her allegations in a

conclusory manner, in violation of Fed. R. Civ. P. 12(b)(6).
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 17

(Dkt. 40.) On September 23, 2009, Judge William T. Lawrence, the original district court judge assigned to

Leveski’s case, dismissed it under Fed. R. Civ. P. 9(b),

finding that Leveski had “all but admit[ted] that she

has not plead her allegations with sufficient particularity,” but gave Leveski the option to file an amended

complaint within fifteen days. In issuing this order, the

judge explicitly rejected both ITT’s jurisdictional argument and its release argument. The judge rejected the

release argument because Leveski had only released

ITT from claims “based upon” and “relate[d] to her

employment,” but Leveski’s claims in the present FCA

suit were “derivative in nature, based on an obligation

owed to the Government.” (Dkt. 74, 4.) With respect to

the jurisdictional argument, the judge noted that 31

U.S.C. § 3730(b)(5) only barred subject-matter jurisdiction if Leveski’s case could be fairly characterized as a

“related action based on the facts underlying” Graves.

Since Leveski alleged many facts in her complaint that

occurred after the Graves litigation had been resolved,

the judge did not see how Leveski’s case could be

“based on” Graves. Thus, the judge concluded, nothing

stood in the way of federal subject-matter jurisdiction

over Leveski’s case were she to re-file an amended complaint alleged with sufficient particularity. (Dkt. 74, 3-4.)

Leveski took up the district judge’s offer to amend

her complaint, and she filed this amended complaint on

October 8, 2009. (Dkt. 75.) ITT immediately filed a

second motion to dismiss pursuant to Fed. R. Civ. P.

12(b)(6) and 9(b), this time alleging that (1) Leveski

had again failed to plead her fraud allegations with

sufficient particularity, (2) Leveski had again failed to
18 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

state a claim, (3) Leveski’s suit was barred by a settlement agreement between ITT and the Department of

Education, and (4) at least some of Leveski’s claims

were barred by the FCA’s six-year statute of limitations. (Dkt. 77.) Leveski’s case fared much better on the

disposition of ITT’s second motion to dismiss than it

had on the first, with one exception. On May 12, 2010,

Judge Lawrence agreed with ITT that the FCA’s sixyear statute of limitations applied to Leveski’s case, thus

barring all of Leveski’s claims occurring before July 3,

2001 (since Leveski originally filed this action on

July 3, 2007). The statute of limitations issue was ITT’s

only victory, however, as Judge Lawrence rejected the

rest of ITT’s arguments. After the disposition of ITT’s

second motion to dismiss, Leveski’s case proceeded in

the district court covering only the time period from

July 3, 2001 to November 3, 2006 instead of the original

January 8, 1996 to November 3, 2007 period, and it continues covering this abbreviated time period today since

Leveski did not appeal Judge Lawrence’s order. Yet

practically speaking, this abbreviation does not matter

much to Leveski’s case since the new time period—July 3,

2001 to November 3, 2006—still covers Leveski’s employment both as an RR and as an FAA. (Dkt. 92.)

By the time that Judge Lawrence issued an order on

ITT’s second motion to dismiss, he had already been

dealing with Leveski’s case for close to three years. Nonetheless, it appears that because of new judicial appointments to the district court, case assignments were

shuffled, and Leveski’s case was reassigned from Judge

Lawrence’s docket to Judge Tanya Walton Pratt’s
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 19

docket on June 25, 2010. (Dkt. 110.) Perhaps believing

that it would have better luck with a new judge, ITT

filed a third motion to dismiss Leveski’s case on March 16,

2011. (Dkt. 141.) In this third motion, filed pursuant to

Fed. R. Civ. P. 12(b)(1), ITT hearkened back to an argument from its first motion to dismiss, claiming once

again that the federal court lacked subject-matter jurisdiction over Leveski’s case. Instead of basing its jurisdictional argument on 31 U.S.C. § 3730(b)(5), however,

ITT now based its jurisdictional argument on the applicable version of 31 U.S.C. § 3730(e)(4): 

(A) No court shall have jurisdiction over an

action under this section based upon the

public disclosure of allegations or transactions in

a criminal, civil, or administrative hearing, in a

congressional, administrative, or Government

Accounting Office report, hearing, audit, or investigation, or from the news media, unless the

action is brought by the Attorney General or the

person bringing the action is an original source

of the information.

(B) For purposes of this paragraph, “original

source” means an individual who has direct

and independent knowledge of the information

on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section

which is based on the information.

Based on this statute, ITT argued that Leveski’s case

was “based upon publicly disclosed allegations,” and
20 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

Leveski was “not the original source of these allegations.”

(Dkt. 141, 1.) Although based on a different subsection

of § 3730, ITT’s new jurisdictional argument before

Judge Pratt was similar to its earlier jurisdictional argument before Judge Lawrence. Still, ITT now claimed

to have stronger evidence that the federal court lacked

subject-matter jurisdiction over Leveski’s case. (Dkt. 141-

1, 6-7.) This stronger evidence came in the form of

Leveski’s deposition testimony from only two weeks

prior, which—according to ITT—“firmly establish[ed

that] Leveski lacks direct knowledge of the fundamental

premise of her suit . . . and what minimal knowledge

she does have was not acquired independently, but

through Internet research of prior cases brought against

ITT and conversations with the lawyer who recruited

her, Matusheski.” (Dkt. 141-1, 15.)

Judge Pratt found ITT’s jurisdictional arguments more

convincing than her predecessor had found them. On

August 8, 2011, Judge Pratt dismissed Leveski’s case

for lack of jurisdiction under 31 U.S.C. § 3730(e)(4), finding

that Leveski’s allegations had already been publicly

disclosed in Graves and that Leveski was not the original

source of these allegations. Judge Pratt noted that, like

Leveski, the Graves relators had also been employed by

ITT as RRs, and they had also “alleged that ITT violated

the HEA by compensating its admissions and recruitment representatives based directly on the number of

their enrolled students.” (Dkt. 241, 5-6.) Although

Leveski had attempted to distinguish her case from

Graves, the judge did not find her attempts persuasive.

The judge acknowledged that Leveski’s allegations
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 21

against ITT spanned a later time period than the

Graves allegations. The judge also recognized that Leveski

made additional allegations not present in the Graves

complaint—most notably, the allegation that ITT compensated both FAAs and RRs in a manner that violated

the HEA. (In contrast, the Graves relators had alleged

that ITT only compensated RRs in a manner that violated

the HEA.) But citing Glaser v. Wound Care Consultants, Inc.,

570 F.3d 907, 920-21 (7th Cir. 2011), for the proposition

that “though a complaint may add a few allegations

not covered by the previous disclosure, it is not enough

to take this case outside the jurisdictional bar,” the

judge ultimately concluded that Leveski’s additional

allegations were “insufficient to withstand the ‘based

upon public disclosure’ analysis.” (Dkt. 241, 6.) Thus,

Judge Pratt concluded that 31 U.S.C. § 3730(e)(4)(A)

required her to dismiss Leveski’s suit for lack of subjectmatter jurisdiction. (Dkt. 241.)

Following this dismissal for lack of subject-matter

jurisdiction, things went from bad to worse for Leveski.

Leveski filed a motion to alter or amend the judgment

under Fed. R. Civ. P. 59(e) on September 2, 2011, arguing

that the dismissal order had “not take[n] into consideration the material factual differences between this case

and . . . Graves” and had also ignored binding Seventh

Circuit precedent. (Dkt. 255, 2.) A sharp denial ruling

referred to Levesi’s 59(e) motion as a “second bite at the

apple.” (Dkt. 297, 15.) The denial did note that “the mechanics of this scheme [alleged by Leveski] are perhaps

not identical to the mechanics of the scheme alleged in

Graves,” but emphasized that “the two cases need not be
22 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

identical” in order to be barred by 31 U.S.C. § 3730(e)(4)(A).

(Dkt. 297, 20.) In response to Leveski’s allegation

that binding Seventh Circuit precedent had not been

followed, the denial ruling noted that “the Court’s

decision to grant ITT’s motion to dismiss was not an

anomaly. To the contrary other courts have dismissed

nearly identical qui tam suits where the plaintiff’s

attorney [Matusheski] clearly recruited the relators to

serve as makeshift and manufactured whistleblowers

wielding generic and cookie-cutter complaints.” (Dkt 297,

20.) Along those lines, the order concluded with a stern

criticism of the way in which attorney Matusheski

had recruited Leveski to bring her case. Noting that

Matusheski had recently apologized to another federal

district court for his behavior in a separate FCA case

involving a different for-profit educational institution,

the district judge characterized Matusheski’s continual

pursuit of Leveski’s case as “brazen.” (Dkt 297, 20.)

Leveski, according to the district judge, was “worlds

apart from the type of genuine whistleblower contemplated by the FCA,” leading the judge to conclude

that both “the existence of nearly on-point cases

reaching identical results [and] the attorney-driven

nature of this lawsuit” demanded the dismissal of

Leveski’s suit for lack of subject-matter jurisdiction

under 31 U.S.C. § 3730(e)(4)(A). (Dkt. 297, 21.)

The final blow to Leveski’s lawsuit came in the form

of sanctions. ITT had sought sanctions in the district

court against both Leveski and her counsel, principally

contending that the qui tam suit was frivolous. Upon

the dismissal of Leveski’s case for lack of subject-
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 23

matter jurisdiction, the district judge awarded

sanctions against counsel only. (Note that in addition to

Matusheski, Leveski had secured additional counsel by

the time that the district court dismissed her case

and granted sanctions. The law firm of Plews

Shadley Racher & Braun had joined Matusheski in the

representation of Leveski on April 30, 2009, and the law

firm of Motley Rice LLP had joined both Matusheski

and Plews Shadley in the representation of Leveski on

June 2, 2011. Despite their differing lengths of involvement with Leveski’s case, all counsel were included in

the sanctions order.) Nevertheless, because we now

reverse the dismissal, this sanctions order will require

little discussion.

Leveski and her counsel filed a timely appeal of both

the dismissal and the sanctions order with our court. We

review Leveski’s appeal concerning the district court’s

dismissal of her case for lack of subject-matter jurisdiction de novo. Apex Digital, Inc. v. Sears, Roebuck & Co., 572

F.3d 440, 443 (7th Cir. 2009). Furthermore, because ITT

raised a factual (instead of a facial) challenge to jurisdiction, we are “not bound to accept as true the allegations

of the complaint which tend to establish jurisdiction.”

Grafon Corp. v. Hausermann, 602 F.2d 781, 783 (7th Cir.

1979). Instead, we may “properly look beyond the jurisdictional allegations of the complaint and view whatever

evidence has been submitted on the issue”—such as

Leveski’s deposition testimony. Id.; see also Hay v. Ind.

State Bd. of Tax Comm’rs, 312 F.3d 876, 879 (7th Cir. 2002).
24 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

The current version of 31 U.S.C. § 3730(e)(4), which went into 1

effect on March 23, 2010, expressly incorporates the “substan-

(continued...)

II

Both Leveski and ITT agree that federal subject-matter

jurisdiction over this case turns on our interpretation

of 31 U.S.C. § 3730(e)(4). The version of § 3730(e)(4) applicable to Leveski’s lawsuit is the version that was “in

force when the events underlying this suit took place.”

United States ex rel. Goldberg v. Rush Univ. Med. Ctr., 680

F.3d 933, 934 (7th Cir. 2012) (noting that the language of

§ 3730(e)(4) was “altered in 2010, but that change is not

retroactive”). This version of § 3730(e)(4), which remained effective from October 27, 1986 until March 22,

2010—a time period that encompasses both Leveski’s

employment at ITT and her subsequent filing of this

lawsuit—bars federal court “jurisdiction over an [FCA]

action . . . based upon the public disclosure of allegations . . . unless . . . the person bringing the action is an

original source of the information.” Pub. L. No. 99-562, § 3,

100 Stat. 3153 (1986). Congress added this provision to

the FCA in order to avoid the “risk that unnecessary

‘me too’ private litigation would divert funds from

the Treasury.” Goldberg, 680 F.3d at 934. With this congressional purpose in mind, we have previously interpreted the phrase “based upon [a] public disclosure”

to mean “substantially similar to publicly disclosed

allegations,” in accordance with virtually every other

circuit that has interpreted this phrase. Glaser, 570

1
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 25

(...continued) 1

tially similar” standard previously used by our circuit and

most other circuits under the prior version of the statute. See 31

U.S.C. § 3730(e)(4)(A) (2013) (commanding courts to “dismiss

an action or claim under this section, unless opposed by the

Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed.”

F.3d at 920. Moreover, the applicable version of

§ 3730(e)(4)(B) defines the term “original source” to

mean “an individual who has direct and independent

knowledge of the information on which the allegations

are based and has voluntarily provided the information

to the Government before filing an [FCA] action.”

Applying the definitions of these terms to the instant

case, we must first determine whether Leveski’s allegations are “substantially similar to publicly disclosed

allegations.” 570 F.3d at 920. If we decide that Leveski’s

allegations are not substantially similar, then our jurisdictional inquiry ends, and Leveski can proceed to

litigate her case on the merits in the federal district

court. On the other hand, if we decide that Leveski’s

allegations are substantially similar, then our jurisdictional inquiry has a second step. In this second step,

we must assess whether Leveski has “direct and independent knowledge of the information on which [her]

allegations are based.” 31 U.S.C. § 3730(e)(4)(B). (Both

sides agree that Leveski contacted the government

before bringing this action, so we need not inquire

whether Leveski “voluntarily provided [her] information

to the Government before filing.”) (Dkt. 334-3, 4.) If
26 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

we decide that Leveski has direct and independent knowledge of her allegations, then once again, Leveski can

proceed to litigate her case on the merits in the federal

district court. If we decide that Leveski does not have

direct and independent knowledge, however, then 31

U.S.C. § 3730(e)(4)(A) bars subject-matter jurisdiction,

and Leveski cannot litigate her case in federal court.

A

The first step of our jurisdictional inquiry requires us

to determine whether Leveski’s allegations are substantially similar to the relators’ allegations in Graves, 284

F. Supp. 2d at 490-93, which was filed more than five

years before Leveski’s case on April 22, 2002. (Dkt. 241.)

Although we have already reviewed Leveski’s allegations in Section I, we must also review the Graves allegations before making this determination. We turn to

this review now. Much like the present case, the Graves

case was brought by relators who were former

employees of ITT. The two relators, Susan Newman

and Dan Graves, had worked for ITT as Inside RRs—the

same job that Leveski had once held at ITT. Moreover,

the two Graves relators alleged in their complaint that

ITT had violated the HEA by illegally paying incentive

compensation to its RRs. (Dkt. 241, 6.)

Certainly, the allegations in Graves seem very similar

to Leveski’s allegations on first impression. But first

impressions can be deceiving. A closer examination

reveals four critical differences between the two cases.

First, we note that the relators in Graves had much
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 27

shorter tenures at ITT than did Leveski. Relator Susan

Newman was employed by ITT for approximately

nineteen months (from June 2, 1998 to February 7, 2000),

while relator Dan Graves was employed for less than

one year (from July 1999 to February 2000). (Dkt. 141-9, 3.)

Leveski, in contrast, worked for ITT for over a decade

(January 8, 1996—November 3, 2006). (Dkt. 75.) The

relatively long span of Leveski’s employment, of course,

does not directly impact her FCA claim. Nevertheless,

because Leveski worked at ITT for so much longer than

the Graves relators, she has greater potential than the

Graves relators to possess relevant evidence about ITT’s

compensation scheme that could directly impact her

FCA claim.

Second, and relatedly, the long span of Leveski’s employment allows her to make allegations against ITT that cover

a different time period than the Graves allegations. Although the Graves relators worked for ITT for less than

two years, they allege that “ITT paid illegal incentive

compensation to its admissions representatives” from

“1993 to 1999”—i.e. during the five years prior to their

being hired by ITT as well as during their brief employment. (Dkt. 141-9, 24-25.) Leveski, on the other hand,

alleges that ITT paid illegal incentive compensation

throughout her decade-long employment at ITT from

1996 to 2006. After excluding the earlier years of

Leveski’s employment (since Judge Lawrence found

allegations from these years barred by the six-year

statute of limitations), Leveski’s allegations cover the

period from July 3, 2001 to November 3, 2006. (Dkt. 92.)

Thus, there is no temporal overlap between the Graves

allegations and Leveski’s allegations. 
28 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

Third, because the Graves relators were employed by

ITT for a relatively short period of time, they were only

able to make allegations about the one department to

which they were briefly exposed: the recruitment office.

Leveski, on the other hand, is able to present evidence

about ITT practices in a second department, the financial

aid office, since her long employment afforded her the

opportunity to hold two different positions (RR and

FAA). Indeed, Leveski’s experience as an FAA during

the latter half of her employment at ITT allows her to

make allegations both about the way that ITT compensated its employees in the financial aid office and

about the way that ITT applied to the federal government

for financial aid. Specifically, Leveski alleges that the

FAAs’ salaries “were directly tied” to how much financial aid they could secure for ITT “by the first available

date permitted by Federal law.” (Dkt. 75, 13-14.) With

regard to ITT’s applications for federal financial

aid, Leveski testified in her deposition that other ITT

employees, and even her manager, condoned students

underreporting their income on the FAFSA (which

would, of course, increase the amount of financial aid

for which they were eligible). (Dkt. 141-6, 151-53). If true,

both of Leveski’s allegations would constitute clear

violations of the HEA—and yet, these allegations are

wholly absent from the Graves case.

Fourth, even putting aside Leveski’s additional allegations about the ITT financial aid office, we see significant

differences in her allegations about the recruitment

office. The scheme alleged by the Graves relators
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 29

involved a flagrant violation of Department of Education requirements. According to them,

ITT’s salary administration program for admissions and recruitment personnel provided in

part for the payment of “5% of earned revenues

for Inside Representatives and 10% of earned

revenues for Outside Representatives.” The level

of “earned revenue” was a direct function of the

new and continuing students and graduates

who are enrolled by the admissions and recruitment representative.

(Dkt. 141-9, 24.) In addition to this allegation that ITT

paid direct commissions to its RRs, the Graves relators

alleged that ITT “had minimum enrollment quotas for

recruiters. Recruiters failing to meet their enrollment

quotas were fired. Each campus had a minimum enrollment quota that was determined by ITT’s officers and

directors as part of the annual budgeting process.” Brief

of Petitioner-Appellant at 6, United States ex rel. Graves

v. ITT Educ. Servs., No. 03-20460 (5th Cir. Nov. 4, 2003).

The scheme alleged by Leveski, in contrast, involves a

much more sophisticated—and more difficult to detect—violation of Department of Education requirements. Leveski does not allege that either her compensation or her continuation as an ITT employee depended

on explicit percentages or quotas. In fact, she acknowledges that ITT claimed to compensate her based on a wide

range of factors (including appearance, attitude, and

participation in continuing education classes). But Leveski

alleges that how ITT claimed to compensate her and
30 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

how ITT actually compensated her were very different.

Despite ITT’s claims, Leveski believes that her compensation was based on only one thing: the number of students

Leveski brought into ITT (and as a result, the amount

of money Leveski brought into ITT).

Moreover, through her affidavit and deposition testimony, Leveski provides evidence to support her allegations that ITT’s claimed practices in its recruitment and

financial aid offices did not match ITT’s actual practices.

As the excerpts from Leveski’s testimony in Section I

demonstrated, Leveski was able to name specific individuals in positions of authority at ITT who told her

that her recruitment and financial aid “numbers” were

all that mattered. Leveski also provided evidence that

ITT never considered any other factors besides her numbers. For example, Leveski indicated that ITT did not

police what types of continuing education classes that

its employees took, even though the employees were

allegedly evaluated on these classes. As a result,

ITT employees who “got a master’s degree in education” appeared to get the same amount of “professional

development” credit as employees who “took something

at [their] church.” (Dkt. 141-6, 87.) Furthermore, although

ITT employees were allegedly evaluated on their appearance, ITT’s evaluation of appearance did not correlate with how the employee actually appeared. Leveski

testified that she “wore the same suits the first day

[she] started to work at ITT and the last day [she] left

ITT.” (Dkt. 141-6, 88.) Yet she only received an excellent

appearance evaluation during her first year at ITT—

coincidentally, the same year that her recruitment “num-
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 31

bers” were also “exceptional.” (Dkt. 141-6, 88.) Leveski’s

testimony suggests that ITT’s supposed multi-factor

evaluation system was little more than a sham.

Undoubtedly, the sham compensation scheme and the

financial aid violations alleged by Leveski are different

than the outright quota system alleged by the Graves

relators. But the question we must face is whether

Leveski’s allegations are different enough from the

Graves allegations to bring her suit outside the public

disclosure bar of 31 U.S.C. § 3730(e)(4). A review of our

recent case law leads us to the conclusion that they are

different enough. Indeed, Leveski’s allegations against

ITT are only similar to the Graves allegations when

viewed at the highest level of generality. But in the last

few years, we have indicated on more than one

occasion that viewing FCA claims “at the highest level of

generality . . . in order to wipe out qui tam suits that rest

on genuinely new and material information is not

sound.” Goldberg, 680 F.3d at 936.

For instance, in United States ex rel. Baltazar v. Warden,

635 F.3d 866, 869-70 (7th Cir. 2011), we reversed a

dismissal under the § 3730(e)(4) jurisdictional bar after

we found that the district court had viewed the relator’s

claims too generally. There, chiropractor Kelly Baltazar

brought an FCA claim against the chiropractic group

for which she had previously worked, alleging that the

group had “added to her billing slips services that had

not been rendered and [upcoded] for services that had

been performed.” Id. at 866. Prior to Baltazar’s suit,

the General Accounting Office (GAO) had issued
32 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

several reports detailing widespread, abusive Medicare

billing practices by chiropractic groups—without

naming specific groups that were guilty of these abusive

practices. Nevertheless, the district judge believed that

these reports were enough to preclude federal court

jurisdiction over Baltazar’s claim. On appeal, we

pointed out that Baltazar’s suit was “ ‘based on’ her own

knowledge rather than the published reports” and had

“supplied vital facts that were not in the public domain.”

Id. at 869. Because the GAO reports did “not disclose

the allegations or transactions on which Baltzar’s [suit

was] . . . based,” we found that § 3730(e)(4) did not

stand in the way of Baltazar’s suit. Id. at 868. Like

Baltazar’s allegations, Leveski’s allegations are clearly

based on her own knowledge; in her affidavit and deposition, she provides the court with relevant names,

meetings, and other details specific to her employment

with ITT. And like Baltazar, Leveski has supplied

the court with vital facts that were not alleged in

Graves. Leveski has suggested that ITT developed a

sophisticated, yet illegal employee evaluation and compensation scheme designed to avoid detection by the

Department of Education.

As helpful as the Baltazar decision is to Leveski, even

more helpful to her is our decision last year in Goldberg,

680 F.3d at 936. There again, we reversed a district court

that had dismissed an FCA suit for lack of jurisdiction

under § 3730(e)(4) after viewing the relator’s claims too

generally. Id. The relators in Goldberg were an orthopedic

surgeon and a director of real estate at Rush University

Medical Center in Chicago. Together, they alleged
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 33

that Rush was improperly billing Medicare for services

performed by teaching physicians that were, in reality,

performed by inadequately supervised residents. Id. at

934-35. During the 1990s, both the Department of

Health and Human Services and the GAO had issued

research studies concluding that improper billing for

services performed by unsupervised residents was a

widespread problem in teaching hospitals nationwide.

Id. at 934. Much like Leveski, however, the relators in

Goldberg alleged a more sophisticated, harder to detect

scheme than the kind described in the governmental

reports. The reports had accused teaching hospitals of

billing for services performed by residents who were

wholly unsupervised. The Goldberg relators, on the other

hand, alleged that Rush billed for services performed

by residents who were not adequately supervised. According to them, Rush scheduled teaching physicians

for multiple surgeries at once, such that “even if the

teaching physician were present for the ‘critical’ portion

of one [surgery], . . . the surgeon could not have been

‘immediately available for the rest of each procedure,” as

required by Medicare. Id. at 935. After reviewing the

relators’ allegations, we found that they had “allege[d]

a kind of deceit that the GAO report does not attribute

to any teaching hospital. Unless we understand the ‘unsupervised services’ conclusion of the [governmental

reports] at the highest level of generality—as covering

all ways that supervision could be missing or inadequate—the allegations of these relators are not ‘substantially similar.’ ” Id. at 936. Thus, we found that § 3730(e)(4)

did not destroy federal court jurisdiction over the

relators’ claims. Id.
34 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

Like Goldberg and Baltazar, we believe that Leveski’s

case is yet another instance of a district court dismissing

an FCA suit after viewing the allegations at too high a

level of generality. To be sure, Leveski’s case looks

similar to the Graves case at first blush. The relators in

both cases are former employees of ITT—and even held

the same job title. The relators in both cases also allege

that ITT violated the incentive compensation provision

of the HEA. But this is where the similarities between

the two cases end. The details of how ITT allegedly violated the HEA are quite different in Leveski’s case

than they were in Graves. Unlike the Graves relators, who

alleged a more rudimentary scheme by ITT to violate

the HEA incentive compensation provision, Leveski

alleges a more sophisticated, second-generation method

of violating the HEA.

Furthermore, although we know from Leveski’s deposition testimony that she reviewed the Graves case before

filing her lawsuit, we are convinced that Leveski has done

more than just “add[] a few allegations” to the Graves

complaint. Glaser, 570 F.3d at 920. In Glaser, we upheld

a district court’s dismissal for lack of jurisdiction under

§ 3730(e)(4) after finding that a relator had done just

that—characterizing the Glaser relator’s allegations as

“wrongdoing [that was] virtually identical” to prior,

publicly disclosed allegations. Id. The relator, Carol A.

Glaser, brought an FCA suit accusing a medical clinic

of fraudulent billing practices; but this time, the relator

was a patient, not an employee, of the medical clinic.

Unlike Leveski, Glaser had no inside information from

her own personal experience at the clinic; instead, she
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 35

appeared to have learned all of the relevant information

in her FCA complaint from her attorney. Id. at 921. Moreover, Glaser’s allegations covered the same time

period covered by an ongoing Centers for Medicare

and Medicaid Services (CMS) investigation of the clinic.

Id. at 909. The CMS investigation centered on whether

the defendant medical clinic had billed patients for

seeing a doctor when they had actually seen a

physician’s assistant. Glaser alleged exactly the same

fraudulent billing practices in her complaint. Indeed,

Glaser’s only unique contribution was pointing out a

couple of instances in which the clinic billed patients

for seeing a doctor (instead of the physician’s assistant

whom they had actually seen) that were not mentioned

in the CMS report. It was under these circumstances

we held that “add[ing] a few allegations . . . is not

enough to take [a] case outside the jurisdictional bar,

properly understood; ‘based upon’ does not mean

‘solely based upon.’ ” Id. at 920.

In contrast to Glaser, Leveski has used inside information that she obtained during her decade-long employment to make allegations that are noticeably different

from any prior allegations against ITT. Leveski’s case

would be more analogous to Glaser if Leveski had

merely added a few examples from her own personal

experience at ITT to the Graves complaint, re-alleging

that ITT maintained minimum enrollment quotas for its

recruiters and paid its recruiters direct commissions. But

Leveski has done much more than re-package the

Graves complaint. She has alleged new tactics by ITT to

avoid the mandates of the HEA—tactics that extend
36 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

beyond the recruiting office (the focus of Graves) to

the financial aid office.

The extent to which Leveski’s complaint goes beyond

a mere re-packaging is perhaps most apparent when

viewed in light of two other recent FCA cases that

were unsuccessfully litigated by her attorney, Timothy

Matusheski. Matusheski, who bills himself as the “Mississippi Whistle Blower,” has apparently recruited many

other FCA relators besides Leveski to pursue HEArelated cases against for-profit educational institutions.

The Law Offices of Timothy J. Matusheski, available at

http://mississippiwhistleblower.com (last visited July 1,

2013). For at least two of these cases, Matusheski appears

to have recruited relators who possessed little to

no knowledge beyond what was already in the public

domain.

In United States ex rel. Lopez v. Strayer Educ., Inc., 698

F. Supp. 2d 633 (E.D. Va. 2010), the relator recruited

by Matusheski, Magdalis Lopez, was a former recruiter

for Strayer University who alleged that Strayer paid

its recruiters incentive compensation in violation of the

HEA. Like the Graves relators, Lopez only alleged violations in the recruiting office (not the financial aid office), and Lopez appeared to allege a more straightforward scheme of outright recruitment commissions and

bonuses. Nevertheless, the exact details of Lopez’s

alleged scheme were never clear due to her total inability

to produce any evidence of specific people, statements,

and incidents to support her allegations. For instance,

when asked at her deposition to explain certain allega-
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 37

tions in her complaint, Lopez could not provide

any details:

Q. Do you have any factual knowledge of any

of the statements in your complaints from paragraphs 43 through 72?

A. I have knowledge.

Q. What knowledge? Point to—me to one factual

statement that you knew before talking to

[Matusheski].

A. (after objection by counsel) I’m not an attorney. You know, I cannot give you, you know, like,

details.

Lopez, 698 F. Supp. 2d at 639. Lopez’s inability to

provide relevant details in her deposition testimony

stands in sharp contrast Leveski’s ability to name

specific people and describe specific incidents in her

deposition testimony, as recounted in Section I.

Similarly, in United States ex rel. Schultz v. DeVry Inc.,

No. 07 C 5425, 2009 WL 562286 (N.D. Ill. Mar. 4, 2009), the

relator recruited by Matusheski, Jennifer S. Schultz, was

also a former recruiter—but this time, for DeVry University—who alleged that DeVry paid its recruiters incentive compensation in violation of the HEA. Like Lopez,

Schultz only alleged violations in the recruiting office,

and Schultz alleged a straightforward bonus incentive

compensation system for recruiters that violated the

HEA. And just like Lopez, Schultz was completely incapable of providing any relevant details in her deposition

testimony. During Schultz’s deposition, she refused
38 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

to answer any questions about what information

Matusheski had provided her, and what information she

had provided Matusheski, citing the attorney-client

privilege. Id. at *1, *4. Leveski, in contrast, was much

more candid about the information that Matusheski

had provided her, and the information she had provided him. (Dkt. 141-6, 239-44.) More importantly, the

specific names and incidents that Leveski provided

though her deposition testimony and her affidavit are

details specific to Leveski’s employment—details that

Matusheski was incapable of supplying to Leveski.

It is true that serious questions have been publicly

raised about whether some for-profit educational institutions have violated the incentive compensation provisions of the HEA. See, e.g., Editorial, An Industry in Need

of Accountability, N.Y. Times, Aug. 15, 2011, at A20. The

fact that Matusheski alone has litigated multiple

FCA lawsuits against for-profit educational institutions

demonstrates that this general knowledge is well within

the public domain. But Leveski has added new facts

and new details to this general knowledge that were not

previously in the public domain. Even though prior

relators represented by Matusheski, such as Lopez and

Schultz, were not able to add new facts and new details,

Leveski is different. Through her deposition testimony

and her affidavit, Leveski has informed the public about

a new method of violating the HEA prohibition against

incentive compensation—a method much more difficult

to detect than outright commission and bonus schemes.

Leveski has also informed the public that HEA violations in for-profit educational institutions may extend
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 39

beyond recruiting departments and bleed into financial

aid departments. And Leveski’s allegations do not

appear to be baseless; as the excerpts from Leveski’s

deposition and affidavit in Section I demonstrate, she

has recounted specific conversations with specific individuals that support her allegations.

In closing our discussion of why Leveski’s allegations

are not “based upon” Graves for the purposes of 31

U.S.C. § 3730(e)(4)(A), we pause to emphasize two important points. First, we have not ignored ITT’s

argument that Leveski has altered her allegations on

appeal in order to distinguish them from the Graves

allegations. But we have saved our discussion of this

argument to the end because we think it lacks merit.

Accusing Leveski of “brief[ing] a different case from

the one Leveski actually filed,” ITT asserts that Leveski

did not emphasize the allegations that most convincingly distinguish her case from Graves in the district

court. ITT argues that Leveski did not emphasize that

ITT “created a matrix to feign compliance” with the

HEA even though it “was still illegally compensating

student recruiters” in her second amended complaint

(the controlling complaint in this case). Yet we had no

trouble finding this allegation in paragraph thirty-two

of the second amended complaint:

While continually reminding sales representatives

to meet sales targets to obtain raises and stay

employed, ITT corporate employees and Troy

campus directors never discussed tactics to

meet non-sales targets that were included in sales
40 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

representatives’ yearly review such as assisting

the school in meeting its attrition budget, being a

team player, appearance, and attitude.

(Dkt. 75, 12.) Similarly, ITT accuses Leveski of not previously emphasizing her allegations that ITT’s illegal compensation scheme extended beyond the recruiting office

to the financial aid office. But again, we had no trouble

finding this allegation in paragraph thirty-eight of

Leveski’s second amended complaint: “Relator’s and

other financial aid administrators’ salary increases were

directly tied to financial aid: rising and falling based

on whether the representative exceeded or failed to

meet financial aid goals.” (Dkt. 75, 14.) Perhaps ITT’s

most puzzling argument, however, is that Leveski has

somehow waived the right to distinguish her case from

Graves because she failed to mention Graves in her

second amended complaint. But Leveski had no reason

to mention Graves in her second amended complaint.

Her allegations had nothing to do with the Graves case.

Her allegations were based upon her own personal experience at ITT, not the allegations of the Graves relators.

Graves only became an issue in Leveski’s case once ITT

brought it to the district court’s attention in its final

motion to dismiss for lack of subject-matter jurisdiction. (Dkt. 143.) As soon as ITT raised Graves, Leveski immediately responded. In her brief opposing ITT’s final

motion to dismiss for lack of subject-matter jurisdiction,

Leveski pointed out to the district court that her “complaint allege[d] different misconduct during a different

time period than Graves” and that “Graves d[id] not

address financial aid advisors.” (Dkt. 154, 12.) In sum,
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 41

ITT has failed to produce any convincing evidence

that Leveski has altered her allegations on appeal.

Second, although we believe that Leveski has evidence

to support her allegations, we do not necessarily imply

that Leveski has a winning case. As we have noted before,

“[r]elators’ allegations may be incorrect . . . [b]ut these

are questions on the merits.” Goldberg, 680 F.3d at 936.

In other words, we believe that Leveski could have a

winning case, but ultimately, it is up to her to convince

a trier of fact that her allegations are true. For now,

we only evaluate whether the federal district court has

subject-matter jurisdiction under 31 U.S.C. § 3730(e)(4)(A)

to let Leveski’s case proceed. All we care about at this

stage is whether Leveski’s allegations “rest on genuinely

new and material information.” Id. We find that

Leveski’s case does rest on genuinely new and material

information, and as a result, Leveski’s allegations are

not “substantially similar to publicly disclosed allegations.” Glaser, 570 F.3d at 920. Leveski’s case is not “based

upon” the prior Graves allegations, and so the federal

district court has subject-matter jurisdiction over her

case under § 3730(e)(4)(A).

B

Because we find that Leveski’s allegations are not

“based upon the public disclosure of allegations” under

31 U.S.C. § 3730(e)(4)(A), our jurisdictional inquiry need

not go any further. Nevertheless, we pause here to

note that even if we had found that Leveski’s allegations were based on a prior public disclosure, Leveski
42 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

would still be allowed to proceed as an “original source” of

her information. 31 U.S.C. § 3730(e)(4)(A). Recall that

Leveski may litigate her case on the merits—even if her

allegations are based upon a prior public disclosure—as long as she has “direct and independent knowledge of the information on which [her] allegations are

based.” 31 U.S.C. § 3730(e)(4)(B).

In evaluating whether Leveski is an “original source”

of her claims, we find our language in Baltazar, 635 F.3d

at 869, particularly enlightening: “The question is

whether the relator is an original source of the allegations in the complaint and not, as the district court supposed, whether the relator is the source of the information in the published reports.” Thus, it is not appropriate

to ask whether Leveski was the original source of the

allegations in Graves. Nor is it appropriate to ask whether

Leveski was the first person to bring HEA violations

by for-profit educational institutions to the public’s

attention. Rather, it is appropriate to ask whether Leveski

is the original source of the specific allegations in her

complaint. 

For the same reasons that we found that Leveski’s

allegations are not “based upon” a prior public disclosure

under § 3730(e)(4)(A), we also find that she has direct

and independent knowledge of her allegations, and

thus, is the original source of them. In Glaser, 570 F.3d at

921, we indicated that a relator’s knowledge was not

“direct” if the relator “had no knowledge whatsoever of the

fraudulent conduct before hearing from an attorney.” We

further indicated that a relator’s knowledge was not
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 43

“independent” if the relator would not “ ‘have learned

of the allegation or transactions independently of the

public disclosure.’ ” Id. (quoting United States v. Bank of

Farmington, 166 F.3d 853, 865 (7th Cir. 1999)).

Along these lines, ITT argues that Leveski’s knowledge

of the RR and FAA compensation schemes was neither

direct nor independent since Leveski admitted at her

deposition that she had not considered filing an FCA

suit until attorney Matusheski contacted her. Dkt. 141-6,

244. Yet just because Leveski had never considered

filing suit until an attorney contacted her does not necessarily mean that she lacked sufficient knowledge to

bring suit. It could simply mean that Leveski did not

know her rights under the law. And that appears to be

the case here—although we know that Leveski reviewed

prior FCA complaints against ITT after speaking with

Matusheski, including Graves, 284 F. Supp. 2d 487, and

Olson, 2006 WL 64597, Leveski has provided the court

with many pieces of evidence that could have only

come from her. As detailed in Section I, Leveski has

recalled specific conversations with her personal supervisors that indicate ITT was in violation of the HEA

throughout the course of Leveski’s decade-long employment. Matusheski could not have fed this evidence to

Leveski. Matusheski never worked for the Troy,

Michigan campus of ITT—he lives at the other end of

the country in Mississippi—so he would have no way

of knowing what occurred on that specific campus. Nor

could the Graves complaint have fed this evidence to

Leveski. The Graves complaint is extremely general,

providing absolutely no details about how either relator
44 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

surmised through their employment that ITT might be

in violation of the HEA. Ironically, the allegations contained within the Graves complaint read like something

that came from an attorney, and not the relators themselves. (Dkt. 141-9.)

In contrast, virtually all of Leveski’s evidence in support of her allegations against ITT comes from conversations to which she was a party. For instance, in her deposition, Leveski makes some references to information

she learned from other ITT employees, but for the most

part, Leveski discusses statements that were made directly

to her by her supervisors at ITT. Leveski’s main evidence

is personal and specific to her; it is not second- or thirdhand evidence learned from another source like an attorney, a co-worker, or a prior lawsuit. Therefore, we

find that Leveski’s evidence is based on her own direct

and independent knowledge. Because the most compelling evidence against ITT could have only come

from Leveski herself, we are not troubled by Leveski’s

admission that she had not contemplated filing suit

until Matusheski contacted her. Attorneys are allowed

to advise potential future clients of both the contents of

the law and their rights under the law; it is upon that

basis that attorneys are permitted to advertise their

services. See Bates v. State Bar of Ariz., 433 U.S. 350, 376

(1977) (noting that advertising allows a “supplier [attorney] to inform a potential purchaser [client] of the availability and terms of exchange”). After all, “potential clients

rarely know in advance what services they do in fact

need,” and in some cases, potential clients do not know

that they need any services from an attorney. Id. at 386
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 45

Because ITT makes much of Matusheski’s “track record of 2

improper behavior” in its brief, we specifically asked ITT at

oral argument what rule of professional conduct that

Matusheski’s “recruitment” of Leveski violated. ITT could not

supply us with a single rule.

(Burger, C.J., concurring in part and dissenting in part).

Here, Leveski had no idea that she was sitting on information that was potentially valuable to the government until Matusheski contacted her. The fact that

Leveski first learned the potential value of her information from Matusheski does not bar her claim.2

Moreover, just because a party first learns that she

may have a valuable legal claim from an attorney

seeking her business does not mean that the party’s case

is bogus. Leveski’s counsel drew an analogy at oral argument between the events underlying Leveski’s decision

to file her FCA suit and the events underlying the defendants’ decision in the famous case, Lawrence v.

Texas, 539 U.S. 558 (2003), to pursue their appeal all

the way to the Supreme Court. According to a recent

book by University of Minnesota law professor Dale

Carpenter, the Lawrence defendants would never have

appealed the constitutionality of their sodomy convictions on their own. See Flagrant Conduct: The Story of

Lawrence v. Texas 132 (W. W. Norton & Co. 2012) (noting

that neither of the Lawrence defendants had the “ ‘fire in

the belly’ reaction [to their arrest] of activists ready to

take on the legal system”). Instead, the “legal trajectory” of

Lawrence was the result of gay activists learning of the
46 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

defendants’ arrest and subsequently putting the defendants in touch with a lesbian, gay, bisexual, and transgender legal defense organization. Id. at 118. Without the encouragement of attorneys from this organization, the defendants never would have known their

rights. They would have never known that they had a

strong constitutional challenge to the Texas sodomy

law, and thus, would never have pursued an appeal.

Id. at 117-32. Leveski contends that she is in the

same position: without the encouragement of attorney

Matusheski, she would have never known her rights.

This analogy is interesting, but unnecessary. The annals

of legal history are full of examples of lawyers playing

a vital role in encouraging parties to litigate. If done

in a proper manner—that is, within the confines of the

applicable rules of professional conduct—there is

nothing about such attorney involvement that negates

the validity of a suit. As applied to the case at hand, ITT

has not shown that Matusheski’s conduct invalidates

Leveski’s claim.

Although we find ITT’s argument regarding

Matusheski’s role in this suit unpersuasive, ITT raises

a second argument challenging the directness and independence of Leveski’s knowledge. Leveski, ITT points

out, was never in a position of authority during her

employment; she was never responsible for setting employee compensation or filing PPAs. As a result, ITT

argues that Leveski lacks “sufficient knowledge of ITT’s

allegedly illegal compensation practices.” In response to

this argument, we note that we have never required

a relator to have previously occupied a position of author-
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 47

ity, and in fact, we have previously found relators

who were even greater outsiders than Leveski to possess

direct and independent knowledge of their FCA claims.

For instance, in United States ex rel. Lamers v. City of

Green Bay, 168 F.3d 1013 (7th Cir. 1999), the relator,

Allen Lamers, owned a private bus company that had

once contracted with the city of Green Bay to bus

school children. After it lost the contract, the owner

filed an FCA suit alleging that the city of Green Bay

had fraudulently represented to the Federal Transit

Administration (FTA) that it was in compliance with

FTA regulations in exchange for FTA funding. Lamers

had never even worked for the city of Green Bay—let

alone witnessed or participated in the city’s filing

of compliance forms. Yet still we found that Lamers’s

FCA suit had adequate subject-matter jurisdiction

because he had direct and independent knowledge

derived from “walk[ing] the streets of Green Bay

observing the buses in action.” Id. at 1017. Lamers had

spent time observing the Green Bay buses, and his observations called into question whether Green Bay was

in compliance with FTA regulations. It was unnecessary

for Lamers to prove personal knowledge that Green

Bay had fraudulently certified its compliance with FTA

regulations at the outset of his suit. Clearly, Green Bay

was certifying that it was in compliance since it was still

receiving FTA funding—which meant that if Lamers’s

allegations were true, Green Bay was falsely certifying

it was in compliance.

A decade after Lamers, we reaffirmed that a relator

need not produce a copy of the actual document
48 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

making the false claim at the outset of the lawsuit in

United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d

849, 854 (7th Cir. 2009). There, Curtis J. Lusby, a former

Rolls-Royce engineer, brought an FCA suit claiming

that the company was falsely certifying that the engines

it built for the Air Force conformed to military specifications. Id. at 850. In response, Rolls-Royce argued that as an

engineer, Lusby had not seen “any of the invoices and

representations that Rolls-Royce submitted to its customers. He kn[ew] about shipments and payments, but

he d[id] not have access to the paperwork.” Id. at 854.

Although Lusby admitted that he had not had access to

the paperwork, he countered that “Rolls-Royce must

have submitted at least one such certificate [of compliance], or the military services would not have paid for

the goods.” Id. We agreed with Lusby, holding:

We don’t think it essential for the relator to produce the invoices (and accompanying representations) at the outset of the suit. True, it is essential

to show a false statement. But much knowledge

is inferential—people are convicted beyond a

reasonable doubt of conspiracy without a written

contract to commit a future crime—and the inference that Lusby proposes is a plausible one.

Id. Moreover, we noted that “[s]ince a relator is unlikely

to have those documents unless he works in the defendant’s accounting department,” holding otherwise

would have “take[n] a big bite out of qui tam litigation.” Id.

Both Lamers and Lusby stand for the proposition that

Leveski need not produce copies of the PPAs in which
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 49

ITT certified compliance with the HEA at the outset of

her lawsuit. For now, an inference is enough. Leveski

observed ITT receive federal funding throughout her

employment, and ITT could only have received federal

funding by certifying compliance with the HEA. Consequently, if Leveski’s allegations about incentive compensation are true, then ITT must have been falsely certifying compliance with the HEA. Furthermore, our

holding in Lamers completely refutes ITT’s contention

that Leveski needed to be in a position of authority or

responsible for setting the compensation of other employees at ITT in order to have direct and independent

knowledge of her FCA claim. Recall that relator

Lamers never worked for the city of Green Bay before

filing an FCA suit against it, and yet we found that he

had sufficiently direct and independent knowledge

based on his personal observations as a total outsider.

168 F.3d at 1017. If Lamers’s observations as a total outsider from the defendant were sufficient to constitute

“direct and independent knowledge of the information

on which the allegations were based,” then certainly

Leveski’s observations as a ten-year employee of the

defendant company are sufficient. 31 U.S.C. § 3730(e)(4)(B).

III

Given our finding that Leveski’s allegations are sufficiently distinguishable from Graves—not to mention our

finding that she has direct and independent knowledge

of her allegations—our sanctions analysis becomes quite

easy. The district judge sanctioned Matusheski personally
50 Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891

under 28 U.S.C. § 1927 and sanctioned the Law Offices

of Timothy J. Matusheski, Plews Shadley, and Motley

Rice under Fed. R. Civ. P. 11. Although these sanctions

were granted under two different rules, they were all

granted for the same reason: the district judge concluded that Leveski’s counsel had continued to pursue

a “frivolous” case despite “unmistakably clear warnings

that [they were] playing with fire by pushing the case

forward.” (Dkt. 318, 23.)

As indicated above, we disagree with this conclusion.

Our lengthy discussion of Leveski’s case has shown

that Leveski’s case appears to be substantial, not frivolous. Even disregarding the fact that Leveski’s allegations

cover a later time period than the Graves allegations,

Leveski has still provided the district court with

at least two ways in which her allegations substantially

differ from the Graves allegations: (1) Graves alleged

an outright scheme to violate the HEA incentive compensation ban, in which ITT did not even attempt to

feign compliance, and (2) Graves was solely concerned

with the ITT recruitment office and had nothing to say

about the ITT financial aid office. Moreover, through

her affidavit and deposition testimony, Leveski has

provided the district court with numerous pieces of

evidence both supporting her allegations and demonstrating that her knowledge is direct and independent.

At this stage of the litigation, we think that Leveski

has produced more than enough to overcome the 31

U.S.C. § 3730(e)(4) jurisdictional bar. We do not know

whether Leveski will ultimately prevail, nor do we
Nos. 12-1369, 12-1967, 12-1979, 12-2008 & 12-2891 51

state any opinion as to whether Leveski should

ultimately prevail. But we do believe that Leveski

should be allowed to litigate her case on the merits,

and thus, sanctions for bringing a frivolous lawsuit are

inappropriate.

Of course, if it becomes clear later in the course of

litigation that Leveski has made up all of her allegations

and all of her supporting evidence, then sanctions may

be warranted. But for now, the truth of Leveski’s allegations is not appropriately resolved on a motion to

dismiss for lack of subject-matter jurisdiction. Leveski

has presented enough to move forward with this litigation. Consequently, we REVERSE both the district court’s

dismissal of Leveski’s case for lack of subject-matter

jurisdiction and the district court’s award of sanctions

in the amount of $394,998.33 against Leveski’s counsel,

and we REMAND the case back to the district court for

further proceedings consistent with this opinion. Circuit

Rule 36 will apply on remand.

7-8-13