Source: https://www.whistleblowerattorneys-blog.com/category/court-decisions/
Timestamp: 2019-04-26 02:51:15+00:00

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A midwest healthcare provider agreed to resolve False Claims Act allegations brought by two whistleblowers for $18 million dollars.
The plaintiffs in the qui tam case were former employees of the company. Evercare, now known as Optum Palliative and Hospice Care, is a Minnesota-based provider of hospice care in Arizona, Colorado, and other states across the United States.
The False Claims Act (“FCA”) allows the government to recover damages and penalties of three times those damages. The fraudulent government contractor is also hit with an $11,000 penalty per false claim. Last November, those penalties per claim will raise to nearly $22,000.
down this week. On Tuesday, the United States Supreme Court upheld a jury verdict that found State Farm Insurance Company (“State Farm”) defrauded a federal flood insurance program to avoid paying a homeowner’s insurance claim in the wake of Hurricane Katrina.
The False Claims Act (“FCA”) is a law Congress adopted to expose rampant fraud among contractors supplying the Union Army during the American Civil War. Frauds included businesses that sold guns that did not shoot and boots that fell apart after a day’s use. The statute encourages private parties, (“whistleblowers”) or (“relators”), with knowledge of fraud to file suit and collect a share of the government’s recovery.
In United States ex rel. Nathan v. Takeda Pharmaceuticals, an opinion handed down by the United States Court of Appeals for the Fourth Circuit on January 11th, 2013, the Court upheld a restrictive view of the Rule 9(b) pleading standard as applied to claims brought under the False Claims Act. The Court held that a qui tam relator must allege details pertaining to specific false claims submitted to the government in order to survive a motion to dismiss. In so doing, the Court rejected the more flexible approach to application of the 9(b) pleading standard adopted by the Fifth Circuit in United States ex rel. Grubbs v. Kanneganti (2009) and (implicitly) by the Eleventh Circuit in U.S. ex rel. Walker v. R&F Properties of Lake County, Inc., furthering a circuit split that will not be resolved unless and until the Supreme Court has occasion to decide the question in future litigation.
The False Claims Act, 31 U.S.C. § 3729 et seq., is a federal statute that prohibits individuals and companies from presenting (or causing to be presented) false claims for payment to the United States government. Enacted in 1863 to deter fraud by private contractors against the Union Army, the law has evolved into a capacious vehicle through which the government protects the Treasury and combats fraud. Successive amendments to the statute, including passage of the Fraud Enforcement and Recovery Act in 2009, the Dodd-Frank Wall Street Reform Act in 2010, and the Patient Protection and Affordable Care Act (“PPACA”) in 2010, have enhanced the tools at the government’s disposal and expanded the ambit of conduct actionable under the Act. In furtherance of the statute’s remedial purpose, the law contains qui tam provisions which allow private whistleblowers, referred to as relators, to file complaints under seal. While a qui tam complaint is under seal, the allegations are disclosed to the government, which then investigates the claim and makes a determination as to whether or not the United States will exercise its right to intervene in the litigation.
As is the case with all federal statutes (especially those involving suits between private parties), the task of interpreting its provisions and fashioning procedural rules governing litigation under the False Claims Act is incumbent upon the federal courts. Of particular interest to relators filing claims under the False Claims Act is the pleading standard governing the sufficiency of a qui tam complaint. Although most types of legal claims in federal court are subject to the relatively liberal pleading standard set forth in Rule 8(a) of the Federal Rules of Civil Procedure, requiring a “short plain statement” describing the claim for which relief is sought, Rule 9(b) requires that claims of fraud be pleaded with “particularity.” Specifically, Rule 9(b) says that a party alleging “fraud or mistake must state with particularity the circumstances constituting fraud or mistake.” Consequently, the federal appeals courts have had little difficulty holding that the heightened pleading requirement of Rule 9(b) applies to qui tam complaints and government prosecutions under 31 U.S.C. § 3729 (a) (1-3). Because the Supreme Court has limited the application of Rule 9(b) to those causes of action enumerated in the rule itself, the heightened pleading standard does not apply to other claims under the False Claims Act (as the Ninth Circuit held, for example, in Mendiondo v. Centinela Hospital Medical Center, 521 F.3d 1097 (2008)).
In a decision released on August 6, 2012 in the case of United States of America v. BNP Paribas SA; BNP Paribas AMERICA; BNP Paribas Houston Agency; and Jovenal Miranda Cruz, the United States District Court for the Southern District of Texas, Houston Division allowed the government’s lawsuit alleging banking fraud under the False Claims Act (“FCA”) to move forward, denying the defendants’ motions to dismiss. The defendants, various divisions of the bank BNP Paribas (“BNPP”), are alleged to have engaged in a scheme to defraud the Commodity Credit Corporation (“CCC”). The CCC is a federally chartered corporation within the United States Department of Agriculture (“USDA”) that administers a Supplier Credit Guarantee Program (“SCGP”), which extends credit guarantees to eligible commodity exporters. Under the program, exporters assign to a financial institution both an importer’s promissory note and the exporter’s right to payment, and the CCC guarantees payment to the financial institution. The government’s complaint alleges that BNP, largely through the initiative of defendant Cruz, who was serving as VP and Manager of Trade Finance for BNP in Houston, entered into a series of Master Purchase and Sale Agreements (“MPSAs”) with several United States exporters pursuant to which BNPP agreed to provide financing to the Exporters in exchange for receipt of payment obligations from a series of corresponding Mexican importers and SCGP guarantees for those payment obligations. Because the exporters were owned and/or controlled by Mexican national Pablo Villareal Cantu (“Villareal”), who also owns the importers with which the exporters enter into commerce, the Villareal exporters are ineglible for participation in the SCGP program. The SCGP does not guarantee payments to exporters that are directly or indirectly owned or controlled by the foreign importer or by a person or entity that owns or controls the importer. According to the United States’ complaint, the Villareal exporters and importers submitted false documents to the CCC, as a result of which they received SCGP guarantees. Subsequently, the guarantees and importers’ payment obligations were assigned to BNPP. The arrangement provided that BNPP would extend a line of credit to the exporters up to the amount of the importer payment obligations, minus a fee. After certain importers failed to make over $78 million in payments owed to BNPP, the banks filed claims with the CCC to recover their losses. The fraudulent CCC claims are the gravamen of the government’s complaint, constituting the false claims that gave rise to liability under the FCA.
The BNPP defendants, including Cruz, filed motions to dismiss in the case, both for failure to state claims for which relief can be granted and for failure to plead fraud with particularity pursuant to Rule 9(b) of the Federal Rules of Civil Procedure. The defendants claimed that, taken on their face, the government’s pleadings affirmatively demonstrated that the FCA’s six year statute of limitations barred the claims. Moreover, the defendants argued that the three year equitable tolling period provided for in the statute did not apply. The court rejected these arguments, and additionally found that a federal law originally dating back to the World War I period, the Wartime Suspension of Limitations Act (“WSLA”), 18 U.S.C. § 3287, applied to civil claims under the FCA and thus the statute of limitations was suspended at any rate. The WSLA was amended in 2008 to apply not only during times of war, but also “‘[w]hen… Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)).'” The court’s finding on the applicability of the WSLA to civil FCA claims may be of great import to whistleblowers.
At the heart of the case, however, was the defendants’ contention that technically “true” claims submitted to the government pursuant to fraudulently-induced contracts could not constitute false claims as a matter of law. The court roundly rejected this argument, underscoring that fraudulent inducement to contract does indeed result in FCA liability. Since the exporters and importers in the BNPP case knowingly submitted false claims in order to qualify for the CCC guarantees in the first place, any claims registered pursuant to the guarantees are tainted by fraud and give rise to FCA liability.

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