This summer, Columbia University signed a settlement agreement with the U.S. government over a case filed under the False Claims Act (FCA), which enables whistleblowers to sue institutions on behalf of the government. Although this may seem like one of the many legal issues facing academic science recently, this case merits a closer look, says John R. Thomas, Jr., an attorney with Gentry Locke who represents whistleblowers in a variety of FCA cases – including a potentially landmark case against Duke University that we covered for Science. Thomas – who also authored a three-part Retraction Watch primer on how to file an FCA suit (“So You Want to Be a Whistleblower?” Part One, Part Two, Part Three) – tells us what we need to know about this latest FCA verdict.
As readers of Retraction Watch are unfortunately well aware, dishonesty in research comes in many forms. While we often focus on dishonesty in research itself, scientists and institutions may also defraud the government through a variety of administrative avenues, such as effort reporting (accounting for researcher time), improper cost accounting, and inflated facilities and administrative (F&A) costs.
We saw an example of this in July, when the U.S. Attorney for the Southern District of New York announced that the Department of Justice settled an FCA case with Columbia University for improper cost recoveries arising out of grants awarded by the National Institutes of Health (NIH). The settlement was for $9.5 million. This represents one of the larger FCA settlements involving NIH grants in recent years.
What was the case about? It involved a specific funding component of federal grants: facilities and administrative costs (F&A costs), also known as “indirect” costs.
Here’s a brief primer on the intricacies of grant administration: Direct costs are those costs budgeted by the researcher that will arise directly from the work on the grant, such as personnel costs, equipment, supplies, and travel. But in most federal grants, grantees (universities, companies, or non-profits) also receive a significant amount of money for “indirect” or F&A costs, which compensate grantees for the costs of facilities, maintenance, administration, libraries, and other research expenses that are not directly associated with particular projects. Research institutions negotiate their F&A rate with the federal government every several years. (For an excellent overview of F&A costs, see this Nature article.)
Certain limitations in funding agency cost policies exist that restrict institutions’ permissible F&A cost rates. One limitation is the distinction between “on-campus” and “off-campus” research. For research conducted “off-campus,” institutions may only collect the “A” (administrative) portion of F&A costs (called the “off-campus rate”), which is typically around half of the full F&A rate.
Here is how this applies to the Columbia case – the university conducted a significant amount of its mental health research at a publicly owned facility called the New York State Psychiatric Institute (“NYSPI”) near the Columbia campus in Manhattan, as well as another building owned by the City of New York. Despite conducting the research at off-campus facilities, Columbia collected the full on-campus rate of 61% on 423 grants from 2003 to 2015.
A whistleblower brought this to the attention of the NIH and Department of Justice through an FCA lawsuit. A valid FCA claim exists when a defendant knowingly submits a false claim for payment by the government. (There are other forms of false claims, but these are the two primary legal theories.)
If successful, an FCA claim results in the defendant paying the United States government treble damages and civil penalties. The whistleblower receives up to 30% of the recovery, along with attorney fees and costs.
The Columbia case was settled in mid-July. In exchange for a release from civil liability for these grants, Columbia agreed to pay $9.5 million. The settlement does not include a corporate integrity agreement. (The settlement agreement is available here, and the government Complaint-in-Intervention is available here.)
What are the takeaways of this case for those in the research field?
Fraud is not always hidden; sometimes it may appear out in the open.
In the Columbia case, the fraud against the NIH was not buried deep in the minutia of grant budgets – it was out in the open for anyone at Columbia to see. According to the United States’ Complaint-in-Intervention, Columbia concealed from Health and Human Services (HHS) and the NIH during F&A cost negotiations that it did not own the NYPSI building. Columbia also listed its main address as the location for the research, despite the grant instructions requiring it to list the primary location where the research would take place.
These are important facts in an FCA case. To prevail, the whistleblower and government need to show that the false statement or claim was made “knowingly.” That means that the institution must have made the statement with actual knowledge of its falsity, with deliberate ignorance, or with reckless disregard to the truth or falsity of the statement. The concealment of the location of the research and other circumstances surrounding the F&A rate negotiation suggest that the Department of Justice had a high degree of confidence it could prove knowledge on the part of Columbia.
Direct costs shape indirect costs.
Research budgets may not always reflect reality. This case illustrates the magnifying effect that F&A costs can have on inflated direct costs. If an institution is receiving an F&A rate of 50%, every dollar of inflated direct costs results in $1.50 of damage to the government. Major deviations from research budgets, therefore, should be carefully documented and reported to funding agencies. Failure to do so could expose grantee institutions and researchers to FCA liability not only for the direct costs themselves, but the corresponding F&A costs associated with the inflated direct costs.
The FCA is a strong remedy for fraud in the research enterprise.
This case is yet another reminder that the FCA is sometimes a viable option for uncovering fraud in research. While every case presents different facts and requires careful analysis, the FCA should be considered as a potential option for whistleblowers.
John R. Thomas, Jr., leads the Qui Tam Relator Practice at Gentry Locke in Virginia. He is the Chair of the Federal Bar Association Qui Tam Section and represents whistleblowers in a variety of False Claims Act cases. He can be reached at firstname.lastname@example.org.
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