This is the second article in a series by John R. Thomas, Jr., a lawyer at Gentry Locke [Editor’s note, 3/26/19: He has since moved to Haley, Hafemann, Magee and Thomas] who represents whistleblowers in a variety of False Claims Act cases. In this installment, he writes about how whistleblowers can tell if they have a viable FCA case.
In my first article, I briefly outlined the role that the False Claims Act (FCA) can play in promoting scientific integrity and safeguarding public grant funding. This article will answer a more substantive and practical question that a potential whistleblower must consider: What constitutes a viable FCA case?
To answer this question, it is important to look at the basic statutory language at the core of the FCA. False claims liability applies when a person “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” The FCA provides six other forms of liability, including making or using “a false record or statement material to a false or fraudulent claim,” and improperly avoiding or decreasing an obligation to transmit money to the government.
A viable FCA case must include a “claim” to the government for payment. In the federal grant funding, a “claim” can be either a grant application or progress report. A viable FCA case must also satisfy four legal elements, which I explain below: (1) falsity, (2) knowledge, (3) materiality, and (4) damages.
Be forewarned: FCA cases involving scientific grants involve many complex issues, and there have not been more than a handful (there have been hundreds of grant cases that do not necessarily involve scientific research, however). While settlements and case results are public, the Department of Justice does not publish detailed statistics on scientific grant cases; therefore, it is difficult to estimate the “success ratio” of these cases. I describe three anecdotal cases where the relator – the person who brought the claim – was successful. So while there are many challenges with bringing a FCA case, it is feasible given the right set of facts and circumstances.
Falsity. The first element, falsity, needs to be carefully considered in the grant context. Most claims to the government (such as Medicare or Medicaid billing, construction contracts, or invoices for procured goods) include costs that are easy to show are objectively false. But in a federally funded scientific grant, there are few statements as easily verifiable as a falsely inflated price. Grant applications and progress reports do, however, present data and conclusions that can be objectively false if the data are partially or completely fabricated. Statements in grant documents may also be false if the actual research deviated substantially from the methods described.
The First Circuit Court of Appeals addressed the issue of falsity of scientific experiments in United States ex rel. Jones v. Brigham & Women’s Hospital (2012). In Jones, the relator accused a neuroanatomist of manipulating measurements in brain scans in order to establish a correlation between certain changes and the development of Alzheimer’s disease. The district court initially ruled that such scientific conclusions were the product of subjective scientific judgment and could not be false for purposes of the FCA. On appeal, the First Circuit disagreed, finding that “cherry picking” measurements in order to produce data supporting a certain hypothesis rose to the level of falsity required by the FCA. (In Jones, the relator was ultimately unsuccessful at trial.)
Other types of falsity in scientific grants are misrepresentations involving staffing, administration and credentials. The stark consequences of such misrepresentations are on display in United States ex rel. Longhi v. Lithium Power Techs, Inc (2009). In Longhi, a company obtained a small business grant from the U.S. Department of Defense to develop lithium batteries. In the grant application, the company misrepresented its date of incorporation and said that it had a cooperative venture agreement with the University of Houston and Polyhedron Laboratories (it did not). The court ruled that these false statements were sufficient to trigger false claims liability, and awarded the U.S. Government damages for three times the full amount of these grants ($5.015 M, of which up to 30% can go to the relator).
The Second Circuit Court of Appeals adopted a similar view in United States ex rel. Feldman v. Van Gorp (2012), where the relator showed that a grant application and progress reports for HIV research misrepresented (and inflated) the identities and credentials of its key personnel. Like Longhi, the court ruled that the full measure of the affected grant was the proper measure of damages, and trebled this amount.
False certifications can also form the basis for FCA liability. Institutions receiving federal grant funding certify compliance with a number of initiatives and policies. The certifications in grants from the U.S. National Institutes of Health, for instance, are listed in the NIH Grants Policy Statement, and include certifications as to proper use of funding, animal protocols, prohibited uses for research funding, research integrity, and others.
On the surface, there are a number of potential areas for grant documents to contain false statements. But be warned: Courts remain reluctant to wade into debates between scientists on the quality of particular scientific results. For a relator to state a viable FCA case in the scientific context, he/she must be able to identify a statement or record that is objectively false.
Knowledge. In order for a person or entity to have liability under the FCA, they must have “knowledge” that the statement or record is false. “Knowledge” has a very particular legal meaning in the FCA context – it includes not only actual knowledge, but also “deliberate ignorance” and “reckless disregard” for the truth. This means that a person or entity may be liable for submitting a false claim to the government if they actually know that the statement is false, or if they are deliberately ignorant (also called “willfully blind”) or recklessly indifferent to the truth. Specific intent to defraud is not required.
What does “deliberate ignorance” or “reckless disregard” mean? The House Judiciary Subcommittee, in the course of amending the statute in 1986, stated in its report that this standard was intended to avoid an “ostrich-with-its-head-in-the-sand” problem where a government contractor avoids knowing whether the information they are providing the government is true or not. In the scientific context, the “deliberate ignorance” or “reckless disregard” standard could encompass a researcher who fails to review raw data and research results to ensure that information in grant documents is true. This standard could also encompass researchers who are so reckless in their supervision of their laboratory that they do not know whether research results are the actual result of the experimental process or not. A researcher may not have “knowledge” of falsity if they generally review their raw data and inadvertently missed several computational errors. They may have “knowledge” of falsity, however, if they almost never review their raw data or supervise the analysis of experimental results.
Who must “know?” In most federal circuits, if any one particular employee of the institution “knows” (has actual knowledge, deliberately ignorant, or reckless) of the falsity of a claim, that is sufficient to impose FCA liability. The individual submitting the claim (i.e. the grant administrator) need not possess knowledge of falsity; if the researcher, analyst or technician “knows,” that is binding upon the institution.
Materiality. The third element that must be proven in an FCA is “materiality” – in other words, the false statement must have the “tendency or capacity to influence” the payment of the claim. The Van Gorp case provides a very interesting lesson in materiality in the scientific context. In Van Gorp, the defendant (Cornell University) called the NIH program officer during trial, who testified that the false information in the grant documents – the inflated credentials of key personnel — were unimportant to him, and no influence on his decision to award grant funding. The Second Circuit Court of Appeals ruled as a matter of law that this did not matter; so long as the information had the tendency or capacity to influence the government, it was sufficiently material and the government was not required to show that it actually did influence the decision to award the grant. Thus, the standard for materiality in the grant context is an objective standard – if the false information has the “tendency or capacity to influence,” it is material.
To sum up, a viable FCA case involving scientific or research misconduct will involve objectively false information in a grant application or progress report. Someone at the institution must “know” that the information is false, which means that they actually know that it is false or are willfully blind or recklessly indifferent to the veracity of the statement. Finally, the false information must have the tendency or capacity to influence a grant decision.
In my final article, I will discuss the steps you have to take to file a qui tam case, the procedures governing such cases, and the framework for calculating damages.
John R. Thomas, Jr., leads the Qui Tam Relator Practice at Gentry Locke in Virginia. John 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 [email protected].
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Most of the cases discussed above are in relation to grants that were already paid out. How do such claims apply to discovery of “creative data presentation” in grants that are applied for but not yet awarded? If one discovers such data in a grant under review, is that fair game for an FCA case? Or does the government actually have to pay out the money in order for the FCA to apply? This is important for those of us who sit on grant review study sections for the NIH or NSF.
This also raises the issue of confidentiality – presumably to make a claim under the FCA for falsified data in a grant application, the reviewer who discovered it would have to be named as the relator in the case. How does that stack up against the CSR (Center for Scientific Review) rules on confidentiality in the review process?
Paul, these are excellent questions.
To your first question – if a grant application with material false information is knowingly submitted to the government, that is sufficient under the FCA to have a false claim, even if the grant is not awarded. In such a scenario, however, the government’s “actual damages” will be 0 – therefore, if the government pursued such a case, the only damages the court would award would be the civil penalty ($5,500 to $11,000 per false claim) and attorneys fees and costs.
Your second question is complicated – while the CSR rules may call for confidentiality, courts (for public policy reasons) will almost never enforce agreements/policies that discourage or prohibit whistleblowing to law enforcement. (Someone can, however, agree not to be a relator.) I would have to analyze those rules in more detail to give you a more complete answer.
Good information, thanks.
Do you know offhand of any successful qui tam cases where:
a) Authors plagiarized copyrighted text in paper Acking Federal grants, had paper retracted, but school seemingly refused to inform the granting agencies?
b) On progress reports for Federal grants/fellowships, people claimed credit for numerous works that bore zero relationship to the funding, while producing little that actually did?
John, I am not aware of a specific case with those precise facts, but I think that scientific publications can certainly form the basis for false claims, in some of the ways that you mention.
“Who must “know?” In most federal circuits, if any one particular employee of the institution “knows” (has actual knowledge, deliberately ignorant, or reckless) of the falsity of a claim, that is sufficient to impose FCA liability. The individual submitting the claim (i.e. the grant administrator) need not possess knowledge of falsity; if the researcher, analyst or technician “knows,” that is binding upon the institution.”
YOWZA! The PI thinks things are great. Somebody in the lab knows or should have known something, which means that the institution “knows,” which could mean damages equal to treble the total amount of the grant?? I wonder if the compliance training at research institutions is really up to speed on scenarios like this one.
>The First Circuit Court of Appeals addressed the issue of falsity of scientific experiments in United States ex rel. Jones v. Brigham & Women’s Hospital (2012). In Jones, the relator accused a neuroanatomist of manipulating measurements in brain scans in order to establish a correlation between certain changes and the development of Alzheimer’s disease. The district court initially ruled that such scientific conclusions were the product of subjective scientific judgment and could not be false for purposes of the FCA. On appeal, the First Circuit disagreed, finding that “cherry picking” measurements in order to produce data supporting a certain hypothesis rose to the level of falsity required by the FCA. (In Jones, the relator was ultimately unsuccessful at trial.)
Mr. Thomas, could you explain the reasons the relator was unsuccessful at the end?
Thank you
It was a jury verdict. The denial of Jones’s appeal of that is here (PDF), for background.
Yes, Federico is correct – the jury ultimately did not find that the representations in the grant documents were false.