Government Continues to Target Colleges and Universities with False Claims Act Claims
April 29, 2013
By: Lindsay Simmons
We've all known for a long time now that institutions of higher education are exposed to lawsuits, including those brought by whistleblowers and the Department of Justice (DOJ) under the False Claims Act (FCA). The upward trend in these cases that began a few years ago is continuing. While healthcare related claims continue to lead the way, representing more than half of the FCA cases involving colleges and universities that were settled from 2004 through 2012, grant and procurement cases are not far behind.
For example, in February 2012, the United States intervened in an FCA suit against American Commercial College Inc. (“ACC”), a company that operated for-profit colleges in Texas, alleging that ACC falsely certified compliance with the “90/10 Rule,” a federal regulation that prohibits a for-profit college or university from obtaining more than 90% of its yearly tuition from federal Department of Education student aid.
The chart linked here provides a summary of the FCA settlements involving colleges and universities over the past nine years. When the DOJ announced its record FCA recoveries for FY12, it emphasized the important and increasing role whistleblowers play in these cases – they brought a record-setting 647 federal qui tam suits last year, totaling $3.3 billion or three quarters of the total recoveries.
What does this mean going forward? What can colleges and universities learn from these cases? There are many lessons, but two in particular we highlight here: the government’s use of implied-certification theory of FCA liability and debarments and suspensions.
Implied-Certification. Whistleblowers and the DOJ are aggressively and successfully pursuing cases based on the implied-certification theory of FCA liability. Under this theory, when a college or university accepts federal funds, that acceptance is considered its implied certification of compliance with all applicable rules and restrictions. During 2012, the DOJ settled or intervened in false-certification cases in a variety of sectors, including the suit against ACC. As the government becomes more aggressive in pursuing implied- certification cases, institutions of higher education negotiating settlements should look carefully at who certifies what and how. Additionally, in the event a FCA case is brought under this theory, such institutions should strive for greater protection under a broad settlement agreement.
Suspension and Debarment. Agencies are under increasing pressure to use debarment and suspension as an additional way of punishing government contractors. Being suspended or debarred can be disastrous to colleges and universities that receive significant grant monies or otherwise conduct “business” with the government. These sanctions can be imposed on those who merely fail to disclose “credible evidence” of a violation of the FCA. As we’ve reported in the past, Congress wants agencies to be more aggressive in their use of suspension and disbarment. As a result, it is more important than ever to have a robust compliance program and to be mindful of your disclosure obligations and the risk of debarment as a possible outcome in FCA matters.
Lindsay Simmons is the attorney responsible for the content of this article.