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Whistleblowers Can Target Local Government

Mar 10, 2003 | UPI The Supreme Court ruled unanimously Monday that whistleblower suits alleging fraud against the government can be filed against local governments.

The case involves a whistleblower who alleged that Cook County, Ill., officials filed false statements to obtain federal drug abuse funds for a Chicago area hospital.

The federal False Claims Act targets any "person" who knowingly presents a false bill in order to get reimbursement from the government. Violators are liable for a civil penalty, triple damages and costs.

Although the attorney general may file suit under the FCA, a private individual may also sue under the law's "qui tam" or whistleblower provisions.

The individual, called a "relator," must tell the Justice Department of his or her intentions and must keep the process under seal until the government decides whether it wants to join the suit. If the suit is successful, the relator can get up to 30 percent of the money recovered, plus expenses.

In Monday's case, the fraud allegedly involved a $5 million grant from the National Institute of Drug Abuse to Cook County Hospital. The grant was for a treatment program for pregnant drug addicts.

Administration of the study was later transferred to a non-profit research organization, Hektoen Institute for Medical Research, which was affiliated with the hospital.

The program was run from 1993 until 1995 by Dr. Janet Chandler. In 1997, Chandler filed a whistleblower suit under the FCA claiming that the county and the institute had submitted false statements to the government in order to get the grant.

Besides violating the grant's conditions, Chandler said, the county and organization had failed to comply with regulations on human-subject research and submitted false reports of what she called "ghost" non-existent research subjects.

Chandler said she was fired for reporting the alleged fraud to doctors at the hospital and the granting agency.

The Justice Department declined to participate in the suit, but the process continued. The county asked a judge to dismiss the claims against it, in part, because it is not a "person" under the meaning of the act.

Eventually, a federal appeals court ruled that the county is a "person" for the purposes of the act, but could not be subjected to triple damages.

Monday, the Supreme Court upheld the appeals court.

Writing for the full Supreme Court, Justice David Souter noted that when the FCA was passed in 1863 "municipal corporations and private ones were simply two species of 'body politic and corporate,' treated alike in terms of their legal status as persons capable of suing and being sued."

Nothing had changed since then, despite amendments to the law in 1986, he added.

"The term 'person' in (the relevant section of the law) included local governments in 1863 and nothing in the 1863 amendments redefined it."

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