Does your organization rely on federal funding? Beware False Claims Act lawsuits

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in Employment Law,Human Resources

There’s a new legal worry for organizations that receive federal funding contingent on complying with performance conditions. Under the federal False Claims Act (FCA), employees reporting wrongdoing may receive a whistle-blower award worth up to 25% of funds wrongly received by their employer. Plus, employees fired or otherwise retaliated against for threatening to blow the whistle may recover damages.

Those are powerful incentives to stay in compliance.

Recent case: Carlos Diaz worked as a professor of paralegal studies for Kaplan University, an online higher education provider. Kaplan receives federal funding in the form of student loans and grants. Therefore, it must abide by federal rules on student enrollment and academic progress.

Diaz told supervisors that he was going to report grade inflation and other alleged wrongdoing to authorities. He was fired shortly after.

He sued, alleging both a False Claims Act claim and retaliation.

He told the court that, because keeping his job depended on receiving positive student evaluations, he felt compelled to let them pass with As and Bs. This grade inflation, he argued, was fraud intended to obtain federal student loan and grant funds for the company.

The court didn’t buy the grade-inflation claim, but did allow his retaliation claim to go forward. It said that having a winning False Claims Act case wasn’t necessary to win a retaliation claim. (U.S.A. ex rel Diaz, et al., v. Kaplan University, et al., No. 09-20756, SD FL, 2011)

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