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Reversed: Relators Adequately Alleged FCA Elements Against Medco

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By Robyn Hagan Cain on February 22, 2012 3:03 PM

The Eleventh Circuit Court of Appeals reversed a Florida district court's dismissal of a False Claims Act lawsuit this week, finding that the relators bringing the case had sufficiently stated a claim upon which relief could be granted.

Lucas Matheny and Deborah Loveland brought a qui tam action against their employer's parent company, Medco Health Solutions, Inc. (Medco) and its subsidiaries, alleging violations of the reverse false claim provision of the False Claims Act.

Matheny and Loveland, who both worked for Medco subsidiary Liberty Medical Supply (LMS), claimed that Medco companies violated a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services' Inspector General's office by failing to return government overpayments that the companies received.

During their time as LMS employees, the relators became aware of a supposed scheme by their supervisors to conceal approximately $69 million dollars in overpayments that, under the CIA, should have been remitted to the government. After reporting the irregularities through internal channels failed to correct the alleged problem, the relators proceeded under the False Claims Act.

The reverse false claim provision imposes liability on any person who "knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government." To establish a reverse false claim, relators must prove that the defendant knowingly made, used, or caused to be made or used a false record or statement for the purpose to conceal, avoid, or decrease an obligation to pay money to the government. The relators must also prove the materiality of the misrepresentation.

The district court dismissed two counts against the defendants for failure to establish the existence of an obligation that was knowingly unpaid. The Eleventh Circuit Court of Appeals reversed that decision, concluding that the relators adequately alleged with particularity the existence of an obligation to pay money to the government.

Reverse false claims are harder to prove than standard False Claims Act allegations. Before you bring a reverse false claim qui tam action on behalf of a whistleblower, take a close look at Matheny, et al. v. Medco Health Solutions, Inc., et al. to review the kinds of allegations that the Eleventh Circuit recognizes as sufficient to state a claim.

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