Posner Shoots Down 'Bounty Hunter' Who Exposed Fraud for Money
This week, Judge Richard Posner authored a rather pithy and readable opinion in which his court affirmed a lower district court's dismissal of a relator's claim seeking a hefty reward for shining a light on a contractor's fraud.
Nice try, said Judge Posner. You can't collect a bounty for a target already in hand.
Heard About the Kickbacks Scheme?
Medline, a major seller of medical equipment to medical providers who get reimbursed by federal programs including medicare, was sued in a qui tam suit by plaintiff Bogina on behalf of the United States. The facts revealed that Medline had been providing kickbacks and other illicit monetary incentives to one of its customers, Tutera, in order to encourage the latter to continue buying from Medline.
This would actually encourage significant losses to the federal government because even if other lower prices for equipment might be available elsewhere, the kickback scheme would reimburse Tutera in the amount that the federal government would defray a certain portion of. In other words, no incentive to shop around exists. So, the fraud occurred when Medline and Tutera conspired and submitted documents intending to defraud the government.
Bogina: Bounty Hunter Extraordinaire
Bogina learned about the scheme through his business associate, Michael Tutera (former ownership of Tutera). Michael Tutera apparently informed Bogina that Medline had a regular practice of handing out illegal kickbacks. He thus brought a qui tam suit as a relatoron behalf of the federal government and held out his hands for receipt.
What gave (ostensibly) Bogina the right to do this is the notion of a relator who essentially sniffs out illicit dealings in favor of the government. Judge Posner actually described Bogina as a bounty hunter, hungry for a portion of his "payout."
Compare to the 2007 Relator Suit
In 2007, a Sean Mason brought a similar relator suit against Medline under fraud allegations with facts substantially similar to those pled by Bogina. The only real material difference was the dates and a few "extra details" provided by Bogina. Mason eventually went on to be awarded $23.4 million for his whistleblowing efforts.
In a last ditch attempt to save his case, Bogina argued also that the particularity requirement of fraud cases was satisfied because he had alleged his facts "on information and belief." Judge Posner balked at this and said to allow such pleading would condone "rumor has it that" being satisfactory for pleading fraud -- an absurd consequence.
So, Judge Posner denied Bogina his reward because he failed to satisfy the relator's "original source" requirement; and Mason had already done all the heavy lifting. Paraphrasing Judge Posner, you can't take a bounty for a target that's already caught.
Related Resources:
- Whistleblower Qui Tam Lawsuit Leads to Recovery of $39 Million (Globe News Wire)
- Spirit of AC21 Act Should Be Followed, Rules 2nd Cir. (FindLaw's U.S. Seventh Circuit Blog)
- Water Analyst Can Publish Water Use Report, 7th Cir. Rules (FindLaw's U.S. Seventh Circuit Blog)
- 7th Cir. Rules on 'Our Lady of America' Defamation Case (FindLaw's U.S. Seventh Circuit Blog)