Defendant Subjectively Believed He’d Been Truthful. Did this Negate the Scienter Element of the Government’s FCA Claim?

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An FCA defendant argued the government couldn’t prove scienter because he subjectively believed he had not submitted a False Claim. The Fifth Circuit rejected the argument. A subjective belief cannot negate scienter if the subjective belief is nonsensical.

United States v. Daniels, 5th Cir. No. 23-50423 
  • Alleged Fraud – The GI Bill provides financial assistance to veterans enrolled in certain education programs. To enroll GI Bill students, an institution must have been operating for at least two years. Here, the defendant enrolled GI Bill students. But the government said the defendant had lied about operating for two years. The government claimed the defendant defrauded the GI Bill program. The district court granted the government summary judgment. The defendant appealed.
  • False Claim – The defendant argued on appeal that it had not submitted a false claim. The defendant reasoned its education institution was merely an extension of an institution that had existed for more than two years. The Fifth Circuit rejected the argument. The institution was an LLC that was distinct from other entities where the defendant had offered classes. It was that LLC, not the other entitles, that applied for enrollment in the GI Bill.
  • Scienter – The defendant argued the government could not prove the scienter element of an FCA claim. The defendant reasoned that he believed his institution had been operating for two years, so he had not known he submitted a false claim. The Fifth Circuit rejected this argument, too. The defendant’s alleged legitimate belief defied credulity. The court believed it was unlikely the defendant legitimately thought he could use records from a different school to satisfy the GI Bill’s two-year requirement.

—Case summary by Craig LaChance, Senior Editor