The Fifth Circuit upheld a district court’s dismissal of a qui tam complaint alleging various banking entities engaged in a reverse false claims scheme by failing to refund the Treasury for SSA deposits made to deceased beneficiaries. The appeals court agreed that the relator failed to provide details of the alleged scheme or ascribe any actions to particular defendants. The court also held the complaint failed under the public disclosure bar, both the original and the language as amended by the Patient Protection and Affordable Care Act. Finally, the court agreed that the relator—a fraud investigator for the Department of Veterans Affairs—could not be an original source because he learned of his allegations through his employment.
Relator Edward Hendrickson appealed a decision by the U.S. District Court for the Northern District of Texas dismissing his reverse false claims action against multiple banking entities. The court found the action was barred by the False Claims Act’s public disclosure bar and that the complaint failed to plead the alleged scheme with enough detail.
In his complaint, Hendrickson, a former fraud investigator in the Department of Veterans Affairs Office of Inspector General, alleged that 15 banks knowingly and improperly avoided their regulatory obligation to return government-benefit payments they received for beneficiaries they knew to be deceased. According to Hendrickson, the banks had to know the beneficiaries were deceased, because the Social Security Administration is required to send death notices to a financial institution that receives SSA deposits.
First, the court noted that Hendrickson’s complaint implicated two versions of the FCA’s public disclosure bar: the original statute’s provision and the language as amended by the Patient Protection and Affordable Care Act. Hendrickson alleged behavior that began prior to the enactment of the ACA, as well as behavior that continued after.
In their motion to dismiss before the district court, the defendants provided 16 documents they claimed amounted to public disclosures. The district court agreed, first dismissing the portion of Hendrickson’s claims dated prior to March 23, 2010—the date of enactment of the ACA—for lack of jurisdiction, as the public disclosure bar in effect then was jurisdictional. The district court then dismissed the rest of the claims, finding that the documents proffered by the defendants disclosed substantially the same information as the complaint. The court then concluded Hendrickson was not an original source because he learned of the alleged misconduct through his employment as a VA fraud investigator.
Alternatively, the court dismissed the action for failing Rule 9(b)’s particularity requirement because it failed to distinguish among defendants or present necessary details of the alleged scheme.
On appeal, Hendrickson argued the documents provided by the defendants did not disclose substantially the same information as his complaint because they did not reference death notices or name specific banks. In response, the banks argued the documents were as specific as the complaint, which failed to allege particular instances of their receiving death notices or differentiate allegations made against each defendant.
Hendrickson argued his complaint provided fair notice and sufficiently alleged a fraudulent scheme, but again the banks noted the complaint did not differentiate among the defendants or allege any particular facts showing they engaged in the alleged fraud.
The appeals court agreed and upheld the dismissal. The court found no point to allowing Hendrickson to further amend his complaint, because there was no complaint to amend.
