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Even FCA Cases Lacking Merit Can Take Years to Resolve

In 2016, Stop Illinois Health Care Fraud, LLC, brought a case against Asif Sayeed, Physician Care Services, S.C., Vital Home & Healthcare, Inc., and Management Principles, Inc. (MPI) under the qui tam (whistleblower) provisions of the False Claims Act (FCA), predicated on alleged violations of the Anti-Kickback Statute (AKS). The case stems from the plaintiff’s allegations that defendants paid a community care organization, Healthcare Consortium of Illinois (“HCI”), to refer patients to defendants or to give defendants certain patient information. The defendants were alleged to have then marketed Medicare-reimbursed healthcare services to those patients identified or referred by HCI. After an investigation, neither the United States nor the State of Illinois “intervened” in (or “took over”) the litigation.

MPI, which is owned by Mr. Asif Sayeed, arranges medical referrals to other entities and markets itself as a “one stop shop,” managing healthcare companies, such as defendants Vital Home & Healthcare, Inc. and Physician Care Services, S.C. MPI and HCI entered into an agreement under which MPI paid HCI for its advice and counsel. The whistleblower alleged that the payments under this agreement were for “some kind of kickback” but offered no specific evidence of payments in exchange for referrals. Importantly, most of the allegations related to gift cards valued between $5 and $10 for Dunkin’ Donuts that were provided to employees of the healthcare organization. The gift cards were provided on birthdays and other special occasions. Despite the fact that the government declined to intervene in this litigation after a thorough investigation, the case went through prolonged litigation and eventually resulted in a three-day trial.

At trial, an MPI employee testified that she became friendly with some employees of the HCI and would provide the gift cards on special occasions. The MPI employee testified that “she never did so with the expectation of receiving a referral.” The defendants argued that no evidence was presented showing intent for referrals or knowledge of referrals. The court agreed and found that the “plaintiff presented no evidence that the gifts cards or agreement were intended to induce referrals or other illegal or inappropriate kickbacks.” The court further noted the relator’s testimony that the payments reflected “some kind of kickback” was conjecture. On July 26, 2019, about three years after the suit was brought, the court finally dismissed the case.

This case is an example of how even a meritless FCA qui tam suit can often require the expenditure of valuable resources and take many years to resolve. While every case is different, this case reflects the possible advantages of early discussions with the government to weed out claims lacking merit. While the government is often very reluctant to dismiss qui tam suits over the relator’s objections, FCA defense counsel should always analyze the facts of every case in light of the DOJ’s January 10, 2018 Memo entitled Factors for Evaluating Dismissal Pursuant to 31 U.S.C. § 3730(c)(2)(A) (otherwise known as the “Granston Memo”). Under the Granston Memo, DOJ Attorneys are instructed to consider dismissing a case – even over a relator’s objection – for several reasons, including cases that are “facially lacking merit,” or that would offer a relator a windfall because the relators offer no new information to the government’s investigation. The Granston Memo instructs DOJ attorneys considering dismissal to consult with affected government agencies and to consider discussing their intentions with the relator. While working to obtain dismissal using the guidance of the Granston Memo may be difficult, if successful, it could reduce the resources expended defending against a facially meritless claim.