Collection of Million Dollar Health Care Fraud Judgment Proves Tough
I tried one of the first health care fraud qui tam cases in the Federal District Court for the Middle District of Tennessee and the subsequent case to collect the $10 million judgment was recently decided by the Federal Sixth Circuit Court of Appeals. In November 2000, the federal government won the multi-million dollar judgment against a defunct home health care company, Century Health Services, Inc., and two of its former executives on claims under the False Claims Act for misuse of medicare reimbursement funds.
Unable to collect on the judgment from the two executives, the feds went after their wives for benefiting from the ill-gotten gains and sued using the common law theory of unjust enrichment and the Federal Debt Collection Procedures Act (FDCPA). The feds settled with one of the wives and won summary judgment in the Federal District Court against the other. The Court of Appeals overturned the majority of the summary judgment decision and remanded a single issue to the District Court. The feds' unjust enrichment claim was based, in part, on the home health care company's repayment of a loan from the wife. The feds argued that the company's repayment was made with money the government paid it through fraud. It failed because the Court of Appeals found that the government conferred no benefit on her in connection with the transactions and that, basically, repayment of a loan is not unjust enrichment.
The feds claimed the FDCPA applied because the wife's monthly allowances she received from her husband were made with the intent to hinder, delay, and defraud the government because they were made after her husband knew he owed a debt to the feds. However, the argument failed on appeal because it was uncontradicted that the wife used the monthly allowances to pay living expenses such as food, clothing, utilities, etc., and, therefore, did not meet the definition of fraudulent transfer.
The hard truth: Even the big federal government sometimes has trouble collecting on judgments. The opinion, United States v. Goforth, et al., is available here.