Taking the fight for justice to the Supreme Court, Joel Hesch recently filed an amicus brief supporting a whistleblower who reported that a company overcharged Medicaid. The Ninth Circuit Court of Appeals had affirmed dismissal of the whistleblower’s case based upon rule created by some judges that a claim for federal funds is not considered false if a government employee knew that a company was charging more than a federal contract or regulation allowed. Although not personally representing the whistleblower, Joel filed an amicus brief urging the Supreme Court to take the case because the Ninth Circuit got it wrong. Joel points out that a defendant can escape liability under the so-called “government knowledge defense” only if the government official that knew of the overpayment had actual authority to waive a contract provision or agency regulation.
Here, a state and federal regulation stated that to be eligible for Medicaid reimbursement for certain types of goods, a company may only bill the government for its acquisition costs, but not profit. The company admitted that it marked up the costs of the goods before selling them to Medicaid recipients and billed the Medicaid program for the high profit margins. Nevertheless, it argued that it could keep the Medicaid paid profits because a state employee told the company not to repay the overcharges. However, the government employee lacked any authority to waive either the state of federal regulation that barred billing for profits. In short, the company knew that the only way it could charge Medicaid more than its acquisition cost would be to ask both the proper federal and state agencies to amend the regulation.
Unfortunately, the Ninth Circuit totally ignored the fact that the state employees who turned a blind eye lacked authority to waive the regulation. Because of the lack of a clear rule regarding the boundaries of the “government knowledge defense,” Joel Hesch filed a motion to be allowed to present a brief to the Court in order to offer his scholarship and unique experiences with the whistleblower provisions of the False Claims Act to aid the Court in ruling upon the circuit split pertaining to the government knowledge defense.
Joel pointed out that to allow this contractor to escape liability merely because a state government employee who lacked authority to alter the regulations later discovered the overbilling and did not ask for the funds back would be like a company stealing from a bank and being told after the fact by a bank manager (or for that matter a police officer) that it could keep the money because the bank is FDIC insured. The brief went on to outline the proper standard and included other useful analogies.
This is the third time that Mr. Hesch has been authorized to file an amicus brief before the Supreme Court on behalf of whistleblowers. Joel will continue in his mission to vigorously fight to uphold whistleblower rights and protections.