Background. The False Claims Act (FCA) permits an individual to bring a civil action against one who has submitted a false claim to the government for payment. However, the FCA does not permit such a suit ifthe information used as the basis for the claim comes from a publicly disclosed transcript of a judicial hearing or government hearing, audit, or investigation. Congressional reasoning for this prohibition was that if the government already knew about the false claim, as it would if the false claim had been reported in a hearing, audit or investigation, the government itself would bring the civil action if it so desired. However, if the government was not aware of the false claim, then Congress wanted to encourage citizens to come forward and report the fraud. As an incentive to individuals to report fraud, the FCA authorizes a reward to the individuals who provide information leading to a recovery of the false claim payment.
Facts of the Case. Century Healthcare Corporation (Century) employed Ramseyer as a clinical director. In her suit,she alleged that although she informed her supervisors that patient charts in a treatment program showed widespread noncompliance with Medicaid requirements, claims to Medicaid were nevertheless submitted by Century for payment. Century's noncompliance had already been documented in the Hughes Report, an audit report created independently by the Oklahoma Department of Human Services (DHS). One copy of the report went to Century, one went to the DHS program administrator, and the third copy remained in DHS files. The report could have been obtained by the general public upon specific written request for the record and after approval by the DHS legal staff.
Court Ruling. Even though the information was in a government audit, the Tenth Circuit Court of Appeals concluded that Ramseyer's suit was not based on publicly disclosed information. The Tenth Circuit agreed with the appellate courts of the District of Columbia and the Ninth Circuit that public disclosure signifies more than the mere theoretical or potential availability of the information. It ruled that public disclosure under the FCA requires an affirmative act of disclosure by the agency possessing the information. The Tenth Circuit Court held that a report such as the Hughes Report, which is potentially discoverable through a Freedom of Information Act request but was not actually made known to the public by the agency, does not fall within the ambit of public disclosure. The mere placement of the Hughes Report in the DHS files did not constitute disclosure because the evidence was hidden in the files and it was highly unlikely to be discovered by a member of the public. IMPACT: The Ninth Circuit's opinion followed by the Tenth Circuit is currently before the United States Supreme Court. Oral arguments were recently heard and a decision is expected later this year.
The basic issue before the Court is the type of person the FCA intended to encourage to expose fraudulent claims. Many believe the Act was meant to encourage employee/whistle blowers to come forward with information an agency otherwise would not discover. The Ninth Circuit's view seems to encourage professional bounty hunters to scour public records for information which would be equally available to the government.