August 31, 2017 - Posts

A Lesson for the Government: Whistleblowers Fight to Get You Your Money Back. Let Them.

In a cautionary tale about making the perfect the enemy of the good, the U.S. Justice Department has agreed to resolve fraudulent billing allegations against a nursing home chain for about $275,000—two years after rejecting a settlement almost ten times as high.

The whistleblowers in this case filed their lawsuit in 2012, alleging that Agape Senior Community, Inc. had defrauded the government by billing for nonexistent services and ineligible patients.  The government declined to intervene in the lawsuit, and the whistleblowers continued to litigate the claims themselves.

In 2015, the whistleblowers reached a tentative deal with Agape to resolve the case for $2.5 million.  However, the United States vetoed that settlement as being too low—despite the fact that the government had not intervened in the case, was not actively litigating it, and was not offering any help to the whistleblowers going forward.

In the intervening two years, a series of unfavorable decisions regarding various evidentiary issues put the whistleblowers in a worse and worse position.  In July of this year, the whistleblowers ultimately agreed to the summary dismissal of the vast majority of their claims, based on the conclusion that it would not be practical or economically feasible to continue litigating them.

Now, according to certain public statements made by Agape, the whistleblowers and the United States have agreed to dismiss the remaining claims in exchange for a settlement of only $275,000, almost 90% less than the case could have settled for two years ago. It appears that the full terms of the settlement have not been finalized, and no DOJ press release has been issued, so it is possible that the final terms will change.

At the end of the day, whistleblowers fight to recover the government’s money, so it is reasonable for the government have final say in whether to accept or reject a proposed settlement—even in cases that it has decided to let the whistleblower litigate.  However, the United States may want to think carefully about how and when to exercise that veto power moving forward.  If the government had had a little more faith in the whistleblowers and their lawyers in the Agape case, then the government could have recovered millions more dollars and two years worth of time.

The case is docketed as U.S. ex rel. Michaels et al. v. Agape Senior Community Inc. Case No. 0:12-cv-3466 (D.S.C.)

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