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Posted by on Sep 17, 2012

Court of Appeals Rules Against Cornell University in False Claims Act Case

On September 5, 2012, the Second Circuit Court of Appeals upheld a lower court’s judgment finding that Cornell University’s Weill Medical College and Dr. Wilfred van Gorp, a former faculty member, submitted false claims on grant renewal applications and progress reports from 1999 through 2001. The case is U.S. ex rel. Daniel Feldman v. Wilfred van Gorp and Cornell University Medical College.

The National Institutes of Health (NIH) awarded the grant to Cornell and Dr. van Gorp to provide training to post-doctoral fellows researching neuropsychology and HIV/AIDS. In 2003, Daniel Feldman, a fellow hired under the grant, filed a qui tam case under the False Claims Act.  (The False Claims Act imposes liability on persons and companies who defraud governmental programs.  These cases are often referred to as qui tam actions, which are suits brought by an individual, known as a relator, in an effort to prosecute government procurement and program fraud.  Additionally, to help alleviate the potential negative aspects of being a “whistleblower,” the federal government allows the relator to keep up to 30% of the amount the government recovers.)  Dr. Feldman alleged the program misused grant funds and that material changes had been made from the original grant application. After a four-year investigation, the government declined to intervene; however, Dr. Feldman pursued the claim using private counsel.

The Court of Appeals upheld damages in the amount of $855,714 – three times the amount the government paid in grant funds to Cornell after it submitted its first fraudulent progress report.  The lower court also awarded $32,000 in statutory penalties and more than $625,000 in attorneys’ fees to Dr. Feldman.

The Court of Appeals rejected all of the defendants’ arguments and provided a detailed discussion on awarding damages.  The Court found that when no tangible benefit has been received on the part of the government, then the “benefit of the bargain” method would be inappropriate.  The government, the Court said, received no benefit at all and therefore should be made whole again.

We’ll be taking a closer look at this case in our Federal Grants Update 2012 course.

The entire the decision can be found here.

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