Misrepresentations on financial disclosure form offered in settlement is actionable under False Claims Act, court rules

by Ben Vernia | February 6th, 2012

On January 23, Judge Gregory D. Presnell of the Middle District of Florida denied the motion to dismiss of two brothers, defendants in a False Claims Act case in which the government intervened, U.S. ex rel. Mustafa v. Najjar. One of the brothers was convicted of health care fraud in 2001, and was sentenced to pay $5 million in forfeiture and restitution to victims – but he only paid $1.65 million before sentencing and virtually nothing thereafter. The U.S. alleged that through financial disclosure forms, the brothers misled the government regarding the convicted brother’s assets and his brother’s support of him. The brothers argued that the allegations failed to state a claim under the Act, were inadequately particular, and were time-barred. Judge Presnell disagreed with all three arguments.

The allegations stated a claim under the reverse false claims provision of the Act, he concluded, even if the government would have passed the funds on to third-party victims as restitution. Citing a case involving oil and gas royalties received by the government as trustee for Indian tribes, he concluded that the Act encompasses misrepresentations made to avoid transmitting money, regardless of the government’s ultimate interest in the funds.

The government’s claims were sufficiently particular under Fed. R. Civ. P. 9(b), he wrote: “As alleged frauds go, the scheme outlined in the Amended Complaint was fairly simple: To avoid having to pay the remaining $3.35 million owed by Samir Najjar, the Defendants hid assets in the name of Lee Najjar (or companies controlled by him) and his wife’s name and falsely certified to the Government that Samir Najjar had no means to pay off the debt.” The complaint identified specific transactions and assets at issue, as well as the brothers’ attempts to sell realty worth millions of dollars to an undercover agent.

Finally, Judge Presnell found that the statute of limitations did not bar the action, because although one brother made certain alleged misrepresentations more than seven years before the filing of the suit, there is nothing in the complaint to suggest that relevant officials knew or should have known of the misconduct more than three years before filing the case, as provided under the Act. In addition, other reports were made within the 6-year period, and although the complaint did not specifically allege that brother’s involvement, it was fair to infer it from the allegations.

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