September 9, 2013 General

Seventh Circuit Reverses Lower Court’s Dismissal of ‘Frivolous’ Qui Tam Lawsuit

Let’s face it: whistleblowers do not embark on the qui tam lawsuit labyrinth expecting the experience to be without conflict. Earlier this summer, a former employee of ITT Educational Services, Inc. commenced a lawsuit against the for-profit nationwide university under the qui tam provisions of the False Claims Act in response to her decade-long exposure to questionable practices. As is often the case with whistleblower litigation, the case took nearly four years to until it was dismissed for lack of jurisdiction, among other things, in the U.S. District Court for the Southern District of Indiana.

Allegations Against ITT Become National Headlines

In the four years between Debra Leveski’s original filing of her complaint and the decision by the District Court, the troubles plaguing ITT Educational Services had been made public, leading the District Court to conclude that the case had been publically disclosed and Ms. Leveski was not the original source of the allegation, thus violating the public disclosure bar. In sum, ITT was alleged to have committed violations of the Higher Education Act – an Act which places restrictions on schools receiving federal funding for student financial aid.

Under these provisions, universities like ITT are prohibited from “provid[ing] any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the award of student financial assistance.” In other words, the Act prohibits paying money to recruiters for obtaining certain enrollment rates and seeks to avoid enrollment of students who are likely or unable to either repay their student loans or finish the degree program in the first place.

In the case against ITT, Ms. Leveski, a former recruiter, recalled the extreme emphasis placed on “numbers” and the fact she was promised bonuses and incentives for securing the most amount of federal aid money possible. With the introduction of the Higher Education Act came widespread abuse by universities across the nation and stories like those occurring at ITT became regular news fodder for the media – leading to the eventual dismissal of the whistleblower claim against ITT. Fortunately, the Seventh Circuit was able to see through the haze of sanctions, reprimands and judicial strife imposed by the District Court to hold that Ms. Leveski’s case did in fact have merit and was worth reviewing.

Court Concludes the Claims Against ITT are Worth Review

The District Court did not hesitate to resoundingly rebuke Ms. Leveski’s attorneys for bringing what it called a “frivolous” lawsuit “wholly without merit.” It further sanctioned Ms. Leveski’s attorneys for “plucking” her out of thin air and essentially forcing her to file a qui tam claim in hopes of a lucrative result. However, on appeal, the Seventh Circuit recognized some of the following important points about this qui tam lawsuit that resulted in its remand back to District Court for more careful consideration:

Ms. Leveski’s long tenure and experience at ITT make her a likely original source of information despite the fact that other lawsuits have been filed against ITT for similar, but not identical, alleged breaches of the False Claims Act;
Ms. Leveski’s employment experience at ITT covers different time periods than those involved in other similar lawsuits and media coverage;
Ms. Leveski’s case introduces new and material information about ITT’s “sham” recruitment practices not introduced by other, seemingly similar, allegations.

Do Not be Afraid to Come Forward With Your Claim

The moral of the story is this: if you suspect fraudulent billing practices, no matter how seemingly insignificant, make a claim. Fortunately for taxpayers, Ms. Leveski did not give up when the District Court dismissed her case for being “meritless.” Because of her perseverance and dedication to revealing fraud, her lawsuit has been revived and we all stand a greater chance of having our taxpayer dollars restored.

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