5th Circuit Throws Out Whistleblower Case Against Premier Rehabilitation Center in Monroe

When a company defrauds the government, the taxpayers literally pay the costs for that crime. A whistleblower is someone who brings that fraud to the attention of the government or the public. At times, whistleblowers are fired from their jobs, and some seek to bring suit against the company. The whistleblower has to send the complaint to the government first, and if the government refuses to take over the case, then the whistleblower can bring suit on behalf of the government and seek recovery of the money that was fraudulently obtained. Under federal law, such actions are known as qui tam cases.

In qui tam cases, the whistleblower is known as the relator, as they are the one who relates information about the fraud to the government or the public. Depending on the specifics of the case, a relator is entitled to receive a portion of any award obtained on behalf of the government. While this may sound like easy money, the case of Stennett v. Premier Rehabilitation Center shows that qui tam actions can be very difficult to win in court.

From March 2007 to September 2007, George Stennett served as the Administrator of the Premier Rehabilitation Center in Monroe (Premier). He oversaw the company’s financial practices and business relationships. Mr. Stennett claimed that he discovered some of Premier’s billing practices violated both Medicare and Medicaid requirements; and he also claimed that he informed the company’s owners, Mr. Joubert and Mr. Markstrom.

In June 2007, the State of Louisiana conducted a routine audit and inspection of Premier’s finanicial records, and concluded in a public Government Audit Report that there were discrepancies in the company’s books that likely violated federal regulations. Subsequently, Premier addressed these compliance issues. In September 2007, Mr. Stennett was fired by Mr. Joubert and Mr. Markstrom.

In June 2008, after the federal government refused to get involved in the case, Mr. Stennett brought a qui tam action against Premier and several related management companies. He claimed that he was the “original source” of the information relating to Premier’s compliance issues and that he was fired for exposing those problems to government authorities. Stennett’s own complaint directly stated that the Government Audit Report was the basis for his allegations of fraud committed by Premier.

When assessing whether or not a qui tam case can survive a motion to dismiss, a three prong test (known as the Graham test) has to be applied:

1) has there been a “public disclosure” of the allegations,
2) is the qui tam action “based upon” such public disclosure, and
3) if so, is the relator the “original source” of that information

In this case, the district court was not convinced by Stennett’s arguments and threw out his case against Premier, concluding that Stennett failed to properly state a claim as he was not the original source of the allegations against Premier. The 5th Circuit analyzed Stennett’s case using the Graham test.

The 5th Circuit, in review, began with a discussion of whether there had been a “public disclosure” of the allegations against Premier. The court found that since Stennett admittedly based his allegations on the Goverment Audit Report, there had been a public disclosure of the allegations against Premier. Furthermore, that admission on Stennett’s part, meant that his qui tam action was “based upon” those publicly disclosed allegations against Premier. So Stennett’s suit lost out on the first two prongs of the test outright.

Stennett’s last hope of prevailing fell on the “original source” prong of the Graham test. To be an “original source” of information, the relator must

1) “have voluntarily disclosed the information on which the allegations are based prior to public disclosure”, or
2) “have knowledge that is independent of and materially adds to the publicly disclosed allegations”

As stated above, by this point in the opinion, the 5th Circuit already determined that the first prong was not applicable to Stennett since he did not discover the allegations until after the Audit Report was released.

As to independent knowledge, the court notes that while the relator does not necessarily have to obtain indpendent knowledge about the alleged misconduct prior to a public disclosure, “his prior knowledge of the information, upon which he based his complaint, may help demonstrate that he obtained the information independent of the public disclosure.” Again, though, Stennet admittedly only discovered the irregularities after reviewing the Government Audit Report, and therefore his allegations were neither prior to, nor independent of, those publicly disclosed allegations. Thus, the court finds that Stennett was not the “original source” of the information.

Stennett’s case had fallen completely apart, and the 5th Circuit affirmed the district court’s decision to throw his case out for failure to state a proper claim. In the end, Stennett’s case failed because of his admission that he based his allegations on the findings of the Government Audit Report. That was the single most important aspect of the case, and highlights one of the major difficulties in bringing a successful qui tam case.

If you, or someone you know, feel that you have a potential whistleblower case, please contact the Berniard Law Firm so that you can talk to an attorney who will fight to make sure that you receive all of the damages you deserve.