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UNITED STATES EX REL. FINE v. UNIVERSITY OF CALIFO

April 5, 1993

UNITED STATES OF AMERICA ex rel. FINE, Plaintiff (s),
v.
THE UNIVERSITY OF CALIFORNIA AND THE BOARD OF REGENTS OF THE UNIVERSITY OF CALIFORNIA, Defendant (s).



The opinion of the court was delivered by: FERN M. SMITH

 INTRODUCTION

 Relator, Harold R. Fine ("Mr. Fine"), brought this qui tam action against the University of California ("University"), alleging violations of the False Claims Act ("FCA"). Defendants filed this motion to dismiss claiming that (1) the Court lacks subject matter jurisdiction to review this case because Mr. Fine's claims are based on information that was publicly disclosed prior to the filing of the action and Mr. Fine was not an "original source" of the disclosed information; (2) Inspector General employees should be barred from bringing FCA qui tam actions because such actions conflict with the Inspector General Act ("IGA"); (3) construing the FCA to confer qui tam standing on members of the investigative and prosecution arms of the executive branch violates the principles of separation of powers; and (4) the Eleventh Amendment precludes this Court's exercise of jurisdiction.

 The Court grants defendants' motion to dismiss because Mr. Fine was not an "original source" and IG auditors should be barred from bringing qui tam actions arising from IG audits.

 FACTS

 From September 1982 through July 18, 1992, Mr. Fine was employed by the Office of the Inspector General ("IG") at the United States Department of Energy ("DOE"). Mr. Fine was an assistant manager of the Western Region Audit Office. Mr. Fine both conducted audits and supervised other auditors of contractors doing business with the DOE. Among those were audits relating to the University.

 Mr. Fine states that during the course of his work, he brought suspected violations of the FCA to the attention of his supervisors. He alleges that his superiors were unwilling to either prosecute or institute civil actions against the alleged violators. The suit, however, does not name any government officials who were allegedly corrupt or incompetent.

 Mr. Fine alleges that he continued to investigate, at his own expense, his suspicions of fraud, misuse, and taxing of appropriated funds addressed in the complaint. After his retirement, Mr. Fine brought seven qui tam actions. Of these seven actions, two were voluntarily dismissed and one was dismissed by this Court (Schnacke, J.) for lack of subject matter jurisdiction. United States ex rel. Fine v. Chevron, U.S.A., No. C91-3224 (N.D. Cal.).

 Mr. Fine's initial complaint alleged that: (1) defendants, between 1986-1989, intentionally circumvented regulations restricting the amount the University could spend on exploratory research and development ("ER&D"), and (2) defendants deliberately made false claims to the government relating to their operation of electrical, water, and natural gas utilities. The complaint was later amended to allege that the practice of circumventing regulations continued into 1991 - 1992. The amended complaint also added the allegation that defendants had obtained unauthorized payments from the United States to subsidize their employees' use of the cafeteria and transport to the airport. The complaint was amended further to allege that defendants improperly expended funds obtained under the Civilian Nuclear Waste Policy Act.

 HISTORY OF THE FALSE CLAIMS ACT'S

 WHISTLE BLOWER PROVISIONS

 The FCA provides penalties for those who knowingly present false or fraudulent claims to the United States and incentives for whistleblowers who expose the fraud by filing qui tam actions. The FCA, as enacted in 1863, included no restrictions on "parasitic" suits. A "parasitic" suit is one in which a person with no independent knowledge of the fraud at issue files a qui tam action based on either the government's investigation of the incidents of fraud or other public disclosures solely to share in the award. In 1943, the Supreme Court ruled that a relator who brought a qui tam action based purely on allegations copied from a criminal indictment was entitled to proceed and share in any award. United States ex rel. Marcus v. Hess, 317 U.S. 537, 87 L. Ed. 443, 63 S. Ct. 379 (1943). The Court held that nothing in the FCA prohibited a qui tam action based solely on information already in the government's possession and that such prohibition, if intended, was a matter for Congress. Id.

 Congress responded to this decision by amending the FCA. The 1943 amendments barred all qui tam actions based on information already in the government's possession. 31 U.S.C. ยง 3730(b)(4) (1982) (superseded) 89 Cong. Rec. 10844 (1943). These amendments were interpreted to preclude all qui tam actions once any government agency had knowledge of the alleged fraud. In United States ex rel. Wisconsin (Dept. of Health and Social Services) v. Dean, 729 F.2d 1100 (7th Cir. 1984), the state of Wisconsin independently investigated Medicaid fraud and reported its findings to the government as required by law. The Seventh Circuit affirmed dismissal of the qui tam plaintiff ...


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