The Fourth Circuit continues to issue rulings favorable to whistleblowers and Whistleblower Law Firms. Most recently it addressed the issue of whether certain state-created loan corporations could be named as defendants under the False Claims Act (FCA). The lower court said they could not because they were “arms-of-the-state” and thus not “persons” under the FCA. The appellate court found otherwise with respect to two of the three named defendants-appellees, at least based on the face of the relator’s qui tam complaint. It therefore reversed the lower court and remanded proceedings to allow limited discovery on whether, in fact, the “arm-of-the-state” doctrine barred the action.
This case involved allegations that numerous student loan corporations defrauded the US Department of Education. Specifically, the relator alleged that the loan corporations submitted false claims for Special Allowance Payments (“SAP”), a generous federal student loan interest subsidy. This was done by engaging in noneconomic sham transactions to inflate loan portfolios eligible for SAP, according to the relator’s complaint. As a result the Department of Education overpaid hundreds of millions of dollars to the loan corporations.
The lawsuit is captioned: United States ex rel. Oberg v. Pennsylvania Higher Education Assistance Agency, et al, No. 12-2513 (4th Cir. March 13, 2014).
