Medical Device Manufacturer Triggered False Claims Act Liability by Allegedly Submitting False NIH Grant Application

Each year, the federal government doles out billions of dollars in grant money, some of which is acquired or used based upon fraudulent misrepresentations made to the Government. 

In the most recent example, the CEO of medical device manufacturer, Telehealth Holdings, pled guilty in June 2016 to making false grant claims to the NIH and was sentenced to four months in federal prison. One month later, DOJ filed a related civil False Claims Act action against the CEO and Telehealth Holdings, alleging that the manufacturer’s grant applications ran afoul of the False Claims Act.

According to the government’s complaint, the defendants knowingly made false statements and false certifications in grant applications in order to win the grants. The government further alleged that after the grants were awarded, the defendants misused the grant funds, including by expending federal grant money on personal expenses and on business costs not allowed under the grant regulations.

The criminal and civil FCA actions against Telehealth were noteworthy, for they were government-initiated suits. However, in the vast majority of NIH grant fraud cases, a whistleblower was needed to expose the fraudulent accounting or misstatements buried in seemingly innocuous grant applications. Indeed, over the years, millions of dollars of whistleblower rewards have been paid in successful NIH grant fraud FCA cases.