UAB Cuts Jobs After Defrauding the Federal Government

The University of Alabama at Birmingham (UAB) announced yesterday that it was eliminating 245 jobs in its health-care operation. The plan, which resulted in the termination of 164 employees, is expected to save $16 to $20 million a year.

That leaves this glaring question, one UAB obviously does not want raised publicly: What happened to the estimated $300 to $600 million that UAB allegedly pilfered from the federal government in a massive research-fraud scheme that lasted for approximately 10 years, starting in the 1990s?

In other words, what happened to UAB's dirty money?

As we have reported previously, UAB settled a whistleblower lawsuit under the U.S. False Claims Act for $3.4 million in 2005. But according to court documents, the settlement represented only a tiny fraction of the actual alleged fraud.

The case against UAB was built on the complaints of two whistleblowers--Thomas Gober, a former auditor and research-compliance officer at the university, and Dr. Jay Meythaler, a physician who practiced in rehabilitation medicine at UAB until his resignation in 2004.

Gober now has a forensic-accounting firm, specializing in fraud detection, in Iuka, Mississippi. Meythaler now serves on the faculty at Wayne State University in Detroit.

Gober's complaint was filed on April 19, 2001. Meythaler's complaint followed on June 1, 2004. The U.S. Department of Justice consolidated the complaints prior to the settlement in 2005.

The nature of the fraud is summarized in Gober's complaint:

The false claims include double billing and improper billing of the federal Medicare, Medicaid, and CHAMPUS Programs and misrepresenting facts on grant applications and continuation grant applications to the government.

Part of the fraud involved improper "effort reporting" on federal grants. Effort reporting is supplied in a grant application to inform the government of the applicant's time and effort available for a grant or research program. Gober states that UAB failed to disclose overlap support "on hundreds and perhaps thousands" of grant applications over a 10-year period.

How big was the fraud? Gober's complaint states:

In the year 2000 alone, (UAB) submitted over 100 false claims in grant applications and continuation grant applications. These claims resulted in approximately $72,000,000 of grants and continuation grants being given to (UAB) by the government in the year 2000.

The complaint goes on to state that "based on the statutory penalty of $10,000 for each false claim submitted, treble damages applied, and a conservative estimate of 100 false claims in the year 2000," the total amount to be recovered was $217 million.

That was just for one year--and for only one form of fraud. UAB's fraud took several forms.

For example, Gober says UAB submitted thousands of claims to federal health-care programs that should have been billed to non-federal entities. The Gober complaint states:

This resulted in (UAB) double billing and improperly billing the government for goods, services, and other health care provided to persons participating in federally funded and non-federally funded research programs. (UAB was) aware of this double billing and improper billing, yet took no action to correct it . . .

Gober says UAB submitted more than 1,000 such false claims in 2000 alone, totaling about $23 million. Under federal law, the government should have recovered $79 million for those violations--in one year alone. And Gober stated that the double billing had been going on for at least 10 years.

Finally, the complaint states that UAB overcharged the government for bed space on a grant that had been sponsored by a pharmaceutical company. This fraud totaled about $30,000, which would have allowed the government to recover about $100,000 in damages.

Now, let's do a little math:

* On the "effort reporting" scheme, Gober says the fraud totaled $72 million in 2000 alone, and the misrepresentations went on for approximately 10 years. Let's be generous to UAB and say the fraud averaged $40 million a year in the other nine years. That would bring the total to $432 million in effort-reporting fraud. Based on a statutory penalty of $10,000 for each false claim, plus treble damages, the recoverable amount for the government would easily top $1 billion.

* On the "double billing" scheme, Gober says the fraud totaled $23 million for 2003 alone, and the unlawful billing continued for approximately 10 years. Again let's be conservative and estimate that the fraud averaged $15 million a year in the other nine years. That would bring the total in double-billing fraud to $158 million. Based on statutory damages, the recoverable amount would approach $500 million.

* The "bed space" scheme covered only one year, totaling $30,000 and a recoverable amount of about $100,000.

The grand total? According to Gober's complaint UAB committed--by a conservative estimate--$590 million of research fraud. And the government should have been able to recover approximately $1.5 billion in damages.

Does Tom Gober know what he's talking about? You can check out his bio at his Web site. You can read a Newsweek article that quotes him extensively about the AIG scandal. And you can even check him out with your own eyes. Here is a video of Gober discussing the financial fraud that has led to our nation's current economic crisis:



Let's return our thoughts to those 164 people who have lost their jobs at UAB. How does an institution, according to the sworn statement of a forensic accountant, defraud the federal government out of almost $600 million (and that's a conservative figure)? How does that same institution wind up with such financial difficulties that it has to lay off employees?

How badly managed does an institution have to be in order to pull off that feat?