Wednesday, May 4, 2011

University of Kentucky Hires a President With Ties to Medicare Fraud

Eli Capilouto at the U of Kentucky

The new president of the University of Kentucky has connections to massive research fraud from his previous position as chief academic officer at the University of Alabama at Birmingham (UAB).

Eli Capilouto became provost at UAB in 2002 and remained in that position until being named UK's president yesterday. According to two whistleblower lawsuits, filed under the U.S. False Claims Act, UAB engaged in a research-fraud scheme involving hundreds of millions of dollars during much of the time Capilouto was a dean or provost at the school.

The lawsuits, filed in U.S. District Court in the Northern District of Alabama, allege that UAB engaged in about $600 million worth of research fraud over at least a 10-year period. The Bush Justice Department settled the qui tam cases in 2005, while Capilouto was provost, for $3.4 million, which was less than one percent of the alleged fraud. Under the treble-damages provision of the False Claims Act, UAB could have been liable for approximately $1.5 billion.

As we reported yesterday, Capilouto was part of a UAB administration that took steps to essentially condone racist and sexist language in official university policies. But UAB also faced charges of major financial mismanagement during Capilouto's time at the school, including his time as provost.

Allegations in the qui tam complaints involve misappropriation of funds from Medicare, Medicaid, the National Institutes of Health (NIH), and other federal entities. The government alleged that UAB submitted claims under Title XVIII of the Social Security Act, which involves health insurance for the aged and disabled. UAB also allegedly defrauded a health-insurance program for military personnel and their dependents.

As we reported previously, a source has told Legal Schnauzer that the U.S. attorney for the Northern District of Alabama at the time, Bush appointee Alice Martin, did not even investigate the claims. The settlement figure was based on one claim to which UAB officials admitted wrongdoing. More than 100 similar cases within UAB were ignored by Bush officials.

No wonder the Lexington Herald-Leader reported Tuesday that Capilouto had supported a number of conservative political figures, including U.S. Sens. Jeff Sessions (R-AL), Richard Shelby (R-AL), and Mitch McConnell (R-KY), plus . . . President George W. Bush.

No wonder the Obama administration had to deal with exploding health-care costs when it took office. No wonder a UAB administration headed by President Carol Garrison and Capilouto unlawfully terminated me for writing what could be called a progressive blog, outlining wrongdoing by mostly Republican judges in Alabama and officials in the Bush DOJ--especially related to the political prosecution of former Governor Don Siegelman.

Thomas Gober, a former auditor and research-compliance director at UAB, filed the first whistleblower complaint. Gober now has his own forensic-accounting firm and was featured in a Newsweek article about fraud at financial giant AIG.

Dr. Jay Meythaler, a physician who practiced in rehabilitation medicine at UAB until his resignation in 2004, filed the second whistleblower complaint. He now serves on the faculty at Wayne State University in Detroit.

Here is a timeline of Capilouto's rise to power in academia and the allegations of fraud in the qui tam complaints:

* 1991--A UAB scheme to submit false claims to Medicare, Medicaid, and NIH begins at least by this date. It might have started earlier.

* 1994--Capilouto is named dean of the UAB School of Public Health.

* 2001--Gober files his whistleblower complaint and resigns from UAB.

* 2002--Capilouto is named UAB's provost, the chief academic officer.

* 2004--Meythaler files his whistleblower complaint and resigns from UAB.

* 2005--The U.S. Justice Department consolidates the two claims and settles the case with UAB.

* 2011--Capilouto is named president of the University of Kentucky.

Research fraud at UAB took several forms, and Gober's complaint provides devastating details. (See the full complaint at the end of this post.)

* Improper effort reporting--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. Such false claims resulted in UAB receiving approximately $72 million in federal funding--in 2000 alone.

* Double billing and improper billing--Gober states that UAB routinely submitted claims to federal health-care programs that should have been billed to non-federal entities. In some cases, UAB already had received compensation from non-federal entities but billed the federal government anyway. In other cases, UAB already had received compensation from one federal entity but billed another federal entity anyway. Hence, the term "double billing."

How insidious was the deception on the part of UAB officials? From the Gober complaint:

The double billing occurred when the Defendants billed the Federal Medicare, Medicaid, and CHAMPUS Programs [Civilian Health and Medical Program for Uniformed Services] for patient care services that the Government had already provided funds for through the PHS Grant Program [Public Health System] for patients who took part in research trials. This fraudulent double-billing harmed the Treasury of the United States. The number of fraudulent charges for the year 2000 is over 1,000, and upon information and belief, may exceed 10,000 for the past 10 years. The amount of fraudulent charges, at a minimum total approximately $30,000,000 for the year 2000, and based upon information and belief, exceeds $100,000,000 in double billing for the past 10 years.

As we noted earlier, part of the fraud involved a Social Security program for the aged and disabled. And what is CHAMPUS? Now known as TRICARE, it provides civilian health benefits for military personnel, military retirees, and their dependents.

In other words, UAB's scheme involved bilking federal programs designed for the aged, the disabled, veterans, active-duty military personnel, and their dependents.

The University of Kentucky chose a president who was in the midst of all that? Have UK officials ever heard of "doing your homework"?

Actions under the False Claims Act (FCA) are considered "quasi criminal" and often describe misconduct that could be considered criminal under associated statutes. FCA cases are civil in order to encourage whistleblowers to come forward, allowing them to share in any proceeds that are recovered for the government.

An article from provides an overview of qui tam/whistleblower cases and describes how they are prosecuted:

A whistleblower must file a qui tam suit under seal with a U.S. District Court, and the Justice Department then conducts an investigation of the facts involved in the complaint. When its investigation is complete, the government has the option to take over the case, or intervene. In some cases, the U.S. Attorney will open a criminal investigation based on the qui tam allegations and the civil case will not proceed until the criminal investigation is complete. Whether or not the government takes over the case, the whistleblower is entitled to a share of any successful qui tam action recovery. If the government decides not to participate, the whistleblower may pursue the case on behalf of the government. The filing, investigation, and trial in a qui tam action may take many years to complete.

This paragraph, plus language in the settlement agreement, makes it clear that some UAB officials were in danger of facing criminal prosecution. Given the huge sums allegedly involved, federal prison sentences were a real possibility--if a genuine investigation had been conducted.

A Bush-appointed U.S. attorney provided cover for Birmingham's largest employer, and so far, no one at UAB has had to don an orange jumpsuit.

Could Eli Capilouto have been in the criminal cross hairs? The answer to that question is not clear from documents filed in federal court. But it's certainly easy to understand why he supports conservative politicians.

In future posts, we will examine the settlement agreement and the Jay Meythaler complaint, which provides details about the provost's role in the UAB research scheme. For now, here is the Tom Gober qui tam complaint. Such complaints, by law, are filed under seal, so this kind of information often escapes public inspection. We obtained this document, and others, after the seal on the UAB case was lifted:

UAB Qui Tam Complaint (Gober)

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