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United States v. University of Massachusetts

United States District Court, D. Massachusetts

July 11, 2016

UNITED STATES OF AMERICA and COMMONWEALTH OF MASSACHUSETTS ex rel. MICHAEL A. WILLETTE, Plaintiffs,
v.
UNIVERSITY OF MASSACHUSETTS, WORCESTER A/K/A UNIVERSITY OF MASSACHUSETTS MEDICAL SCHOOL, THE ESTATE OF LEO VILLANI, and JOHN DOES, Defendants.

          MEMORANDUM AND ON MICHAEL A. WILLETTE’S MOTION FOR RELATOR’S SHARE (DOCKET NO. 81)

          TIMOTHY S. HILLMAN DISTRICT JUDGE.

         In early 2013, Michael A. Willette reported to his employer, the University of Massachusetts, Worcester (UMass), that his deceased coworker, Leo Villani, had misappropriated approximately $3.8 million that was intended for remittance to the Commonwealth’s Executive Office of Health and Human Services (EOHHS). After an internal investigation and communications with EOHHS and the Medicaid Fraud Division of the Massachusetts Attorney General’s Office (AGO), UMass repaid the funds to EOHHS in the spring of 2015. During the investigatory period, Willette brought suit on behalf of the United States and the Commonwealth, pursuant to the state and federal False Claims Acts, against UMass and Villani’s estate, seeking to recover the misappropriated funds. UMass and the estate of Villani have since been dismissed, and Willette moves for a relator’s share of the $3.8 million that was repaid to EOHHS. For the reasons set forth below, Willette’s motion (Docket No. 81) is denied.

         Background

         The following facts are derived from Willette’s second amended complaint and the exhibits submitted by Willette, the United States, and the Commonwealth in relation to the instant motion. Michael A. Willette brought this qui tam False Claims Act (FCA) suit, on behalf of the United States and the Commonwealth of Massachusetts, against UMass and the estate of Leo Villani. Willette alleged that UMass and Villani violated the FCA, 31 U.S.C. §§ 3729-3733, and the Massachusetts False Claims Act, Mass. Gen. Laws ch. 12, §§ 5A-5O, by committing various acts of Medicaid fraud. Willette further alleged that Villani, a financial analyst in UMass’s Estate Recovery Unit (ERU), had used his position to misappropriate approximately $3.8 million, the collection of which funds he had facilitated on behalf of the Commonwealth as healthcare reimbursements. Through the ERU, UMass acts as a contractor for EOHHS in the pursuit and collection of liens placed on decedents’ estates for the purpose of recouping Massachusetts Health payments. ERU caseworkers negotiate settlements with decedents’ estates, pursuant to which the estates make payments to the Commonwealth in exchange for release of the liens. The payments are made in the form of checks delivered to the ERU, which then remits the funds to EOHHS, keeping a percentage as compensation for the collection services. This arrangement between UMass and EOHHS is governed by an Interdepartmental Service Agreement (ISA).

         Villani passed away in January of 2013. Shortly thereafter, Willette discovered the misappropriation, which had occurred over a period of several years. Willette reported the issue to Villani’s manager at UMass on January 17, 2013. On January 28, 2013, he met with Executive Vice Chancellor Joyce Murphy and disclosed the information to her. According to Murphy, the decision to repay the Commonwealth was made almost immediately after UMass officials found out about Villani’s conduct, although it took time to investigate the matter and determine the appropriate method of repayment. Later in the month, additional officials at UMass were informed, including the Chancellor, Michael Collins, as well as the General Counsel and several internal auditors. On February 1, 2013, UMass’s General Counsel notified the Massachusetts AGO, and Murphy discussed the matter with the Secretary of EOHHS. Willette continued to share information in aid of the investigation.

         On June 5, 2013, Willette filed his first complaint in the instant qui tam case, on behalf of the United States against UMass and the estate of Villani. Pursuant to the FCA, this complaint was filed under seal. On July 8, 2013, he filed his first amended complaint, also under seal, in which he added the Commonwealth as a Plaintiff. Willette alleges that he was terminated from his employment at UMass three days later, on July 11, 2013. According to Associate Vice Chancellor James Healy, at some point during the summer of 2013 the Chancellor expressed the opinion that he planned to repay EOHHS in full for Villani’s theft, because it was the right thing to do, and also because EOHHS was a valued business partner.

         On July 29, 2013, Willette met with Assistant United States Attorney Christine Wichers and Assistant Attorney General George Zachos, who have appeared in this case as counsel for the United States and the Commonwealth, respectively. This meeting also included officials from the AGO. Willette continued to provide information and materials relating to the investigation. On October 30, 2013 Attorney Zachos, on behalf of the Medicaid Fraud Division (MFD) of the AGO, wrote to the Director of Medicaid at EOHHS:

Having reviewed the circumstances of the theft of Medicaid funds by [UMass] employee, Leo Villani, MFD strongly recommends that [EOHHS] promptly notify [UMass] and the Comptroller’s Office that EOHHS will seek to recoup the lost funds pursuant to an offset of future payments to [the] Commonwealth [ ], under the terms of the interagency service agreement (“ISA”) between EOHHS and [UMass]. Under the terms of the ISA, [UMass] bears the risk of loss of all deliverables until received by EOHHS, and therefore, [UMass] is bound to reimburse EOHHS for all funds stolen by Mr. Villani, without regard for [UMass’s] ability to recover monies from Mr. Villani’s estate.

(Willette ex. P.)

         According to Healy, during late 2013 and early 2014 UMass was engaged in a dialogue with EOHHS regarding the proper manner and timing for the repayment. Healy explained that there were multiple factors to consider, including whether the payment would be accompanied by a settlement agreement and a general release, and whether EOHHS potentially bore some responsibility for UMass’s legal fees incurred in the process of investigating the matter and trying to collect the money for repayment. Healy also reported that there were discussions regarding “whether [UMass] should pay all of the money that was lost or whether we should just pay what we recovered, ” and whether UMass should “repay monies that [it] had received at the time and make other payments down the road as [it] received more monies.” (Willette ex. G at 115-16.)

         On January 15, 2014, Willette filed his second amended complaint in this case, under seal. On April 24, 2014, the United States and the Commonwealth filed a joint notice of election to decline to intervene pursuant to 31 U.S.C. § 3730(b)(4)(B) and Mass. Gen. Laws ch. 12, § 5C(4)(ii). The case was unsealed on April 29, 2014.

         On May 9, 2014, the Chancellor wrote to the President of UMass, Robert Caret, seeking approval of a plan to repay the stolen funds through two mechanisms: 50% through a decreasing adjustment on UMass’s quarterly “CMS-64” expenditure report; and 50% through a direct payment to EOHHS. According to Healy, the Chancellor advocated for this plan “because of the campus’ strong business relationship with EOHHS and a general desire to make the government whole for the stolen funds.” (Willette ex. A at 3.) In his letter to the President, the Chancellor wrote:

The Comptroller’s Office, the Attorney General’s Office and the Executive Office of Administration and Finance are also well aware of this matter and see its earliest resolution as essential. [UMass] concurs with the plan to repay EOHHS in full and in the manner requested and described below by EOHHS. . . . Yesterday, we received a formal notice from EOHHS’s CFO, Steve Barnard, requesting that repayment of both the state and federal portions of these recoveries be made. . . . The CFO’s request details the amount, timing and manner in which EOHHS would like to receive these payments . . . .

(Willette Ex. Q.) Later that day, Healy received notice of the instant qui tam case. This was the first that he or anyone else at ...


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