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Jury Finds No False Claims Act Liability in NIH Grant Funding Case

February 5, 2015

Author: Stephanie D. Willis.

Federal grant seekers in the life sciences and health care space may be breathing a sigh of relief in the wake of the recent jury verdict in Siebert v. Gene Security Network, Inc. (N.D. Cal. Feb. 3, 2015). This case involved a former employee who alleged that the in-vitro fertilization testing company had falsely certified to the government that it employed specific time, effort, and expense accounting practices before seeking federal grants from the National Institutes of Health (NIH) for research. The jury found that Gene Security Network (which had changed its corporate name to Natera, Inc.) did not make false statements to the United States in its NIH grant applications with respect to these processes.

The relator accused the company of failing to use adequate tracking mechanisms to support Natera’s obligations under the grants’ conditions. To support these allegations, the relator relied on grant administration requirements such as those stated in the SF424 grant application, the NIH Grants Policy Statement and the Department of Health and Human Services’ Uniform Administrative Requirements for Awards and Subawards to Institutions of Higher Education, Hospitals, Other Nonprofit Organizations, and Commercial Organizations (“UAR”) that Natera was supposedly certifying compliance with as a precondition to receiving funds. The relator contended that as a result of falsely certifying compliance with the statements within these documents, Natera’s drawdowns of grant money from the NIH were false claims.

Although the outcome may have been different with stronger facts for the relator or if it was adjudicated through a bench trial, this is a significant victory for NIH grant applicants who may have become fearful about the extent to which the SF 424, NIH Grants Policy Statement, and UAR could be relied upon for FCA suits premised on a false certification theory. Notwithstanding the verdict, federal grant applicants should continue to monitor their compliance with grant management requirements lest they become the basis of an FCA suit.

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Stephanie D. Willis
Counsel – Washington, D.C.
Phone: +1 202.624.2721
Email: swillis@crowell.com