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Wisconsin Halfway House Overbills BOP; Fired Whistle blower Settles For $435,000

by John E. Dannenberg

Federal jurors found that Rock Valley Community Programs (RVCP) in Janesville, Wisconsin and its chief executive officer, Irwin McHugh, had submitted false claims for reimbursement to the Federal Bureau of Prisons (BOP). The jury also found that the whistleblower reporting the fraud had been wrongfully terminated thereafter. A settlement was reached totaling $500,000 for both the fraud and the wrongful termination.

RVCP is a 75-bed halfway house providing drug abuse treatment programs to state and federal offenders and has been paid over $300,000 annually by BOP. The story broke when RVCP employee Nancy Gilligan-OBrien refused to sign bogus claims paying for alleged work supervision that she had never performed. Gilligan-OBrien had been employed by RVCP since 1990, and was their director of outpatient and clinical services. In addition to the billing fraud, Gilligan-OBrien charged that RVCP didnt have adequate staff to meet Wisconsin certification for residential treatment services, a deficiency validated in June 2006 by U.S.D.C. Judge John Shabaz. In April 2004, she asked for official investigations. One month after Gilligan-OBriens whistle blowing, McHugh fired her for being publicly critical of RVCPs programs.

Gilligan-OBrien sued in a qui tam action accusing RVCP and McHugh of knowingly making false claims in violation of 31 U.S.C. § 3729(a)(1) and (2). She also claimed her firing was in retaliation for whistle blowing, protected under both 31 U.S.C. § 3730(h) and Wisconsin law. Defendant's motion for summary judgment was denied and the case went to trial to resolve disputed facts. In April 2006, a jury found that RVCP did knowingly present false/fraudulent claims to the BOP; that McHugh also did so; that RVCP used false records to gain fraudulent payment; that McHugh also did so; but that Gilligan O'Brien's conduct was not a motivating factor in her termination. Nonetheless, the jury found that she was wrongfully discharged in violation of an important Wisconsin public policy, a judicial exception to the states employment at-will doctrine that was carved out by the Wisconsin Supreme Court in Brockmeyer v. Dun & Bradstreet, 335 N.W. 2d 834 (Wis. 1983).

It was this last finding that led to a damages settlement for Gilligan-OBrien. RVCPs insurer, West Bend Mutual Insurance, agreed to pay her $407,000 to settle her wrongful discharge claim. In addition, West Bend paid $92,500 to settle the false claims act violation. Of this, 70% went to the U.S. Government and 30% to Gilligan-OBrien. Gilligan-OBrien was represented by Janesville attorney Julie Lewis of Nowlan & Mouat, LLP. See: United States ex rel Nancy Gilligan-OBrien v. Rock Valley Community Programs, Inc. and Irwin McHugh, U.S.D.C. (W.D. Wis.), Case No. 04-C-975-S, Memorandum and Order (March 2006) and Special Verdict (April 2006).

Other source: Madison Gazette.

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Related legal case

United States ex rel Nancy Gilligan-OBrien v. Roc