Whistle-blower suit against FHCN proceeds

A lawsuit filed by a former employee of Family HealthCare Network alleging fraud is proceeding after a federal court judge in December rejected a motion to dismiss the suit.

“The case is going forward,” said attorney Michael Hirst of the Hirst Law Group who filed the suit on behalf of Sharmon Wood, a former employee. The case is set for trial on June 5, 2012.

A whistle blower suit is one filed by an individual alleging an entity had frauded the federal government. In some instances the federal government, after the suit is filed, intervenes, but Hirst said the federal government had declined to do so in this case.

Wood, who lives in Visalia and worked for FHCN as a grants management coordinator from November 2002 until March 2004, alleges the health clinic submitted false and fraudulent claims to the United States to obtain grant funds for FHCN. The original complaint was filed under seal on May 11, 2007.

The action names the clinic, CEO Harry Foster and Vice President of Finance Tony Weber, along with unnamed people, as defendants in the case.

According to court documents, Wood wrote all grant applications and assisted other staff in preparing grant progress reports.

She claims “defendants submitted applications for two competitive federal grants, both of which were subsequently awarded to FHCN.

“In each application, as required by the grants, defendants submitted detailed budget and narrative information setting forth its plan to hire additional staff and extend the operating hours at two FHCN clinics.”

However, Wood claims, the defendants never intended that the grant funds would be used for their stated purpose, that defendants intended that the funds would be applied to FHCN’s ongoing operating expenses.

“Defendants also wrongly harassed Wood for her role in exposing and complaining about the fraud,” the suit alleges.

The lawsuit alleges violation of the federal False Claims Act that dates back to the Civil War.

It is to protect the government from being overly charged or for false claims to be made.

The suit states that “during the course and scope of her employment at FHCN, qui tam plaintiff Sharman Wood (“Relator”) learned that defendants falsified FHCN’s applications for federal grants, falsified reports after receiving the grant awards, and did not intend to meet the requirements set forth in the grants.

“As a result of their fraudulent conduct, Defendants caused the government to sustain a direct loss of funds and damage to its interests.”

The suit quotes other employees of FHCN who allegedly raised similar concerns, including Teresa Mora-Macias, former vice president of Operations, who allegedly wrote in a letter Jan. 14, 2004, “I asked Tony (Weber) if he felt that this was appropriate and he responded that he was not comfortable with it, but that was what Harry had instructed him to do.”

In its motion to dismiss, attorneys representing FHCN – Barger and Wolen in San Francisco – claimed the complaint was flawed because the “Plaintiff declined to describe the fraud allegedly committed” and that the allegations were too vague to meet the requirements of the False Claim Act.

In rejecting the motion  to dismiss, federal Judge Oliver Wanger in Fresno said, “The complaint contains sufficient allegations to state claims for violation of section 3729(a)(1) against Foster and Weber.”

Wanger also found the allegations were “sufficient” against FHCN and that the claim of conspiracy and the false claims allegations would stand.

“The Court denied the defendants’ motion to dismiss the case “in its entirety,” stating that ‘None of the Defendants’ arguments have merit.’ We believe the evidence will show that the defendants knowingly defrauded the United States and look forward to presenting the evidence at trial,” said Hirst.

Attempts to reach Foster and attorneys representing FHCN were unsuccessful.

FHCN, founded in Porterville, operates 11 health clinics at 13 sites in Tulare and Kings counties. At one time all of its corporate officers were located in Porterville, but now its corporate office is in Visalia.

Thousands of patients visit the clinics every month seeking medical and dental care.