A federal appeals panel has agreed a former Cook County Health Department financial director can’t continue her lawsuit claiming the county improperly amassed millions of dollars through federal grants for which it ultimately provided no services, describing her claims of fraud as "sheer speculation, bald assertions and unsupported conclusory statements."
Noreen Lanahan, who worked as a financial control director until her 2017 retirement, sued the county on behalf of the federal government, alleging several False Claims Act violations. Had she prevailed in the so-called qui tam action, Lanahan would’ve been entitled to a portion of any financial award. After U.S. District Judge Harry Leinenweber dismissed the complaint with prejudice, Lanahan took the matter to the U.S. Seventh Circuit Court of Appeals, which affirmed the dismissal.
Seventh Circuit Judge Amy St. Eve wrote the panel’s opinion, issued July 20; Circuit judges Ilana Rovner and David Hamilton concurred.
According to the panel, Lanahan’s lawsuit said the county accepted about $20 million a year during her tenure, from 1994 through 2017. But in 2008, she said, she started warning people the county was seeking federal reimbursement for expenses it never incurred. The panel’s opinion summarized four examples of what Lanahan identified as fraud.
The first was a 2009-2011 Centers for Disease Control and Prevention H1N1 vaccine grant worth $2.5 million. Lanahan accused the county of estimating time employees spent on administering the grant rather than accurately accounting for that labor. The second involved the Supplemental Nutrition Assistance Program (SNAP) for Women, Infants and Children through which the county had accumulated $6.8 million in deferred credits, which the county moved into the general health fund despite incurring no expenses connected to the grants.
Lanahan also alleged a kickback scheme tied to the Hektoen Institute of Medicine, a nonprofit personal service claims processor which she said submits claims for and collects revenue from doctors’ federal research grants. She said the Institute kept between 10% and 15% of the grant total, and reallocated that take into a “Dean’s Fund," while giving doctors “near autonomy” over the money.
The final example involved the Public Health Institute of Metropolitan Chicago. Although that body isn’t a certified public health department, Lanahan said in 2010 the county approved it as the fiscal agent for almost $16 million in CDC funds.
The federal government declined to intervene in Lanahan’s complaint. When Judge Leinenweber dismissed Lanahan’s second amended complaint, he said it had the same deficiencies as the initial lawsuit. He noted Lanahan didn’t adequately specify falsehoods in the county’s reports or properly link any statements to government payments. For the claims the county improperly retained money, he explained those allegations lacked sufficient facts.
On appeal, Lanahan challenged both the notion she failed to state a claim and that Leinenweber’s dismissal was with prejudice.
Lanahan “has not alleged any false claim or statement for payment with the degree of granularity” the law requires, St. Eve wrote. “We dismiss outright (Lanahan’s) conclusory assertions that Cook County profited from ‘reimbursement of WIC false claims’ and that Hektoen was reimbursed ‘despite the falsity of the underlying claims.’ We are not obligated to accept ‘sheer speculation, bald assertions and unsupported conclusory statements’ on a motion to dismiss.”
The panel said Lanahan’s complaint functionally objects to how Cook County treated its grant money after it was disbursed without identifying “any statement or claim, false or otherwise, Cook County made to the government.” The judges further said she didn’t adequately allege any falsified expense reports, nor did she properly connect any such reports to the federal payouts.
St. Eve further explained that the closest Lanahan came to pleading improper retention of federal funds is an allegation the county put money from the H1N1 and WIC grants in the wrong accounts. But she didn’t allege the county was obligated to return that money to federal agencies.
Writing Lanahan’s “allegations amount to nothing more than a putative regulatory violation,” St. Eve said the complaint also lacks “any facts suggesting Cook County knew it was in possession of government funds to which it was not entitled.”
Finding the dismissal for failure to state a claim was warranted, the panel also said Lanahan “entirely” failed to expound on her position the dismissal should’ve been without prejudice and waived the challenge “as perfunctory, underdeveloped and cursory.”