The federal government has filed suit against the University for fraud in relation to the ALG transplant program and is seeking $107 million in damages. The case rests on illegal sales of the experimental transplant drug. While the University has admitted to selling the drug, a large portion of the amount the government demands is the result of a request that damages be tripled — a request that seems calculated to make an example out of the University. But the government’s action will punish not only those who are directly alleged to have participated in grant mismanagement and illegal sales of ALG. It will punish — first and foremost — faculty, students and Minnesota taxpayers.
Attempts to settle the case out of court fell through when the University refused to back down on its stance that the National Institutes of Health should remove the University’s designation as an “exceptional organization.” Exceptional, in this case, means exceptionally suspect in the eyes of federal funders. The designation, which the University received in 1995, stipulates that grant proposals from all University health researchers be subject to special scrutiny. It requires additional paperwork from grant applicants, which has caused delays in funding. Only one other school in the United States, Thomas Jefferson University in Philadelphia, has been tagged as an exceptional institution, and Academic Health Center Provost Frank Cerra has called the label a black eye that damages the University’s reputation.
The University has admitted to serious grant mismanagement within the Department of Surgery, but the NIH sanction has been applied to the entire University. A $7 million internal audit found no mismanagement outside the Department of Surgery.
Nevertheless, all health researchers on campus, regardless of their department or their histories of grant management, must labor under the stigma imposed by the NIH. Innocent researchers may also find it harder to obtain nongovernment grants while under the shadow of the NIH sanction.To put the government’s $107 million request into perspective, it’s worth noting that the University received only $497 million from the state Legislature last year. The damages, if awarded, would represent around 20 percent of the U’s annual state appropriation. Gov. Arne Carlson has said that Minnesota taxpayers will ultimately bear the burden of any damages assessed. “The taxpayers of Minnesota have made a substantial investment in the University,” he said, “and through that investment they will, directly or indirectly fund a significant portion of such costs.”
Whether the University wins or loses the case, it will undoubtedly spend hundreds of thousands of dollars on litigation, should the case go to court. If it is tried, the case is expected to go on for years. If the University loses the case or settles, University President Nils Hasselmo has said the University will not ask for an appropriation from the legislature to pay for the costs of the suit. Instead, the money will come from University reserves. However, those reserves, once depleted, will have to be replaced — most likely through budget cuts that will undoubtedly affect students. The government’s punishment, therefore, will inevitably trickle down to those who can least afford it.