University prepares for next move in suit

In the wake of last week’s U.S. District Court decision to leave a massive federal government suit against the University intact, the Board of Regents litigation committee will meet with the school’s lawyers today to discuss its next move.
The government is suing the University in excess of $60 million for mismanaging medical research funds and fraudulently claiming federal research grants.
Judge Richard Kyle, who cannot comment on pending cases, ruled against full summary judgment for the University. The decision brings the case one step closer to what University head attorney Mark Rotenberg said will be a “lengthy, costly trial.” The trial could begin sometime this fall.
“For over a year, the University has been interested in putting this matter behind us,” Rotenberg said. “But the Justice Department has taken such a rigid view of this litigation that we’ve been unable to reach an agreement.”
Justice Department spokesman Joseph Krovisky refused to comment on the decision or any other aspect of the case.
The University admits some of the alleged wrongdoing and is willing to pay the government, but Rotenberg said the $60 million figure is far beyond the $20 million at which University officials have estimated the case’s value. “Nobody’s bluffing here,” Rotenberg said. “This is two honest, radically different opinions of what the law requires in this case.”
The Justice Department, in conjunction with a University whistleblower and the National Institute of Health, filed suit against the University in December 1997.
They claim the University illegally sold the unlicensed transplant rejection drug ALG and mismanaged research grants between 1968 and 1993, accruing more than $80 million with the illegal sales. The government also brought criminal charges against Dr. John Najarian, who was in charge of the ALG program, in 1995. After a lengthy trial, he was acquitted of all charges.
The current lawsuit alleges that the University also filed false claims with the NIH for improperly receiving $19.6 million in federal research funds. NIH officials also refused to comment on the case.
One argument the University has maintained is that when school officials discovered the problems, they reported them and have since taken measures to correct them. However, the NIH still classified the University as an “exceptional organization,” and imposed research sanctions on the University in August 1995. The designation makes it more difficult and time consuming for medical researchers to initiate government-funded projects.
The University’s status with the NIH has been a point of contention in negotiations. The University sought to have the sanctions lifted in conjunction with a settlement package, but months of talks yielded no conclusion.
“The government got its money’s worth in research,” Rotenberg said. “It’s not like the money went to pay for boats and airplanes. The money from the sale of the drug was used for surgical department research and production of the drug.”
Justice Department officials disagree with that logic. They contend that since the funds were obtained illegally, the University is responsible for paying them back.
The University won a large victory last July when Kyle dismissed claims that would have allowed the government to collect compensatory damages in the lawsuit. The government was originally seeking more than $100 million. Officials had argued that the government was not entitled to the original sum because the University helped expose the mismanaged program.
The victory wasn’t wholesale, however. A University countersuit filed in December 1996 was also dismissed in the July ruling.
As much as Rotenberg and the regents would like to see a settlement agreement, the cost of appeasing the government at this point seems financially disastrous.
“We are willing to pay, but not exorbitant amounts,” Rotenberg said of the current government demands. He added that losing that kind of money would impact taxpayers and students in the form of higher tuition and taxes.
“If the regents provide me with a new direction,” Rotenberg said, “then I will carry that water and see if we can still reach an agreement.”