United States District Court, E.D. North Carolina, Western Division
W. FLANAGAN, UNITED STATES DISTRICT JUDGE
matter is before the court on defendant's motion to
dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6),
(DE 23), and plaintiff's motion to allow discovery, (DE
25). The issues raised are ripe for ruling. For the following
reasons, the court denies defendant's motion to dismiss
and denies plaintiff's motion as moot.
September 13, 2017, plaintiff filed a qui tam suit under seal
on behalf of the United States asserting claims under the
False Claims Act, 31 U.S.C. § 3729 et. seq.
(“FCA”), against his former employer defendant
Shaw University. Plaintiff, former general manager of
defendant's radio station, WSHA-FM, alleges that
defendant 1) overstated its revenues and expenditures above
and beyond its radio station's budgetary documents in its
audited financial reports to increase its grant awards from
the Corporation for Public Broadcasting (“CPB”)
and 2) retaliated against plaintiff for voicing his belief
that defendant was out of compliance with reporting
United States declined to intervene. (DE 10). Subsequently,
plaintiff moved to dismiss his first claim under section 3729
and to proceed individually on his retaliation claim under an
amended complaint, (DE 13), which the court allowed on
October 9, 2018.
filed amended complaint the next day, (Am. Compl. (DE 22)),
and on October 29, 2018, defendant filed instant motion to
dismiss, (DE 23), attaching in support three documents: 1)
CPB's Radio Community Service Grant General Provisions
and Eligibility Criteria (the “General
Provisions”), 2) CPB's Financial Reporting
Guidelines For Preparing The Annual Financial Report &
Financial Summary Report, and 3) February 12, 2016 audited
financial statements for defendant's radio station.
November 21, 2018, plaintiff filed opposition to
defendant's motion to dismiss which also sounds as motion
for the court to allow discovery, arguing documents attached
to defendant's motion and arguments made by defendant are
properly brought pursuant to Rule 56, not Rule 12(b)(6),
requesting the court to either defer ruling on
defendant's motion and allow discovery or strike
defendant's motion insofar the arguments contained
therein relate to questions of evidence and not the
sufficiency of plaintiff's pleadings. (DE 25). Defendant
filed opposition to plaintiff's motion on January 28,
2019, maintaining defendant's motion is properly brought
pursuant to Rule 12(b)(6).
facts alleged in the amended complaint relevant to the
resolution of the instant motions may be summarized as
Corporation for Public Broadcasting and Community Service
order for a public broadcasting station to receive a
community service grant (“CSG”) from the CPB, the
station must certify annually to the CPB that they comply
with the requirements of the Communications Act of 1934
(“Communications Act”), 47 U.S.C. § 396, et
seq., as a condition of accepting a CSG. The Communications
Act requires that CSG recipients undergo audits of their
books and financial records, conducted by public accountants,
and retained according to the form required by the CPB. The
Communications Act requires, inter alia, that, “funds
may not be distributed [under the CSG] . . . to any public
telecommunications entity that does not maintain for public
examination copies of the annual financial and audit reports,
or other information regarding finances, submitted to the
[CPB] . . . .¨ 47 U.S.C. § 396(k)(5).
allocation to radio stations features a base grant in
addition to an “incentive grant” or matching
grant, which is calculated in part according to the amount of
non-federal financial support (“NFFS”) accrued by
the grantee during a particular period of time. Accordingly,
fluctuations in the amount of NFFS accrued or reported by the
grantee may cause the amount of the incentive grant
authorized to the grantee to rise or fall in turn.
alleges that as recently as April 2017, the CPB office of the
inspector general began to identify incorrect calculations of
NFFS and admonished grantees that “[i]f not calculated
correctly, non-federal financial support may be overstated
and subject your station to a penalty under the CSG
Non-compliance Policy.” (Am. Compl. (DE 22) ¶ 15).
Overstated NFFS can cause the CPB's incentive grant
component of the CSG to allocate more federal funds to the
grantee than that grantee may be entitled to receive.
Plaintiff's Work at WSHA-FM
has owned WSHA-FM since 1968. Plaintiff worked for defendant
for nearly 29 years as general manager of WSHA-FM, from his
date of hire in August 1987 until his termination on or about
July 8, 2016. Under plaintiff's leadership of
WSHA-FM, the radio station earned millions of dollars in
donations, signed contracts with major telecommunications
companies such as Verizon, Sprint, and T-Mobile, and built a
radio tower for defendant which was appraised at over $3,
000, 000.00 in 2008 and has earned approximately $250, 000.00
in annual revenue for defendant for over 20 years. Plaintiff
maintained high performance evaluations throughout his
employment until February 2016.
virtue of plaintiff's position as general manager,
plaintiff alleges he had intimate knowledge of WSHA-FM's
budget, including its itemized expenditures. As part of
plaintiff's job duties, he was regularly required to
review WSHA-FM's budget to make requests for approved
expenditures under that budget, including approving personnel
expenditures, travel costs, and other financial outlays
incurred during the station's operation. Plaintiff held a
general understanding of the amounts of revenue brought in by
WSHA-FM, including the various sources of revenue such as
fundraising and renting the use of the station's radio
tower. Plaintiff received regular annual training on the CSG
grant requirements by and through his annual attendance at
CPB conferences held for the same purpose in Washington, D.C.
Financial Management of WSHA-FM
plaintiff's tenure as general manager of WSHA-FM,
defendant largely exerted exclusive control over the
financial management of WSHA-FM operations by and through the
department of fiscal affairs. Plaintiff did not have control
over developing the WSHA-FM budget throughout his tenure at
WSHA-FM. At all times relevant to the complaint,
WSHA-FM's budget was created by defendant's vice
president of fiscal affairs and the vice president of
institutional advancement, from whom plaintiff was required
to obtain approval for requisitions.
all income generated by WSHA-FM was directed to defendant and
was not deposited directly into WSHA-FM internal accounts but
instead into defendant's general fund. For example,
revenue generated by WSHA-FM, including leasing of the radio
tower, was directed to fiscal affairs and not retained in
WSHA-FM's own accounts.
was able to review budgetary documents that represented
WSHA-FM's budget for the fiscal year. Specifically,
plaintiff was able to access WSHA-FM's general fund as
well as the CSG fund. WSHA-FM's general fund and the CSG
fund represented the only two bank accounts associated with
WSHA-FM and Community Service Grants
1992, defendant began to apply for and receive CSGs to
support its radio operations. In the most recent years of
WSHA-FM's operations, the radio station received the
following in CSGs over the course of the following fiscal
years: 2011: $136, 215.00; 2012: $122, 442.00; 2013: $136,
141.00; 2014: $179, 245.00; 2015: $175, 475.00.
each year in which defendant received a CSG, defendant, by
and through its agents, was subject to multiple requirements
including the requirement to certify the accuracy of its
financial documentation, describing the assets, liabilities,
expenditures, and revenue over a specified period of time,
which was submitted to the CPB and was published and made
available to the general public; to report and annually
certify an amount it received in NFFS; and to read and sign
their assent to the Radio Community Service Grant Agreement
and Certification of Eligibility (“CSG
years relevant to the complaint, the CSG Agreement's
language was substantially similar to that included in the
CSG Agreement for fiscal year 2016, which stated in relevant
A. Grant Offer and Acceptance: CPB offers
and Grantee accepts the grant (Grant(s)) set forth in Section
III below, subject to all of the terms and conditions herein.
CPB has calculated and offered the Grants in reliance and
contingent upon the accuracy of the following:
1. The representations and warranties made by the Grantee to
qualify for and receive the following Grants:
• FY 2016 Radio Community Service Grant (CSG); . . .
2. Grantee's Fiscal Year (FY) 2014 financial report.
B. Conditions: In addition to the terms and
conditions stated herein, this Agreement includes and the
Grantee must fully comply with CPB's Radio Community
Service Grant General Provisions and Eligibility Criteria . .
., the certification requirements set forth in the
Communications Act of 1934, . . . and the Financial Reporting
Guideline s . . . All o f the se d o cume n t s . . . ar e
incorpor ated herein by reference as if fully set forth
(Id. ¶ 47).
such CSG Agreements, grantees such as defendant were required
to certify its compliance with a checklist of criteria,
including that the grantee complied with the General
Provisions for eligibility. In the General Provisions, the
CPB warned grantees that, “improper certification may
result in penalties under the Federal False Claims
Act.” (Id. ¶ 49).
alleges defendant knowingly submitted its Audited Financial
Reports (“AFR”) and Audited Financial Statements
(“AFS”) to the CPB, and published the same on the
WSHA-FM website, with knowledge that the CPB would rely upon
the accuracy of the same in approving the payment of the CSG
within each annual CSG Agreement, language substantially
similar to the following used in the CSG Agreement for fiscal
year 2016 was included:
E. Representations and Warranties: Grantee
represents and warrants:
1. The information provided in this application is true and
accurate; 2. That Grantee understands that using false
information to obtain the Grants may subject the Grantee to
penalties under the Federal False Claims Act, 31 U.S.C.
§§ 3729-3733; . . .
4. That Grantee shall comply with all of the terms and
conditions herein and in the General Provisions . . . .
(Id. ¶ 52).
acting on behalf of defendant were required to sign, and did
sign, specific certifications of eligibility for each annual
CSG Agreement, including an express certification that
“Grantee complies with the General Provisions”
provided in the CSG grant. (Id. ¶ 53).
each year defendant received a CSG allocation,
defendant's president as well as plaintiff signed the CSG
Agreement and signed other documents material to the
CPB's determination to approve disbursement of the CSG to
defendant, certifying their compliance with the CSG
requirements, including but not limited to those
aforementioned, and defendant caused the same to be submitted
to the CPB for payment of the CSG.
Plaintiff's Complaints to Defendant Prior to 2016
the annual CSG application and AFR/AFS reporting processes,
fiscal affairs worked directly with defendant's chosen
auditor, BDO USA, LLP (“BDO”), to prepare the
same. Beginning in 2007, plaintiff began to be included in
reviewing the AFR/AFS prior to its submission to the CPB.
the outset of plaintiff's inclusion in this process,
plaintiff identified exaggerated amounts claimed as
expenditures for WSHA-FM. Plaintiff was further concerned
that inflated expenditures were being used to cover similarly
inflated revenues, including for the purpose of increasing
the matching grant component of the CSG. Plaintiff
communicated his concerns promptly to his supervisors,
including but not limited to the instances discussed below.
about February 2, 2007, plaintiff emailed Tom Poitier
(“Poitier”), then defendant's vice president
of fiscal affairs, stating:
I have received the second draft for WSHA's Annual
Financial Report (AFR) for 2005-2006. I am still baffled at
the figures used in the calculations. . . . This is the first
time our AFR has been released to me for review before it was
uploaded to CPB. It is ...