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State School Immune From Grant-Fraud Suit

(CN) - Immunity shields a Michigan state university from a former professors claims that its grant applications defrauded the government, the Sixth Circuit ruled.

After Wayne State University fired him in 2012, former assistant professor Christian Kreipke brought a federal complaint claiming that his termination stemmed from his work on the Detroit school's research-grant auditing committee.

Kreipke claimed that Wayne State had been boosting its grant funding by fudging costs in its budget requests, reporting higher-than-actual salaries for the researchers, exaggerating the time spent working on grants, misappropriating federal funds to purchase equipment, and inflating the costs for other services and supplies.

When the United States declined to intervene in the case and the complaint was unsealed, the university president said Kreipke's own research misconduct got him fired, not his supposed whistle-blowing activity.

Specifically, the school claimed that Kreipke's conduct had led the U.S. Department of Veterans Affairs to institute a 10-year ban of further grant funding to him.

Kreipke in turn added a defamation count to his complaint alleging five violations of the False Claims Act and retaliatory discharge.

A federal judge dismissed the suit before reaching the merits, however, after finding he found that Wayne State is not a "person" subject to liability under the False Claims Act.

The Sixth Circuit affirmed Friday, ruling that "WSU is an arm of the state of Michigan," not a "person," as defined by the act.

Only the school's Board of Governors has the capacity to sue and be sued, the 21-page judgment says.

U.S. District Judge Thomas Rose wrote the decision for a three-judge panel, sitting by designation from the Southern District of Ohio.

While the state not control it significantly, "WSU's independence from state control is consistent with its status as a state educational institution," Rose wrote.

In vying to label the school an independent institution, Kreipke pointed to the fact that the university receives only 20 percent of its funding from Michigan.

Rose nevertheless found the level of funding "only marginally relevant, if at all, to the issue of whether WSU is performing a traditional state function."

"The question of whether a function is within the state's traditional purview is determined by analyzing whether the state has a history of performing or providing the same function or service," he wrote.

He added that Wayne State performs a function traditionally within the purview of state government by providing higher education.

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