IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
STATE OF WASHINGTON, ex rel. LISA HUNTER, an individual, No. 79959-2-I
Respondents, DIVISION ONE
v. PUBLISHED OPINION
JASON LOWERY and JANE DOE LOWERY, and the Lowery community,
Appellants,
RELATIONSHIPS TOWARD SELF- DISCOVERY, INC., a Washington corporation; LAIRD RICHMOND, JANE DOE RICHMOND, and the Richmond community estate,
Defendants.
APPELWICK, J. — Lowery appeals the judgment in a bench trial finding him
liable for violating the Washington False Claims Act, chapter 74.66 RCW. The
judgment is based on the submission of false expense claims in the annual
reconciliation against moneys advanced for care of state disability clients. Lowery
claims he cannot be liable because (1) he was only an employee and not an owner
or control person of RTS; (2) he did not personally prepare the fraudulent reports;
and (3) the State was aware of his allegedly false billing practices and continued
to pay his claims. He also claims the trial court erred in finding a conspiracy
Citations and pin cites are based on the Westlaw online version of the cited material. No. 79959-2-I/2
between himself, the owner, and RTS. We strike the findings relating to withdrawn
and unstated violations. We otherwise affirm.
FACTS
The Washington State Developmental Disabilities Administration (DDA)
contracts with private companies to provide services to developmentally disabled
adults. DDA is a division of the Department of Social and Health Services (DSHS).
Relationships Toward Self Discovery, Inc. (RTS) was a supported living program
that contracted with the DDA to provide staffing and supervision services for this
purpose.
DDA and RTS had regular rate setting meetings to estimate the
compensation due to RTS per client. This process involved projecting how many
hours of care each client needs. It began with DDA determining the base level of
support that a client needs. This rate was then adjusted to account for the clients’
actual living situation. For clients who live in a group setting, staff are expected to
care for multiple clients, such that clients can “share” staff hours. During the night,
when clients are presumed to be sleeping, one staff member might be expected to
provide support for four clients. Thus, even though a client may require 24 hours
of support in a day, the adjusted hours that DDA authorizes during rate setting
meetings might be only 12 hours.
DDA paid RTS on a monthly basis. RTS was required to submit an annual
cost report that reconciled funds received with services actually provided to clients.
If the cost report revealed that RTS had been paid for service hours it didn’t actually
provide to clients, it would have to reimburse DDA for those services.
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RTS clients require 24 hour supervision. RTS provides this supervision with
a “live in” staffing model. In this model, staff sleep at residential facilities and are
available to assist clients with whatever needs they may have during the night.
RTS staff were not paid an hourly wage for sleep hours unless they awoke to care
for a client.
RTS was paid for its work through a contract with the DDA. Its mission is
to provide home, community, and facility based residential and employment
supports. The DDA contracted with RTS to provide these services. As a DDA
contractor, RTS received payments through the DDA from Medicaid.
The dispute in this case involves RTS’s reporting of sleep hours in cost
reports from 2012, 2013, 2014, and 2015. In those cost reports, RTS reported
sleep hours as paid hours worked, but it did not pay employees for those hours
unless they were awakened to provide care.
Laird Richmond was the owner of RTS. Jason Lowery was the director of
RTS. Lisa Hunter was a contracted bookkeeper for RTS from 2004-2015. Hunter
prepared the 2012, 2013, and 2014 cost reports. Lowery and Lisa Aird, Hunter’s
successor, prepared the 2015 report.
Hunter testified that she reported unpaid sleep hours on the cost reports
determined by a formula given to her by Lowery. DDA guidelines instruct providers
to include only paid hours worked in cost reports as reimbursable service hours.
These guidelines appear in a DDA policy manual, rather than the Washington
Administrative Code. Sleep hours may be included only to the extent that the
number is adjusted to include only actual paid hours worked.
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Hunter understood that sleep hours should not be submitted for payment
unless they were actually paid to employees. She raised these concerns with
Lowery “continually . . . year after year.” She also had a meeting with Lowery in
April 2015, after several cost reports had been submitted, in which she tried to stop
RTS from continuing to submit unpaid sleep hours. She testified that Lowery’s
response to her objections was to say, “[S]omething has to be done. I’m going to
lose my business and my house.”
She also raised her concerns with Richmond. On April 15, 2015, she sent
a long text message to Richmond outlining why the way in which she was being
instructed to report sleep hours was inappropriate. RTS terminated Hunter’s
contract the following month.
Hunter thereafter filed a qui tam complaint against RTS, Richmond, and
Lowery.1 She alleged that they violated the Washington Medicaid False Claims
Act (WAFCA), chapter 74.66 RCW, and employment discrimination. The State
intervened, filing its own complaint against the defendants alleging violations of the
WAFCA, common law fraud, unjust enrichment, and conversion.
RTS ceased doing business in 2016 and is now defunct. Richmond died in
2017. Both defaulted on the claims against them. Only Lowery actively
participated in the defense of these claims.
Both sides moved for summary judgment. The trial court denied both
motions. The trial court then held a four day bench trial. At summary judgment,
1RCW 74.66.050 allows a person to bring a civil action for a violation of RCW 74.66.020 on behalf of themselves and on behalf of the government. The person bringing the action is known as a “qui tam relator.”
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the State’s counsel orally represented that it was pursuing only its claim that
Lowery violated RCW 74.66.020, and not any others. Specifically, the State
alleged a violation of RCW 74.66.020(1)(g), that imposes liability for submitting
false statements related to an obligation to pay the State. The parties agree that
the State submitted only the WAFCA claim for adjudication by the court.
Nevertheless, the trial court entered findings of fact and conclusions of law
finding the defendants liable for all the State’s original claims. Lowery moved for
reconsideration, arguing that he should not be liable for claims the State had
abandoned. The trial court requested additional briefing, including any other
proposed changes to the findings that Lowery wished to make. The trial court
issued new findings accepting that the State had dropped all claims except for a
violation of the RCW 74.66.020(1), but affirmed that Lowery was liable under that
claim. The trial court found Lowery liable for violating RCW 74.66.020(1)
subsections (a)-(b), that relate to claims for payment, subsection (c), related to
conspiring to violate the statute, and subsection (g), related to obligations to pay
the government.2
Lowery appeals.
DISCUSSION
Lowery makes seven arguments. First, he argues that he cannot be liable
under the WAFCA because he is not an owner or control person of RTS. Second,
2 The trial found that RTS, Laird, and Lowry violated RCW 74.66.020(1) in five ways. Each conclusion of law is labeled as a subsection which mirrors the language of the subsections of RCW 74.66.020(1). Subsections (a)-(d) in the conclusions of law correspond to RCW 74.66.020(1)(a)-(d). Subsection (e) of the conclusions of law corresponds to subsection (g) of the statute.
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he claims that he cannot be liable under WAFCA because he did not prepare,
review, certify or submit the fraudulent cost reports. Third, he argues that he
cannot be liable because the State had prior knowledge of RTS’s reporting
practices but still paid RTS’s claims. Fourth, he argues that the trial court erred in
finding he conspired to violate WAFCA without evidence of an agreement to
conspire to accomplish an unlawful purpose. Fifth, he claims the intracorporate
conspiracy doctrine bars a finding of conspiracy in this case. Sixth, he argues that
cost reports are not “claims” under RCW 74.66.020(1)(a). Last, he argues that he
did not act “knowingly” under RCW 74.66.020(1).
As an initial matter, Lowery argues that all of his assigned errors are entitled
to de novo review. This case presents both legal and factual questions. We review
the trial court’s conclusions of law and statutory interpretations de novo. McCleary
v. State, 173 Wn.2d 477, 514, 269 P.3d 227 (2012). We review the trial court’s
challenged findings of fact for substantial evidence. Id.
I. Liability for Non-owners
Lowery argues first that he cannot be liable under WAFCA because he is
not an owner or control person of RTS.
RCW 74.66.020(1) provides,
[A] person is liable to the government . . . if the person:
(a) Knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
(b) Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;
....
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(g) Knowingly makes, uses, or causes to made or used a false record or statement material to an obligation to pay or transmit money or property to the government entity, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the government entity.
RCW 74.66.010(11) defines “person” as “any natural person, partnership,
corporation, association, or other legal entity, including any local or political
subdivision of a state.” The trial court found that Lowery is a “person” for the
purposes of the State’s WAFCA claims.
Our goal in interpreting statutes is to ascertain and carry out the legislature’s
intent. State v. Alvarez, 128 Wn.2d 1, 11, 904 P.2d 754 (1995). If the language is
clear on its face, courts must give effect to its plain meaning and assume the
legislature means exactly what it says. State v. Chapman, 140 Wn.2d 436, 450,
998 P.2d 282 (2000).
Such is the case here. The statute clearly places liability on any “person”
who commits one of the acts listed in RCW 74.66.020. It provides a definition for
“person” that includes “natural person[s].” RCW 74.66.010. Lowery would have
the court interpret that definition to require that the “person” must be an owner or
control person of a company on whose behalf the false claim was submitted. The
statute contains no such limitation on liability. And, Lowery cites no case law to
support the addition of an “owner” or “control person” requirement to the statute.
We affirm the trial court’s finding that Lowery is a “person” subject to liability
under WAFCA.
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II. Cost Reports as a “Claim”
Lowery argues that the trial court erred in finding him liable under RCW
74.66.020(1)(a)-(c) because the cost reports are not a “claim” as defined by the
statute. The trial court found that Lowery violated RCW 74.66.020(1) by
“knowingly . . . causing . . . false or fraudulent claims [to be submitted],” and
“knowingly making . . . false records or statements material to the false or
fraudulent claims.”
RCW 74.66.020(1) establishes several bases for liability. Subsections (a)-
(b) establish liability when a person submits false claims “for payment” or false
statements in support of those claims. The trial court found liability based on
fraudulent reporting of sleep hours in cost reports. Lowery is correct that the cost
reports were not “claims for payment.” Rather, the cost reports reconcile RTS’s
obligation to reimburse the State for payments already made to RTS.
For this reason, the State made clear at trial that it was not alleging Lowery
was liable under subsections RCW 74.66.020(1)(a)-(b). Rather, the State alleged
liability attached under RCW 74.66.020(1)(g). That subsection imposes liability on
a person who causes a false record or statement “material to an obligation to pay
. . . the government entity or knowingly conceals or knowingly and improperly
avoids or decreases an obligation to pay . . . the government entity.” RCW
74.66.020(1)(g). The cost reports fit squarely in that subsection, because they
determined the amount RTS was obliged to refund the State for overpayment over
the year. The trial court found Lowery was liable under this subsection as well.
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We agree that the trial court erred in finding that Lowery submitted false
“claims for payment” under RCW 74.66.020(1)(a)-(b), because the cost reports at
issue did not cause the State to pay RTS. Therefore, we strike the findings related
to subsections (1)(a)-(b).3 However, the trial court did not err in finding that
submission of the cost reports violated RCW 74.66.020(1)(g). Thus, the erroneous
findings related to subsections (1)(a)-(b) are harmless. We affirm that providing
false information in cost reports was a violation of the statute.
III. Causation
Lowery argues next that he is not liable because he did not prepare, review,
certify, or submit the fraudulent cost reports. The trial court found that Richmond
and Lowery “caused” the fraudulent cost reports to be submitted to the State.
Causation is generally a fact question for the trier of fact. Hertog v. City of Seattle,
138 Wn.2d 265, 275, 979 P.2d 400 (1999). We do not disturb findings of fact that
are supported by substantial evidence. McCleary, 173 Wn.2d at 514. Substantial
evidence exists if the record contains evidence sufficient to persuade a fair-
minded, rational person of the truth of the declared premise. In re Custody of A.T.,
11 Wn. App. 2d 156, 162, 451 P.3d 1132 (2019). The party claiming error has the
burden of showing that a finding of fact is not supported by substantial evidence.
Id.
Lowery seeks to minimize his role in causing the submission of the false
statements in the cost reports. He argues that he did not prepare, certify, or review
Those findings are found in the trial court’s conclusions of law, section B, 3
paragraph 6, subsections (a)-(b).
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the reports. Instead, he characterizes his role as “merely a conduit facilitating a
transfer of the required documents between [Hunter] and Richmond.”
Lowery’s description is not supported by the record. When asked what role
Richmond played in the preparation of the reports, Hunter replied, “He signed it.”
When asked if Richmond did any other work on the reports, she replied, “No.”
Hunter testified that Lowery was much more “hands on” in the preparation of cost
reports than Richmond. She further testified that Lowery gave her the formula with
which to determine the number of sleep hours to submit in the cost reports. She
also testified that Lowery would adjust the formula to make sure it was “on target”
for the appropriate number of hours. Hunter understood that sleep hours should
not be submitted for payment unless they were actually paid to employees. She
raised these concerns with Lowery “continually . . . year after year.” She also had
a meeting with Lowery in April 2015, after several cost reports had been submitted,
in which she tried to stop RTS from continuing to submit unpaid sleep hours. She
testified that Lowery’s response to her objections was to say, “[S]omething has to
be done. I’m going to lose my business and my house.” This evidence is sufficient
to persuade a rational, fair-minded person that Lowery caused the false statements
in the cost reports to be submitted.
We affirm the trial court’s finding that Lowery caused the false report to be
submitted.
IV. State’s Knowledge
Lowery argues that he cannot be liable because the State was aware of
RTS’s practices around sleep hours in cost reports and paid anyway.
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Whether or not the State actually had knowledge of RTS’s billing practices
is a question of fact. We review questions of fact for substantial evidence.
McCleary, 173 Wn.2d at 514. Lowery points to the “extensive” involvement of the
State in the rate setting process with RTS. He claims that RTS was transparent
with the State about its billing practices during these rate setting meetings. The
State characterizes these meetings differently. It argues that the purpose of these
meetings was not to discuss billing practices, but to set the value of services
provided to clients. The State argues it was unaware that RTS was submitting
unpaid hours for payment by the State.
Substantial evidence supports the State’s position. An employee of RTS
testified that RTS was “totally transparent” about billing practices concerning sleep
hours. But, a DSHS employee who discussed rate setting with RTS testified that
billing and reimbursement practices were not discussed at rate setting meetings.
And, Lowery points to no documentation that he submitted to the State showing
that RTS was submitting unpaid hours for payment by the State.
Hunter confronted Lowery about the cost reports in 2015. Lowery did not
assert that he had informed the State of the practice. Rather, he said, “[S]omething
has to be done. I’m going to lose my business and my house.” Taken together,
this evidence is sufficient to convince a fair-minded, rational person that the State
was unaware that RTS was submitting unpaid sleep hours for payment by the
State.
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We affirm the trial court’s finding that the State was unaware RTS was
submitting unpaid sleep hours for reimbursement.4
V. Lowery’s Knowledge
The trial court found that Lowery acted “knowingly” in violating WAFCA.
Lowery argues this was an error.
We review questions of fact for substantial evidence. McCleary, 173 Wn.2d
at 514. RCW 74.66.020 imposes liability only on a person who acts “knowingly.”
The statute defines “knowing” as actual knowledge of the information, and acts in
deliberate ignorance of the truth or falsity of the information or acts in reckless
disregard of the truth or falsity of information. RCW 74.66.010(7)(a).
Lowery argues that he did not act knowingly because he believed that
RTS’s reporting of sleep hours was permissible. He relies primarily on an overtime
audit of RTS by the United States Department of Labor (DOL). He claims that,
through this audit, DOL confirmed that RTS’s practice of not paying sleep hours
unless the employee’s sleep is interrupted was permissible under DOL regulations.
He claims this creates a “conflict” between DOL regulations and DDA policies.
This is not so. Whether or not employees may be unpaid for sleep hours under
DOL regulations has nothing to do with whether or not RTS may submit those
unpaid hours for payment to RTS by the State of Washington.5 And, Lowery has
4 Because we find that the State was unaware of RTS’s billing practices, we need not address whether such knowledge is a defense to liability under the WAFCA. 5 At oral argument, Lowry sought to argue that there is also a discrepancy
in the DDA policy statement. He claims this is so because, while the DDA policy indicates that only actual paid hours worked may be submitted for reimbursement, a different subsection allows that sleep hours may be submitted in certain
12 No. 79959-2-I/13
not explained why the federal DOL would have any authority to provide guidance
on Washington DDA policies concerning reimbursement for patient services.
Lowery argues that the only evidence in the record that RTS was aware it
was not in compliance with DDA policies was a 2015 text message from Hunter to
Richmond that Lowery was not aware of. That is not true. Hunter testified that
she also brought her concerns directly to Lowery. She testified that she did this
“continually . . . year after year.” And, the trial court specifically found that Lowery’s
testimony that he believed the reporting of unpaid sleep hours was permissible
was not credible. This evidence is sufficient to persuade a rational, fair-minded
person that Lowery acted knowingly with respect to the fraudulent reporting of
sleep hours.
We affirm the trial court’s finding that Lowery acted knowingly in the
fraudulent reporting of sleep hours.
VI. Conspiracy
Lowery argues the trial court erred in finding that he conspired to violate the
WAFCA. The trial court found that Lowery and Richmond violated WAFCA by
conspiring with each other to do so.6 The State did not allege Lowery conspired
to violate WAFCA. Rather, the State alleged that the defendants were jointly and
situations. There is no ambiguity. The first subsection establishes a baseline that only paid hours worked may be reported. The following subsections clarify what types of paid hours may be reported. Thus, that a subsection allows that sleep hours may be reported in certain situations, it presumes that those hours must actually be paid to employees in order to be reimbursed. 6 That finding is found in the trial court’s conclusions of law, section B,
paragraph 6, subsection (c).
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severally liable. Lowery therefore did not have notice to defend himself from a
conspiracy charge. The trial court’s findings related to conspiracy are error.
However, Lowery does not challenge the trial court’s determination that he
can be jointly and severally liable under the statute. He has not argued that liability
should be apportioned or that he cannot be jointly and severally liable.
The trial court found Lowery, Richmond, and RTS liable as individuals for
causing false statements material to their obligations to pay the State. That alone
is enough to confer liability on Lowery. RCW 74.66.020(1)(g). A finding of
conspiracy was therefore unnecessary. We find that the trial court erred in finding
Lowery conspired to violate WAFCA, but that the finding is harmless and does not
affect the judgment.
We strike the findings relative to RCW 74.66.020(1)(a)-(c) and to
conspiracy. We otherwise affirm the judgment.
WE CONCUR: