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Did the Marlins Make a False Claim?

As reported in the Miami Herald, the sale of the Miami Marlins by former owner Jeffrey Loria in September of 2017 potentially triggered a windfall for Miami-Dade. A clause in the 2009 profit-sharing deal between the ballclub and Miami-Dade supposedly required the team to provide 5 percent of sale proceeds to the city. But an accounting statement released following the sale of the club for $1.2 billion to a conglomerate headed by Derek Jeter showed a net loss of over $141 million. Despite purchasing the club for $159 million in 2002, the former owners claim to have lost money on this sale, which would permit them to avoid remitting 5% of the profit to the county.

A key issue that Miami-Dade Mayor Carlos Gimenez commented on in the article was the fact that the profit-sharing agreement ran for about 10 years from the date of the initial deal with the county, which was signed in 2008. If Loria simply waited about six more months to sell his team after March, the agreement would have run its course and this issue wouldn’t exist.

“I always felt it was kind of funny even though there was that 5 percent clause in the contract,” Gimenez said. “There’s a track record here… Why wouldn’t he wait, unless they felt they already had significant deductions not to pay the city or the county?”

While the Marlins’ moves of late have earned the scorn of locals, did this expose them to potential qui tam litigation for making a false claim? Florida’s False Claim Act encourages employees and insiders to act as whistleblowers and report when money or property is improperly obtained from the state by private actors. Miami-Dade County has its own false claims act that operates similarly to Florida’s. Likewise, there is a federal analog which involves money or property obtained from the federal government. All levels of government actively encourage citizens to monitor the use of public monies and ensure that they are being spent as intended.

Ultimately, when a whistleblower brings a suit forward, they do so on behalf of the government to recover the falsely or fraudulently obtained money. In exchange, the whistleblower is often entitled to a percentage of the recovered funds. Depending on the size of the scheme, this can lead to rewards in the millions of dollars.

Before a whistleblower can reap a financial reward, they must first uncover a “false claim” and evidence proving it. But what is a “false claim”? A false claim is generally when a person, corporation, or other entity (1) knowingly presents false or fraudulent claims for payment or (2) knowingly conceals or avoids an obligation to pay back the government. Claims often manifest themselves under this first category as schemes to provide lesser services than those contracted for and can range from providing medical services to contract work on property. A contractor claims that they will provide one service, but actually provide something of lesser value.

But the Marlins may have exposed themselves under the former category by failing to meet an obligation to pay back the government a portion of the net proceeds of their sale within a certain timeframe. To determine if there was an obligation and whether that obligation was actually met, one would need access to the contract, operating expenses, the sales figures, and innumerable other documents. However, until a complete picture of the transaction is provided to the public, whether the Marlins made a false claim will remain unknown.

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