Chicago Business Litigation Lawyer Blog
After a non-profit discovered some alleged invoicing irregularities it sued its founders and former directors and the companies that submitted the allegedly fraudulent invoices. The trial court dismissed the complaint. An Illinois appellate court reversed the trial court’s dismissal with regard to several of the fraud claims but affirmed the lower court’s dismissal of the remaining claims.
In 2002, Nancy Morgan and Donna Sardina formed and incorporated the National Alliance of Wound Care (NAWCO), a non-profit corporation that provides education and credentials for medical personnel in wound injuries. At its founding, Morgan and Sardina were NAWCO’s sole directors but were not on NAWCO’s board of directors as of 2016 or anytime thereafter.
Soon after incorporating NAWCO, Morgan and Sardina established for-profit corporations, Wound Care Education Institute, Inc. (WCEI) and Wild about Wounds (WOW). WCEI is in the business of providing training and education to medical professionals regarding skin, wound and ostomy care and management. WCEI provides courses to assist healthcare workers in preparing for the national certification exams developed by NAWCO. WOW provides a national conference and trade show for health care professionals in the wound care field.
In 2016, Morgan sent NAWCO an invoice totaling $243,500 on behalf of WCEI for meeting room rentals. In 2017, Morgan sent NAWCO a series of invoices totaling $654,000 on behalf of WCEI for various services. NAWCO paid each invoice upon receipt.
In November 2018, NAWCO filed suit against Morgan, Sardina, WCI and WOW alleging breach of contract, breach of fiduciary duty, fraud, conversion, and conspiracy. In the complaint, NAWCO alleged that these invoices Morgan submitted on behalf of WCEI were fraudulent because they contained charges for work never performed by WCEI and/or work for which NAWCO had already paid WCEI. NAWCO also alleged that WOW submitted charges totaling $583,744.34 to NAWCO from 2006 to 2015, for expenses that were “not legitimate” because of “the utter lack of supporting documentation for these significant charges.” After various amendments and motions to dismiss, the court dismissed NAWCO’s claims for failure to state a claim.
On appeal the Court found that the complaint had stated a claim for fraud against the defendants and reversed the trial court’s dismissal of those claims. The court affirmed dismissal of the remaining claims. Continue reading ›