What Happens to an FCA Whistleblower’s Reward If the Government Files Criminal Charges against the Defendant?

October 29th, 2019

As a whistleblower, or “relator,” under the False Claims Act (FCA), you have filed a complaint against a company that defrauded the federal government. The government investigated your allegations and indicted the defendant company on federal criminal charges. At sentencing, the government seeks restitution of the amount it lost due to the defendant company’s fraud. Can you receive a whistleblower reward from the restitution paid in the criminal case?

The short answer is maybe, but probably not in the context of the criminal action itself. Continuing a trend favorable to whistleblowers, a recent court decision may help you receive an award from the restitution paid in the criminal action if your whistleblower case under the FCA is successful.

Relators, Rewards, and Restitution

On October 28, 2019, the Third Circuit Court of Appeals joined other circuits in addressing whether a relator may intervene in a criminal proceeding in order to receive an alternate remedy reward. In United States ex rel. Charte v. American Tutor, Inc., — F.3d —-, No. 17-1717, 2019 WL 5538568 (3d Cir. Oct. 28, 2019), the relator alleged that the defendants submitted false reimbursement claims to the United States Department of Education. The relator provided information to the government and cooperated with the government while it determined whether it would intervene in her qui tam case.

During this period, the information relator provided led directly to an investigation that resulted in the criminal prosecution of an individual defendant for tax fraud and tax evasion. The individual defendant signed a plea agreement that required him to pay $1.5 million in restitution, which he paid by the time he was sentenced. Subsequently, the government declined to intervene in the relator’s qui tam case.

Criminal Case as “Alternate Remedy”

After learning of the plea agreement, the relator attempted to intervene in the criminal case to assert her claimed interest in a share of the restitution. The relator relied on two key provisions of the FCA. First, under 31 U.S.C. § 3730(d), the relator is entitled to recover between 15% and 30% (depending on whether the government intervenes) of any settlement or judgment. Second, under 31 U.S.C. § 3730(c)(5), known as the FCA’s alternate-remedy provision, the government may “elect[ ] to pursue its claim through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty.”

In addition, “[i]f any such alternate remedy is pursued in another proceeding, the person initiating the action shall have the same rights in such proceeding as such person would have had if the action had continued under” the FCA. Id. Relying on these statutory provisions, the relator argued that because the government chose the criminal proceeding—an alternate remedy to her qui tam action—as the means to recover the funds lost through fraud, she should be entitled to intervene and receive a share of the restitution award.

However, the Third Circuit rejected the relator’s argument. Affirming the district court, the Third Circuit explained that the right to participate in an “alternate remedy” proceeding does not extend to criminal matters because doing so would permit the relator to participate as a co-prosecutor in a criminal case, which is prohibited under Supreme Court precedent. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 576 (1992); Linda R.S. v. Richard D., 410 U.S. 614, 619 (1973). In so holding, the Third Circuit joined the Eleventh and Ninth Circuits in prohibiting relators from intervening in criminal cases for purposes of seeking a financial recovery. See United States v. Couch, 906 F.3d 1223, 1228 (11th Cir. 2018); United States v. Van Dyck, 866 F.3d 1130, 1133 (9th Cir. 2017).


The good news, however, is that the Third Circuit did not preclude the relator from seeking any recovery. Instead, the Third Circuit determined that the relator should do so through the qui tam case rather than by intervention in the criminal case. Charte, 2019 WL 5538568, at *8. The law in the Eleventh and Ninth Circuits is similar. See Couch, 906 F.3d at 1228-29; Van Dyck, 866 F.3d at 1135. In other words, a relator cannot literally participate in the criminal case, but can benefit from a criminal restitution payment if the relator’s FCA case is successful. Charte, 2019 WL 5538568, at *9.

The Third Circuit’s recent decision highlights the complexity of FCA cases and the importance of retaining qualified, experienced qui tam counsel to prosecute them. If you are aware of fraud against the government, contact Halunen Law’s False Claims Act Group for guidance and assistance.

Close-cropped portrait of attorney, Jon Leavitt. Leaning slightly toward the camera, the man wears a suit and sits in front of a studio backdrop. Lon Leavitt joined Halunen Law after a successful 12-year tenure as an Assistant United States Attorney in the District of Arizona, one of the largest and busiest federal districts in the country. In that role, he managed False Claims Act investigations and litigation on behalf of the federal government in a wide range of fields, including health care, defense and education. Lon is especially knowledgeable in health care fraud enforcement, having pursued cases successfully against hospitals, hospices, physician groups, and other health care providers. Learn more about Lon Leavitt and his work at Halunen Law.