Parallel Prosecutions: Good or Bad in a Whistleblower Case?

A common scenario: a whistleblower files a solid False Claims Act complaint with an ample disclosure. The government takes the disclosure and complaint, does some preliminary investigation, and opens a criminal file and grand jury investigation. The civil False Claims Act goes dormant and the Federal Rule of Criminal Procedure 6(e) prohibits the U.S. attorney from discussing any grand jury evidence with the whistleblower or whistleblower’s counsel. De facto, the government has taken over the case. That can only be good. Simply, if there is a criminal conviction by plea or after trial, and the factual basis for the conviction is the same as that alleged in the complaint, the case is a winner. And if there is a plea, global settlements are the rule rather than the exception. So the relator gets paid at the same time the criminal plea is entered.

So what’s the issue? First, a closed-mouth assistant U.S. attorney will completely shut down a civil case and no information will be forthcoming. Clients get nervous, there are large gaps in communication, and there is little or no input from the whistleblower or counsel. Unlike a case where the government intervenes in the False Claims Act, the whistleblower has little or no role in the investigation or analysis of the facts. And that is not good.

Second, if a global disposition is negotiated, it is usually with little or no input from the whistleblower. The assistant U.S. attorney in charge of the case often decides how much of an amount agreed to be paid by the defendant is “False Claims Act money” and how much is restitution and criminal fine. Sometimes the whistleblower’s counsel has a bit of input, but not usually. There are issues of fairness and what is appropriate with respect to the division of funds. I had a case where I was compelled to threaten a fairness hearing under the statute to obtain several million dollars more for my client. The government never did explain how it came up with the initial split and, in fact, had to back off the number in open court since it was in an original plea agreement.

So while it is usually a good sign that the government proceeds criminally, whistleblower counsel has to be very careful and active so that the government does not think that it can unilaterally apportion any settlement proceeds among the various constituencies, including the government’s forfeiture office. And it is always nice if whistleblower counsel can develop a relationship with the assistant U.S. attorney so that some “hypothetical” information can be shared during the ongoing investigation. This helps keep a whistleblower calm and interested.

Anybody have ideas about how to handle this problem and the best way to address it early on?

Comment