Last week, in Schroeder v. United States, the Ninth Circuit joined several other courts in holding that a False Claims Act whistleblower must be dismissed from a suit if he or she is convicted of criminal conduct arising from the fraudulent conduct at issue in the FCA case, even if the whistleblower was only a minor participant.
The Ninth Circuit held that the FCA’s provision requiring dismissal of whistleblowers convicted of related criminal conduct was unambiguous.
The court brushed off the whistleblower’s argument that mandatory dismissal of minor participants in the fraud is illogical because the statute allows unconvicted whistleblowers who “planned and initiated” the fraud to receive a reward.
The decision should send a signal that delay in coming forward to stop a fraud can hurt, or even negate, whistleblowers’ rights under the FCA. In our experience, the United States rarely, if ever, prosecutes minor wrongdoers who step forward voluntarily to tell the government about a fraud about which the government was unaware.
But if the government finds out about the fraud before the whistleblower comes forward, it may choose to make its case by charging minor offenders and then cutting deals with them to gain evidence against more senior wrongdoers. A person who fears criminal prosecution for her minor role in a fraud hatched by her bosses might be able to avoid that prosecution by voluntarily providing information about the fraud to the government.
That strategy won’t work, though, if the person waits too long to approach the government.
The key to Schroeder was that the court found that the whistleblower only approached the government after he learned that Department of Energy agents were already investigating the fraud. If he had approached the government sooner, he might have avoided prosecution and might have been allowed to receive a reward for the government’s recovery.
The lesson is clear: If you are considering blowing the whistle on a fraud in which you participated in even a small way, get in touch with a lawyer immediately to review your options. You may find that it doesn’t pay to wait to blow the whistle.
- Schroeder v. United States v. CH2M Hill, ___ F.3d ___, 14 C.D.O.S. 7782 (9th Cir. Jul. 16, 2015)
- 31 U.S.C. § 3730(d)(3)