Criminal remedy not “alternate remedy” as to later-filed FCA case

Babalola and Adetunmbi alerted authorities to Medicare fraud by the clinic they worked for. Federal authorities investigated and the clinics’ operators, the Sharmas, were indicted and pleaded guilty, accepting a criminal restitution obligation of over $40 million.  United States ex rel Babalola v. Sharma, No. 13-20182 (Feb. 14, 2014).  During the criminal proceedings, the whistleblowers filed a FCA suit against the Sharmas.  The Sharmas asserted an interest in the restitution proceeds, arguing that it was an “alternate remedy” within the meaning of the FCA that would give them “the same rights in such proceeding as [they] would have had if the action had continued under this section.”  The Fifth Circuit disagreed, finding that other Circuits’ authorities “implicitly recogniz[e] that a qui tam suit must be filed before there is an alternate remedy.”   A dissent conceded that this reading of the FCA was correct, but called for Congressional intervention in situations like this where the plaintiffs “took the path of the Good Samaritan and without delay provided the government with the evidence needed to pursue the defrauders.”