Judge John Daniel Tinder of the U.S. District Court in Indianapolis has held that a successful qui tam relator may collect its share of the United States' recovery in a criminal forfeiture action arising out of the same conduct. In United States v. Bisig, No. 1:00-cv-335 (S.D. Ind. Dec. 21, 2005), the court considered the application of the portion of the False Claims Act that states that the United States "may elect to pursue its claim through any alternate remedy available to the [United States]," and that the relator "shall have the same rights in such proceeding as such person would have had if the action had continued under this section." 31 U.S.C. § 3730(c)(5).

In Bisig, the United States had proceeded only with a criminal indictment and forfeiture action, and had not intervened in the relator's action under the False Claims Act. Defendant Peggy Bisig pleaded guilty to various fraud charges and agreed to forfeit various pieces of personal and real property that had been acquired in the fraud scheme. Relator Health Care Fraud Detection Systems, Inc. sought to recover a share of the forfeited property pursuant to 31 U.S.C. § 3730(c)(5).

Rejecting arguments from the government that "a remedy is only alternative when it precludes the continuance of the qui tam action," the court concluded that a criminal forfeiture action pursuant to 18 U.S.C. § 982(a)(7) was indeed the sort of "alternate remedy" which would yield a source of recovery for a qui tam relator. Bisig, slip op. at 6.

Underlying the court's decision was a recognition that Congress' intent in adopting the qui tam provisions was to "encourage more private enforcement suits" and the fear that "the United States' proposed interpretation .would enable the United States to stay the qui tam suit, prosecute the Defendant, and recover the Defendant's assets through criminal forfeiture without having to share that recovery with the relator, who was first to uncover the fraudulent activities and report them to the United States." Bisig, slip op. at 7-8.

The court also analogized the circumstances of Bisig to two other cases, one in which the United States had elected not to intervene in a qui tam complaint, but reached an independent settlement with the defendants, United States ex rel. Bledsoe v. Cmty Health Sys., Inc., 342 F.3d 634 (6th Cir. 2003), and another in which the United States chose not to intervene but instead initiated and settled administrative proceedings against a defense contractor, United States ex rel. Barajas v. Northrop Corp., 258 F.3d 1004 (9th Cir. 2001). In both cases, the reviewing courts concluded that the subject agreements were alternate remedies under the False Claims Act.

Together, these cases signal that courts are likely have an expansive view of the types of remedies that would create a source of recovery for qui tam relators. Often, a putative defendant or the government have reasons to attempt to preclude a qui tam relator from receiving a portion of the proceeds of a fraud settlement. To the extent that such settlements are characterized as settlements of fraud allegations, as opposed to refunds of overpayments, it is probable that such attempts will fail.