Relators’ Share Provision Encourages Insiders to Step Forward

Whistleblowers have sometimes decided against stepping forward because they had participated, however slightly, in the underlying fraud scheme. Indeed, a provision of the False Claims Act does provide that the whistleblower/relator could be dismissed and receive zero percent of the recovery if he/she planned or initiated the fraud. The Ninth Circuit held in a recent decision that this elimination of relator’s share applies even when the criminally convicted relator played a “minor role” in the underlying fraud scheme.

The reality is, however, that few relators have fallen prey to this provision. In fact, in drafting the False Claims Act, Congress recognized that the very best insiders may have played some role in the underlying fraud. To encourage these people to come forward, Congress explicitly stated that only those who “planned or initiated” the fraud would receive a reduced share. In other words, unless the relator was the mastermind or driving force behind the fraud, the relator’s share would not be reduced.

Thus, would-be relators should not be concerned about a diluted share under this particular FCA provision, as long as they did not “plan or initiate” the fraud and they were not criminally convicted for their role in the scheme.

More information for whistleblowers is located at the Nolan Auerbach & White website.