United States v. Wegeler

941 F.3d 665

UNITED STATES of America

v.James WEGELER

*Jean Charte, Appellant

*(Amended Per the Clerk's Order dated 12/27/17)

United States of America, ex rel. *** Jean Charte

v.American Tutor, Inc., James Wegeler, Jr.; James Wegeler, Sr.; Sean Wegeler**

*Jean Charte, Appellant

*(Amended per the Clerk's Order dated 12/27/17)

**(Amended per the Clerk's Order dated 1/25/18)

***(Amended per the Clerk's Order dated 5/7/18)

United States of America

v.James Wegeler *Jean Charte, Petitioner

*(Amended per the Clerk's Order dated 12/27/17)

No. 17-1717

No. 17-1718

No. 17-8009

United States Court of Appeals, Third Circuit.

Argued on April 19, 2018

Opinion Filed: October 28, 2019

Sean F. Byrnes [Argued], Byrnes O'Hern & Heugle, 28 Leroy Place, Red Bank, NJ 07701, Counsel for Appellant/Petitioner

Mark E. Coyne, Anthony J. LaBruna, Jr., John F. Romano, Office of United States Attorney, 970 Broad Street, Room 700, Newark, NJ 07102

Charles W. Scarborough, William E. Havemann [Argued],^* United States Department of Justice, 950 Pennsylvania Avenue, N.W., Washington, DC 20530, Counsel for Appellee/Respondent

Before: GREENAWAY, JR., RENDELL and FUENTES, Circuit Judges.

OPINION

GREENAWAY, JR., Circuit Judge.

Our criminal justice apparatus is not the Eye of Providence. Though ever vigilant, it cannot see all, and it is mightily aware of that. So it relies on the eyes and ears of private citizens from many walks of life. These citizens are rewarded for their heroics at times, but their rewards rarely, if ever, amount to an expectation, let alone an interest, that they can pursue in the criminal case of another. This is because, as the Supreme Court has observed, "in American jurisprudence at least, a private citizen lacks a judicially cognizable interest in the prosecution or non[-]prosecution of another." Linda R.S. ("Linda ") v. Richard D. , 410 U.S. 614, 619, 93 S.Ct. 1146, 35 L.Ed.2d 536 (1973).

Jean Charte insists that she is the anomaly. Her case rests on the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 – 3733 (2012), which is a statute that Congress enacted during the Civil War to stem fraud against the federal government. United States v. Bornstein , 423 U.S. 303, 309, 96 S.Ct. 523, 46 L.Ed.2d 514 (1976). The FCA includes a qui tam¹ provision to encourage actions by private individuals—called relators—who are entitled to a portion of the amount recovered, subject to certain limitations. See § 3730(b), (d). In turn, a relator is required to provide the government with the information she intends to rely on so that the government can make an informed decision as to whether it should intervene. § 3730(b)(2). In the event that the government elects to pursue what is ultimately its claim through an "alternate remedy," the statute provides that the relator retains the same rights she would have had in the FCA action. § 3730(c)(5).

Charte instituted an FCA action alleging that the defendants, including James Wegeler, Sr., submitted false reimbursement claims to the United States Department of Education. She provided the requisite information to the government and cooperated with the government while it determined whether it would intervene. During this period, the information she provided led directly to an investigation that resulted in the criminal prosecution of Wegeler, Sr., for tax fraud and tax evasion. Wegeler, Sr. ultimately entered into a plea agreement that required him to pay $1.5 million in restitution. He paid the restitution by the time he was sentenced. Subsequently, the government declined to intervene in the FCA action.

Charte learned of the plea agreement and tried to intervene in the criminal proceeding to secure her alleged interest in a share of the restitution. Her motion to do so was denied, however. Her appeal to us thus presents a question of first impression for our Court: whether a criminal proceeding constitutes an "alternate remedy" to a civil qui tam action under the FCA, entitling a relator to intervene in the criminal action and recover a share of the proceeds pursuant to § 3730(c)(5).

We determine that the rights to participate in a proceeding that the alternate-remedy provision provides a relator does not extend to a criminal proceeding. Such a holding would be tantamount to an interest in participating as a co-prosecutor in the criminal case of another. Charte's important aid to the government notwithstanding, she lacks standing to assert such an interest under "the long line of precedent holding that a [private individual] lacks a judicially cognizable interest in [another]'s prosecution" and likewise, "in [another's] sentence." United States v. Stoerr , 695 F.3d 271, 277–78 (3d Cir. 2012). Even if we focused on only her alleged interest in a share of the restitution, nothing in the FCA suggests that a relator has a right to intervene in the government's alternative-remedy provision proceeding for the purpose of asserting this interest. The text and sparse legislative history regarding the alternate-remedy provision counsel otherwise, as they together make clear that the court overseeing the FCA suit determines whether and to what extent a relator is entitled to an award. Our holding is straightforward—a qui tam relator lacks standing to intervene as to her rights to prosecute a case alongside the government, and lacks a basis to do so as to her right to an award. We will therefore affirm the District Court. As was evident before this action, Charte may pursue her right to an award by conducting the FCA action.

I. Background

A. Legal

An action under the FCA can be brought either by the government or a private person "in the name of the Government." 31 U.S.C. § 3730(a), (b). If such a person—known as a relator—files the action, the complaint is filed in camera, sealed for at least sixty days, and served on the government but not the defendant until so ordered by the court. § 3730(b)(2). The government can move for "extensions of the time during which the complaint remains under seal" for good cause. § 3730(b)(3). Before the end of the expiration of time, the government must either "proceed with the action, in which case the action shall be conducted by the Government," or "notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action." § 3730(b)(4).

If the government intervenes and proceeds with the FCA action, "it shall have the primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action ...." § 3730(c)(1). However, the relator retains "the right to continue as a party to the action," subject to certain limitations. Id . In addition, the relator "receive[s] at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action." § 3730(d)(1). That amount is reduced to "no more than 10 percent" if

the action is one which the court finds to be based primarily on disclosures of specific information (other than information provided by the person bringing the action) relating to allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media ...."

Id .

Where the Government declines to intervene, "the person who initiated the action shall have the right to conduct the action," although "the court, without limiting the status and rights of the person initiating the action, may nevertheless permit the government to intervene at a later date upon a showing of good cause." § 3730(c)(3). When the relator conducts the action, she shall receive an amount "not less than 25 percent and not more than 30 percent of the proceeds of the action or settlement." § 3730(d)(2).

This assortment of rights is rounded out by the FCA's alternate-remedy provision, under which the government may "elect[ ] to pursue its claim through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty." § 3730(c)(5) (emphasis added). And "[i]f any such alternate remedy is pursued in another proceeding, the person initiating the action shall have the same rights in such proceeding as such person would have had if the action had continued under" the FCA. Id. (emphasis added). Moreover, "[a]ny finding of fact or conclusion of law made in such other proceeding that has become final shall be conclusive on all parties to" the FCA action. Id.

This framework sets the stage for the case at hand.

B. Factual and Procedural

Charte worked at American Tutor, Inc., a business that received Title I funds to provide supplemental educational services to New Jersey school districts. She alleged that, during her employment, she noticed questionable billing practices, including billing for absent students and services not provided. She filed a qui tam complaint in 2010, after her termination in 2007. The complaint, under the FCA and New Jersey False Claims Act, N.J. Stat. Ann. §§ 2A:32C-1 to -18 (West 2010), alleged that the defendants submitted false claims for reimbursement to the United States Department of Education. The district court stayed the proceeding and kept it under seal until 2017, when the Government ultimately declined to intervene. In the interim, Charte and her counsel "provided information, documents and even deposition testimony from a separate matter" to the government. Appellant Br. 15; see JA 83.

While the FCA suit was still unresolved, the government brought criminal charges against Wegeler, Sr. for tax fraud and tax evasion. Wegeler, Sr. pleaded guilty. The plea agreement requested restitution in the amount of $1.5 million representing the tax loss. It states:

This agreement was reached without regard to any civil or administrative matters that may be pending or commenced in

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