United States v. Nancy Smith
2017 U.S. App. LEXIS 14780
| 9th Cir. | 2017Background
- Defendant Neil Van Dyck, a podiatrist, was investigated for Medicare billing fraud after contractor SafeGuard found suspicious billing and allegedly altered records; he pled guilty to health-care fraud and a $1.23 million criminal forfeiture money judgment was entered.
- Relators Wendy Johnson and Nancy Smith (former employees) filed a qui tam action under the False Claims Act alleging long‑running fraudulent billing and falsified records; the government declined to intervene.
- The government’s criminal investigation and forfeiture preceded or developed independently of much of the relators’ disclosed information.
- Relators moved to intervene in the criminal forfeiture proceeding seeking a share of forfeited funds under 31 U.S.C. § 3730(c)(5) and/or as partial assignees under 21 U.S.C. § 853(n).
- The district court denied intervention, declined an evidentiary hearing, and refused to consider sanctions raised first in a reply brief; the relators appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether relators can intervene in a criminal forfeiture to claim FCA share under the Act’s “alternate remedy” provision | Relators: criminal forfeiture is an "alternate remedy" under 31 U.S.C. § 3730(c)(5), entitling them to intervene to secure 15–25% | Government: FCA provides no right to intervene in criminal prosecutions; relators’ remedy is a civil qui tam action | Held: No. FCA does not authorize relators to intervene in criminal prosecutions to assert entitlement to proceeds; their remedy is civil qui tam litigation |
| Whether relators have standing to intervene in criminal forfeiture generally | Relators: they have a concrete interest in recovered funds meriting intervention | Government: general rule bars private intervention in criminal proceedings; § 853(k) bars intervention except narrow § 853(n) claimants | Held: No standing; general rule and § 853 preclude intervention here |
| Whether relators qualify under 21 U.S.C. § 853(n) as having an interest established at time of the criminal acts | Relators: are partial assignees of government claims and thus have a cognizable interest | Government: relators cannot show a pre‑existing legal right, title, or interest in the property at the time of the crimes | Held: No. Relators cannot meet § 853(n)(6) requirements; any right depends on outcome of pending civil case |
| Whether district court erred by denying evidentiary hearing or considering sanctions | Relators: requested an evidentiary hearing to establish interest and sought sanctions against government | Government: moving papers insufficient; sanctions argument raised too late (reply brief) | Held: No abuse of discretion. Court properly denied hearing and refused to consider late sanctions request |
Key Cases Cited
- Linda R.S. v. Richard D., 410 U.S. 614 (private citizen lacks interest in prosecution decision)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requires concrete injury, causation, redressability)
- United States v. Kovall, 857 F.3d 1060 (3d‑party victims lack standing to appeal restitution order)
- United States v. Mindel, 80 F.3d 394 (beneficiary of criminal restitution lacked standing to appeal)
- United States v. Lippert, 148 F.3d 974 (civil FCA damages may follow criminal penalties)
- United States v. Eghbal, 475 F. Supp. 2d 1008 (FCA damages and penalties can be awarded after criminal restitution)
- United States v. Walczak, 783 F.3d 852 (standard for when evidentiary hearing required)
- Zamani v. Carnes, 491 F.3d 990 (district court need not address arguments raised first in reply brief)